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Related Expertise: Machinery and Industrial Automation , Product Innovation and Engineering , Climate Change and Sustainability

The Green Tech Opportunity in Hydrogen

April 12, 2021  By  Max Ludwig ,  Martin Lüers ,  Markus Lorenz ,  Esben Hegnsholt ,  Minjee Kim ,  Cornelius Pieper , and  Katharina Meidert

It’s been decades since hydrogen was first proposed as a primary source of clean energy. Thanks to advances in a variety of key technologies, the moment when the abundant gas can begin contributing to the fight against climate change may finally be upon us. But the hype level is high, and many technological, economic, and policy challenges remain before hydrogen can offer a truly cost-effective way to lower greenhouse gas (GHG) emissions. If hydrogen is to achieve its full potential, it must become less expensive and more efficient to produce, distribute, and use. Getting there will require two trends to come together.

First, government policymakers and regulators must continue to support, through direct subsidies and policy changes, the production and use of low-carbon hydrogen for applications where hydrogen offers the greatest potential for abating GHG emissions. 1 1 Low-carbon hydrogen refers to hydrogen produced by methods that release minimal amounts of greenhouse gases. See “Making Low-Carbon Hydrogen” for further details. Notes: 1 Low-carbon hydrogen refers to hydrogen produced by methods that release minimal amounts of greenhouse gases. See “Making Low-Carbon Hydrogen” for further details. Already, governments in several jurisdictions are incorporating hydrogen into their efforts to meet GHG emissions targets. The EU, for example, has made hydrogen a key element of its strategy to reach zero emissions by 2050.

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business plan for hydrogen production

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Second, the hydrogen economy needs to become a reality, and stakeholders throughout the ecosystem need to contribute. In particular, machinery makers (the companies that develop and manufacture the necessary machinery, equipment, and components) and their investors must do their part. With the proper support throughout the hydrogen value chain—and assuming that the global effort to reduce GHG emissions increases in keeping with the goals of the Paris Agreement—the market for hydrogen-related machinery, equipment, and components could rise to an annual $200 billion or more by 2050. 2 2 Calculations are based on the International Energy Agency Sustainable Development Scenario, assuming the faster innovation case. Notes: 2 Calculations are based on the International Energy Agency Sustainable Development Scenario, assuming the faster innovation case.

At present, the nascent market for low-carbon hydrogen is both highly complex and highly fragmented, but it holds real promise . Money from governments and private investors is beginning to flow into the sector, and large companies, small and midsize enterprises, and startups are rapidly entering the field. Yet uncertainties—about the market, the right business models, the best technologies, and ongoing government support—remain high. Navigating the market will take a great deal of expertise and a consistent, carefully considered strategy.

The nascent market for low-carbon hydrogen is both highly complex and highly fragmented, but it holds real promise.

In this report, we consider the structure of the low-carbon hydrogen market—along with its opportunities, benefits, and challenges—and offer a roadmap for machinery makers to capture their fair share of the value inherent in the hydrogen ecosystem. Their efforts to research, develop, and produce the technologies needed will be instrumental in reducing the cost and increasing the efficiency of hydrogen applications—and making a real contribution to the fight to reduce global warming.

THE HYDROGEN VALUE CHAIN

Hydrogen’s potential for decreasing GHG emissions is high. By 2050, GHG emissions could be reduced by 5 to 6 gigatons annually through applications such as the substitution of clean H 2 for base chemical production and refinery, the use of fuel cells in heavy vehicles, and as a reduction agent in the iron and steel industry. Altogether, those changes would eliminate about 15% of the 35-gigaton total that we included in our earlier analysis of green tech. 3 3 For our last study, we included emissions data from 34 of the member countries of the Organization for Economic Cooperation and Development (excluding South Korea and Mexico) and the four BRIC countries (Brazil, Russia, India, and China). GHG emissions are stated in terms of CO 2 equivalents (CO 2 -e), a method for consistently defining the global-warming potential of all GHGs. Methane, for example, has a global-warming potential 28 times greater than CO 2 . Notes: 3 For our last study, we included emissions data from 34 of the member countries of the Organization for Economic Cooperation and Development (excluding South Korea and Mexico) and the four BRIC countries (Brazil, Russia, India, and China). GHG emissions are stated in terms of CO 2 equivalents (CO 2 -e), a method for consistently defining the global-warming potential of all GHGs. Methane, for example, has a global-warming potential 28 times greater than CO 2 . (See Exhibit 1.)

business plan for hydrogen production

Hydrogen can be produced in a variety of ways, some of them “cleaner” than others. (See “Making Low-Carbon Hydrogen.”) To maximize the environmental gains, H 2 must be produced without emitting GHGs. The cleanest method of producing H 2 involves breaking water down into its constituent parts through electrolysis, using electricity from renewable-energy sources. It is this so-called “green” H 2 that we focus on here.

Making Low-Carbon Hydrogen

business plan for hydrogen production

Exhibit 2 breaks down the potential market in 2050—$200 billion in annual capital spending—for the equipment and components needed at each link in the hydrogen value chain:

  • Production of H 2 , primarily via electrolyzer systems
  • Distribution, including compression, pipelines, and storage
  • Conversion of H 2 to transportable forms, mostly components and materials-handling equipment
  • Transport and industry applications, including fuel cells, combustion, and use as a feedstock

business plan for hydrogen production

These market segments will not mature at the same time. While production and distribution will need to develop independently of where and how H 2 is to be used, the conversion of H 2 into transportable forms and its specific uses depend on their economic competitiveness with current technologies and other green alternatives, as well as government policies and customer preferences.

Our scenario analysis shows that at $2 per kilogram of hydrogen, several applications will likely be economically competitive in Europe by 2030. For heavy-duty transport, unit economics will be favorable comparatively early. Direct electrification using battery-electric systems is another green alternative for transport applications, but in the heavy-duty segments, fuel cells and hydrogen-based fuels have operational advantages compared with battery-electric options owing to their higher power density and faster refueling times. We expect battery-electric power to dominate the passenger car and light-commercial-vehicle segments because of its generally higher round-trip efficiency.

In addition to unit economics, handling and distribution costs will need to be considered in order to make hydrogen competitive for those heavy-duty applications. This will require either lowering hydrogen production costs even further or developing decentralized production and distribution networks. Either way, companies need to overcome barriers related to the high capital intensity of providing the required infrastructure and to the availability of hydrogen-powered vehicles and equipment at industrial scale. (See Exhibit 3.)

business plan for hydrogen production

Applications in the chemical sector and the iron and steel industry could also become economically viable by 2030, as hydrogen production costs decline. The main barriers will be the high investments required to switch to low-carbon hydrogen production, the need to maintain operational continuity in chemical and steel production, and the long investment cycles and planning periods required.

Despite the challenges, the economic viability of H 2 applications will increase over the next decade. The higher that taxes or GHG emissions costs rise, and the faster the barriers in infrastructure and availability of equipment at industrial scale are removed, the sooner each application will become economically viable.

The task of developing and scaling up the equipment and processes needed to reduce the costs of producing, distributing, and developing uses for hydrogen will fall primarily to the world’s machinery makers. In what follows, we analyze the four segments of the hydrogen market—production, distribution, conversion, and applications—and the opportunities each segment offers to machinery makers.

PRODUCING HYDROGEN

In the future, most of the hydrogen produced will be low-carbon—either green or blue. In this report, we focus on the production of green hydrogen through electrolysis. Although blue H 2 will also likely account for a considerable amount of the total hydrogen supply, the market for the carbon capture membrane technologies needed to produce it will remain considerably smaller than the electrolyzer market.

Under its Sustainable Development Scenario, the International Energy Agency expects installed electrolysis capacity for producing H 2 to rise to 130 gigawatts in 2030, with the EU accounting for 80 gigawatts of the total, including production for import. Powering all these electrolyzers to produce green hydrogen will require the production of about 600 terawatt hours of renewable energy, providing a huge new market for the renewable-power generation industry (not considered in this analysis). But to meet the expected demand for low-carbon H 2 , the cost of electrolysis must decline, and its efficiency must rise.

Several different types of electrolyzers are in use. The most common are polymer electrolyte or proton exchange membrane (PEM) electrolyzers, which use stacks of solid polymer membranes between the electrolyzer’s anode and cathode, and alkaline electrolysis cells (AECs), which use a liquid alkaline solution as the electrolyte. Solid oxide electrolysis cells (SOECs) use a solid electrolyte to produce H 2 from steam; the technology is less mature but offers the potential for efficiency levels of up to 80%.

The cost both to produce and to operate electrolyzers is high, owing largely to the inefficiency of current electrolyzer technology and the end-to-end support systems they require. (See Exhibit 4.) Increasing overall efficiency offers a major opportunity for machinery makers. For example, boosting the system efficiency of PEM electrolyzers from 60% to 70% seems possible, primarily by improving the materials used in the stack.

business plan for hydrogen production

At present, building out the required electrolyzer capacity is far too costly to be practical. These capital cost are high for several reasons. For one, electrolyzers require a large amount of pricey material, such as precious metals. This holds true especially for PEM electrolyzer stacks that mostly use a membrane with platinum on the cathode and iridium or ruthenium on the anode side of it. R&D is ongoing to explore ways of reducing the amount of precious metal needed without risking durability.

Other factors also contribute to the high capex. One issue is that only a small number of electrolyzers are being produced. And manufacturing costs are high owing to a lack of production automation. Electrolyzers typically contain as many as 150 cells, in ten very thin layers; given the precision needed to make them, automating the process is extremely difficult and requires considerable expertise. Quality standards, too, are lacking, forcing operators to ensure the quality of each individual electrolyzer, further increasing costs. Finally, the largest operational electrolyzer has a capacity of just 10 megawatts. At today’s relatively small capacities, the cost of setting up the peripheral components for each electrolyzer is high.

Reducing the cost of materials and increasing automation and standardization could bring down the capex needed for AEC stacks by 30% to 40%, if production can be scaled up from 50 units to 1,000 units a year. At that scale, the capex needed for the balance of plant (BOP) would decrease by 20% to 30%, bringing the overall system cost to about $280 to $350 per kilowatt (not including margins, overhead, and SG&A). For PEM electrolyzers, the capex required for the stacks would need to fall by 40% to 50% and for BOP by 20% to 30%, bringing overall system costs down to $320 to $400 per kilowatt.

As production of H 2 electrolyzers ramps up, established system makers may have an advantage because they are more likely to be able to establish large-scale electrolysis plants at the required quality standards. In time, however, this is expected to change, as increasing specialization opens up opportunities for suppliers of components such as membranes and bipolar plates for the electrolysis stack, as well as the compressors, pumps, power electronics, and gas analytics for entire electrolysis systems.

Hydrogen production offers a variety of opportunities for machinery makers, worth a total of $60 billion to $65 billion annually by 2050.

Taken together, the production end of the hydrogen value chain offers a variety of opportunities for machinery makers, worth a total of $60 billion to $65 billion annually by 2050. Building and improving the efficiency of the electrolyzers that will be needed is only part of the equation. More R&D will be required to improve the reaction and startup times of electrolyzers and the methods for running them under different conditions.

DISTRIBUTING AND STORING HYDROGEN

If the market for hydrogen is to reach its full potential, companies must overcome several significant hurdles in distribution and storage. Unlike the current oil and gas industry, the low-carbon hydrogen ecosystem will require a mix of centralized and decentralized production, distribution, and storage, depending on the availability of renewable energy, the existing infrastructure, and the locations for efficiently using the H 2 .

Unlike hydrocarbons, hydrogen is highly volatile and lighter than air, making transportation and storage tricky. Thus it makes sense, in the near term, to locate hydrogen production near where it will be used. Over time, however, as demand for low-carbon hydrogen increases, the cost advantages of producing large volumes of H 2 in the Southern Hemisphere, near major sources of renewable energy (especially solar energy), will drive further growth of international markets for H 2. Long-distance transportation networks must be developed, most likely using ships. For shorter distances, large amounts can be sent through pipelines, while a combination of trains and trucks can deliver smaller amounts. (See Exhibit 5.)

business plan for hydrogen production

H 2 is highly flammable and explosive, escapes easily, and has a relatively low density. Transporting it in one of its higher-density forms is preferable but requires compression, liquefaction, or conversion. H 2 also reacts with many metals, causing them to become brittle.

These considerations open up a number of potential markets for machinery manufacturers, especially those that specialize in hazardous materials, and for suppliers that can adapt their products for use with hydrogen.

Because of its low density, H 2 must be highly compressed in order to store it efficiently and ship it to its destination. Several technologies are under consideration. H 2 becomes a liquid at a temperature of –252°C, but transporting liquid hydrogen over long distances is only 70% efficient; the efficiency is limited by the need for super-cold cryogenic tanks and constant active cooling to prevent rising pressure and the associated risk of explosion. And still, some of the liquid will inevitably return to its gaseous state and escape as boil-off gas. Improved liquefaction methods and insulation materials need to be developed in order to make shipping liquefied H 2 over longer distances economically competitive. New ships that can keep the H 2 cold must also be designed and built; and regulatory hurdles must fall: transporting liquid H 2 is currently not allowed.

Another option for long-distance transportation is converting hydrogen to a different form. (See the next section.) Converted hydrogen can be handled through existing transport infrastructure in use by the gas industry. But if the converted hydrogen needs to be reconverted at its destination, efficiency losses are even higher than for liquid hydrogen.

The most economical way to transport H 2 across distances of up to a few thousand kilometers is through pipelines, opening up a further opportunity in pipeline construction and repurposing. As of 2018, for example, Europe had just 2,000 kilometers of pipelines carrying H 2 but had almost 23,000 kilometers of methane gas pipelines that could be refitted for H 2 by 2040. New pipes designed for H 2 could also be installed inside current pipelines, making it unnecessary to recoat and reseal the existing pipes.

Either way, there will be high demand for pipeline materials that can withstand H 2 for decades and for the equipment required to keep the H 2 under compression as it moves through the pipelines. Leak-proof seals, pumps, gas flow management systems, and heat exchangers, as well as smaller parts like valves, will also be needed.

Opportunities in the storage of H 2 for future transport and use differ depending on the amount being stored. Solutions vary from gas cylinders for small amounts of compressed hydrogen up to salt caverns and rock cavities for large amounts. Medium amounts will most likely be stored in larger vessels or tanks, in compressed, liquefied, or converted forms.

For machinery makers, the potential hydrogen distribution market opportunity will total an annual $25 billion to $30 billion by 2050.

CONVERTING HYDROGEN

As mentioned above, once H 2 is produced, it can be converted into other forms, such as ammonia and synthetic hydrocarbons like methanol, or bound to a liquid organic carrier such as toluene. This allows it to be stored and transported through the existing commodity infrastructure, including storage tanks, ships, and pipelines. (See Exhibit 6.) Japan, for example, expects to import 300,000 tons of H 2 annually by 2030. Ships capable of transporting 50 tons of liquefied H 2 are in development, and that would require 5,000 to 6,000 shiploads. But transporting H 2 converted into ammonia, for example, could reduce the number of shiploads required by a factor of 100.

business plan for hydrogen production

Energy efficiency losses vary from about 12% when converting H 2 to ammonia, to more than 20% when converting it to methanol or binding it to a carrier, and up to about 35% when converting it to a synthetic hydrocarbon. In the latter case, the added carbon required must be derived from sources other than fossil fuels—through a process called direct air capture, for example.

Depending on its application, the converted H 2 does not necessarily need to be reconverted to pure H 2 . For example, ammonia can be used directly as a feedstock in the chemical industry and to make fertilizers, and methanol can be converted to power and heat for the steel industry through combustion. Both processes offer considerable potential as soon as producing green H 2 becomes competitive with other production methods. Ammonia, as well as synthetic hydrocarbon, could eventually be used for direct combustion in other applications, but this depends on replacing traditional combustion engines and turbines with ones fit for ammonia or synfuels, which isn’t likely to happen at scale until well after 2030.

A further possibility is to link H 2 to a liquid organic carrier that is less toxic than ammonia (such as toluene), ship it, and then return it to gaseous form once it reaches the destination. At present, the conversion and reconversion or dehydrogenation process results in a 50% loss of H 2 , far less efficient than other conversion processes. And the dehydrogenated liquid organic carrier must be shipped back to where the H 2 was originally converted so that it can be reused. But technological advances in conversion and transport could make this method more energy efficient.

The development of improved conversion and recapture technologies presents a considerable opportunity for machinery makers—$35 billion to $40 billion a year by 2050.

USING HYDROGEN

Hydrogen will be put to a wide variety of uses. The applications with the greatest opportunity for machinery makers are fuel cells for transport and feedstock for the iron and steel industry. (See Exhibit 7.) In the longer term, H 2 is also expected to be used in direct combustion to produce power and heat. Together, these add up to potential revenue for machinery makers of $80 billion to $90 billion annually by 2050. Hydrogen, however, is not nearly as cost-effective as current applications yet and must compete with other low-carbon technologies for some applications.

business plan for hydrogen production

Transport. As a fuel for trucks, trains, and ships, hydrogen has many advantages. Given its higher energy density, it offers considerable advantages in range and refueling time compared with direct electrification through battery-electric systems. But the abatement cost of replacing the industry’s current GHG emissions can be high, depending on the form of transportation.

Because of the considerable efficiency losses inevitable in both the electrolysis process and the use of fuel cells, direct electrification has a much higher round-trip efficiency. Although the total cost of ownership of battery-electric vehicles is lower, their long recharging times and heavy batteries give vehicles powered with fuel cells operational advantages in applications such as heavy-duty trucks, off-highway vehicles such as mining trucks and excavators, and long-haul buses, given their heavy loads, long ranges, high fuel consumption, and the need for fast refueling.

The first trains powered by hydrogen are already in passenger operation in Europe today.

In rail transport, fuel cells provide a green alternative in situations where an overhead catenary system providing electric power can’t be used, and they will likely become competitive with diesel in the next ten years. The infrastructure challenge is smaller than in road transport since fewer refueling stations are required. The first trains powered by hydrogen are already in passenger operation in Europe today.

Fuel cells can also be used in other forms of transport. In certain kinds of shipping, such as ferries, they are likely to become a green alternative to biofuels, given potential restrictions on emissions close to some coastlines. For other forms of shipping, ammonia and methanol derived from green H 2 will likely become the favored green alternative to battery-electric power, though such applications will probably not be developed at scale by 2030.

For transport applications, fuel cell technology is already well advanced, and both policymakers and vehicle manufacturers are beginning to promote it heavily. We expect the use of hydrogen in the transport sector to grow rapidly over the next ten years—albeit from a low base—eventually offering a market opportunity for machinery companies of some $45 billion to $50 billion annually by 2050. The opportunity can be broken down into three areas:

  • Refueling Stations. If the demand for H 2 for heavy on-road vehicles rises to as much as 40 megatons to 45 megatons a year, more than 50,000 H 2 refueling stations will be needed around the world by 2050, up from just 450 in 2019. On average, each station will need to supply 800 tons to 900 tons of H 2 per year—by providing a consistent supply of hydrogen to the station via pipelines or other means, by storing enough H 2 at the station, and perhaps by producing the H 2 at the station itself, conceivably with onsite solar panels or wind turbines. To ensure short refueling times comparable to the refueling of diesel or gasoline, the H 2 must also be precooled and compressed.
  • Fuel Tanks. Powering vehicles with H 2 can be done in three ways: through direct combustion of H 2 in an engine, conversion of H 2 in a fuel cell to generate electricity to power electric engines, and conversion into a synthetic fuel or e-fuel to run a combustion engine. The first two require the ability to store H 2 onboard the vehicle compactly, safely, and inexpensively. Tanks must be able to withstand high pressure and be sealed perfectly. Opportunities for machinery companies will also include improving and lowering the cost of the production processes for both the tanks and the carbon fibers used to make them.
  • Fuel Cells. Perhaps the greatest challenge lies in developing and producing the high-quality, efficient, and affordable fuel cells used to provide power for electric vehicles. Fuel cells are made from hundreds of individual cell membranes that generate electricity. These are combined into stacks and equipped with cooling systems, compressors, pumps, control units, and gas flow management systems to form a complete fuel system. Altogether, fuel cells offer many opportunities for machinery makers. The efficiency, durability, longevity, and cost of the cells must be improved, and the amount of precious metals, such as platinum, that are used to make them must be reduced. It will also be necessary to develop a method of recycling these metals so that they can be reused. Currently, fuel cells are crafted mostly by hand, a time-consuming method. The process must become fully automated at rapid speeds of less than 2 seconds each, allowing factories to produce as many as 1 million a year within high tolerances and under extreme pressure. Different kinds of fuel cell stacks and systems will need to be manufactured for specific applications. This will increase the demand for very complex assembly line equipment and for the equipment needed to manufacture the many components that go into the full fuel system.

Industrial Processes. H 2 can be used in a variety of industrial applications. In the chemical industry, H 2 is already used to produce feedstock, significantly decreasing the market potential for equipment in this industry. The use of green or blue H 2, however, will significantly reduce the GHG emissions generated as a result of the process.

If blue H 2 is used for these processes, it could be produced onsite by refitting steam methane reformers and installing carbon capture and compression equipment to produce clean blue H 2 . Providing the carbon capture equipment and membrane technology for filtering out the GHGs released should provide a business opportunity for machinery makers of $5 billion to $7 billion per year by 2050.

The iron and steel industry is the second-most-promising industrial application, where H 2 can replace methane gas as a reduction agent for producing direct-reduced iron that can then be used in an electric-arc furnace to produce steel. Assuming that countries around the world comply with the Paris Agreement, this market could reach an annual $16 billion to $20 billion by 2050, including the equipment needed for cooling, heat recuperation and compression, as well as humidifiers and gas-drying systems. To reach that potential, however, several challenges must be overcome. These include boosting the quality of the steel made using H 2 , dynamically managing the supply of H 2 from onsite electrolyzers, and optimizing H 2 -based furnace design and reduction processes to improve the system’s overall efficiency—not to mention the need to replace all the existing traditional blast furnaces.

Finally, H 2 can be put to use in a variety of power and heat generation applications, a market that could total a yearly $8 billion to $10 billion by 2050. It can be used, for example, as a combustion fuel for large-scale, stationary turbine engines and generators and to produce heat for industrial uses. H 2 fuel cells can also be used in decentralized stationary power applications, where they can generate electricity, and the heat created as a byproduct can be captured and used in other industrial applications.

ENTERING THE HYDROGEN ARENA

Like companies moving into any new and rapidly growing sector, machinery makers looking to participate in the hydrogen economy face several challenges and risks, aside from the development of the technologies and the effort to make them cost-competitive. Overcoming these obstacles will require considerable planning as well as support from other players.

Regulatory Uncertainty. Because hydrogen technology is still immature, the market’s continued growth will depend considerably on strong regulatory and policy support. Companies are making significant investments in production and market development, and most are still losing money. The risks involved remain high, and stamina will be needed to stay in the game.

Governments around the world have a critical role to play in creating the hydrogen value chain and a major stake in making it sustainable.

Governments around the world have a critical role to play in creating the hydrogen value chain and a major stake in making it sustainable—through taxes on GHG emissions, cap-and-trade schemes, market regulation, and direct support of the industry. Such efforts would significantly increase the upside potential of the hydrogen market, but whether governments will continue to support hydrogen, and at what level, remains unclear.

Players should therefore consider taking several steps to reduce their risk in the face of uncertain government support. Diversifying geographically will reduce dependence on single markets and exposure to individual regulatory and policy support. Some areas offer favorable local policies and financial support, through public funding of lighthouse projects. Private investors might also help fund such efforts, but this would require stronger business cases backed by greater regulatory support.

Investment Hype. Investors are pouring money into hydrogen-oriented companies, rapidly driving up valuations for pure-play hydrogen companies with little revenue but strong growth prospects. In some cases, the enterprise value-to-sales multiples are heading upward of 50. As a result, incumbent machinery companies looking to grow inorganically will find deals very expensive to make. The money flooding into these companies is enabling their management to invest heavily in R&D and production, making it that much more difficult for private companies without access to that capital to compete.

Ecosystem Complexity. Adding to the challenge is the sheer complexity of the hydrogen investment landscape. At present, there are about 120 active providers of electrolyzers and mobile and stationary fuel cells alone, according to analytics provider Delphai, and two-thirds of them entered the market in the past 20 years. As can be seen in Exhibit 8, a large number of companies are focusing on PEM; although it has higher capex than the more mature alkaline technology, PEM is considered the most promising tech for mobility applications.

business plan for hydrogen production

Given the market’s complexity, companies must first decide which sectors to enter. This decision should be based on several considerations:

  • What specific technological know-how does the company bring to the table? Does it expect its technology to become mature enough in the medium term to start or continue to invest in it now?
  • Which uses can the company’s technology most effectively be applied to in order to create the most value?
  • Which regions are the most promising, considering the company’s technology and the market’s need? How difficult will it be for the player to gain a foothold in the market there, given the region’s competitive landscape?

After prospective players choose their preferred market, they have several options for how to participate (see “Promising Strategic Plays”):

Promising Strategic Plays

  • EKPO Fuel Cell Technologies is a joint venture between two auto parts makers, ElringKlinger and Plastic Omnium, to produce fuel cell stacks and systems as well as high-pressure tanks.
  • Bosch is working with PowerCell to combine its production expertise and existing customer base with the fuel cell maker’s stack technology.
  • Hyundai Hydrogen Mobility (itself a collaboration between Hyundai Motor and H2 Energy) has partnered with Hydrospider (a joint venture of Alpiq, H2 Energy, and Linde for hydropower, electrolysis, and distribution) to make and lease fuel-cell-based trucks and provide them with the necessary refueling infrastructure.
  • Plug Power, for example, aims to cross-sell its H 2 production, fuel cell, and refueling technology through its diverse customer base.
  • Companies targeting organic growth should focus on the most promising link in the hydrogen value chain, depending on their specific expertise. This is true for both suppliers of specific components, such as valves, and those offering complete systems, such as electrolysis, refueling stations, or mobility applications. Canadian fuel cell maker Ballard, for example, has partnered with several mobility players to combine its fuel cell expertise with their know-how in specific transport modes, including Siemens for trains, Van Hool for buses, and Weichai for commercial vehicles.
  • Companies first entering the hydrogen market or targeting growth by acquisition must move fast in emerging segments. Given the current high valuations, they should be prepared to pay up or consider very early-stage companies, even though these players typically conform to a lower M&A risk profile.
  • Many companies will likely prefer to establish partnerships or joint ventures. Either type of deal can foster the buildup of network effects—and thus the creation of a more complete supply-and-demand ecosystem and swifter, more sustainable growth.

Given the current dynamics of the market, moving quickly would be wise. Valuations will keep climbing, enabling companies to continue investing heavily in R&D and production, and potential partners will be harder to find. Finally, once the COVID-19 pandemic subsides, a considerable amount of public funding intended to stimulate the economy is expected to focus on green technologies.

Companies should consider two approaches to capturing the greatest possible share of the value available in the hydrogen market. On one hand, they could differentiate themselves through superior technology. Opportunities exist for lowering the cost and improving the efficiency of individual components as well as optimizing the systems needed for various H 2 applications, for example. Every performance enhancement translates directly into cost savings for customers, a critical factor in making hydrogen economically viable at scale.

On the other hand, companies can also strive to excel in the services they provide and the way they provide them. New business models such as “equipment as a service” are already being explored; Nikola plans to rent out hydrogen-powered trucks by the hour, for example. And Plug Power is developing integrated solutions for its customers, providing fuel cells for forklifts as well as electrolyzers and refueling infrastructure and services to operators of distribution centers.

POWERING UP

Although the hydrogen ecosystem is still nascent, it has the potential to dramatically cut GHG emissions by as much as 6 gigatons a year, contributing significantly to the Paris Agreement goal of keeping the increase in global average temperature to well below 2°C by 2050. It is up to the makers of hydrogen-related machinery, equipment, and components to help meet this objective—an annual revenue opportunity of $200 billion or more by 2050.

Taking advantage of the full potential of hydrogen brings with it significant challenges and risks. Many technological hurdles remain, and the market is highly fragmented, with no clear winners likely to emerge for some time. Further progress will also depend to a significant degree on government subsidies and supportive policies and regulations.

Still, we believe that machinery manufacturers have much to gain by participating in hydrogen’s bright future. Our advice: begin innovating soon, strive for technically superior and cost-efficient products, and find an advantage in ecosystem plays and scale effects.

The authors thank BCG’s Christian Beck, Rajarshi Bhattacharyya, Jorge de Esteban, Joonas Päivärinta, and Filippo Pizzocchero, as well as Delphai’s Jan-Peter Ferdinand for their contributions to this report. They also are grateful to Edward Baker and Siobhan Donovan for writing and editing support, Kim Friedman for design, and Taylor Tinmouth and Mariella von Plessem for marketing assistance.

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Managing Director & Partner

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The Future of Hydrogen

Seizing today’s opportunities

About this report

Online table of contents, 1.0 data and assumptions.

Read online

Hydrogen and energy have a long shared history – powering the first internal combustion engines over 200 years ago to becoming an integral part of the modern refining industry. It is light, storable, energy-dense, and produces no direct emissions of pollutants or greenhouse gases. But for hydrogen to make a significant contribution to clean energy transitions, it needs to be adopted in sectors where it is almost completely absent, such as transport, buildings and power generation.

The Future of Hydrogen provides an extensive and independent survey of hydrogen that lays out where things stand now; the ways in which hydrogen can help to achieve a clean, secure and affordable energy future; and how we can go about realising its potential.

Key findings

Demand for hydrogen.

Supplying hydrogen to industrial users is now a major business around the world. Demand for hydrogen, which has grown more than threefold since 1975, continues to rise – almost entirely supplied from fossil fuels, with 6% of global natural gas and 2% of global coal going to hydrogen production.

As a consequence, production of hydrogen is responsible for CO 2  emissions of around 830 million tonnes of carbon dioxide per year, equivalent to the CO 2  emissions of the United Kingdom and Indonesia combined.

Global demand for pure hydrogen, 1975-2018

Growing support.

The number of countries with polices that directly support investment in hydrogen technologies is increasing, along with the number of sectors they target.

There are around 50 targets, mandates and policy incentives in place today that direct support hydrogen, with the majority focused on transport.

Over the past few years, global spending on hydrogen energy research, development and demonstration by national governments has risen, although it remains lower than the peak in 2008.

Current policy support for hydrogen deployment, 2018

Hydrogen production.

Hydrogen can be extracted from fossil fuels and biomass, from water, or from a mix of both. Natural gas is currently the primary source of hydrogen production, accounting for around three quarters of the annual global dedicated hydrogen production of around 70 million tonnes. This accounts for about 6% of global natural gas use. Gas is followed by coal, due to its dominant role in China, and a small fraction is produced from from the use of oil and electricity.

The production cost of hydrogen from natural gas is influenced by a range of technical and economic factors, with gas prices and capital expenditures being the two most important.

Fuel costs are the largest cost component, accounting for between 45% and 75% of production costs. Low gas prices in the Middle East, Russia and North America give rise to some of the lowest hydrogen production costs. Gas importers like Japan, Korea, China and India have to contend with higher gas import prices, and that makes for higher hydrogen production costs.

Hydrogen production costs using natural gas in selected regions, 2018

While less than 0.1% of global dedicated hydrogen production today comes from water electrolysis, with declining costs for renewable electricity, in particular from solar PV and wind, there is growing interest in electrolytic hydrogen.

Keeping an eye on costs

Dedicated electricity generation from renewables or nuclear power offers an alternative to the use of grid electricity for hydrogen production.

With declining costs for renewable electricity, in particular from solar PV and wind, interest is growing in electrolytic hydrogen and there have been several demonstration projects in recent years. Producing all of today’s dedicated hydrogen output from electricity would result in an electricity demand of 3 600 TWh, more than the total annual electricity generation of the European Union.

Hydrogen production costs by production source, 2018

With declining costs for solar PV and wind generation, building electrolysers at locations with excellent renewable resource conditions could become a low-cost supply option for hydrogen, even after taking into account the transmission and distribution costs of transporting hydrogen from (often remote) renewables locations to the end-users.

Hydrogen Costs From Hybrid Solar Pv And Onshore Wind Systems In The Long Term

Various uses for hydrogen

  • Hydrogen use today is dominated by  industry , namely: oil refining, ammonia production, methanol production and steel production. Virtually all of this hydrogen is supplied using fossil fuels, so there is significant potential for emissions reductions from clean hydrogen.
  • In  transport , the competitiveness of hydrogen fuel cell cars depends on fuel cell costs and refuelling stations while for trucks the priority is to reduce the delivered price of hydrogen. Shipping and aviation have limited low-carbon fuel options available and represent an opportunity for hydrogen-based fuels.
  • In  buildings , hydrogen could be blended into existing natural gas networks, with the highest potential in multifamily and commercial buildings, particularly in dense cities while longer-term prospects could include the direct use of hydrogen in hydrogen boilers or fuel cells.
  • In  power generation , hydrogen is one of the leading options for storing renewable energy, and hydrogen and ammonia can be used in gas turbines to increase power system flexibility. Ammonia could also be used in coal-fired power plants to reduce emissions.

Near term, practical opportunities for policy action

Hydrogen is already widely used in some industries, but it has not yet realised its potential to support clean energy transitions. Ambitious, targeted and near-term action is needed to further overcome barriers and reduce costs.

The IEA has identified four value chains that offer springboard opportunities to scale up hydrogen supply and demand, building on existing industries, infrastructure and policies. Governments and other stakeholders will be able to identify which of these offer the most near-term potential in their geographical, industrial and energy system contexts.

Regardless of which of these four key opportunities are pursued – or other value chains not listed here – the full policy package of five action areas listed above will be needed. Furthermore, governments – at regional, national or community levels – will benefit from international cooperation with others who are working to drive forward similar markets for hydrogen.

Executive summary

The time is right to tap into hydrogen’s potential to play a key role in a clean, secure and affordable energy future.  At the request of the government of Japan under its G20 presidency, the International Energy Agency (IEA) has produced this landmark report to analyse the current state of play for hydrogen and to offer guidance on its future development. The report finds that clean hydrogen is currently enjoying unprecedented political and business momentum, with the number of policies and projects around the world expanding rapidly. It concludes that now is the time to scale up technologies and bring down costs to allow hydrogen to become widely used. The pragmatic and actionable recommendations to governments and industry that are provided will make it possible to take full advantage of this increasing momentum.

Hydrogen can help tackle various critical energy challenges.  It offers ways to decarbonise a range of sectors – including long-haul transport, chemicals, and iron and steel – where it is proving difficult to meaningfully reduce emissions. It can also help improve air quality and strengthen energy security. Despite very ambitious international climate goals, global energy-related CO 2  emissions reached an all time high in 2018. Outdoor air pollution also remains a pressing problem, with around 3 million people dying prematurely each year.

Hydrogen is versatile.  Technologies already available today enable hydrogen to produce, store, move and use energy in different ways. A wide variety of fuels are able to produce hydrogen, including renewables, nuclear, natural gas, coal and oil. It can be transported as a gas by pipelines or in liquid form by ships, much like liquefied natural gas (LNG). It can be transformed into electricity and methane to power homes and feed industry, and into fuels for cars, trucks, ships and planes.

Hydrogen can enable renewables to provide an even greater contribution.  It has the potential to help with variable output from renewables, like solar photovoltaics (PV) and wind, whose availability is not always well matched with demand. Hydrogen is one of the leading options for storing energy from renewables and looks promising to be a lowest-cost option for storing electricity over days, weeks or even months. Hydrogen and hydrogen-based fuels can transport energy from renewables over long distances – from regions with abundant solar and wind resources, such as Australia or Latin America, to energy-hungry cities thousands of kilometres away.

There have been false starts for hydrogen in the past; this time could be different.  The recent successes of solar PV, wind, batteries and electric vehicles have shown that policy and technology innovation have the power to build global clean energy industries. With a global energy sector in flux, the versatility of hydrogen is attracting stronger interest from a diverse group of governments and companies. Support is coming from governments that both import and export energy as well as renewable electricity suppliers, industrial gas producers, electricity and gas utilities, automakers, oil and gas companies, major engineering firms, and cities. Investments in hydrogen can help foster new technological and industrial development in economies around the world, creating skilled jobs.

Hydrogen can be used much more widely.  Today, hydrogen is used mostly in oil refining and for the production of fertilisers. For it to make a significant contribution to clean energy transitions, it also needs to be adopted in sectors where it is almost completely absent at the moment, such as transport, buildings and power generation.

However, clean, widespread use of hydrogen in global energy transitions faces several challenges:

  • Producing hydrogen from low-carbon energy is costly at the moment. IEA analysis finds that the cost of producing hydrogen from renewable electricity could fall 30% by 2030 as a result of declining costs of renewables and the scaling up of hydrogen production. Fuel cells, refuelling equipment and electrolysers (which produce hydrogen from electricity and water) can all benefit from mass manufacturing.
  • The development of hydrogen infrastructure is slow and holding back widespread adoption.  Hydrogen prices for consumers are highly dependent on how many refuelling stations there are, how often they are used and how much hydrogen is delivered per day. Tackling this is likely to require planning and coordination that brings together national and local governments, industry and investors.
  • Hydrogen is almost entirely supplied from natural gas and coal today.  Hydrogen is already with us at industrial scale all around the world, but its production is responsible for annual CO2 emissions equivalent to those of Indonesia and the United Kingdom combined. Harnessing this existing scale on the way to a clean energy future requires both the capture of CO2 from hydrogen production from fossil fuels and greater supplies of hydrogen from clean electricity.
  • Regulations currently limit the development of a clean hydrogen industry.  Government and industry must work together to ensure existing regulations are not an unnecessary barrier to investment. Trade will benefit from common international standards for the safety of transporting and storing large volumes of hydrogen and for tracing the environmental impacts of different hydrogen supplies.

The IEA has identified four near-term opportunities to boost hydrogen on the path towards its clean, widespread use. Focusing on these real-world springboards could help hydrogen achieve the necessary scale to bring down costs and reduce risks for governments and the private sector. While each opportunity has a distinct purpose, all four also mutually reinforce one another.

  • Make industrial ports the nerve centres for scaling up the use of clean hydrogen.  Today, much of the refining and chemicals production that uses hydrogen based on fossil fuels is already concentrated in coastal industrial zones around the world, such as the North Sea in Europe, the Gulf Coast in North America and southeastern China. Encouraging these plants to shift to cleaner hydrogen production would drive down overall costs. These large sources of hydrogen supply can also fuel ships and trucks serving the ports and power other nearby industrial facilities like steel plants.
  • Build on existing infrastructure, such as millions of kilometres of natural gas pipelines.  Introducing clean hydrogen to replace just 5% of the volume of countries’ natural gas supplies would significantly boost demand for hydrogen and drive down costs.
  • Expand hydrogen in transport through fleets, freight and corridors.  Powering high-mileage cars, trucks and buses to carry passengers and goods along popular routes can make fuel-cell vehicles more competitive.
  • Launch the hydrogen trade’s first international shipping routes.  Lessons from the successful growth of the global LNG market can be leveraged. International hydrogen trade needs to start soon if it is to make an impact on the global energy system.

International co‑operation is vital to accelerate the growth of versatile, clean hydrogen around the world.  If governments work to scale up hydrogen in a co‑ordinated way, it can help to spur investments in factories and infrastructure that will bring down costs and enable the sharing of knowledge and best practices. Trade in hydrogen will benefit from common international standards. As the global energy organisation that covers all fuels and all technologies, the IEA will continue to provide rigorous analysis and policy advice to support international co‑operation and to conduct effective tracking of progress in the years ahead.

As a roadmap for the future, we are offering seven key recommendations to help governments, companies and others to seize this chance to enable clean hydrogen to fulfil its long-term potential.

The IEA’s 7 key recommendations to scale up hydrogen

  • Establish a role for hydrogen in long-term energy strategies.  National, regional and city governments can guide future expectations. Companies should also have clear long-term goals. Key sectors include refining, chemicals, iron and steel, freight and long-distance transport, buildings, and power generation and storage.
  • Stimulate commercial demand for clean hydrogen.  Clean hydrogen technogies are available but costs remain challenging. Policies that create sustainable markets for clean hydrogen, especially to reduce emissions from fossil fuel-based hydrogen, are needed to underpin investments by suppliers, distributors and users. By scaling up supply chains, these investments can drive cost reductions, whether from low‑carbon electricity or fossil fuels with carbon capture, utilisation and storage.
  • Address investment risks of first-movers.  New applications for hydrogen, as well as clean hydrogen supply and infrastructure projects, stand at the riskiest point of the deployment curve. Targeted and time-limited loans, guarantees and other tools can help the private sector to invest, learn and share risks and rewards.
  • Support R&D to bring down costs.  Alongside cost reductions from economies of scale, R&D is crucial to lower costs and improve performance, including for fuel cells, hydrogen-based fuels and electrolysers (the technology that produces hydrogen from water). Government actions, including use of public funds, are critical in setting the research agenda, taking risks and attracting private capital for innovation.
  • Eliminate unnecessary regulatory barriers and harmonise standards.  Project developers face hurdles where regulations and permit requirements are unclear, unfit for new purposes, or inconsistent across sectors and countries. Sharing knowledge and harmonising standards is key, including for equipment, safety and certifying emissions from different sources. Hydrogen’s complex supply chains mean governments, companies, communities and civil society need to consult regularly.
  • Engage internationally and track progress.  Enhanced international co‑operation is needed across the board but especially on standards, sharing of good practices and cross-border infrastructure. Hydrogen production and use need to be monitored and reported on a regular basis to keep track of progress towards long‑term goals.
  • Focus on four key opportunities to further increase momentum over the next decade.  By building on current policies, infrastructure and skills, these mutually supportive opportunities can help to scale up infrastructure development, enhance investor confidence and lower costs:
  • Make the most of existing industrial ports to turn them into hubs for lower‑cost, lower-carbon hydrogen.
  • Use existing gas infrastructure to spur new clean hydrogen supplies.
  • Support transport fleets, freight and corridors to make fuel-cell vehicles more competitive.
  • Establish the first shipping routes to kick-start the international hydrogen trade. 

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IEA (2019), The Future of Hydrogen , IEA, Paris https://www.iea.org/reports/the-future-of-hydrogen, Licence: CC BY 4.0

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Business model and planning approach for hydrogen energy systems at three application scenarios

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Hong Zhang , Tiejiang Yuan , Jie Tan; Business model and planning approach for hydrogen energy systems at three application scenarios. J. Renewable Sustainable Energy 1 July 2021; 13 (4): 044101. https://doi.org/10.1063/5.0031594

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Green hydrogen is used as fuel or raw material in power systems, transportation, and industry, which is expected to curb carbon emissions at the root. First, a unified energy system consisting of clean power generation systems, hydrogen energy systems (HESs), and transmission systems was proposed, and the characteristics of hydrogen load in different fields are analyzed. Possible business models for HESs in industry and transportation are then presented, cost and benefit functions for stakeholders of HES were created, and a business model with multi-party participation was modeled as a multi-objective optimization model. In a power system, the business model of combining two operating modes for hydrogen storage was proposed at the power generation side as well. Finally, three HESs were designed for a chemical plant with a hydrogen demand of 1000 Nm 3 /h, a hydrogen refueling station with a daily hydrogen load of 600 kg, and a 100% clean power generation system, respectively. The results of the case study show that one or more feasible business models (i.e., all stakeholders are profitable) can be found in both industrial and transportation by the HES planning approach proposed, while the internal rate of return of HES installed on the generation side is less than 5% due to high investment cost at this stage and low utilization rate; nonetheless, the profitable strategies are shown by 3D graphics.

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business plan for hydrogen production

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Business models for low carbon hydrogen production

Report commissioned by the Department for Business, Energy and Industrial Strategy on possible business models for low carbon hydrogen production.

Business models for low carbon hydrogen production - report

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The report identifies possible options for low carbon hydrogen production.

The report will be of interest to:

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Biden administration unveils hydrogen tax credit plan to jump-start industry

The Associated Press

business plan for hydrogen production

Hydrogen storage tanks are visible at the Iberdrola green hydrogen plant in Puertollano, central Spain, on March 28. The Biden administration on Friday released its highly anticipated proposal for how the U.S. plans to dole out tax credits to hydrogen producers. Bernat Armangue/AP hide caption

Hydrogen storage tanks are visible at the Iberdrola green hydrogen plant in Puertollano, central Spain, on March 28. The Biden administration on Friday released its highly anticipated proposal for how the U.S. plans to dole out tax credits to hydrogen producers.

WASHINGTON — The Biden administration released its highly anticipated proposal for doling out billions of dollars in tax credits to hydrogen producers Friday, in a massive effort to build out an industry that some hope can be a cleaner alternative to fossil fueled power.

The U.S. credit is the most generous in the world for hydrogen production, Jesse Jenkins, a professor at Princeton University who has analyzed the U.S. climate law, said last week.

The proposal — which is part of Democrats' Inflation Reduction Act passed last year — outlines a tiered system to determine which hydrogen producers get the most credits, with cleaner energy projects receiving more, and smaller, but still meaningful credits going to those that use fossil fuel to produce hydrogen.

To rein in climate change, Biden pledges $7 billion to regional 'hydrogen hubs'

To rein in climate change, Biden pledges $7 billion to regional 'hydrogen hubs'

Administration officials estimate the hydrogen production credits will deliver $140 billion in revenue and 700,000 jobs by 2030 — and will help the U.S. produce 50 million metric tons of hydrogen by 2050.

"That's equivalent to the amount of energy currently used by every bus, every plane, every train and every ship in the US combined," Energy Deputy Secretary David M. Turk said on a Thursday call with reporters to preview the proposal.

That may be a useful metric for comparison, but it's a long way from reality. Buses, planes, trains and ships run on liquid fuels for which a delivery infrastructure exists, and no such system exists to deliver cleanly-made hydrogen to the places where it could most help address climate change. Those include steel, cement and plastics factories.

Land of the free, home of the inefficient: appliance standards as culture war target

Land of the free, home of the inefficient: appliance standards as culture war target

Hydrogen is being developed around the world as an energy source for sectors of the economy like that which emit massive greenhouse gases, yet are difficult to electrify, such as long-haul transportation and industrial manufacturing. It can be made by splitting water with solar, wind, nuclear or geothermal electricity yielding little if any planet-warming greenhouse gases.

Most hydrogen today is not made this way and does contribute to climate change because it is made from natural gas. About 10 million metric tons of hydrogen is currently produced in the United States each year, primarily for petroleum refining and ammonia production.

Companies that produce cleaner hydrogen qualify for bigger incentives

As part of the administration's proposal, firms that produce cleaner hydrogen and meet prevailing wage and registered apprenticeship requirements stand to qualify for a large incentive at $3 per kilogram of hydrogen. Firms that produce hydrogen using fossil fuels get less.

Hydrogen may be a climate solution. There's debate over how clean it will truly be

Hydrogen may be a climate solution. There's debate over how clean it will truly be

The credit ranges from $.60 to $3 per kilo, depending on whole lifecycle emissions.

One contentious issue in the proposal was how to deal with the fact that clean, electrolyzer hydrogen draws tremendous amounts of electricity. Few want that to mean that more coal or natural gas-fired power plants run extra hours. The guidance addresses this by calling for producers to document their electricity usage through "energy attribute certificates" — which will help determine the credits they qualify for.

Rachel Fakhry, policy director for emerging technologies at the Natural Resources Defense Council called the proposal "a win for the climate, U.S. consumers, and the budding U.S. hydrogen industry." The Clean Air Task Force likewise called the proposal "an excellent step toward developing a credible clean hydrogen market in the United States."

How a utility company fought to keep two Colorado towns hooked on fossil fuels

How a utility company fought to keep two Colorado towns hooked on fossil fuels

But Marty Durbin, the U.S. Chamber of Commerce's senior vice president for policy, said the guidance released today "will stunt the growth of a critical industry before it has even begun" and his organization plans to advocate during the public comment process "for the flexibility needed to kickstart investment, create jobs and economic growth, and meet our decarbonization goals."

He accused the White House of failing to listen to its own experts at the Department of Energy.

The American Petroleum Institute said in a statement that "hydrogen of all types" is needed and urged the administration to foster more flexibility for hydrogen expansion, not less.

The Fuel Cell & Hydrogen Energy Association includes more than 100 members involved in hydrogen production, distribution and use, including vehicle manufacturers, industrial gas companies, renewable developers and nuclear plant operators. Frank Wolak, the association's president, said it's important the industry be given time to meet any provisions that are required for the top tier of the credit.

Japan Is Betting Big On The Future Of Hydrogen Cars

Environment And Energy Collaborative

Japan is betting big on the future of hydrogen cars.

"What we can't have is is an industry that is stalled because we have imposed requirements that the marketplace is not ready to fulfill," Wolak said, particularly with the time it takes to bring new renewable resources online.

If the guidance is too restrictive, he said, "you'll see a much smaller, if not negligible growth in this industry and a failed opportunity to capitalize on the IRA."

Other industry representatives welcomed the proposal.

Chuck Schmitt, president of SSAB Americas — a supplier of steel plates— said the proposal "supports SSAB's leadership and innovation in the decarbonization of the steel industry. This clarifying language will help drive new technology investment and create clean energy jobs in the United States."

  • alternative fuels

Global Energy Perspective 2023: Hydrogen outlook

About the authors.

This article is a collaborative effort by Chiara Gulli, Bernd Heid , Jesse Noffsinger , Maurits Waardenburg, and Markus Wilthaner , representing views from McKinsey Energy Solutions.

The Global Energy Perspective 2023 models the outlook for demand and supply of energy commodities across a 1.5°C pathway, aligned with the Paris Agreement, and four bottom-up energy transition scenarios. These energy transition scenarios examine outcomes ranging from warming of 1.6°C to 2.9°C by 2100 (scenario descriptions outlined below in sidebar “About the Global Energy Perspective 2023”). These wide-ranging scenarios sketch a range of outcomes based on varying underlying assumptions—for example, about the pace of technological progress and the level of policy enforcement. The scenarios are shaped by more than 400 drivers across sectors, technologies, policies, costs, and fuels, and serve as a fact base to inform decision makers on the challenges to be overcome to enable the energy transition. In this article, we explore how hydrogen could contribute to decarbonizing the energy system, uncertainties around hydrogen’s future role, and what it would take to set up a global hydrogen economy by 2050.

Clean hydrogen demand is projected to increase to between 125 and 585 Mtpa by 2050

Hydrogen demand today is largely supplied by fossil fuel-based steam methane reforming and driven by fertilizer production and refining. These industries are expected to lead the uptake of blue and green hydrogen until 2030 in the slower scenarios, as they switch their hydrogen-based operations to clean hydrogen. In parallel, “new” emerging applications—for instance in steel, in the production of synthetic fuels, and in heavy road transport—may begin to emerge in the faster scenarios.

Nearly all hydrogen consumed today is grey hydrogen (approximately 90 million tons 1 Metric tons: 1 metric ton = 2,205 pounds. per annum [Mtpa]). However, demand for grey hydrogen is projected to decline as demand for clean hydrogen rises and costs of the green molecules eventually become more competitive. 2 Clean hydrogen includes both green hydrogen (hydrogen produced by the electrolysis of water using renewable energy as a power source) and blue hydrogen (hydrogen produced through steam reforming of natural gas or methane with carbon capture, utilization, and storage [CCUS]), and contrasts with grey hydrogen (hydrogen produced through the same process as blue hydrogen but without CCUS). By 2050, clean hydrogen demand could account for up to 73 to 100 percent (125 to 585 Mtpa) of total hydrogen demand, with only between less than 1 and 50 Mtpa of demand being met by grey hydrogen, depending on the scenario.

After 2025, nearly all new hydrogen production coming online is expected to be clean hydrogen. This coincides with the start of the expected phaseout of grey hydrogen, driven by the growing cost competitiveness of clean hydrogen and commitments to decarbonize. Until 2030, clean hydrogen uptake is projected to be driven by existing applications switching from grey to blue and green hydrogen, but between 2030 and 2040 the uptake of hydrogen in new applications without existing demand is expected to drive the increase in clean hydrogen demand.

After 2040, private and public sector commitments are projected to drive the uptake of clean hydrogen and hydrogen-based fuels in emerging applications in the Further Acceleration and Achieved Commitments scenarios. Potential mechanisms that would be required to support demand growth of hydrogen and hydrogen derivatives in these applications include the implementation of, or increase in, CO 2 pricing, quotas on sustainable fuels in aviation, or CO 2 -reduction targets in maritime transportation. On the other hand, in the Current Trajectory and Fading Momentum scenarios, hydrogen uptake is projected to be driven by a continuation of the current cost decline and the underlying growth in some of the fertilizer and chemicals markets that use hydrogen today, with limited new policy support.

Some geographies, such as the European Union and United Kingdom, are expected to fully phase out grey hydrogen by 2050 in all scenarios except Fading Momentum. Grey hydrogen will likely play a larger role in the Fading Momentum scenario than in the faster energy transition scenarios, due to slower uptake of clean hydrogen in new sectors. In these sectors, uptake of clean hydrogen is projected to be limited until 2050.

Industry is projected to drive the majority of clean hydrogen uptake until 2030, followed by a wider uptake in new applications by 2050

Applications with existing demand will likely account for the majority of clean hydrogen demand throughout the 2020s, potentially driving the increase in clean hydrogen’s share of total hydrogen demand from less than 1 percent today to around 30 percent by 2030 in the Further Acceleration scenario.

By 2040, clean hydrogen could play a larger role in new applications—especially in mobility, which is expected to be the largest “newcomer” for clean hydrogen demand by 2040 in the Further Acceleration scenario. Applications could range from fuel cell electric vehicles in long-haul, heavy-duty trucking to synthetic kerosene in aviation. The second largest newcomer is expected to be hydrogen used in (mainly industrial) heating, displacing natural gas. Combined, clean hydrogen uptake in existing applications and emerging applications could drive clean hydrogen’s share of total demand to 75 percent by 2040.

By 2050, in the Further Acceleration scenario, mobility applications are projected to remain the largest drivers for clean hydrogen uptake, with road transport accounting for around 80 Mtpa and aviation around 50 Mtpa, with the remaining 15 Mtpa coming from maritime. Existing industrial applications and heating are projected to drive further clean hydrogen uptake, potentially resulting in clean hydrogen accounting for 95 percent of total hydrogen demand in 2050.

However, uncertainties around demand growth remain. For example, power could drive an additional demand upside of between 60 and 70 Mtpa by 2050, on top of the projected demand in the Further Acceleration scenario. This could happen if hydrogen-fueled turbines or stationary fuel cells prove more competitive or have more public support than alternative technologies for the last-mile decarbonization of the energy system, such as long-duration energy storage technologies and carbon capture, utilization, and storage (CCUS).

In the Fading Momentum scenario, the already existing end use of hydrogen in fertilizer production is expected to drive consumption far beyond 2030 corresponding with the lower total growth.

The only sector that is not projected to see an increase in total hydrogen demand in 2050 compared to today is refining, with demand expected to peak in the late 2020s or early 2030s, depending on the scenario, driven by lower oil demand across scenarios.

Uptake in new applications depends on operating environment, infrastructure development, and relative competitiveness

Going forward, the decarbonization agendas of governments and companies are expected to drive hydrogen uptake in new applications, as well as the decarbonization of existing grey hydrogen applications. However, in most regions, there is significant uncertainty around projected hydrogen uptake in these new applications across scenarios.

The uncertainty surrounding hydrogen demand in emerging applications stems from a combination of factors, including lack of clarity in government support, the development of enabling infrastructure, and evolving competitive dynamics with other decarbonization technologies. For example, hydrogen’s role in decarbonizing aviation could depend on government support, as well as market dynamics and competition. First, sustainable aviation fuel (SAF) quotas are needed across geographies to drive a switch from fossil fuel-based kerosene to clean alternatives. Second, hydrogen-based synthetic fuels would have to prove competitive with the main SAF alternatives, for instance biokerosene, either based on costs or constraints in the availability of feedstock necessary to produce biokerosene.

Similarly, there is uncertainty about the switch from grey to clean hydrogen. Active mandates, such as CO 2 prices and subsidies, will likely be needed to facilitate the decarbonization of existing hydrogen demand, as the switch will likely not be attractive based on economics alone.

Infrastructure scale-up and technology advancements could be critical

In key sectors, the timely deployment of infrastructure across the whole supply chain is projected to be needed to meet clean hydrogen demand.

Several key enablers—mostly physical infrastructure—would have to be rolled out by 2050 to facilitate the future hydrogen economy. In the Achieved Commitments scenario, over 163,000 refueling stations for trucks would be needed globally, alongside a network of more than 40,000 kilometers of hydrogen pipelines in Europe alone.

Technological advancements may also be needed to ensure the uptake of hydrogen in sectors where hydrogen technology is not yet mature, such as the further development of fuel cells for heavy-duty vehicles and marine vessels.

Coordination between government and the private sector may be needed to ensure the required infrastructure is in place to meet hydrogen demand at the pace necessary to meet decarbonization commitments and with an attractive business case.

The extent of the growth and advancement necessary to establish a hydrogen economy is not without precedent—historical adoption of natural gas in the European Union since the 1960s and 70s shows that it is possible to rapidly change an established energy system if the necessary competitiveness and support are in place.

Asia is projected to remain the region with the largest hydrogen demand to 2050

Despite uncertainties in regional and sectoral demand, Asia is projected to remain the biggest hydrogen consumer across scenarios, largely driven by the demand from chemicals that already exist today, and, to a lesser extent, the transport, iron, and steel sectors in China and India. In Japan and South Korea, a significant share of hydrogen demand is expected to come from electricity generation as ammonia and hydrogen are blended in existing coal and gas plants, respectively. As Asia will likely not produce enough hydrogen to meet its growing demand, the region might rely on imports from Oceania or the Middle East, for instance.

In Europe and the United States, the chemicals sector is projected to remain a significant driver of hydrogen demand, but new applications in sectors including steel and production of synthetic fuels for aviation, maritime, and heavy road transport are also expected to contribute significantly to demand growth.

Green hydrogen production is projected to be spread across regions, while blue hydrogen production is geography-specific

By 2050, green hydrogen is expected to dominate the global supply mix, with a share of between 50 and 65 percent across scenarios, as cost reductions in renewables and electrolyzers make this production route more cost competitive. Blue hydrogen is projected to account for the next largest share of supply, at between 20 and 35 percent.

The ratio of blue to green hydrogen production is expected to differ significantly by region, driven mainly by cost factor developments. Blue hydrogen production is projected to be concentrated in regions with cost-competitive natural gas and CCUS, such as the Middle East and North America. By 2050, blue hydrogen production could require as much as around 500 billion cubic meters of natural gas (between 10 and 15 percent of global natural gas demand in the Further Acceleration scenario), and capacity to capture and store 750 to 1,000 megatons of CO 2 .

Green hydrogen production is projected to have a higher share in regions with abundant and cost-competitive renewable resources, such as Australia and Iberia. The production of green hydrogen could potentially be constrained by a lack of renewable power. Globally, approximately a quarter of renewable electricity generation (around 14,000 terawatt-hours) could be required to produce the green hydrogen needed by 2050 in the Further Acceleration scenario. Further potential bottlenecks to be tackled to achieve strong green hydrogen uptake include large-scale investments and deployment of at-scale manufacturing of electrolyzers, with cost competitiveness being strongly dependent on the latter.

Clean hydrogen cost competitiveness is projected to vary between regions

Clean hydrogen production costs are expected to drop significantly by 2030–50, with large differences across regions under the scenarios explored. Cost differentials among regions could drive an increased mismatch between supply and demand centers and thus lead to the development of major hydrogen and hydrogen-derivatives export hubs.

Regions with cost-competitive natural gas resources and CCUS, such as the Middle East, Norway, and the United States, are expected to have the highest cost competitiveness and could potentially account for 30 percent of exports at production costs of below $1.5/kg by 2050.

Regions with access to low-cost renewable power, such as Australia or North Africa, could make up an additional 60 percent of exports at production costs of between $1.5/kg and $2/kg.

The growing hydrogen trade could enable uptake in countries that have strong decarbonization ambitions but lack the necessary energy resources for clean hydrogen production, such as parts of Europe, as well as Japan and South Korea.

A global hydrogen trade could emerge to connect demand centers with resource-rich export hubs

Major hydrogen trade flows are expected to evolve to connect export hubs with favorable renewable power or natural gas resources to two main demand regions: Asia and Europe.

Europe could meet most of its demand from within the region, importing from countries with low gas prices or abundant hydro and solar power, such as Iberia and the Nordics. The remainder could be sourced from the Middle East, North Africa, and North America. Asia could source hydrogen from countries and regions like Australia, Latin America, the Middle East, and North America.

Regions with favorable routes to market—either by producing and shipping as derivatives or building a strategic network of hydrogen pipelines toward off-takers, potentially re-using existing natural gas infrastructure—may also emerge as production hubs.

While major trade flows in Europe will likely depend heavily on pipelines, shipping could prove critical to enable overseas trade. Hydrogen shipping could be expedited by converting hydrogen to synfuels (such as ammonia or methanol) at export hubs. Liquid hydrogen shipment could be one way to enable the global hydrogen trade after 2030, potentially increasing to approximately 20 Mtpa traded in 2050 in the faster scenarios.

Although this projected ramp-up of the global hydrogen trade is ambitious, it does have historical precedent—similar growth was observed in the first 25 years of LNG development.

About the Global Energy Perspective 2023

Hydrogen is a versatile energy carrier that has the potential to play a significant role in decarbonizing the energy system. Hydrogen-based technologies and fuels can provide low-carbon alternatives across sectors. However, as of now, there is still a wide range of possible hydrogen pathways up to 2050 both in terms of hydrogen demand and supply, leading to uncertainty for organizations looking to enter the hydrogen market or to scale their operations.

Government and private sector support is projected to heavily affect hydrogen uptake. At the same time, future technological developments of alternatives (for instance, high-temperature electric furnaces, long-duration energy storage, and availability of biobased feedstock) could also create competition in some of the new applications for hydrogen and hydrogen-based fuels. Hydrogen companies may benefit from closely monitoring signposts on policies, the development of hydrogen-enabling infrastructure, and the cost-competitiveness of hydrogen-based technologies compared to other low-carbon alternatives as they chart their way forward.

To request access to the data and analytics related to our Hydrogen outlook, or to speak to our team, please contact us .

Chiara Gulli is a solution manager in McKinsey’s Amsterdam office; Bernd Heid is a senior partner in the New York office, where Maurits Waardenburg is a partner;  Jesse Noffsinger is a partner in the Seattle office; and Maurits Waardenburg is a partner in the Brussels office.

The authors wish to thank Cristina Blajin, Alison Hightman, Albertine Potter van Loon, and Ole Rolser for their contributions to this article.

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Hydrogen Supply Outlook 2024: A Reality Check

BNEF expects clean H2 supply to skyrocket 30-fold to 16.4 million metric tons per year by 2030, driven by supportive policy and a maturing project pipeline. Still, this is not sufficient to meet most government targets. Less than a third of the 1,600 projects that have been announced to date materialize in BNEF’s bottom-up analysis, and often later than planned.

  • From 0.5 million metric tons (Mt) of capacity online today, annual low-carbon hydrogen supply could grow 30x by 2030. Only around 30% of all currently announced supply for commissioning by the end of the decade is likely to be built – a total of 477 projects.
  • Over half of supply in 2030 comes from electrolysis, but blue H2 plays a significant role (Figure 1). Most policies favor green H2 production but economics, demand from Asia and a mature project pipeline will support large volumes of blue H2 as well.
  • The US is expected to become the single largest producer of clean H2 by 2030 , accounting for almost 37% of global supply. The US hosts the most mature project pipeline globally, dominated by big blue H2 projects which are likely to benefit from tax credits.
  • China, Europe and the US could account for over 80% of clean H2 supply by the end of the decade, driven by supportive policies and a pipeline of advanced projects (Figure 2). This means other regions with large project pipelines but less policy support, such as Latin America and Australia, may only play a minor role in global clean H2 supply to 2030.

Million metric tons per year of forecasted annual low-carbon H2 supply by production method (2024 to 2030)

  • Up to 31% of BNEF’s 2030 forecasted H2 capacity is export-oriented, but actual exports could be much lower . Over half of supply intended for exports likely comes online in North America supported by tax credits. How much of each project’s output will be exported is still unclear and a significant share of output could also serve local demand. Policies for clean H2 imports across Europe, Japan and Korea alone could support up to 1.6Mt by 2030.
  • Around 95 gigawatts (GW) of electrolyzers could become operational by the end of 2030, almost 10x the capacity that is already past final investment decision (FID) today. Around 40% of this 95GW is past FID or in advanced planning compared to 60% for all low-carbon H2 supply, showing the lower maturity of electrolysis projects relative to blue H2. Most forecasted electrolyzer capacity (~58GW) is driven by announced policies and is therefore still subject to uncertainty around policy implementation. This capacity will largely be based in Europe and China.
  • Some 10Mt per year of H2 production capacity is past FID or in advanced planning stages. This supply is very likely to be built by 2030. Around 2.7Mt per year are past FID with the remainder at front end engineering design stage in markets with strong policy support. The remaining capacity in this forecast is subject to large uncertainty.
  • Deployment in China is the largest uncertainty to this outlook. The market is difficult to predict as projects are not announced well in advance and deployment is driven by policy targets, which are still lacking for 2030. Supply in China is based on BNEF’s view on market adoption and assumptions around a replacement rate for gray H2. As China accounts for 38% of forecast electrolyzer capacity, changes to installations could strongly affect 2030 capacity.
  • Several other uncertainties exist. Most forecasted electrolyzer capacity is still at early planning stage and only materializes if announced policies are implemented. BNEF’s outlook accounts for policy delays but major changes to announced programs, such as a remodel of the US IRA tax credits after the November presidential election, would impact this forecast. New policies or advanced projects that do not take FID could also change BNEF’s outlook.

Million metrics tons per year of low-carbon H2 supply from 2024 to 2030

BNEF clients can access the full report here .

About BloombergNEF

BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.   Sign up for our free monthly newsletter →

Power Market Outlook: East Meets West as Japan Prices Cool

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H2A: Hydrogen Analysis Production Models

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The Hydrogen Analysis (H2A) hydrogen production models and case studies provide transparent reporting of process design assumptions and a consistent cost analysis methodology for hydrogen production at central and distributed (forecourt/filling-station) facilities.

The H2A central and distributed hydrogen production technology case studies, blank model cases, and documentation are available for free. NREL develops and maintains these models with support from the U.S. Department of Energy Hydrogen and Fuel Cell Technologies Office.

Required input to the models includes capital and operating costs for the hydrogen production process, fuel type and use, and financial parameters such as the type of financing, plant life, and desired internal rate of return. The models include default values, developed by the H2A team, for many of the input parameters, but users may also enter their own values. The models use a standard discounted cash flow rate of return analysis methodology to determine the hydrogen selling cost for the desired internal rate of return.

For a more convenient, high-level techno-economic view of select hydrogen production technologies, use our H2A-Lite model .

Case Studies

The H2A case studies are technology-specific versions of the base models developed by members of the H2A team with expertise in design and advancement of these technologies. These files contain macros necessary for hydrogen price calculation. Make sure macro use is allowed in Excel. If you have difficulty opening these Excel files through your browser, please contact the webmaster .

Current Central Hydrogen Production via Biomass Gasification version Oct 2020

Future Central Hydrogen Production via Biomass Gasification version Oct 2020

Current Central Hydrogen Production from Coal Gasification with CO₂ Capture and Sequestration version Aug 2022

Current Central Hydrogen Production from Solid Oxide Electrolysis version Nov 2020

Future Central Hydrogen Production from Solid Oxide Electrolysis version Nov 2020

Current Central Hydrogen Production from Polymer Electrolyte Membrane (PEM) Electrolysis (2019) version Nov 2020

Future Central Hydrogen Production from PEM Electrolysis (2019) version Nov 2020

View supporting documentation for the PEM and solid oxide electrolysis case studies .

Current Central Hydrogen Production from Steam Methane Reforming of Natural Gas without CO 2 Capture and Sequestration version Aug 2022

Current Central Hydrogen Production from Steam Methane Reforming of Natural Gas with CO₂ Capture and Sequestration version Aug 2022

Current Central Hydrogen Production from Natural Gas Autothermal Reforming with CO₂ Capture and Sequestration version Aug 2022

Current Distributed Hydrogen Production from Polymer Electrolyte Membrane (PEM) Electrolysis version April 2022

Future Distributed Hydrogen Production from PEM Electrolysis version April 2022

View supporting documentation for the PEM electrolysis case studies .

Current Distributed Hydrogen Production from Ethanol version May 2022

Future Distributed Hydrogen Production from Ethanol version May 2022

Current Distributed Hydrogen Production from Natural Gas (1,500 kg per day) version April 2022

Future Distributed Hydrogen Production from Natural Gas (1,500 kg per day) version May 2022

Future Central Hydrogen Production from Photoelectrochemical Type 2 version Oct 2020

Future Central Hydrogen Production from Photoelectrochemical Type 4 version Oct 2020

Future Central Hydrogen Production from Solar Thermo-Chemical Ferrite Cycle version Oct 2020

H2A Hydrogen Production Model: Version 3.2018 User Guide (DRAFT)

Case Study Documentation

Supporting documentation about model development, analysis parameters, and results is available for some of the case studies.

Central Solid Oxide Electrolysis

DOE Hydrogen and Fuel Cells Program Record 16014: Hydrogen Production Cost from Solid Oxide Electrolysis

Central and Distributed Polymer Electrolyte Membrane Electrolysis

PEM Electrolysis H2A Production Case Study Documentation

DOE Hydrogen and Fuel Cells Program Record 19009: Hydrogen Production Cost from PEM Electrolysis

Hydrogen Pathways Analysis for Polymer Electrolyte Membrane (PEM) Electrolysis , 2014 Annual Merit Review Proceedings

Blank Model Cases

Blank versions of the central and distributed production models that contain no pre-populated capital inputs are also available for download.

H2A Central Hydrogen Production Model version 3.2018

H2A Current Distributed Hydrogen Production Model version 3.2018

Version History

Version 3.2018 of the models was released in 2018 and includes the following updates and corrections:

  • Updated plant start dates: current technology to 2015 and future technologies to 2040.
  • Updated energy feedstock costs with AEO 2017 case. Costs were extrapolated beyond AEO forecast window using GCAM .
  • Changed reference year dollars to 2016$.
  • Updated emissions factors with GREET 2015 values .
  • Updated distributed hydrogen production cases to comply with HDSAM updated parameters for hydrogen refueling stations.
  • Updated price indexes for GDP deflator, plant cost, labor cost, and chemical price until 2016.
  • Updated carbon sequestration techno-economic assessment.
  • Updated federal tax rate to 21%.

Updated cost of capital parameters: 40% equity financing, constant outstanding debt, 3.7% interest rate, 8% real after-tax internal rate of return.

For more version history and to download previous versions, see the H2A model archives .

Technical Support

Send questions or feedback to [email protected].

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  • Latin America Alert: Chile’s Ministry of Energy publishes Green Hydrogen Action Plan 2023–2030

business plan for hydrogen production

Chile’s Ministry of Energy publishes Green Hydrogen Action Plan 2023–2030

On April 25, 2024, Chile’s Ministry of Energy published its Green Hydrogen Action Plan 2023–2030 following a successful consultation process.

The plan aims to establish a roadmap of milestones and actions that will be executed between 2023 and 2030 to develop a sustainable green hydrogen industry, including its derivatives and the entire value chain. Its objectives closely align with those of Chile’s National Energy Policy (2022) and the National Green Hydrogen Strategy (2020).

The plan’s related activities will be carried out in coordination with the Chilean government, relevant agencies, and regional and local initiatives.

Timeframe and milestones

a. The first stage, lasting from 2023 to 2026, will focus on implementation, with an aim to achieve adequate investment signals, develop standards and regulations, and strengthen relationships with potential buyers b. The second stage, from 2026 to 2030, will focus on initiating productive development and decarbonization, with an emphasis on regional and local development

Action points

The Green Hydrogen Action Plan proposes 18 lines of action that are further divided into 81 specific sub-actions. These actions will be coordinated and developed by multiple ministries and agencies, including the International Development Bank, GIZ, InvestChile, and ProChile, among others. Each action has a definite objective, deadline, milestone, and institution responsible for its implementation.

The plan focuses on ten milestones focused on industry growth, all to be completed within the first stage. These milestones include:

  • The formal opening of the Financial Facility, called “Facility H2V”
  • The closing of the first fiscal land allocation process, called the “Window to the Future,” and kicking off a second allocation process
  • Strengthening Chile’s R&D Law by tripling its upper tax credit threshold, and
  • Publication of Public Environmental Baselines to facilitate environmental assessment processes and standardize available information, among others.

Other highlighted actions include:

  • Action 12: Strengthening Production Development Corporation (CORFO) development instruments with a focus on H2V
  • Action 13: Boosting domestic demand for H2V in relevant sectors through an Emissions Trading System (ETS)
  • Action 23: Adopting international reference standards not presently covered by Chilean regulations for the environmental assessment of projects
  • Action 29: Promoting specific and enabling regulations for seawater desalination
  • Action 30: Strengthening public services in charge of delivering permits for the development of Chile’s green hydrogen industry, and establishing an implementation route with a regional focus
  • Action 35: Updating regulations related to territorial compatibility with Chile’s green hydrogen industry
  • Action 49: Implementing green hydrogen, ammonia, and other derivatives projects within the electricity markets to provide services related to energy and capacity, as well as complementary services

For more information, please contact the authors.

Leer este artículo en español.

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CNX plans $1.5B hydrogen fuels plant at Pittsburgh airport, but wants federal tax credit to build it

business plan for hydrogen production

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HARRISBURG, Pa. (AP) — Natural gas producer CNX Resources said it plans to build a $1.5 billion facility at Pittsburgh’s airport to make hydrogen-based fuels, but only if President Joe Biden’s administration allows coal mine methane to qualify for tax credits that are central to the Democrat’s plan to fight climate change.

The proposed facility has the backing of Pittsburgh-area labor unions, which hope to fill thousands of construction jobs, and top Pennsylvania officials, including U.S. Sen. Bob Casey. But it is likely to face scrutiny from clean energy and climate change activists.

The announcement comes as Biden’s administration decides how to tailor billions of dollars in tax credits in a massive effort to build out a hydrogen industry to be a cleaner alternative to fossil fueled energy and slash planet-warming greenhouse gas emissions.

CNX said the facility would remove a potent greenhouse gas from the atmosphere — methane vented from coal mines — and blend it with natural gas to produce enough hydrogen-based airline fuel to supplant almost all of the jet fuel consumption at Pittsburgh International Airport.

“We want to produce our gas here, use it here to solve complex problems and this is one of those that addresses a really hard problem to solve: decarbonizing aviation is a challenge,” said Ravi Srivastava, CNX’s president of new technologies.

CNX’s partners include the airport and KeyState Energy, which is building a facility in northern Pennsylvania to produce hydrogen from natural gas.

Darrin Kelly, president of the Allegheny/Fayette Central Labor Council, called it the “most significant energy project” in years in a region where many boosters have hoped a natural gas boom would reindustrialize an economy battered by the collapse of coal and steel.

Climate change activists don’t want coal mine methane and other fossil fuels to qualify for the tax credits.

They don’t like coal mine methane escaping into the atmosphere, but producing hydrogen from fossil fuels, instead of from carbon-free electricity, would undermine the purpose of the entire hydrogen program to displace fossil fuels, they say.

“I fear that if we take this path, we’ll look up a decade down the line and see we’ll have just poured hundreds of billions of taxpayer dollars into something that is not clean and does not move us in the right direction,” said Julie McNamara, a senior energy analyst at the Union of Concerned Scientists.

Lobbying is heavy over the final rule, giving Biden a political hot potato in a premier battleground state with fewer than six months until November’s election.

The Treasury Department hasn’t said when it will publish a final rule, and nothing may happen before the election.

A final rule could determine how qualifying hydrogen projects must calculate their emissions and direct billions of public tax dollars on a sliding scale. Qualifying projects with the lowest emissions scores would get bigger tax credits.

As part of that, the department could determine whether a project can use coal mine methane as a feedstock. The federal government considers methane capture to have a negative emissions score, which helps lower the emissions score of a project that also uses natural gas a feedstock.

CNX could draw natural gas from below the airport and it has the rights to capture methane from coal mines in northern Appalachia.

Methane from operating and shuttered coal mines is normally vented straight into the atmosphere. Capturing it requires expensive equipment and there are no regulatory requirements or incentives to capture it.

The tax credit, however, makes methane capture economically viable as part of a project “that is checking all the boxes when it comes to economy, jobs and climate that the law was intending to check,” CNX’s CEO Nicholas DeIuliis said.

The project isn’t financially viable without a tax credit to price the aviation fuel competitively, CNX officials said.

The draft regulation for the tax credits — part of Democrats’ Inflation Reduction Act passed in 2022 — was published in December. At the time, the Treasury Department said it anticipated a final rule would allow “hydrogen production pathways” using coal mine methane.

Administration officials estimate the hydrogen production credits will help the U.S. produce 50 million metric tons of hydrogen by 2050.

Hydrogen is being developed around the world as an energy source and can be made by splitting water with solar, wind, nuclear or geothermal electricity, yielding little if any greenhouse gases.

Most hydrogen today is made from natural gas. About 10 million metric tons of hydrogen is currently produced in the United States each year, primarily for petroleum refining and ammonia production.

Follow Marc Levy at twitter.com/timelywriter .

MARC LEVY

Delta joins ATL, Airbus, Plug Power in hydrogen fuel study

Delta's first A321neo arrives in Atlanta

Hartsfield-Jackson Atlanta International Airport (ATL), Airbus, Delta Air Lines and Plug Power have joined forces to assess the feasibility of hydrogen fueling at the world’s busiest airport in support of advancing a more sustainable future for travel.  

The study will help define the infrastructure, operational viability, and safety and security requirements needed to implement hydrogen as a potential fuel source for future aircraft operations at ATL. It will also contribute to the understanding of supply and infrastructure requirements for hydrogen hubs at airports worldwide.  

The use of hydrogen to power future aircraft models could ultimately eliminate aircraft carbon dioxide emissions in the air while also decarbonizing air transport activities on the ground – a top priority for all of the partners as they work toward the decarbonization of the aviation industry. 

An infographic showing how airports will look in the future with hydrogen operations

While the Atlanta-based study preliminarily launched earlier this year, it is one of three that Airbus announced with partners May 21 . The study in Atlanta is scheduled for completion at the end of 2026. 

“Hartsfield-Jackson has long been a leader in the commercial aviation industry, and it only makes sense that we help lead this effort,” said ATL Senior Deputy General Manager Michael Smith. “If hydrogen proves to be a viable alternative, ATL will investigate options to update infrastructure needs in order to implement the new technology. We are thrilled to participate in this study and look forward to the results.”  

As part of the study, ATL is providing the current airport layout plan and organization and will share updates on future developments and findings. 

Airbus launched the Hydrogen Hub at Airports program to jumpstart research into infrastructure requirements and low-carbon airport operations across the entire value chain. To date, agreements have been signed with partners and airports in thirteen countries including Canada, France, Germany, Italy, Japan, New Zealand, Norway, Sweden, Singapore, South Korea, Sweden, the United Kingdom and the U.S.  

“The U.S. has easy and massive access to additional renewable energies to produce green hydrogen, and airports are looking for a diverse and balanced energy mix to be more resilient and help reduce the impact of aviation on the environment. Hydrogen is a key enabler for this,” said Karine Guénan, Airbus’ Vice President ZEROe Ecosystem. “The journey to prepare airport infrastructure to support hydrogen and low carbon aviation begins on the ground with pre-feasibility studies like this one, working with pioneer players like Delta, Plug and the world’s busiest airport.” 

Delta is the largest airline operating at the world’s busiest airport, and offers one of the largest commercial airline schedules globally. It has been a core partner in the Airbus ZEROe program since 2022, when it signed on to provide expertise to identify fleet and network expectations, and the operational and infrastructure requirements needed to develop commercial aircraft powered by hydrogen fuel. Delta’s Chief Sustainability Officer Amelia Deluca said this study is part of Delta’s ongoing commitment and that no one company can solve the industry’s sustainability challenges alone.  

“All aviation stakeholders need to explore new paths in every direction today for the industry to achieve a more sustainable future for travel by 2050,” she said. “While we work to scale sustainable aviation fuel to power today’s aircraft, hydrogen is a key element to unlocking the decarbonized future of flight and the next generation of aviation. That’s why we are on this journey to help map the industry’s hydrogen blueprints with partners who share our passion for connecting the world.”  

Plug Power is a leading provider of equipment and end-to-end, turnkey solutions for the global green hydrogen economy. The company is building an end-to-end green hydrogen ecosystem including the manufacture of electrolyzers, fuel cells and hydrogen facilities across the United States to decarbonize a variety of industrial, transportation and energy needs and applications worldwide. 

“We believe the potential to decarbonize aviation with green hydrogen is substantial,” noted Plug CEO Andy Marsh. “We are pleased to contribute our expertise in hydrogen infrastructure and applications development to this pioneering effort at Hartsfield-Jackson Atlanta International Airport. We have a ready-made supply of green hydrogen to support the airport from our new Woodbine, Georgia, production plant, the largest green hydrogen plant in the U.S.” 

  • Sustainability , Hartsfield-Jackson Atlanta International Airport (ATL) , Airbus

business plan for hydrogen production

Hyundai's new supercar doubles down on its commitment to hydrogen

S outh Korean automaker Hyundai  ( HYMTF )  is looking to expand beyond EVs for its zero-emission future, with new reports saying that it seeks to prove the worth of a new 'clean' fuel with a sleek, new supercar. 

Related: Honda brings powerful hybrid tech to a beloved model

As per a new reports in The Korean Economic Daily (한국경제, or Hankyung) and its English-language counterpart , Hyundai is set to bring its much-buzzed N Vision 74 concept car into production as a low-volume, hydrogen-powered supercar. 

Codenamed 'N74' by the automaker, sources who spoke to Hankyung said that the future 2-seater supercar will look just like the retro-cyberpunk concept that wowed spectators at the world's auto shows and on social media, complete with cool touches like DeLorean-style gullwing doors.

An official at an unnamed supplier for Hyundai told Hankyung that they were notified that Hyundai planned to put the car into production in small numbers, specifically "only 100 units annually for two years" starting in June 2026. Another unnamed supplier told the Korean financial publication that they are in the process of producing components for the hydrogen-powered supercar, and expects to finish the order by July 2024. 

Powering Hyundai's new ride is a combination of a hydrogen fuel cell and a 70-kWh battery pack powering two electric motors. Together, they are expected to make upwards of 764 horsepower (570kW), sending the car from 0-60 mph in less than 3 seconds. 

More Business of EVs:

  • Tesla makes another harsh last-minute decision, frustrating students
  • Forget Tesla's Supercharging, Polestar's new charging tech can charge even faster
  • EVs have a problem Ford's partner aims to fix

Hyundai's high-performance, hydrogen-powered wake up call:

In the past, automakers like Lexus, Ford and Honda have come up with "halo cars" to send a message to consumers and enthusiasts showing off the absolute limits of what automakers could do in terms of engineering and design. While Lexus's LFA, Ford's Ford GT and Honda's Acura NSX served its purpose as good looking, high-performance supercars, Hyundai's N74, or N Vision 74 is dead-intent on using its looks and performance to win hearts and minds over to its hydrogen plans.

According to the reports, Hyundai's goal with the limited-production car is to establish it as a "symbol" of the automaker's hydrogen ecosystem and what possibilities can be achieved using the novel "clean fuel."

Earlier this year during the Consumer Electronics Show in Las Vegas , Hyundai unveiled a broad strategy centered around hydrogen, specifically its production as hydrogen fuel, hydrogen storage, transportation and its use as a fuel throughout its affiliated businesses, including steelmaking. 

Related: Hyundai is switching lanes from EVs in a quest for another 'clean' fuel

In its bold plan, the South Korean automaker seeks to create an 'ecosystem' centered around harvesting the parts it needs for hydrogen fuel from sustainable sources and using them in critical places where it's needed. This includes harvesting hydrogen molecules from organic waste and microplastics, the development of PEM electrolyzers for hydrogen production, as well as using hydrogen to power critical use vehicles like fuel cell trucks at the Port of Oakland.

“It is said that the popularization of hydrogen is difficult. But we aim to make it with a sense of mission as someone has to do it and it will be taken away by someone if we don’t,” Hyundai Executive Chairman Chung Euisun said at CES.

With production limited to 200 units, and a reported asking price of a whopping $370,000, the gateway to hydrogen powered high-performance may be a tough sell unless you have deep pockets.

Hyundai Motor, trading under  ( HYMTF )  on OTC markets, stood at $60.45, up 3.81% at the time of writing Wednesday, May 22.

Related: Veteran fund manager picks favorite stocks for 2024

Hyundai N Vision 74

COMMENTS

  1. Catalyze the Clean Hydrogen Value Chain Using Business Model ...

    13 business models to expand the hydrogen value chain. Deloitte's research finds innovative, real-life business model solutions that can help address these uncertainties. ... This arrangement can reduce hydrogen producers' production and investment risk by giving them access to a vast pool of prospective buyers across the globe. 7. Redeploy ...

  2. Hydrogen applications and business models Going blue and green?

    hydrogen are oil refining and ammonia production, mainly for fertilizers (referred as A). 60% of the total hydrogen produced today is produced in dedicated hydrogen production plants (fossil fuel-based) which comes to around 70 Mt (referred as B). Hydrogen applications and business models 10

  3. Hydrogen production business model

    The business model will provide revenue support to hydrogen producers to overcome the operating cost gap between low carbon hydrogen and high carbon fuels. It has been designed to incentivise ...

  4. Catalyze The Clean Hydrogen Value Chain Using Business Model Innovation

    Geoff Tuff. Sustainability and Climate Leader for Energy, Resources & Industrials | U.S. Hydrogen Practice Leader. [email protected]. +1 617 437 3863. Geoff has more than 30 years of experience consulting to some of the world's top companies on the subjects of growth, innovation, and adapting business models to deal with change.

  5. The Green Tech Opportunity in Hydrogen

    THE HYDROGEN VALUE CHAIN. Hydrogen's potential for decreasing GHG emissions is high. By 2050, GHG emissions could be reduced by 5 to 6 gigatons annually through applications such as the substitution of clean H 2 for base chemical production and refinery, the use of fuel cells in heavy vehicles, and as a reduction agent in the iron and steel ...

  6. Business Opportunities in Low-Carbon Hydrogen

    The current market for hydrogen is about 115 million metric tons, but Bain's research estimates this could increase to 300 million metric tons by 2050, with the low-carbon component growing from virtually nonexistent to most of the supply. (For more on the developing market for hydrogen, see " Five Imperatives to Thrive in a Hydrogen Future.")

  7. PDF HYDROGEN STRATEGY

    Global hydrogen production is approximately 70 MMT, with 76% produced from natural gas via SMR, 22% through coal gasification (primarily in China), and 2% using electrolysis (see Figure 3). Figure 3. U.S. and Global Production of Hydrogen SMR is a mature production process that builds upon the existing natural gas pipeline delivery infrastructure.

  8. Catalyzing the Shift to Clean Hydrogen with Business Model Innovation

    In Catalyzing the Clean Hydrogen Economy Using Business Model Innovation, we highlight 13 innovative business model solutions that the private sector can use to reduce risk, alleviate first-mover concerns, and help the clean hydrogen economy gain traction. Here, we detail five of those business models that could have the greatest near-term impact:

  9. PDF Green Hydrogen for Industry

    The European Commission "Fit for 55" proposal package includes targets that would give a significant boost to the development of green hydrogen in industry. The target is to have a 50% green share in total hydrogen consumption by industry - or around 5 Mt - by 2030. Binding quotas move the implementation of targets.

  10. The Future of Hydrogen

    Supplying hydrogen to industrial users is now a major business around the world. Demand for hydrogen, which has grown more than threefold since 1975, continues to rise - almost entirely supplied from fossil fuels, with 6% of global natural gas and 2% of global coal going to hydrogen production.

  11. Creating the Business Case for Hydrogen

    When it comes to anything new and pioneering, in many cases investment needs to be staggered over time as return and realities become more evident. Creating and aligning with hydrogen hubs and owning a portion of the value chain can help de-risk the demand side of the project. 5. Stakeholder engagement success.

  12. Business model and planning approach for hydrogen energy systems at

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  13. Business models for low carbon hydrogen production

    The report identifies possible options for low carbon hydrogen production. The report will be of interest to: investors and developers of potential hydrogen projects. the energy sector. industry ...

  14. Hydrogen Production

    The overall challenge to hydrogen production is cost. DOE's Hydrogen and Fuel Cell Technologies Office is focused on developing technologies that can produce hydrogen at $2/kg by 2026 and $1/kg by 2031 via net-zero-carbon pathways, in support of the Hydrogen Energy Earthshot goal of reducing the cost of clean hydrogen by 80% to $1 per 1 ...

  15. PDF How to evaluate the cost of the green hydrogen business case?

    The industrial sector are beginning to develop strategies and explore site specific decarbonisation options and hydrogen can be a key component as a fuel, high temperature heat, and as a feedstock in industries such as ammonia, methanol, and refineries. The EU's carbon-free hydrogen targets are a key pillar in the European industry's ...

  16. PDF 100 Mw Green Hydrogen Production in A Replicable and Scalable

    plan for the demonstration and Task 5.2: Business plan, hydrogen off-take and financing. A case study shows that the levelized cost of hydrogen (LCOH) can be reduced by 17% (from 4.8 to 4.1 €/kg) when the offshore hydrogen production plant is scaled up from 2 GW to 4 GW under the case study assumptions.

  17. U.S. unveils hydrogen fuel tax credit plan to jump-start the industry

    Administration officials estimate the hydrogen production credits will deliver $140 billion in revenue and 700,000 jobs by 2030 — and will help the U.S. produce 50 million metric tons of ...

  18. Global Energy Perspective 2023: Hydrogen outlook

    The Global Energy Perspective 2023 models the outlook for demand and supply of energy commodities across a 1.5°C pathway, aligned with the Paris Agreement, and four bottom-up energy transition scenarios. These energy transition scenarios examine outcomes ranging from warming of 1.6°C to 2.9°C by 2100 (scenario descriptions outlined below in sidebar "About the Global Energy Perspective ...

  19. Hydrogen Supply Outlook 2024: A Reality Check

    Most policies favor green H2 production but economics, demand from Asia and a mature project pipeline will support large volumes of blue H2 as well. The US is expected to become the single largest producer of clean H2 by 2030, accounting for almost 37% of global supply. The US hosts the most mature project pipeline globally, dominated by big ...

  20. PDF GREEN HYDROGEN

    hydrogen, both as pure hydrogen and as a P2G fuel, will account for about 16 percent of customer deliveries by 2050. The Climate Business Plan incorporates conservative cost and market share. It assumes a cost of $20 per MMBtu, by 2050, with methanized hydrogen available at $2 more per MMBtu. In contrast, Bloomberg News estimates

  21. Energy Department Releases its Hydrogen Program Plan

    WASHINGTON, D.C. - Today, the U.S. Department of Energy (DOE) released its Hydrogen Program Plan to provide a strategic framework for the Department's hydrogen research, development, and demonstration (RD&D) activities.. The DOE Hydrogen Program is a coordinated Departmental effort to advance the affordable production, transport, storage, and use of hydrogen across different sectors of the ...

  22. How to evaluate the cost of the green hydrogen business case?

    Hydrogen will play a key role in the energy transition in the coming decades. Billions will be invested in the coming years to scale up green hydrogen production. This requires investors to have a good overview of all the requirements in the business case. But how do you assess a business case that barely exists on a commercial scale?

  23. H2A: Hydrogen Analysis Production Models

    The Hydrogen Analysis (H2A) hydrogen production models and case studies provide transparent reporting of process design assumptions and a consistent cost analysis methodology for hydrogen production at central and distributed (forecourt/filling-station) facilities. The H2A central and distributed hydrogen production technology case studies ...

  24. BUSINESS PLANS FOR HYDROGEN ENERGY DEVICES Content list

    Power Assets Holdings Limited (PAH), a global investor in energy and utility-related business, has identified a hydrogen economy as a strategic vision in its business plan for zero carbon ...

  25. Chile's Ministry of Energy publishes Green Hydrogen Action Plan 2023

    The plan aims to establish a roadmap of milestones and actions that will be executed between 2023 and 2030 to develop a sustainable green hydrogen industry, including its derivatives and the entire value chain. Its objectives closely align with those of Chile's National Energy Policy (2022) and the National Green Hydrogen Strategy (2020).

  26. World's highest-efficiency hydrogen system scales up for mass production

    The company has raised US$111 million to scale up production. Hysata promises the world's cheapest hydrogen, thanks to a remarkable device that splits water into H2 and O2 at 95% efficiency ...

  27. CNX plans $1.5B hydrogen fuels plant at Pittsburgh airport, but wants

    HARRISBURG, Pa. (AP) — Natural gas producer CNX Resources said it plans to build a $1.5 billion facility at Pittsburgh's airport to make hydrogen-based fuels, but only if President Joe Biden's administration allows coal mine methane to qualify for tax credits that are central to the Democrat's plan to fight climate change.. The proposed facility has the backing of Pittsburgh-area labor ...

  28. Multi-period, multi-timescale stochastic optimization model for

    Given the steep rises in renewable energy's proportion in the global energy mix expected over several decades, a systematic way to plan the long-term deployment is needed. The main challenges are how to handle the significant uncertainties in technologies and market dynamics over a large time horizon. The problem is further complicated by the fast-timescale volatility of renewable energy ...

  29. Delta joins ATL, Airbus, Plug Power in hydrogen fuel study

    Hydrogen is a key enabler for this," said Karine Guénan, Airbus' Vice President ZEROe Ecosystem. "The journey to prepare airport infrastructure to support hydrogen and low carbon aviation begins on the ground with pre-feasibility studies like this one, working with pioneer players like Delta, Plug and the world's busiest airport."

  30. Hyundai's new supercar doubles down on its commitment to hydrogen

    With production limited to 200 units, and a reported asking price of a whopping $370,000, the gateway to hydrogen powered high-performance may be a tough sell unless you have deep pockets.