As the world scrambles to reach net-zero emissions by 2050, hydrogen has emerged as a potential silver bullet to help mitigate climate change. Hydrogen has been in consideration as a potential aid to decarbonization for over 50 years. However, it is only now that it has gained traction in government strategies, business plans, and the media. But what makes the attention given to hydrogen in the 2020s different from the 1970s?
Political, environmental, and economic landscapes have shifted, providing the perfect conditions for hydrogen's success. The hydrogen market lacked the policy and regulation to drive it forward in the 1970s. Additionally, the technology to bring low-carbon and renewable hydrogen would have required significant investment and research. All of this made it economically unfeasible. However, governments have set targets, regulators are establishing conditions for market participants, and businesses are under pressure from investors, consumers, and stakeholders to commit to net-zero emissions. This shift is leading to a hydrogen transition across the value chain.
The European Commission revealed funding for 41 hydrogen projects totaling €5.4 billion on July 15, 2022. The Indian government is currently holding consultations with stakeholders and is anticipated to launch a comprehensive renewable hydrogen mission that may announce purchase obligations for different industries. On the back of anticipated increased demand, the chemical company Johnson Matthey (JM) has announced a plan to build a manufacturing facility to produce hydrogen fuel cell components. The hydrogen movement is gaining momentum on a global scale, and it is essential to navigate the hydrogen transition.
Policymakers have set multiple targets for hydrogen market participants over the course of this decade. Countries have created roadmaps and policies to ensure that steps are continuously taken towards a decarbonized society. The targets in these strategies indicate that they are on track to increase hydrogen production capacity to 400 times that of 2020 by the end of this decade. As of the end of May 2022, the industry had announced 680 large-scale hydrogen project proposals worldwide.
The UK government has published a policy paper highlighting investment opportunity across the entire hydrogen value chain and providing information on the Net Zero Hydrogen Fund, which was established to support hydrogen deployment as well as hydrogen business models that provide revenue support to pioneer hydrogen projects. All of this indicates that hydrogen is becoming a more appealing investment, and market participants are facing concrete implementation plans at a scale hitherto unseen.
Despite the opportunities, hydrogen production comes with a price tag. The production process usually requires purchasing electricity or natural gas, and the final cost of producing hydrogen can vary substantially depending on the type and environmental impact. Moreover, demand for the commodity is not set in stone, which means that market sizing is difficult for new entrants to understand.
However, policymakers are establishing support schemes to reduce the price at which hydrogen is sold to the market, as well as grants for projects to move forward. Investment in the technologies for producing hydrogen is increasing, which may also reduce final costs. Price reporting and forecasting for hydrogen are becoming more robust, and investors can now access actionable insights on the supply and demand of the emerging hydrogen market, as well as market-leading information on the cost of production.
In conclusion, a strong government commitment to deep decarbonization, supported by financial investment, regulation, and clear hydrogen strategies and targets, has sparked unprecedented momentum in the hydrogen industry. If the initial goals set out by policymakers and legislators are to be fulfilled, momentum must now be maintained, and a long-term regulatory framework must be established. The rise of hydrogen is inevitable, and the prospects for decarbonized energy are looking more promising than ever before.