Scaling green hydrogen – why a global challenge requires a global answer

By Energy Connects

Sep 26, 2023

Sebastian Schrapp, Managing Director and Partner, Boston Consulting Group, outlines the case for why and how the world can meet its targets for decarbonising with cleaner fuels

image is Sebastian Schrapp Web

In order to meet global net-zero commitments, the world must shift its energy dependency from oil and gas to decarbonised sources of energy. Low-carbon hydrogen - in other words, hydrogen generated from 100% renewable energy sources or with carbon capture - is going to be a pivotal part of this global transition to a decarbonised world.

Hydrogen, based on renewable resources, is expected to contribute to approximately 13% of global greenhouse gas reductions by 2050. It will play a significant role in sectors such as power generation, industry, transport and chemicals.

However, the global roll-out of green hydrogen is falling behind targets; low-carbon hydrogen solutions are not available at scale in the near-term future. In order to accelerate the transition, leading economies are gearing up to foster innovation, economic viability and operational feasibility of green hydrogen solutions - three examples:

The Inflation Reduction Act (IRA) in the USA

The US IRA came into effect last year. The Act is designed to kickstart research and development and large-scale commercialisation of low carbon technologies, such as carbon capture, storage and green hydrogen. Nearly $400 billion has been made available via tax incentives, loans and grants, and most of this money is earmarked for clean energy projects.

The IRA works well because it is simple. It unlocks investment into green hydrogen via providing tax credits for what today is a costly technology to deploy. Specifically, companies receive a subsidy of up to $3 per kilo of hydrogen they produce over the next decade if the hydrogen is created via renewable energy.

China’s fast-paced rollout of renewable energy sources

The speed with which China is installing domestic renewable energy sources is globally unmatched. Reliable access to renewable energy and security of supply at competitive - and predictable - prices is key in mastering the green transition. Without renewable electricity available, nations are incapable of producing green hydrogen and achieving their decarbonisation targets. China is fully on track to double its wind and solar installations to 1.2TW by 2025 - reaching its 2030 renewable energy source installation target five years ahead of time. Other nations, however, are lagging behind with their rollout of renewable projects, often suffering from long-winded consenting processes and bureaucracy in application, approval and execution.

Europe’s strong demand off-takers and innovators

Europe is by many considered a front-runner in research and development, cross-country collaboration and information sharing to innovate the low carbon energy sector. The global leaderboard for patent filings, as a proxy for innovativeness, has long been led by European companies and research institutes. In addition, Europe is home to a large industrial base, including key future demand sectors for green hydrogen, for example heavy industry, steel, chemicals, and heavy-duty and commercial transportation. Proximity to domestic demand off-takers represents a significant benefit in scaling green hydrogen solutions.

From deploying renewable energy solutions, to mobilising investment to fund the green transition, or creating demand in both the transport and stationary sector - for example, electric vehicles, residential power and heat - none of the world’s leading economies have yet identified the ‘winning recipe’ albeit they continue ‘trial-and-error’ through regular policy updates.

So what globally?

Scaling of low-carbon hydrogen solutions needs to be tackled as a global challenge. The global emergence of powerful innovators can accelerate the green energy transition. Through collaboration and sharing of best practices to resolve key bottlenecks, plus the use of co-investments de-risked through consortia, the commercial viability of green hydrogen is starting to look brighter.

Around 55% of global greenhouse gas reductions need to stem from yet-to-be-industrialised solutions not available today. Innovation in sectors that help abate emissions is becoming increasingly imperative in the race towards reaching net-zero targets by 2050 – and a critical source of a competitive edge, globally. Only if individual resources, capabilities and strengths are locally piloted and globally deployed, will we be able to address this global challenge. 

Green hydrogen energy and storage systems will be key in the world’s transition away from fossil fuels to low carbon alternatives. By bringing together learnings from different countries and companies, we can push forward the effective rollout of this essential technology at scale and stay on track to meet global climate targets in the wake of the Paris agreement implementation.


Subscribe to our newsletter and get the best of Energy Connects directly to your inbox each week.

By subscribing, you agree to the processing of your personal data by dmg events as described in the Privacy Policy.

Back To Top