If climate change is the challenge of the century, hydrogen could be the dark-horse solution. So far, it has received little attention compared with other options to reduce greenhouse gas emissions, such as solar or electric vehicles, but that is changing fast. Money and labor are flowing into hydrogen companies, projects, and infrastructure, almost all of them focused on producing hydrogen supplies that emit little to no carbon, thanks to rapid and profound technology and policy advances. Since 2020, developers have announced more than 150 new hydrogen production projects, now exceeding 250 gigawatts of new power production (roughly ten times all renewable power added by China last year and three times the renewable power additions for the whole world). Public policy is helping. At least 35 countries across the globe have developed formal hydrogen strategies—including Canada, Chile, Germany, India, Japan, the Netherlands, Qatar, Saudi Arabia, and the United Kingdom—because they see clean hydrogen as both essential for addressing climate change and a huge opportunity for trade and commercial competitiveness.
Until recently, hydrogen was used chiefly to make ammonia and refined fuels. Most of that hydrogen has come from processes that use fossil fuels with no abatement measures, which add 500 million tons of carbon dioxide to the atmosphere each year, or about one percent of all global greenhouse gas emissions. In contrast, most of today’s enthusiasm and investment is going toward using hydrogen as a fuel itself or for making new clean fuels. And rather than rely on the old processes that pump carbon dioxide into the atmosphere, there is an intense focus on making “green” hydrogen, which instead uses clean electricity from solar, wind, hydro, or nuclear power to split water into its component parts: hydrogen and oxygen. The approach is simple—it is performed in chemistry classes worldwide—and it requires no combustion and has few moving parts. Investment in these technologies puts green hydrogen center stage for the future production of widely available clean fuels.
Five years ago, this excitement for green hydrogen would have surprised many energy and climate experts, who saw hydrogen as an unlikely player in the future energy mix. In earlier economies, hydrogen couldn’t compete as a fuel. It was simply too expensive, as were solar and wind power, and abundant alternatives were available, including coal, natural gas, and crude oil. Early attempts to make hydrogen a larger part of the economy focused on its use in automobiles, which would have required wholesale changes to fueling infrastructure and factory floors.
The need to address climate change is spurring interest in hydrogen, and new policy measures, along with remarkable technological progress, are making its production a practical reality. Over 137 countries have committed to reaching “net zero” by 2050, meaning they will reduce their greenhouse gas emissions to as close to zero as possible and offset whatever cannot be eliminated by planting trees or taking carbon out of the atmosphere by other means. Major corporations are making similar pledges: over 320 companies have committed to reaching net zero by 2040. Behind these promises is simple climate math: to stabilize climate change at any level, all sectors everywhere, including electricity, transportation, food, and manufacturing, must effectively reach zero and stay there forever.
That inflexible arithmetic drives production of enormous amounts of green hydrogen to serve those goals. The International Energy Agency has estimated that global green hydrogen production must increase 400-fold by 2050 to make net-zero emissions possible. In addition to ambitious climate goals, advances in technology also enable the shift to green hydrogen. Ten years ago, green hydrogen was wildly more expensive than its dirtier cousins (especially “gray” hydrogen, which is made from natural gas or coal). Most notably, the dramatic decrease in the cost of generating wind and solar power has brought the possibility of scaling up green hydrogen production into the realm of the politically possible.
Green hydrogen’s promise is finally coming into focus. Ramping up its production and diversifying its use will create risks and challenges along the way. To realize the full potential of green hydrogen in the fight against climate change, countries must invest in infrastructure and set the right policies to mitigate the inevitable risks when a new energy market quickly goes commercial.
THE PROMISE
As a clean fuel, hydrogen is quite extraordinary. It burns hot: 2,100 degrees Celsius. That is hot enough to make cement, glass, and steel. It is light—the lightest in the universe – which helps maintain efficiency as a transportation fuel. When run through a fuel cell, it generates electricity on demand. It can combine with other compounds to make fertilizer, liquid fuels, and plastics. Most important for reducing the effects of climate change, these uses emit zero greenhouse gases directly, making hydrogen a destination fuel and feedstock in a net-zero-emissions economy. Burning hydrogen yields water, suitable for drinking or recycling into hydrogen. Plus, once isolated, hydrogen can serve as the main building block to produce other clean fuels, most important, ammonia—another dark horse in the decarbonization race because it emits no carbon when used, has high energy density, and is easily stored and shipped. Hydrogen is also the main building block for fertilizer and other important products, such as explosives and cleaning liquids. Because hydrogen and its derivative products can be stored in tanks and salt caverns indefinitely, it can meet surges in demand during seasonal power variations and stand ready at shipping terminals.
But the process to make pure hydrogen and turn it into a useful product requires energy, and that energy may not always be clean. Natural gas is used to produce gray hydrogen, but the process emits carbon dioxide, exacerbating the climate change problem. When that carbon dioxide byproduct is captured or stored underground, the resulting hydrogen is referred to as “blue” hydrogen, which can be very clean and low in carbon. Biomass, ranging from wood chips to trash, can be chemically changed into biohydrogen, with or without carbon capture. Both these processes can generate very low-carbon hydrogen but require feedstocks (coal, methane, or municipal wastes) that must be mined, stored, shipped, and then converted, with the byproduct carbon dioxide stored underground.
In contrast, the production of green hydrogen requires only three things: fresh water, electrolyzers to split water into its atomic elements, and low-carbon electricity to power the process. It can therefore be produced from low-cost renewable power—namely, solar, wind, and hydro—and other ultra-low carbon electricity, such as nuclear power. Any location with enough fresh water and clean electricity options can become a hydrogen energy superstar. One unlikely example is Chile, which appears to have achieved the lowest generation cost so far because it has superb solar, wind, and hydropower resources—some of the best on earth. Chile has launched ambitious plans for green hydrogen products to generate ten percent of its GDP by 2040. In July, the EU announced a multibillion-dollar investment in green hydrogen production in Namibia, which also has exceptional solar and wind resources. The hydrogen will be used to make ammonia, which will be shipped to Europe and used for energy and food production. It should also produce jobs and new wealth for Namibians.
Described as a sort of Swiss Army knife for climate change, hydrogen has potential applications in electricity generation, transportation, and agribusiness. But the most promising application for green hydrogen is heavy industry. Manufacturing of concrete, steel, and chemicals is a huge source of global emissions. These hard-to-decarbonize sectors can’t run on electricity easily or at all. Their range of potential alternative fuels is small, and almost all continue to emit greenhouse gases. For these sectors, hydrogen and its derivative products will be extremely attractive when venting greenhouse gases is no longer accepted or allowed. An example of what the future could look like is the HYBRIT—“hydrogen breakthrough ironmaking technology”—steel plant in Sweden, which has produced the first fossil-free steel using green hydrogen from hydro and nuclear power. HYBRIT is such a rip-roaring success that Sweden’s national steel company has announced that it is replacing all its blast furnaces with similar green-hydrogen-fueled systems.
The eventual price of green hydrogen may be the secret to its success. Most experts agree that between 2030 and 2040, green hydrogen will be produced in many major markets below $2 per kilogram. While this is still roughly 50 to 100 percent more than what gray hydrogen costs today, it is an acceptable cost for many industries and countries. Chile has already declared that it can make hydrogen below $2 per kilogram, and that may soon be true of western Saudi Arabia and northwest Australia, where mammoth projects are under development to produce green hydrogen and ammonia. Projects in the works in Canada, Colombia, the United Kingdom, and the United States also reflect the expectation that demand for clean hydrogen will grow and costs will eventually come way down.
THE DRAWBACKS
Like all other solutions that promise lower greenhouse gas emissions, green hydrogen faces substantial obstacles to quickly scaling up. The biggest is the lack of infrastructure. The United States has only about 1,000 miles of hydrogen pipelines, a relatively meager amount. (It has 100 times more natural gas pipeline miles, which cannot be readily reused for hydrogen.) There is also the problem of power transmission. Chokepoints in the electric grid limit the ability not only to add renewable power but also to bring it to urban and industrial centers, where the electricity-intensive electrolyzers must operate.
Because hydrogen is so light and so small, it’s very hard to ship and store. Hydrogen molecules are small and slippery, and are commonly stored at super high pressures or super low temperatures, which adds energy and capital costs. Few ports can ship or receive hydrogen or ammonia, and virtually none have facilities to fuel ships, boats, trucks and dock engines with either fuel, even ports with large industrial demands. This lack of infrastructure to generate, move, and store hydrogen is common to most countries, developed and developing alike. Although some policies have made new infrastructure investments possible, current limits will create chokepoints for this decade and beyond.
Cost is another challenge. In many markets, green hydrogen is still much more expensive than gray or even blue hydrogen—typically four to eight times more expensive. Although some herald green hydrogen as lower cost than hydrogen made from natural gas (blue or gray), such predictions assume a physical scaling up of production that has not yet occurred. They also assume that renewable power generation will run at high capacity, producing electricity more than 75 percent of the time. But that level of uptime can be maintained in only a handful of places on earth—typically regions with abundant hydropower or a combination of abundant solar and wind, such as Chile, Namibia, and northwest Australia, generally far from global demand centers. Moreover, supply chain crunches and critical material shortages are driving up costs for both renewable power equipment and for electrolyzers.
Finally, scaling of hydrogen may present unexpected climate and environmental risks. One example is leakage, which is when hydrogen escapes into the air from production sites, use sites, or pipelines. A lot of leakage would extend the life of some greenhouse gases such as methane or nitrous oxides in the atmosphere, further warming the planet. If countries begin to rapidly scale up their production without properly regulating and monitoring it—which all countries fail to do today—that could lead to substantial hydrogen leakage. Although hydrogen and ammonia can be used safely, massively scaling up their use around the world would add millions of potential leak points without proper oversight and regulation. Similarly, spills and leaks of hydrogen-based fuels (such as ammonia) pose environmental challenges that must be managed, as with gasoline or crude oil spills and leaks.
NEW POWER PLAYERS
The geopolitical implications of a shift from fossil fuels to green hydrogen could prove profound. For one thing, it will create new fuel providers that will compete with current providers. Some petrostates have ample green and blue hydrogen resources, so they will be able to maintain some of their power and leverage, but many new countries are coming online and could disrupt the status quo. Many of these countries are in the global South, including Chile, Colombia, Indonesia, Morocco, Namibia, and Uruguay, and clean energy production could bring wealth to them as it has to petrostates in the past. Current consumers of fossil fuels and chemicals, such as India, have rolled out ambitious domestic green hydrogen production programs, first to make fertilizer and then to help decarbonize their heavy industry. Big players in the green hydrogen market will compete for market share with emerging blue hydrogen powerhouses, including Canada, Nigeria, and the United States. And they will compete for major buyers, such as China, Japan, South Korea, Singapore, and, of course, the EU. This fight to win buyers and capture markets is reflected in the recent blizzard of bilateral agreements—two nations agreeing to dedicated production and purchase of hydrogen and ammonia. Japan and Chile inked such a deal, as did the EU and Namibia, but they are not alone; over 80 bilateral agreements across dozens of nations support production and trade of hydrogen and its derivative products.
As the forces of technology innovation, geopolitics, the desire for economic growth, and diverse natural resources are converging, new policies are being developed that combine climate, innovation, and trade. This merging of policy is clearest in Japan. The country’s banks are financing the production of green hydrogen in Australia and Chile, which will deliver clean fuel for Japan to use in its ports, power plants, and industrial sites. In Japan, government incentives are encouraging clean power production, clean transportation, and clean manufacturing, thereby surmounting the direct consumer cost from clean hydrogen. Taking a holistic policy approach such as Japan’s helps overcome classic “chicken and egg” problems. In short, Japan is building chickens—dedicated hydrogen and clean fuel production around the world and a market to buy the products. This takes the risk out of green hydrogen production through underwriting, industrial policy, and infrastructure development. At the core of these deals are long-term agreements to take hydrogen at guaranteed (fixed) prices. Many other countries are doing the same, including Singapore, South Korea, and some EU members.
The United States has also entered the fray. The Infrastructure Investment and Jobs Act, passed by Congress in November 2021, committed $8 billion to construction and operation for four hydrogen hubs to produce, store, ship, and use hydrogen. Congress has also added billions of dollars for new renewable generation, transmission lines, and port infrastructure. But that was just the opening act. Congress then passed the Inflation Reduction Act in August 2022. Most notably, the law created a new class of tax credits, known as Title 45V, which provide tax breaks for clean hydrogen production. This new tax credit is indexed to the carbon intensity of different types of production, with the cleanest hydrogen production receiving $3 per kilogram, dramatically lowering the total cost for green hydrogen. The best solar, wind, hydro, and nuclear projects in the United States would receive this direct-pay incentive, allowing easier access to markets.
The European Green Deal, a blueprint of carrots and sticks by the European Commission to meet stricter climate goals, features grants, tariff relief, and subsidies for green hydrogen production, providing an estimated $500 billion in incentives. European interest in green hydrogen has grown after the invasion of Ukraine, with many governments eyeing green hydrogen as a medium-term alternative to Russian gas while remaining true to their climate goals. In many ways, this flood of government investment encourages private investment and resembles the kind of bilateral policies and deals seen in the early days of liquid natural gas production and shipping 20 years ago. Back then, governments made similar long-term commitments to encourage large private-capital investments in liquid natural gas infrastructure.
Given the government support and private-sector investment, it is easy to be optimistic about the trajectory of green hydrogen. Climate advocates can feel good that its falling production costs should make the world’s 2050 climate goals easier to achieve than they were just five years ago. Those who focus on energy security see a way to diversify fuel supplies and reduce the power of individual geopolitical actors. Organized labor sees jobs. Banks see returns. Those concerned with global equality see a chance to shrink the gap between the global North and the global South. Still, care and attention will be required as this new energy market grows. In theory, there’s no difference between theory and practice. In practice, there is. Although the journey to green hydrogen will be a bumpy ride, the optimism is warranted, and the hype is justified.
S. Julio Friedmann is Chief Scientist at Carbon Direct and a Nonresident Fellow at the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. He has served as Principal Deputy Assistant Secretary of the Office of Fossil Energy at the Department of Energy under President Barack Obama and Chief Energy Technologist at Lawrence Livermore National Lab.