Green shoots for green hydrogen provide fertile ground for renewables
The investment thesis for green hydrogen was always compelling.
Hydrogen has been used for decades in industrial processes ranging from refining to fertiliser production. Crucially, as a zero-emissions ‘clean’ fuel, which also acts as an effective energy carrier, it holds much promise to support the decarbonisation of industries across the economy, including long-haul transportation, chemicals, and steel production.
However, most of the hydrogen that is used today comes from fossil fuels such as natural gas (predominantly) or coal, and the processes used to extract it also generate carbon emissions as a by-product. As a result, hydrogen production currently accounts for around 2% of global greenhouse gas emissions .
Enter ‘green’ hydrogen, which is instead produced from water using renewable energy-powered electrolysis. No fossil fuels are used to source the hydrogen, no emissions are produced when extracting it – and the resulting fuel is emission-free, too. Some thought this was the fuel of the future that would help to power the global energy transition.
Excitement over the potential for green hydrogen reached a peak in the early 2020s, with the Hydrogen Council, a Belgium-based industry group, predicting in 2021 that there would be $500bn invested in projects by 2030. Instead, high costs, production complexities and slow implementation of government support led to project delays and a loss of enthusiasm for the sector among investors.
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