Four key challenges and opportunities of a hydrogen economy: BloombergNEF

As the world pivots to cleaner sources of energy, interest in hydrogen as a possible zero-carbon substitute for fossil fuels has grown. 

Besides producing no direct pollutant emissions, hydrogen is also light, storable, transportable and energy-dense. These characteristics make it a prime solution for reducing emissions in industries like road transport, low-temperature industrial processes and heating solutions for buildings.

Despite these benefits, hydrogen has yet to eclipse other forms of clean energy especially from renewable sources like wind and solar energy. Bloomberg New Energy Finance’s (BloombergNEF’s) Hydrogen Economy Outlook report points out possible reasons for the slower development and what efforts must be taken to fast track its adoption to secure a greener energy future:

1. Renewable Hydrogen remains expensive, but costs are falling – Besides fossil fuels, hydrogen can also be produced by applying renewable electricity to split water in an electrolyser. As manufacturing of electrolysers scales up, its prices will likely fall. BloombergNEF’s calculations suggest hydrogen could be produced for US$0.7 to US$1.6/kg in most parts of the world by 2050. At present, the cost of alkaline electrolysers has already fallen by some 40 per cent between 2014 and 2019 in North America and Europe. This is even more so for Chinese-made systems, which are more than 80% cheaper than those made in the West. 
2. Infrastructure investments are needed to transport and store hydrogen – BloombergNEF’s report points out that if hydrogen were to replace natural gas, storage infrastructure must increase by three to four times to the tune of US$637 billion by 2050. It is likely that energy storage will pose a significant challenge.
3. Policy is critical – Even as hydrogen has grown to become a notable topic in the energy industry, current government policies for the use of hydrogen are centred on road transportation applications which are poorly-funded. For the industry to scale up at a sustained pace, comprehensive policy support across various government agencies and bodies must exist to facilitate the roll-out of about US$150 billion in cumulative subsidies by 2030.
4. A total of US$11 trillion in investments are needed to fund infrastructure needs – These investments will be used to shore up the production, storage and transportation infrastructure for hydrogen. At the same time, massive amounts of additional renewable energy must also be generated to power electrolysers. 

Despite these signs, it is important to note that hydrogen is already being widely used in industrial activities such as steel and methanol production. Observers in the energy industry also agree that the time is right for action to be taken to tap into hydrogen’s potential – so as to realise an affordable and clean energy future. To bring this future to life, international co-operation is essential to accelerate the growth and adoption of clean hydrogen through scaling up production. 

Learn more about these and other findings by reading the full report at: Hydrogen Economy Outlook: BloombergNEF