The pressure on the energy industry to curb carbon emissions while simultaneously meeting growing global demand has drawn attention to alternatives to fossil fuels.

Of those alternatives, renewable energy is already making steady progress in electricity generation capacity, while another source of energy—hydrogen—is also gaining momentum and is being touted as a key fuel in the energy transition.

Hydrogen has the potential to become a key clean fuel source in the future that could help reduce greenhouse gas emissions—this could be the perfect solution to supplying growing amounts of low-carbon fuel and energy.

But not all hydrogen is created equal. There’s the so-called ‘grey’ hydrogen made from coal and natural gas, and this is nearly all the hydrogen currently produced in the world. Hydrogen production from natural gas emits CO2 every year equivalent to the CO2 emissions of the United Kingdom and Indonesia combined.

Then there’s ‘blue’ hydrogen, produced from natural gas with carbon capture and storage (CCS). Oil and gas supermajor BP says that blue hydrogen is currently the lowest-cost source of low carbon hydrogen at scale.

And finally, there’s the zero-emission hydrogen, the so-called ‘green’ hydrogen, produced using renewable energy with water electrolysis.

This is the hydrogen of the future and its development is set for a massive uptake in the next decade, enabled by ambitious climate goals and actions across major economies and by the continuously declining costs of renewables, proponents of the green hydrogen say.

Yet, massive investments and unprecedented policy support will be necessary to scale up green hydrogen production and make it cost-efficient.

According to the Hydrogen Council, a global CEO-level advisory body, the continuous scale up of hydrogen production and distribution could lead to a 50-percent decline in costs by 2030 for many hydrogen applications, making green hydrogen competitive with other low-carbon alternatives and, in some cases, even conventional options.

However, US$70 billion of investment will be needed to make hydrogen cost-competitive, the council says.

“Realising this ambitious vision for hydrogen’s role in the future of energy is far from automatic and requires investment above and beyond current commitments,” the Hydrogen Council said in its ‘Path to hydrogen competitiveness’ report last month.

In hydrogen production alone, achieving cost-competitive green hydrogen from electrolysis requires the deployment of aggregated 70 GW of electrolyser capacity, with an implied cumulative funding gap with ‘grey’ hydrogen production of U$20 billion. In transport and in heating for buildings and industry the investments needed are US$30 billion and US$17 billion, respectively, the report notes.

The cost of hydrogen is expected to drop drastically and imminently, and it’s up to policy-makers and investors to jump start this transition now, Hydrogen Council co-chairs Benoît Potier and Euisun Chung wrote last month.

While the US$70-billion investment in making hydrogen competitive looks huge, it is just a fraction of annual global spending on energy, accounting for less than 5 percent of that, Potier and Chung say.

A recent analysis by Wood Makenzie showed that green hydrogen costs could reach parity by 2030 in Australia, Germany, and Japan based on US$30 per megawatt-hour for renewables.

Globally, over US$3.5 billion worth of projects are in the pipeline for commissioning by 2025, WoodMac has estimated.

“Green hydrogen is a clean energy carrier and can decarbonise ‘difficult sectors’ such as steel, cement, chemicals, heating and heavy-duty trucking. It can also tackle the intermittency of renewables by diverting excess supply during the day to produce hydrogen that can be stored for use in the evening when demand is high,” Prakash Sharma, Head of Markets and Transitions in Asia Pacific at Wood Mackenzie, says.

The International Renewable Energy Agency (IRENA) believes that green hydrogen could play a central role in the global energy system and estimates that it could account for 8 percent of global energy consumption by 2050.

“Falling renewable power cost and falling capital cost for electrolyzers is creating an economic case for green hydrogen,” IRENA says.

Declining renewables costs and growing pressure for climate action could help the green hydrogen momentum going, but it will take a lot of investment and policy support to make green hydrogen a scaled-up competitive source of zero-emission energy.

By Tsvetana Paraskova for Oilprice.com

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