Hydrogen is gaining prominence as a critical component of the energy transition as significant policy support and government commitment to deep decarbonization are spurring investments in hydrogen. This momentum that has been built along the entire value chain is accelerating cost reduction in hydrogen production, transmission, distribution, retail, and end-applications, according to GlobalData, a leading data, and analytics company.
According to the company’s latest report, “Global Hydrogen Market Report, 2021 – Market Outlook, Trends, and Key Country Analysis“, reveals that with hydrogen rapidly becoming popular as a low- or zero-carbon energy source, most countries are considering a hydrogen-based economy as a solution to the increasing carbon emissions, energy stability, and climate change issues.
Large-scale adoption of hydrogen can fuel a significant increase in demand for renewable power generation. Also, large hydrogen production could help reduce curtailment in grids with a high share of variable renewable electricity. Hydrogen output can be used as a ‘smart’ load to help decarbonize the economy and improve power system flexibility, commented Bhavana Sri Pullagura, Senior Power Analyst at GlobalData.
Currently, hydrogen is largely used as a feedstock for industrial processes, in the production of ammonia for fertilizers, refining, and in food, electronics, glass, and metal industries. With global leaders in the energy industry in search of solutions that help them achieve decarbonization or enhance energy security, hydrogen seems to be on track to becoming an energy vector and its use is gathering momentum.
The report finds that hydrogen is likely to play a crucial role in the clean energy transition in sectors such as transportation, buildings, and power generation. Interest in the use of hydrogen technology is increasing in a range of niche transport market segments, besides other applications.
Many countries are stepping up efforts to increase green hydrogen and hydrogen usage for the energy transition, with a focus on larger-scale, more power system-friendly electrolysis. More than 200 projects have been announced across the value chain, most of them in Europe, Asia, and Australia. Over 30 countries have announced hydrogen-specific strategies. Governments have already pledged more than US$70 billion and included new capacity targets and sector-level regulation to support these initiatives. Hydrogen production costs are expected to decline due to the advent of giga-scale projects. For renewable hydrogen, the biggest driver is a faster decline in the cost of renewables than previously expected, aided by at-scale deployment and low financing costs Bhavana Sri Pullagura highlighted.
By 2070, global demand for hydrogen is expected to increase sevenfold, with transport, industry, and power being the main users. Hydrogen’s role in the power sector is predicted to have a share of 15 percent, allowing for more flexible electricity generation.
However, lower costs of renewable are not enough for the production of low-cost clean hydrogen; value chains for electrolysis and carbon management should be scaled up. This will require public support to bridge the cost gap. Declining costs of clean hydrogen and application-specific cost drivers improve the cost competitiveness of hydrogen applications. The next few years will be decisive for the development of the hydrogen ecosystem, for achieving the energy transition, and for achieving the decarbonization objective, Bhavana Sri Pullagura said.