Hydrogen is the most abundant chemical substance in the universe and the lightest element in the periodic table. As the world struggles fight the growing climate emergency, such a vast resource could help some impactful technologies decarbonise the global economy.
However, while there are numerous potential applications for hydrogen, costs are still high. Not all technologies are mature enough to be applied across the global economy, implying that there are tipping points ahead.
The hydrogen spectrumAlthough colourless, hydrogen can be categorized into grey, blue and green hydrogen. Grey hydrogen is generated via fossil fuels, usually natural gas. So is blue hydrogen, although the CO2 emitted is captured via carbon capture and storage (CCS) technologies. Green hydrogen is generated via renewable energy, mostly wind and solar.
Both blue and green hydrogen find numerous applications in a low-carbon economy, which puts these technologies on the radar of investors. Converting hydrogen into electricity can take place via a hydrogen fuel cell (HFC), which consumes hydrogen and oxygen. When a fuel cell is continuously supplied with hydrogen and oxygen, the fuel cell can generate electricity with water (H2O) as the only by-product.
In a low-carbon economy, hydrogen can be used in a number of ways. Three of these applications stand out: storage, transportation and materials.
Firstly, hydrogen can be used to store electricity in times of excess production from wind and solar. As such, hydrogen storage could offer a potential solution to the problem of intermittency of electricity from solar and wind, which is one of the key roadblocks for faster uptake of these technologies. However, production costs of green hydrogen are still higher than alternatives using gas (and CCS) (see chart). Moreover, the resulting transportation of hydrogen would require significant investment in infrastructure before becoming economically viable.
The second application of hydrogen is in mobility. Although economies of scale favour applications of hydrogen in heavier vehicles such as trains, ships and heavy duty trucks, it is also being used in passenger vehicles.
Much like battery electric vehicles (BEVs), hydrogen fuel cell electric vehicles (FCEV) require considerable infrastructure investment, particularly for charging stations. However, with faster charging times and longer average range than BEVs, FCEVs could outclass BEVs assuming that large scale production further reduces current production costs and that sufficient charging infrastructure is put in place.
Thirdly, high-pollution sectors such as steel and aluminium could benefit from a shift towards heavier use of hydrogen during the production process. Replacing existing blast furnaces with a direct reduction process, including hydrogen and electric arc furnaces, could become a cost-competitive, lower-carbon way of producing steel and aluminium during times when carbon prices (particularly in Europe) are set to rise.
We believe hydrogen-based technologies will play a critical role in the transition to a low carbon economy, with potential applications across large parts of the global economy. But as these technologies come of age, identifying the tipping points ahead will be crucial when separating the winners from the losers in a low-carbon world.
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