The falling cost of making hydrogen from wind and solar power offers a promising route to cutting emissions in some of the most fossil fuel-dependent sectors of the economy, such as heavy-duty vehicles and shipping.

Hydrogen Economy Outlook, a new study from research firm BloombergNEF (BNEF), finds that clean hydrogen could be deployed in the decades to come to cut up to 34% of global greenhouse gas emissions from fossil fuels and industry – at a manageable cost. However, this will only be possible if policies are put in place to help scale up the technology and drive down costs.

The report’s findings suggest that renewable hydrogen could be produced for $0.80 to $1.60/kg in most parts of the world before 2050.

“Hydrogen has the potential to become the fuel that powers a clean economy,” says Kobad Bhavnagri, head of industrial decarbonization for BNEF and lead author of the report.

“In the years ahead, it will be possible to produce it at low cost using wind and solar power, to store it underground for months, and then to pipe it on-demand to power everything from ships to steel mills,” he adds.

Hydrogen is a clean-burning molecule that can be used as a substitute for coal, oil and gas in a large variety of applications. But for its use to have net environmental benefits, it must be produced from clean sources, rather than from unabated fossil fuel processes – the usual method at present.

But right now, the outlook for a hydrogen economy is still uncertain, as there is insufficient policy to support investment and to scale up the industry, according to the BNEF study. Carbon prices and emission policies will still be essential to drive hydrogen use, particularly in locations with very cheap coal and gas. Despite the potential cost reductions, hydrogen must still be manufactured – so it is likely to remain a more expensive form of energy. The industry will not automatically switch to using it – a commitment to net-zero emissions is required.

To read the full press release of BloombergNIF’s Hydrogen Economy Outlook report, click here.