#Hydrogen

Sustainability challenge and related SDGs:

The change to a low carbon economy requires decarbonisation of all sectors, including industry, transport, housing, and energy.  

The International Energy Agency (IEA) outlines in its 2050 scenario the changing energy supply and demand to achieve net-zero. The estimated energy supply is anticipated to rise by over 15% and the final consumption by over 20% by 2050.  While meeting increased demand for supply and consumption, energy production must be decarbonized, and the energy mix must become low carbon.

It means the energy mix will have to change dramatically, and the consumption of fossil fuels such as coal, oil, and gas must be phased out, while renewable energy and other low-carbon energy sources must be scaled up significantly. This shift and its respective challenges are described by the SDG 7 “Affordable and Clean Energy”.  

The IEA outlines that to achieve net-zero by 2050, no new oil and gas projects can be planned or developed, otherwise the remaining CO2 budget will be exhausted, and the climate target of 1.5 °C by the end of the century becomes impossible to achieve. The SDG 7 and climate change mitigation as described in SDG 13 “Climate Action” go hand in hand.

Possible solutions and their contribution to achieving the SDGs

#Hydrogen can be used as an energy carrier, some applications of hydrogen can accelerate the decarbonisation of the energy system and some hard-to-abate industrial sectors. It can be produced from hydrocarbon fuels or from electrolysis of water with electricity. According to the IEA, hydrogen can be burned or used in fuel cells to produce electricity and heat. Hydrogen can be distinguished as grey, blue, or green hydrogen. Grey hydrogen, in contrast to low-carbon hydrogen, is produced with fossil-fuels. Blue hydrogen is produced with fossil fuels and additionally carbon capture, storage and utilisation are employed. Green hydrogen is produced solely with renewable energy.  

On the pathway to decarbonisation, the benefit of low-carbon hydrogen (green or blue hydrogen) is that existing energy infrastructure for transmission and distribution, such as oil and gas pipelines, can be used. According to the IEA, the global hydrogen use is expected to double by 2030 to reach 200 Mt, and the share of low-carbon hydrogen is expected to increase from 10% in 2020 to 70% in 2030. According to the IEA, hydrogen could amount to 2% of electricity production worldwide, 1/3 of fuel trucks and over 60% of fuel consumption in shipping in 2050.  

According to Deloitte, hydrogen can be a substitute fuel on hard-to-abate sectors like some heavy industries or heavy-duty mobility. The high potential of clean hydrogen can be in the steel industry, ammonia, and methanol production as well as refining. Deep-sea shipping, aviation and heavy-duty long haul road freight might be further high potential areas of clean hydrogen. However, the projected global demand of clean hydrogen by 2030 as outlined by the IEA, outpaces announced clean supply capacity by 3x.  

Investment Rationale and Growth Potential

The development of clean hydrogen as an additional component to decarbonize specific industrial processes will become more important as the focus of net zero is moving to hard-to-abate sectors such as steel and cement production. Clean hydrogen can contribute towards a clean energy system in the future and is expected to grow in demand. As a result, clean #Hydrogen is increasingly on the agenda. This will make clean hydrogen a relevant component for the low carbon future and a viable market for future investments.

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