Hydrogen economy

The hydrogen economy is an umbrella term that draws together the roles hydrogen can play alongside renewable electricity to decarbonize those sectors and activities which may be technically difficult to decarbonize through other means, or where cheaper and more energy-efficient clean solutions are not available. In this context, hydrogen economy encompasses hydrogen's production through to end-uses in ways that substantively contribute to avoiding the use of fossil fuels and mitigating greenhouse gas emissions.

Most hydrogen produced today is gray hydrogen, made from natural gas through steam methane reforming (SMR) which accounted for 1.8% of global greenhouse gas emissions in 2021. Low-carbon hydrogen, which is made using SMR with carbon capture and storage (blue hydrogen), or through electrolysis of water using renewable power (green hydrogen), accounted for under 1% of production. Virtually all hydrogen produced is used in oil refining (43% in 2021) and industry (57%), principally in the manufacture of ammonia for fertilizers, and methanol.^{: 18, 22, 29}

In its contribution to limiting global warming to 1.5 °C, it is broadly envisaged that the future hydrogen economy replaces gray hydrogen with blue and predominantly green hydrogen, produced in greater total volumes, to provide for an expanded set of end-uses. These are likely to be in heavy industry (e.g. high temperature processes alongside electricity, feedstock for production of green ammonia and organic chemicals, as alternative to coal-derived coke for steelmaking), long-haul transport (e.g. shipping, aviation and to a lesser extent heavy goods vehicles), and long-term energy storage. Other applications, such as light duty vehicles and heating in buildings, are increasingly found to be out of scope for the future hydrogen economy, primarily for economic and environmental reasons. These reasons include the difficulty of developing long-term storage, pipelines, and engine equipment, safety concerns since hydrogen is highly explosive, and the inefficiency of hydrogen compared to direct use of electricity.

The extent to which hydrogen will be used to decarbonise appropriate applications in heavy industry, long haul transport and long-term energy storage is likely to be influenced by the evolving production costs of low- and zero-carbon hydrogen. Estimates of future costs face numerous uncertainties – such as the introduction of carbon taxes, geography and geopolitics of energy, energy prices, technology choices, and their raw material requirements – but it is likely that green hydrogen will see the greatest reductions in production cost over time.