Shell and the Dutch gas company Gasunie announced plans on Thursday to build the world's largest green hydrogen plant.

Hydrogen gas is a common industrial input, used to make ammonia, steel, and other commodities.

It could also be used to produce clean fuel for cars and homes and as a way to store renewable energy on the grid.

Most hydrogen comes from fossil fuels, but you can also make it using renewable energy — that's what makes so-called green hydrogen.

Here's everything you need to know about the booming hydrogen industry.

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Over the next decade, Shell and the Dutch gas company Gasunie are planning to build the world's largest green hydrogen plant, the companies announced on Thursday.

Based in the Netherlands, the plant will use "very significant wind farms" to power electrolyzers that generate the gas. A local company, Groningen Seaports, is also a part of the project.

The resulting hydrogen will be "green" because it comes from renewable energy and not fossil fuels — which are the source of most hydrogen today.

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According to the announcement, the plant could produce as much as 800,000 metric tons of hydrogen a year by 2040. That would cut carbon dioxide emissions by roughly 7 megatons a year, the companies said.

But what exactly is hydrogen gas, and why is everyone talking about it?

Business Insider did a deep dive into the hydrogen market, which is set to soar. It's worth an estimated $145 billion today and growing at a rate of 25%, according to Cleantech Group. The industry group Hydrogen Council said in a 2017 report that the annual demand for hydrogen could increase tenfold by 2050.

This story was originally published on January 27. It was updated to reflect Shell's plans to build the world's largest green hydrogen plant.

The most abundant element in the universe

Perched in the top left corner of the periodic table, Hydrogen is the world's lightest element. It's also the most abundant, making up about three-quarters of all mass in the universe.

Hydrogen's prevalence and properties have made it one of the most commercially important elements on the planet.

We've long used hydrogen to power lamps and combustion engines, and to make blimps float. You've probably heard of the Hindenburg, the German zeppelin that exploded in 1937 when the flammable gas combusted.

In more modern times, hydrogen is better known as an industrial feedstock. It's a key building block of chemicals like ammonia, and it's used widely in the refining business.

But hydrogen has promised to do so much more.

It can be used to produce clean energy, typically producing only water as a byproduct. That is what propelled the gas to prominence in the 1970s, following petroleum shortages and growing pollution concerns, according to the International Energy Agency.

But hydrogen-based fuels failed to take off then — as well as a few times since, such as in the early 2000s, when hydrogen-powered cars seemed poised to become the next big thing. Each time, the public's interest in hydrogen waned when oil became cheaper and more abundant, the IEA says.

The global demand for pure hydrogen has been rising since 1975. Shayanne Gal/Business insider Now with the help of Shell and other energy giants, interest in hydrogen is cresting once again — not just in fuel cells but in the promise of green hydrogen, which could help reduce emissions from carbon-intensive industries. And this time, analysts and industry experts think it will stick.

'We live in a hydrogen economy and don't know it'

We use a lot of hydrogen already — about 70 million metric tons each year, according to the IEA. Nearly all of that goes toward the production of a handful of industrial commodities including ammonia, in addition to refined oil, methanol, and steel.

"We live in this hydrogen economy and don't know it," said Kevin Harrison, a senior engineer at the National Renewable Energy Lab.

But here's the thing: While hydrogen is abundant and all around us, you can't just pull it out of thin air.

What you can do is pull it out of water, through a process known as electrolysis. The issue is that electrolysis takes a lot of energy and can be expensive.

A cheaper option is to extract hydrogen from fossil fuels. And that's exactly what we do. Nearly all of the hydrogen we use is produced with methane, natural gas, or coal, according to the US Energy Information Administration.

As a result, the hydrogen industry is a hefty polluter. It's responsible for releasing about 830 million metric tons of carbon dioxide each year — or about the same as the UK and Indonesia combined, according to the IEA.

But there is an alternative. It's called green hydrogen.

Sunfire's hydrogen electrolyzer. The company is one of a handful of startups in the fast-growing green-hydrogen industry. Sunfire

Greening the hydrogen industry

Electrolysis, while expensive, is appealing to an industry trying to reduce its carbon footprint.

If you operate electrolysis technology using renewable energy sources like wind turbines, you can create clean hydrogen — aka "green hydrogen."

Until recently, renewable energy was far more expensive than fossil fuels, so using it to split hydrogen was impractical.

But that's starting to change. The cost of solar panels has dropped by about 80% since 2009, and wind turbines are now 30% to 40% cheaper, according to the International Renewable Energy Agency.

"Deploying electrolyzers that make green hydrogen out of wind and solar electricity is becoming more and more cost-effective," Harrison said.

Plus, renewable-energy operators are searching for technologies that allow them to store a surplus of energy. Converting that energy to hydrogen through electrolysis is essentially a way to store it, as hydrogen can later be converted back into electricity.

"If we want more wind and solar on the grid, you're going to need a place to put that electricity when it's not being used," Harrison said.

There's another reason the market for green hydrogen is set to grow: Even if we switch to renewable power, some industries will still be carbon-intensive, says Eric Ingersoll, a hydrogen market expert and managing director of the clean-energy consulting firm LucidCatalyst.

Sourcing green hydrogen is a relatively easy way for industries to minimize their footprints.

"In some ways, we're making a lot of progress with renewables, but we're not making the kind of progress we need with overall decarbonization," Ingersoll said. "People are starting to realize now that we need to have very practical solutions that can decarbonize our existing infrastructure."

The world's first hydrogen train, Coradia iLint, developed by the rail giant Alstom. Alstom

Experts say hydrogen fuel cells will power future heavy-duty vehicles

Green hydrogen isn't just cleaning up an industry feedstock. Experts say it could also accelerate clean transportation— as it has promised to do in years past — through the application of hydrogen fuel cells.

Fuel cells are basically batteries. Through a reaction involving hydrogen and oxygen, they produce electricity, with water as the main byproduct.

Like batteries, fuel cells can power electric motors. Plus, they have numerous important benefits, such as charging quickly, Harrison said.

He said you could fill a fuel-cell vehicle in three to five minutes and drive 300 to 400 miles on a single charge.

There are some hydrogen vehicles cruising the streets of the US, and some automotive giants are now increasing production, according to Pierre-Etienne Franc, a cosecretary of the Hydrogen Council.

But they haven't caught on like traditional electric vehicles, largely because of the cost of building out fueling infrastructure — and of buying and maintaining the cars.

Both the Toyota Mirai, a sedan, and the Hyundai Nexo, a compact SUV, start at about $58,000, for example, and it costs the equivalent of about $5.60 a gallon to fill up in California, which is more than the price of gasoline.

More likely, experts say, is that hydrogen cells will take off in heavy-duty vehicles, such as long-distance trucks, trains, and forklifts.

Harrison says it comes down to size and scale: You can scale up hydrogen fuel cells at a reasonable cost, especially where space is less of a constraint. Lithium-ion batteries, on the other hand, become too expensive if you're trying to power something heavy for a long time.

Put another way: "The heavier the load, the longer the autonomy, and the bigger the hours you use, the more you need hydrogen," Franc said.

The applications of fuel cells don't stop at transportation. Experts say they could also be used to electrify and warm homes — a byproduct of the fuel-cell reaction, other than water, is heat — and store energy on the grid for long periods. But these technologies are expensive and may take longer to gain a foothold, they said.

Turning green hydrogen into natural gas

With a little creativity, you can also use hydrogen to make what Harrison calls "renewable" natural gas.

Through a process called biomethanation, hydrogen is combined with the carbon from carbon dioxide. If the hydrogen is green and the carbon dioxide is recycled (through carbon capture), the resulting gas is carbon-neutral, he says.

This gas is no different from what's already flowing through pipes to homes and businesses, he says, and it could also be used as a fuel for transportation.

According to the International Energy Agency, hydrogen can also be blended into natural gas. That would reduce emissions, as a smaller portion of the gas would be carbon-based.

But experts Business Insider talked to were skeptical of this approach. For one, they said, hydrogen could degrade our existing pipes.

"You can theoretically only inject around 20% of hydrogen into a natural gas network before you start dealing with degradation issues in the pipes," Louis Brasington, an energy analyst at Cleantech Group, said. "Unless the power-to-gas blending issues and the challenges occurring around pipe degradation are solved, you're not going to convince a lot of the investors to get involved with those kinds of projects in the near term."

2 major challenges hold back hydrogen

With such a wide range of clean-tech applications, it seems surprising that green hydrogen isn't already a big part of the economy. Until you learn about two big challenges to adoption.

The most obvious problem is that it's difficult to transport. This is a little counterintuitive, considering hydrogen is the lightest element on Earth. But in fact, that's the problem: While hydrogen has more energy per unit of mass — compared with, say, natural gas — it's so lightweight that you need a really large volume of it to meet the same energy demands as carbon alternatives.

"Even when it's compressed, it takes up quite a lot of space," Ingersoll said.

Pressure is another challenge, especially if you're trying to scale up fuel-cell vehicle infrastructure.

"You're now needing new storage tanks," Harrison said, mentioning that they'd have to be above ground. "I think the biggest challenge is with fueling infrastructure. It costs between $1 million and $2 million to retrofit each fueling station to contain hydrogen."

Another option is to turn the hydrogen gas into a liquid — which is much more compact. The downside is that it requires about 15% of hydrogen's energy content just to do that, Ingersoll said, making the process less efficient.

The second challenge is cost. While the price of renewable energy is tumbling, electrolysis still isn't cheap. Extracting hydrogen from fossil fuels is cheaper, for now.

The liquid hydrogen carrier developed by the German startup Hydrogenious. Hydrogenious

A bright future for hydrogen

At least one of the barriers to hydrogen appears to be shrinking: On Monday, the Hydrogen Council released a report projecting that the cost of hydrogen would fall by up to 50% in the next decade "for a wide range of applications."

"What's really missing for those applications to reach competitiveness is not so much technology," Franc said. "It's scale. If you bring scale, then you bring those technologies to a level where they are competitive to the existing fossil solutions."

Startups are chipping away at the other big challenge — transport and storage. A company called Hydrogenious, for example, is developing an advanced liquid hydrogen carrier. The startup's tagline is "Hydrogen handling made easy."

There are now about 50 "targets, mandates, and incentives" in place, globally, that "support hydrogen deployment," according to Cleantech Group.

Coupled with falling costs, rising innovation, and the climate crisis, green hydrogen just might be poised to finally enter the mainstream.