The hydrogen market has progressed rapidly in recent years due to its growing application in industries like the transport, industrial, energy, aerospace, defence, and construction sectors. Against this backdrop, low carbon hydrogen is gaining traction as a critical component to achieve energy transition and long-term decarbonisation goals, according to data and analytics company GlobalData.
The global demand for pure hydrogen stood at nearly 74 million metric tons per year in 2021, of which low carbon hydrogen accounted for a miniscule share of 0.89 per cent. Low carbon hydrogen, including green hydrogen, has generated tremendous interest since as a sustainable option to achieve long-term climate goals or net-zero targets.
Mike Hemsley, deputy director of the Energy Transitions Commission, says that, with clean electrification at the heart of a zero-carbon economy, clean hydrogen is set to play a major role in decarbonising sectors that are difficult or impossible to electrify, in particular heavy industry, long-distance transport and long-term energy storage. By 2050, clean hydrogen (and its derivatives) could represent 15 to 20 per cent of the final energy demand.
“Green hydrogen, produced via the electrolysis of water, is likely to be the major route in the long-term due to falling renewable electricity and electrolyser equipment costs. However, blue hydrogen, produced from natural gas with carbon capture (with more than 90 per cent capture rates) and low methane leakage (less than 0.05 per cent), will play an important role in transition and in some specific low-cost gas locations,” explains Hemsley. “By 2050, about 85 per cent of hydrogen production will likely come from the green route.”
Global Data’s latest report, ‘Low-Carbon Hydrogen Market Report, Update 2023 – Global Market Outlook, Trends, and Key Country Analysis‘, supports this assumption. It observes that, during the year between 2021 and 2022, the low carbon hydrogen sector took its first big strides, with a number of projects announced as part of the strategy towards energy transition.
Srinwanti Kar, power analyst at GlobalData, says that various countries such as the US, Canada, Germany, Spain, France, Australia, and India have framed hydrogen roadmaps, strategies, mandates, and targets to develop a hydrogen economy in general and low carbon in particular. These plans are focused mainly on scaling up hydrogen production capacity, reducing costs, and bolstering supply chain infrastructure.
“Significant policy support and governments’ commitment to decarbonisation is spurring investments in the hydrogen space,” comments Kar. “The momentum that has been built along the entire value chain is accelerating cost reduction in hydrogen production, retail, and end-applications.”
In November 2022, at COP27, the World Bank Group announced the formation of the Hydrogen for Development Partnership (H4D), a new global project to increase the deployment of low carbon hydrogen in developing countries.
“North America leads the market in terms of low carbon hydrogen active production capacity, followed by the Middle East and Africa, Europe, and Asia Pacific,” Kar adds. “As of February 2023, the global low carbon hydrogen production capacity was 1,698 kilo-tonnes per annum (ktpa), which is anticipated to reach 1,11,326 ktpa in terms of high case scenario and 66,321 ktpa in terms of low case scenario by 2030. Suitable planning at the funding level, constructive regulatory framework, and proper infrastructure may facilitate and accelerate the pace of projects.”
An ETC report from 2021 suggested that around 50 metric tonnes per annum (mtpa) of clean hydrogen could be produced by 2030. As of February 2023, a total of 152 mtpa of the low carbon hydrogen capacity is in the pipeline, of which 1.9 mtpa is in construction, 136.7 mtpa in feasibility, and 6.4 mtpa in front end engineering design (FEED) stage. However, further incentives to use clean hydrogen will need to match the growing project plans to supply it, if the potential for 50 mtpa by 2030 is to be delivered.
According to the International Energy Agency, stimulating demand may prompt investment in hydrogen production assets, infrastructure and factories for key technology areas, but without further policy action, this process will not happen at the necessary pace to align with their Net Zero Scenario. Providing tailor-made support to selected, shovel-ready flagship projects should kick-start the scaling up of low-carbon hydrogen and the development of infrastructure and manufacturing capacity from which later projects can benefit.
Kar concludes: “The cost of low carbon hydrogen production is expected to decrease by up to 60 per cent over the next decade because of the reduction in the cost of renewable electricity. Facilitating regulatory framework and demand visibility by adopting legal measures, accelerating public funding for low carbon hydrogen projects, advancing hydrogen infrastructure development, technological advancements leading to cost reduction, access to finance, and government mandates or targets to support hydrogen adoption are some of the key factors which will drive the growth of low carbon hydrogen market.”