Investment Thesis on the Hydrogen Energy Market

The Future of Hydrogen as Energy

The global green hydrogen market size is expected to reach USD 2.28 billion by 2027 registering a CAGR of 14.24% over the forecast period, according to a new report by Grand View Research, Inc. Growing government investments and subsidies benefitting clean fuel usage along with the hydrogen economy being touted as an eco-friendly alternative to the fossil fuel economy are likely to strengthen the market growth over the forecast period. Alkaline electrolyze technology segment led the market in 2019 owing to low capital cost and higher operating period capability of this technology.

* However, the PEM electrolyze technology is expected to be the fastest growing as well as the largest segment in the forecast period owing to its lower membrane thickness, high proton conductivity, and lower gas permeability.

* Europe was the largest regional market in 2019 owing to the presence of a high number of green hydrogen production plants across the region.

* North America is estimated to register a significant CAGR over the forecast period owing to implementation of clean energy targets along with growing end-market applications, such as green hydrogen being used as a fuel in fuel-cell driven vehicles.

* Asia Pacific is expected to record the fastest CAGR in the forecast period owing to supportive policies and large-scale green hydrogen projects announced in countries, such as Australia and Japan.

What is Hydrogen?

Hydrogen (H2) is the lightest and smallest element on the periodic table. It can be used for clean burning, zero emission fuel to store and harness energy. Hydrogen has many different use cases as it is both versatile and transportable. Currently, Hydrogen is used not only as a fuel and storage of energy, but also as a feedstock/raw material in machine or industrial processes.

Source: Australia’s Commonwealth Scientific and Industrial Research Organization (CSIRO): National Hydrogen Roadmap

Heat uses: Hydrogen can be used as a source of heat for industrial sectors such as steel, cement, aluminum, paper and building either directly or by blending hydrogen with natural gas to reduce carbon emissions. However, there are some cost challenges for Hydrogen’s commercial viability, the carbon prices would still need to be raised to $50–60/tCO2eq for industries like steel and cement and to $160/tCO2eq for space and water heating up to the year 2050 .

Feedstock uses: Industry chemicals such as plastics, fertilizers and fuel refining and products such as iron, steel, glass, metallurgy, and agriculture require raw materials/feedstock that usually comes from fossil fuels as a part of manufacturing lifecycle and hydrogen could be an alternative.

Fuel uses: Long distance vehicles such as trucks, ships, and airplanes, where the electric battery vehicle technology has faced limitations, could leverage hydrogen powered fuel cell vehicles.

There are three factors which contributes to the heightened interest in hydrogen as a renewable source of energy :

  1. Significant decrease in cost of production for hydrogen: the cost of electrolyzes used to create hydrogen (50%) in the last five years, and projected cost decrease down to 60%-90% by 2030.
  2. The technological advances aim to further reduce costs by increasing production efficiency and expansion of green hydrogen usage in fuel cells.
  3. The support from governments and international organizations — European Union’s Green Deal consists of European Hydrogen Strategy as the centerpiece under its fiscal stimulus response to the pandemic.
  4. If hydrogen can be produced efficiently and effectively using low or zero emissions sources, it can augment global decarbonization efforts across various energy and industrial sectors.

Source: A National Hydrogen Strategy: Shaping Possibilities for Australia’s Hydrogen economy — Herbert Smith Freehills LLC.

Hydrogen could be used as a source of power by being re-electrified but low levels of efficiency make this type of use case less appealing in the past. Due to recent technological advancements, Hydrogen now has the potential for longer-duration storage of energy, in addition to the flexibility to convert back to electricity if required. Nevertheless, hydrogen cannot currently unlock some sectors, such as long-distance transport pertaining to electrification.

In the case of green hydrogen, excess renewable energy that would otherwise have been curtailed (e.g., excess solar energy during the middle of the day) can be stored as hydrogen and released as energy later when required. This enables the ability to store solar energy from the summer to winter months or be used in periods of peak electricity demand.

Additionally, the US National Grid has recently secured $12.45 million in funding from the US Department of Energy (DOE) to facilitate research and accelerate the potential of hydrogen blending in its gas networks as a pathway to net carbon zero goal .

Current Limitations of Lithium Battery

– Lithium batteries have low energy efficiency and are explosive.

– It remains in the market because it is affordable compared to other batteries until now (e.g., Zinc battery).

– Lithium batteries also have low voltage, large internal resistance, lithium battery expansion, battery energy loss after spot welding.

Despite its current limitations, the figure below from the Transport & Environment (Europe’s leading clean transport campaign group), shows why electric vehicles are several times more efficient than hydrogen fuel cell vehicles, or those running on synthetic fuels derived from hydrogen. A fuel cell is a device that helps generate electrical power through a chemical reaction. Hydrogen fuel cells convert hydrogen to generate electricity.

However, hydrogen fuel cells have the following advantages in terms of overall utility:

Source: Data from Real Engineering Channel, Science Direct and Wikipedia, Graphic from BofA Global Research

Source: Transition to zero-emission heavy duty freight vehicles — International Council of Clean Transportation

The global space propulsion market is projected to grow from USD 6.7 billion in 2020 to USD 14.2 billion by 2025, at a CAGR of 16.2% from 2020 to 2025. Similarly, the global hydrogen fuel cell market is forecast to reach USD 848 million by 2025 from an estimated value of USD 263 million in 2020, growing at a CAGR of 26.4% during the forecast period.

NASA for example has long been relying on hydrogen as the primary rocket fuel for its space exploration activities — delivery of crew and cargo to space (Centaur, Apollo, and other space shuttle vehicles). From these use cases, NASA has both demonstrated and developed extensive experience in the safe and effective handling of hydrogen. Typically, about 500,000 gallons of cold liquid hydrogen (LH2) is needed for the rocket engines of each. The United Launch Alliance (ULA) Atlas Centaur stage rocket, Boeing’s Delta III and IV rockets, and Blue Origin’s BE-3 and BE-7 engines all use LH2 rocket fuel.

Source: MarketsandMarkets Research Private Ltd

There are several ongoing research projects such as The Pathfinder and Helios projects which were developed by AeroVironment, Inc. under NASA’s Environmental Research Aircraft and Sensor Technology (ERAST) program. The hydrogen fuel cell system regenerated by solar power is used for the Helios unmanned aircrafts. These experimental long-range unmanned vehicles leverage a hybrid system in which hydrogen fuel cells are replenished by electrical power from solar arrays. During the day, solar cells produce electricity which separates water into hydrogen and oxygen through electrolysis. At night, the fuel cells generate electricity from the stored gases, and the cycle continues. This unique combination offers theoretically indefinite day and night continuous operation .

In September 2020, Airbus announced three concepts for the world’s first zero-emission (ZEROe) commercial aircraft which could be ready by 2035. All these concepts depend on hydrogen as a primary power source to be a solution for aerospace and many other industries to meet their climate-neutral targets. All three concepts utilize liquid hydrogen fuel to power modified gas turbine aircraft engines. These concepts consist of a set of different approaches to achieve zero-emission flight by exploring various technology pathways and aerodynamic configurations for the decarbonization of the entire aviation industry. The first concept has hydrogen turbofans providing lift for up to 200 passengers with a range of 2,000+ miles. The second concept revolves around a smaller hydrogen turboprop design to carry up to 100 passengers with a range of 1,000+ miles. The third concept is to configure a bold blended-wing body design that offers enhanced flexibility for hydrogen storage and distribution as well as cabin layout .

Nevertheless, the airports will require significant hydrogen transport and refueling infrastructure to meet the needs of day-to-day operations from an infrastructure perspective. Government subsidies and support will be key to further advance the use of sustainable fuels and the renewal of aircraft fleets to allow airlines to retire older, less environmentally friendly aircraft earlier.

In addition, the widespread viability of hydrogen for global commercial uses depends on the following factors:

● Public Perception — safety concerns over the usage of hydrogen as it is a highly flammable gas with the heightened risk of explosions. However, the largest addressable focus markets for clean hydrogen are for industrial uses that are hard to electrify and are not consumer-facing.

● Transportation — hydrogen is a low-density gas, which means that the volume to transport the same amount of energy is much higher than natural gas for example. Hence, the higher volumes result in much higher costs for transportation without retrofitting the existing networks of pipe systems used for natural gas. It poses a serious threat for oversea export/import logistics of the gas from cheaper places like Australia to in demand areas such as Japan.

● Production Cost — fossil fuels can be extracted from earth, but hydrogen must be produced. Hence, the cost of production will take a long time to be cost-competitive and are likely to remain higher unless governments push initiatives such as — strict policies, incentive programs, subsidies, and carbon prices to become the norm .

● Infrastructure — while hydrogen can be used with some existing infrastructure (e.g., gas pipelines), there needs to be significant investments pertaining to infrastructure upgrades.

Main methods for commercial production hydrogen

– Natural Gas (48%)

– Oil (30%)

– Coal (18%)

– Electrolysis (4%)

Natural Gas

– Steam reforming is a hydrogen production process from natural gas. This is the cheapest method, and the process consists of heating the gas between 700–1000 Celsius with steam and nickel catalyst. The endothermic reaction breaks up the methane molecules and forms CO (carbon monoxide) and hydrogen.

– The main disadvantage of the process is byproducts of Carbon Monoxide, Carbon Dioxide, and other greenhouse gases[2].


– Coal gasification uses steam and controlled concentrations of gases to break molecular bonds in coal and form gas mix of hydrogen and carbon monoxide.

– Advantageous because the main product is coal-derived gas that can be used from fuel.

– Gas gained from coal gasification can be used to produce electricity more efficiently and allow better capture of greenhouse gases and traditional burning of coal.

– Still disadvantageous/less favorable because of its production of greenhouse gases.


– Like coal, petroleum coke can be converted into hydrogen rich syngas through coal gasification.

– The syngas consists mainly of hydrogen, carbon monoxide, depending on the sulfur content of the coke feed.


Electrolysis involves the use of an electrical current to split water into hydrogen and oxygen atoms and it requires the use of low or zero emissions electricity to produce clean hydrogen. Currently, there are two mature electrolysis technologies which include polymer electrolyte membrane (PEM) and alkaline electrolysis (AE). Electrolysis currently only accounts for around 2–4% of global hydrogen production, but there is significant room for improvement to provide more low-carbon hydrogen.

Naturally, hydrogen is colorless but there are several color labels associated with how it is produced. Fossil fuel-derived hydrogen is referred to as either brown (manufactured from coal) or grey (natural gas), which is the most prevalent today. The future alternatives for lower carbon-emitting hydrogen are referred to as blue or green hydrogen.

As of now, most of the hydrogen is produced from fossil fuels and results in carbon emissions (called grey hydrogen). It is called blue hydrogen when emissions are captured through Carbon Capture and Storage CCS (process of capturing waste CO2, transferring to storage site and dispositioning it where it will not enter the atmosphere.)

Hydrogen made from renewable energy sources is referred to as green hydrogen. There are two ways to make hydrogen from renewable sources: power to gas, where electric power is used to produce hydrogen from electrolysis, and the other is to use landfill gas to make hydrogen in steam reformers.

Source: Hydrogen for Australia’s Future, August 2018

Even with smaller market share, green hydrogen has the best outlook because of the industry’s focus on renewable energy and emphasis on an environmentally friendly method of producing energy.

Current situation of hydrogen as energy sources:

In 2019, hydrogen demand was 70mt with major use in ammonia synthesis, oil refinery, and steel production; there are not many uses in the energy industry. It is projected to reach nearly 300 mt in 2050.

Currently, hydrogen is mainly produced via reforming of natural gas, and the hydrogen is called “gray” hydrogen because it is derived from fossil fuels. The process emits up to 2% of total CO2 emission in the world, and because of the higher expectation of hydrogen as a next energy source, a demand for more cleaner ways of producing hydrogen is increasing. If carbon dioxide emitted from the “gray” hydrogen production process gets captured before it is released to the atmosphere, the hydrogen is called “blue”. Nowadays, “green” hydrogen has attracted many players; “green” hydrogen uses renewable energy to electrolyze water to split hydrogen and oxygen. Now the production cost of grey hydrogen is $1/kg, and the cost of green hydrogen is $3–7.5lkg. Since the cost of renewable energy is getting lower, there is a prediction that the cost of green hydrogen could go down to $2/kg.

– Most often this compound is water, which is divided into hydrogen and oxygen.

– If the electricity used comes from renewable sources, like wind and solar, the subsequent hydrogen is known as “green.”

– According to the International Energy Agency, less than 0.1% of hydrogen today is produced through water electrolysis, but that could soon change.

– Most of the hydrogen today is used in industry, including oil refining and the production of ammonia, methanol, and steel. But recent advancements in green hydrogen technology are making it much more appealing for several different industries.

Applications of Green Hydrogen

– What makes hydrogen a big deal is the diversity of its potential uses. Green hydrogen — produced by splitting water into hydrogen and oxygen in an electrolyze, using renewable-powered electricity — can exponentially expand the use of solar and wind power.

– Right now, renewables can be used to pump the grid, but that’s almost it. You can’t put solar or wind power into your car or a plane.

– However, green hydrogen created by solar and wind power has the potential to do that.

– Most of the hydrogen today is used in industry, including oil refining and the production of ammonia, methanol, and steel. But recent advancements in green hydrogen technology are making it much more appealing for several different industries.

– In transportation, hydrogen fuel can act as a direct replacement for gas and diesel.

– Unlike electric vehicles, which can take around 30 minutes to charge with the fastest charging stations, hydrogen fuel cell cars can be ready to go in minutes.

– But fuel cells, which convert hydrogen fuel to usable energy for cars, are still expensive. And the hydrogen station infrastructure needed to refuel hydrogen fuel cell cars is still widely underdeveloped.

– Still, experts think hydrogen can be especially effective when it comes to long-haul trucking, and other sectors such as freight shipping and long-haul air travel, where using heavy batteries would be inefficient.

– Another potential use for hydrogen is storing renewable energy that would otherwise be wasted. Mitsubishi Power and fuel storage company Magnum Development are working on a project in Utah to build a storage facility for 1,000 megawatts of clean power, partly by keeping hydrogen in salt caverns.

– Scheduled to be operational by 2025, the Advanced Clean Energy Storage project would be the largest clean energy storage system in the world.

– BloombergNEF estimates that generating enough green hydrogen to meet a quarter of our energy needs would take more electricity than the world generates today from all sources combined, and an investment of $11 trillion in production, storage, and transportation infrastructure.

Future of Impact, ESG, Sustainability


  1. The key reason green hydrogen hasn’t scaled is cost. Right now, it costs $3–7 per kilogram to produce, compared with $1 per kilogram when made with fossil fuels. But three critical factors have aligned in the last year to make it possible to bring that production cost down to between $1 and $2 by 2050.
  2. First, the cost of electrolyzes used to create hydrogen have dropped 50% in the last five years and are expected to fall at least another 60%-90% by 2030, which can start to make green hydrogen competitive to the gray hydrogen used in industries today.7 Falling renewable prices are also key to bringing down hydrogen costs: 60–75% of green hydrogen costs from electricity.
  3. Seeing technological advances that should further reduce costs by increasing production efficiency and the flexibility of green hydrogen use in fuel cells.


  1. Governments across the globe are buying into green hydrogen, which is the most critical incentive for the green hydrogen economy.

1. In July, the European Union made its European Hydrogen Strategy the centerpiece of its Green Deal, which in turn was folded into its fiscal stimulus response to the pandemic.

2. The Green Deal is tremendously ambitious and provides an instant source of demand, which is bound to be a catalyst for further innovation and cost reduction, not to mention enormous infrastructure development.

  1. Europe isn’t the only place thinking along these lines. Australia, Japan, China, the UK, and Korea all have green hydrogen strategies and/or targets.
  2. Sectors we think could be clear beneficiaries include renewable energy, given that demand is likely to grow 10 times by 2050 to service the needs of green hydrogen alone.10 Utilities will play a role in converting gas grids so that they can carry hydrogen blended with natural gas. Companies that develop electrolyzes and fuel cells stand to benefit, and the chemicals and industrial gases industry is likely to play a large role, given its expertise in using and transporting hydrogen.

Future Direction of Green Hydrogen

  1. It will be a long road and we’re not going to get there tomorrow, or even in 10 years. We’re talking about a long-term transformation of the global energy system, which will challenge some industries and benefit others. But I’m confident that green hydrogen will become part of human life, like fossil fuels are today. I think the pandemic has made government and industry leaders realize they should take heed when there’s overwhelming evidence that environmental challenges are looming.
  2. In addition, the emergence of stakeholder capitalism and surging interest in environmental, social and governance (ESG) investing is making it easier, rather than harder, for companies to set zero-carbon targets.
  3. What’s more, there’s an unlimited source of hydrogen. No one country can use the supply of green hydrogen as a geopolitical negotiating tool. Hydrogen is everywhere.

Transition to renewable energies needs to be accelerated with hydrogen as promising solution but has many barriers to achieve that :

With the UN expecting an overshoot of the Paris Agreement 2030 targets — nearing 32 billion tons of CO2 emissions — the pace of the transition to renewables needs to be accelerated. There have been many barriers to the renewable energy transition. Over the years, economic obstacles have included subsidies for non-renewable energy, low oil prices that have limited investment in renewables, and the cost of infrastructure development. Hydrogen is one of the promising solutions toward achieving aggressive carbon neutral goals. This report discusses what needs to be overcome for hydrogen economy and on-going notable projects.

On-going notable projects around production, storage, and transportation of green hydrogen:

For the society to utilize green hydrogen or even achieve hydrogen economy, infrastructure on production, storage, and transportation of hydrogen needs to be scaled up. Below is a list of examples on mega-hydrogen projects across the world.

Europe, the Middle East, and Africa

Spain: Iberdrola will launch the largest plant that produces green hydrogen for industrial use in Europe.

Germany: The northern city state of Hamburg, for example, announced plans in September to become home to the world’s largest hydrogen electrolysis plant with a capacity of 100 megawatts.

UK: As for thedistribution of hydrogen, in the UK, it uses an existing natural gas pipeline blending 20% of hydrogen. Using the natural gas pipeline to transport 100% hydrogen is ideal (especially for heating of buildings where more and more people want to avoid fossil fuel derived energy such as natural gas), but the hurdles to achieve the initiative are:

● Due to technical barrier, currently no more than 25% of hydrogen can be blended due to an impact of pipe.

● Safety Concerns

● Energy density of hydrogen is lower than natural gas (thus need more volume of hydrogen to replace natural gas to provide the same amount of energy)

Saudi Arabia: A large US gas company, Air Products & Chemicals, announced that it has been building a green hydrogen plant in Saudi Arabia for the past four years. The plant is powered by four gigawatts of electricity from wind and solar projects that sprawl across the desert. It claims to be the world’s largest green hydrogen project — and more Saudi plants are on the drawing board.

South Africa:

Pwc says that South Africa has the competitive advantage to produce and export green energy because South Africa has world leading solar and wind resources and has huge endowment on platinum group metals (PGMs) that are used in the electrolysis to produce green hydrogen as well as used in the hydrogen fuel cells.

North America

US: DoE just announced $33M investment to advance hydrogen production via electrolysis and other infrastructure supports.

Salt Lake City could become one of the largest renewable energy reservoirs in the world when its salt dome is filled with hydrogen.

Canada: Canada’s federal government released the Hydrogen Strategy for Canada in December 2020. The Strategy introduces a framework to leverage hydrogen as a key resource to meet net-zero carbon emission goals by 2050 and make Canada a global leader in hydrogen technologies.

Green infrastructure investments such as investments in clean hydrogen technology are key to achieving Canada’s post-pandemic economic recovery.

Asia Pacific

China: China’s government had promoted ambitious plans for the development of a hydrogen economy. Siemens Energy launches its first megawatt green hydrogen production project in China in 2021.

Japan: Japan has an ambitious target of achieving net-zero by 2050, and its expectation for the hydrogen economy is high since its dependency on oil/coal/natural gas import, difficulty on pushing nuclear power plants after Fukushima, and non-perfect geographical conditions for solar/wind power.

Japan attempts to produce hydrogen from coal in Australia, liquefy it, and ship the ocean ships to Japan. Australia will benefit from the project by replacing hydrogen/ammonia export with coal/natural gas export. However, critics of this idea are that it uses coal to produce hydrogen (and thus it is not “green” hydrogen) and that logistics are too complicated.

Australia: Australia’s government has awarded “major project” status to a $36bn renewable energy project — Asian Renewable Energy Hub (AREH), to build the world’s biggest power station and export green hydrogen and ammonia from a remote desert in the outback to Asia.

This will facilitate the development of 15,000MW wind and solar power for green hydrogen production and ammonia for export to the Asia-Pacific region .


[1] Renewable Energy Growth Continues at A Blistering Pace.  

[2] Global hydrogen demand by sector in the Sustainable Development Scenario, 2019-2070.  

[3] Hydrogen Industry.

[4] The Colors of Hydrogen – Brown, Grey, Blue, and Green – Think About It.  

[5] Hydrogen’s Dirty Little Secret.   

[6] How falling solar costs have renewed clean hydrogen hopes.

[7] Puertollano Green Hydrogen Plant.

[8] Germany and Hydrogen — €9 billion to spend as strategy is revealed.

[9] [10]  Energy Department Announces $33 Million to Advance Hydrogen and Fuel Cell R&D and the H2@Scale Vision.

[11] An $11 trillion global hydrogen energy boom is coming. Here’s what could trigger it.

[12] China’s Hydrogen Society Beginning to Take Shape.

[13] Siemens Energy launches its first megawatt green hydrogen production project in China.

[14] The new fuel to come from Saudi Arabia.

[15] World’s Largest Green Hydrogen Project Unveiled in Saudi Arabia.

[16] Green Hydrogen in Natural Gas Pipelines: Decarbonization Solution or Pipe Dream?

[17] Will Australia’s ‘hydrogen road’ to Japan cut emissions?

[18] PwC gives its take on South Africa unlocking its hydrogen potential.

[19] Hydrogen Strategy for Canada.

[20] New Energy Behind Green Hydrogen.

[21] Hydrogen Economy’ Offers Promising Path to Decarbonization.

[22] HyBlend Project To Accelerate Potential for Blending Hydrogen in Natural Gas Pipelines.

[23] Australia Could Lead The $11 Trillion Hydrogen Boom.

[24] NASA Armstrong Fact Sheet: Helios Prototype.

[25] Airbus reveals new zero-emission concept aircraft.

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