Several industries already use hydrogen gas in industrial processes, most commonly in the production of ammonia. Oil and gas companies also use hydrogen to remove sulfur from fuel. But currently, 96 percent of hydrogen production is derived from fossil fuels, primarily from methane but also from other natural gases, liquid hydrocarbon and coal.

But hydrogen can also be produced through a clean process called water electrolysis. In this method, a device called an electrolyzer degenerates water into hydrogen and oxygen molecules using an electric current from renewable sources. While this process is emissions-free, the cost of electricity—nearly half of the cost of the water electrolysis process—makes the method economically suboptimal in the short term.

However, the expanding availability of renewable sources of energy, including solar and wind power, could presage a sharp decline in the cost of electricity in the coming decade. As a result, it would make the production of hydrogen via the clean water electrolysis process a far more cost-efficient operation.



“As renewable energy capacity demand increases and prices drop, the cost of hydrogen production by 2030 could drop by 70% from current levels," says Carolina Dores, Co-head of the Morgan Stanley European Utility team. “The key to cost savings could be hydrogen production facilities built jointly with wind/solar farms, so producers could generate power without incurring grid fees, taxes and levies.”