Pathways to decarbonisation episode four: the promise and challenges of green hydrogen

Green hydrogen could make a considerable contribution to global decarbonisation efforts, especially in the “harder-to-abate” sectors such as steelmaking, other industrial processes requiring high heat, and heavy duty transport. As the EU’s Energy Commissioner Kadri Simson has argued, “Hydrogen is not an answer to all the questions on the clean energy system of the future, but it can answer some of the hardest”.¹ Indeed it can. But will it? And if so, where and when? That is the sequence of questions we aim to address below. 

The positive signposts are obvious. There is increasing confidence that 2020 may well be remembered as a watershed year for green hydrogen. We witnessed rising decarbonisation ambitions in key regions and loftier voluntary commitments by a rising number of influential global companies. Green stimulus packages were rolled out amidst the Covid-19 pandemic. The EU’s hydrogen strategy was announced. Electrolyser learning rates are now close to those achieved by wind power historically. Searches on Google for “green hydrogen” tripled from the 2019 level.²   

On the other hand, actual funds directed at hydrogen remain very small relative to total energy transition investments (a meagre $1.5bn out of ~$500bn in 2020 according to green think tank BNEF), logistical challenges in the prospective value chain are very real, and the standalone cost competitiveness of green hydrogen remains a huge challenge to surmount, with shortfalls across capex, opex, distribution and storage to overcome, in addition to questions of achieving ample electrolyser supply. And the relative level of social interest in green hydrogen, as proxied by Google searches once again, is still low, at less than one third of “carbon capture utilisation and storage” (CCUS)³, a competing technology for application in the harder-to-abate sectors of the energy and industrial system. The funding gap was somewhat less, but CCUS still attracted $3 billion in spending in 2020 according to BNEF, double the outlay on hydrogen.