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In the clean energy field, with solar, wind and nuclear energy having received widespread attention, hydrogen, as a source of abundant, green, low-carbon and widely used secondary energy, is of great significance in building a clean, low-carbon, safe and efficient energy system and achieving the goal of carbon peaking and carbon neutrality.
The International Energy Agency (IEA) has described hydrogen as “an increasingly important part of the net-zero emissions puzzle by 2050”, especially for those sectors that have proved most difficult to decarbonise, including heavy industry, long-distance transport, shipping and aviation. So, is hydrogen a good investment?
In a report, RBC Capital Markets noted that because hydrogen produces no carbon emissions, it is expected to replace fossil fuels in areas such as fuelling long-distance transport such as ships and aircraft, renewable energy storage and power supply chains, and energy-intensive industrial manufacturing processes such as steelmaking, chemicals and cement production, and crude oil refining.
The overall global green hydrogen energy market is estimated to be valued at USD 1.1 billion in 2023 and is expected to grow at a CAGR of 61.1% to reach USD 30.6 billion by 2030. Fuel cell-powered electric vehicles and the demand for clean energy in the power sector are the engines of growth for this market. The growing popularity of hydrogen fuel cell vehicles, advances in electrolysis technology, and decreasing costs of renewable energy production are also supporting the hydrogen market.
According to technology intelligence firm Darcy Partners, a total of 1,418 hydrogen energy projects have been announced globally in 2023, with a total investment of US$570 billion, an increase of 31 per cent over the previous year.
In Deloitte’s 2023 market report, it is stated that the green hydrogen market will be worth more than the LNG market by 2030 and $1.4 trillion by 2050. In the same year, global hydrogen trade could generate more than $280bn in export revenues annually.
Jennifer Steinmann, Global Sustainability and Climate Practice Leader at Deloitte, said, “Green hydrogen will replace carbon-intensive hydrogen production in less than a decade if policymakers and business leaders can provide decisive support to the market.”
Currently, global demand for hydrogen is still dominated by traditional applications in the refining and industrial sectors. According to the International Energy Agency (IEA), green hydrogen for carbon reduction in heavy industry and long-distance transport is currently less than 0.1 per cent of the market. On the supply side, low-emission hydrogen production will account for less than 1 per cent of global hydrogen production by 2022.
That said, most green hydrogen projects are currently in the pre-commercialisation stage, and one of the main challenges in advancing green hydrogen technology is cost, but analysts believe this becomes less of an issue.
In a 2023 report, PwC said that green hydrogen will become more affordable, with the most attractive production markets being those countries with abundant, low-cost renewable resources, including the Middle East, Africa, Russia, the US and Australia.
Looking ahead, PwC’s analysts see “modest, steady” growth in hydrogen demand through 2030, with many basic applications in industry, transport, energy and construction emerging. What’s more, the firm expects the cost of hydrogen production to nearly halve by 2030.
Another challenge to the widespread adoption of green hydrogen technology is the lack of infrastructure (i.e., import/export terminals and pipelines) required for large-scale hydrogen use, which takes years to develop.
However, governments around the world are taking action to increase the economic utility of low-emission and green hydrogen through policies, incentives and funding to support research and development of emerging technologies and infrastructure for production and distribution.
The UK is launching a certification scheme under its Low Carbon Hydrogen Standard, which will award contracts to projects that produce hydrogen using electrolysis. The UK government aims to build or operate 1 gigawatt of electrolytic hydrogen projects by 2025.
Policies and tax credits to incentivise domestic production of clean hydrogen have also been proposed under the Inflation Reduction Act in the U.S. In October 2023, the Biden administration announced $7 billion in funding for seven regional clean hydrogen hubs to accelerate the development of a domestic market for low-cost, clean hydrogen.
In March 2024, the U.S. Department of Energy allocated $750 million to 52 hydrogen energy projects in 24 states that aim to advance electrolysis technology and increase U.S. capacity to produce electrolysers, fuel cells, and clean hydrogen.
As part of its annual budget, the Government of Canada also proposed the Clean Hydrogen Investment Tax Credit, which would provide green and blue hydrogen developers with a tax reimbursement of up to 40 per cent of the cost of purchasing and installing eligible equipment. In addition to the tax credits, manufacturers of Canadian-made electrolysers, hydrogen refuelling systems, batteries, wind turbines and solar panels are eligible for the Clean Technology Investment Tax Credit, which provides a rebate of 30 per cent of manufacturing costs.
In its Hydrogen Supply Outlook 2024 report, BloombergNEF notes that global low-carbon hydrogen supply will grow 30-fold by 2030 from the current 500,000 metric tonnes, with the US accounting for the largest share of growth at around 37%. More than half of the supply is expected to be green hydrogen produced through electrolysis, but blue hydrogen is still expected to play a large role in meeting demand.
Therefore, the answer of the question, is now a good time to invest in hydrogen mostly depend on individual investment strategy. Clean hydrogen is still an untested emerging market as applications and infrastructure are still being developed. However, the green hydrogen sector could be an early-stage opportunity for those with a long-term investment philosophy and high risk tolerance.
