Hydrogen can be converted into electricity with only clean water and heat emitted. The colourless, odourless, non-toxic gas can be easily stored and shipped. It ought to be key in the transition to a low-carbon world. But today, 98 per cent of the pure hydrogen production involves carbon-intensive methods that use a natural gas or coal feedstock.

That is changing, however. Rising emphasis on decarbonisation is driving renewed interest in carbon-free hydrogen produced using electricity from renewables. Mass production and standardisation can cut the cost of the electrolysers used in producing ‘green’ hydrogen.

Hydrogen is an established fuel in the oil refining and chemical industries, which consume over 95 per cent of pure hydrogen production globally. But lack of infrastructure has restricted its use elsewhere.

Demand for hydrogen-based passenger electric vehicles has been far outstripped by battery-powered vehicles thanks to rapidly falling battery costs and the roll-out of home and public charging points. Hydrogen refuelling infrastructure remains very low and has seen limited political backing.

But for buses and trains, plus long-haul trucks, hydrogen can be more economic than batteries. There were nearly 13,000 hydrogen-powered vehicles in use globally at the start of 2019. But Japan’s early lead may soon be eclipsed by China, which already has over 2000 hydrogen buses and is rolling out commercial transport to reduce emissions.

Technology improvements, economies of scale and government environmental policies should drive down the cost of using hydrogen over the next decade.

Hydrogen’s potential can be realised only if its production becomes carbon-free. The 98 per cent generated using carbon-intensive methods is ‘grey hydrogen’. The other 2 per cent is produced via electrolysis, a chemical reaction that cracks water into its constituent parts of hydrogen and oxygen, but only a small proportion is powered by zero-carbon renewable energy, making it ‘green hydrogen’.

Green hydrogen costs are currently three to four times higher than traditional carbon-intense production, but rapidly falling generation costs from new wind and solar plants, as well as falling costs of equipment to produce green hydrogen, can help close the gap.

We see the runaway growth of wind and solar creating a rising excess of power over the next decade that could be used to produce clean hydrogen for zero power cost.

As solar and wind installations grow, power capacity will exceed average loads or even peak power demand and thus increasingly face the risk of curtailment. Rather than curbing this generation, business and governments should explore ways to use the excess clean power to crack water with electrolysers and generate clean hydrogen, thus dramatically reducing the unit costs of hydrogen production.

We estimate that up to 2.2 million tonnes of pure hydrogen could be produced by 2030 in Germany, Italy, Spain and the UK alone from renewable power that would otherwise be curtailed. Assuming a price of USD1.75 a kilogram, this would translate into a USD3.8 billion annual market for hydrogen gas sales in 2030.

Sales of hydrogen gas could rise sevenfold by 2050 on our estimates, spread across chemicals, transport, industry, power, buildings and transport. Some suggest the market for hydrogen and hydrogen technologies by then could exceed USD2,500 billion a year and provide more than 30 million jobs globally.

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