Underpinned by a global shift of regulators, investors, and consumers toward decarbonisation, hydrogen (H2) is receiving unprecedented interest and investments. At the beginning of 2021, over 30 countries have released hydrogen roadmaps, the industry has announced more than 200 hydrogen projects and ambitious investment plans, and governments worldwide have committed more than USD 70 billion in public funding. This momentum exists along the entire value chain and is accelerating cost reductions for hydrogen production, transmission, distribution, retail, and end applications. Similarly, having grown from 60 to over 100 members since 2020, the Hydrogen Council now represents more than 6.6 trillion in market capitalisation and more than 6.5 million employees globally.

With the advent of hydrogen giga-scale projects, hydrogen production costs can continue to fall. For renewable hydrogen, the biggest driver is a quicker decline in renewables costs than previously expected, driven by at-scale deployment and low financing costs. 2030 renewable costs could be as much as 15% lower than estimated just a year ago. The strongest reductions are expected in locations with optimal resources such as Australia, Chile, North Africa and the Middle East. But lower renewable costs are not enough: for low-cost clean hydrogen production, value chains for electrolysis and carbon management need to be scaled up. This will not happen on its own: a further step-up of public support is required to bridge the cost gap, develop low-cost renewable capacities and scale-up carbon transportation and storage sites. Such a scale-up will lead to a rapid industrialisation of the electrolyser value chain. The industry has already announced electrolyser capacity increases to over approximately 3 GW per year and will need to scale rapidly beyond that. This scaling can translate into system costs falling faster than previously estimated, hitting USD 480-620 per kilowatt (kW) by 2025 and USD 230-380 per KW by 2030.

In the short- to medium-term, the most competitive setup for large-scale clean hydrogen applications involves co-locating hydrogen production on- or near-site. The industry can then use this scaled production to supply the fuel to other hydrogen users in the vicinity, such as refueling stations for trucks and trains, and smaller industrial users. Trucking the fuel to such users typically offers the most competitive form of distribution, with costs below USD 1 per kg of H2. For longer-distance transport by ship, hydrogen needs to be converted to increase its energy density. The cost-optimal solution depends on the targeted end-use, with deciding factors including central versus distributed fueling, the need for reconversion, and purity requirements.

In UK, following a record-breaking heatwave and a High Court ruling that the government’s Net Zero strategy breaches its obligation under the Climate Change Act, it is timely that BEIS (Department for Business, Energy and Industrial Strategy) has just published a suite of hydrogen-related policy updates designed to put more meat on the bones of the Hydrogen Strategy. The update marked the launch of allocation round for green hydrogen projects to receive revenue support under the Hydrogen Business Model, with a joint application window available for those seeking capital support from the Net Zero Hydrogen Fund. As one of the world’s leading support schemes, this is a historic moment for the UK hydrogen economy that will fund an initial 1GW of green hydrogen projects by 2025, as well as helping mobilise thousands of jobs up to £9bn of expected private capital needed to hit 10GW of low carbon hydrogen by 2030. However, a more meticulous approach to policy is needed, which the government has recognised by publishing the Sector Development Action Plan and the first of many planned updates to the Hydrogen Strategy. Alongside this, it announced the appointment of the UK’s first Hydrogen Champion for Industry, Johnson Matthey’s Jane Toogood, who will help coordinate industry investment and deployment.