Hydrogen Council: how to close the cost gap for clean hydrogen demand by 2030

Despite a challenging environment for clean hydrogen, the effective implementation of existing policies could support the business case for the uptake of ~8 Mt p.a. of clean hydrogen across the European Union, the United States and East Asia by 2030, according to the Hydrogen Council.

The council’s The Hydrogen: Closing the Cost Gap report, developed with support from McKinsey & Co, highlights that this can be achieved by the transposition of the EU Renewable Energy Directive (REDIII) at EU country level, rollout of Japan’s Contracts for Difference mechanism (CfD) and South Korea’s Clean Hydrogen Portfolio Standard (CHPS), and implementation of hydrogen-related sections of the US Inflation Reduction Act (IRA), resulting in either reducing the production cost of clean hydrogen and its derivatives or mandating or otherwise incentivising their use. 

Supporting decarbonisation

Approximately another 13 Mt p.a., largely in established use cases, could be unlocked with incremental infrastructure enhancements and cost decline to further advance decarbonisation targets, the council said in a statement.

For instance, serving low-carbon refining and ammonia demand across the EU and US would require the expansion of CCS networks in the US. Uptake in emerging sectors like trucking hinges on a combination of factors including expansion of hydrogen refueling infrastructure and lower clean hydrogen production costs. 

An additional ~13 Mt p.a., primarily in new end uses with limited decarbonisation alternatives, faces more significant cost and infrastructure hurdles. Near-term advancements could lay the necessary foundation for future industry growth – particularly in sectors that could become major clean hydrogen and derivative demand segments in the long-term like maritime and aviation.

Of the total 34 Mt p.a. prospective hydrogen demand considered in this report, around 75% could come from established use cases (e.g., refining, ammonia), while initial adoption in new sectors (e.g. maritime and aviation) makes up the remaining 25%.

“A successful energy transition will be achieved through multiple solutions, including hydrogen,” said Sanjiv Lamba, CEO of Linde and Co-chair of the Hydrogen Council. “As we see compelling business cases emerge, the successful implementation of existing policies in key markets will be essential for advancing a substantial volume of clean hydrogen and its derivatives within this decade.”

According to Jaehoon Chang, Vice Chair of Hyundai Motor Group and Co-chair of the Hydrogen Council, in addition to advancing decarbonisation, establishing hydrogen as an ‘everyday energy’ is also helping unlock tangible business opportunities for the industry. 

Fostering a virtuous cycle

“It’s encouraging to see the report highlight the potential uptake of hydrogen in transport, which is consistent with our experience pioneering sustainable port-decarbonising fleets and clean logistics businesses using our hydrogen fuel cell heavy-duty trucks in real world applications. To further boost demand and lower cost, we need supportive frameworks that will further foster a virtuous cycle within the hydrogen ecosystem,” Chang said.

Ivana Jemelkova, CEO of the Hydrogen Council, concluded: “Continued scale-up of hydrogen and its derivatives requires policy certainty and simplicity as well as cross-sector collaboration on critical business-enabling measures, such as infrastructure. This report outlines concrete solutions to unlock business cases and advance energy security, competitiveness and sustainability priorities.”