Did you know that by 2050 there will be a €2.2 trillion addressable green hydrogen market in Europe for utilities?
How about by 2050 there could be a €10 trillion addressable green hydrogen market globally for utilities?
With green hydrogen looking to become a once-in-a-generation opportunity to become Net Zero, green hydrogen could become a key player in the utilities and energy industry.
By 2050, we are seeing the potential for green hydrogen to become the largest electricity customer, doubling power demand in Europe. Not only this but providing a profound reconfiguration of the gas grid, solving seasonal power storage issues as well as providing a second life to conventional thermal power producers, all due to the conversion of gas plants into hydrogen turbines.
Green Hydrogen Quick Facts
- 65% The estimated share of green hydrogen production cost coming from electricity in Europe.
- More than 650x increase in the European electrolyser market by 2030E based on the EU Hydrogen Strategy.
- Over 8,000x increase in the European electrolyser market by 2050E based on the EU Hydrogen Strategy.
- An almost 3x increase in European renewables annual additions versus the Green Deal Bull Case until 2050E to power electrolysers.
- 100% increase in European power demand between 2020-50E, just from electrolysers, turning clean hydrogen into the largest electricity customer.
- Under €1.5/kg estimated cost of clean hydrogen from solar in Iberia over the longer run.
What Can Green Hydrogen Do?
For the utilities industry, estimations show that e-Hydrogen could see a €10 trillion increase in the addressable market globally by 2050. In Europe, the analysis predicts that green hydrogen has the potential to do the following:
- Power Demand Doubled – With the process of creating green hydrogen being a high electricity-intensive process, the analysis predicts that green hydrogen could become the biggest electricity customer.
- Energy Map Reshape – Currently, hydrogen primary energy consumption is at 2%, but this could reach 15%. Therefore, countries that have cheap renewable sources could become top-level producers and exporters.
- Provide A Solution To Seasonal Storage Issues – By producing hydrogen during periods of high solar and wind availability, we could see a reduction in renewables curtailment, making H2 available for moments of high power demand. Hydrogen could then be used in fuel cells or converted gas-fired plants.
- Suggest A Significant Reconfiguration Of The Gas Grid – With more areas of the economy beginning to rely on hydrogen such as; buses, trains, factories, H2 molecules must be transported through existing gas grids. The hydrogen needs to be compressed, so to seal the pipes would require a significant reconfiguration of the transport gas grid.
- Power Generation Markets Re-Regulation – Almost 100% of green hydrogen production would come from renewables and hydrogen turbines.
- Give A Second Life To Thermal Power Producers – Through modest investment, we can convert gas power plants into hydrogen turbine power plants. They could then be used as peaking facilities, providing backup power during periods of abnormally high demand.
What The Main Disadvantages Of Green Hydrogen?
As you can see, there are plenty of benefits to green hydrogen, with it being a huge opportunity and game-changer for the utilities sector. However, there are some risks, with chances of delays and derailments. The potential disadvantages are as follows:
- Delays In Permitting – In numerous large countries, there is strong policy support, however, it may become overwhelming for local authorities to deal with a sharp acceleration in green hydrogen-related requests. This could include; installing new equipment, developing renewables and upgrading gas pipelines. In Germany and US Offshore, there have been environmental permits and local administration authorisations creating significant delays.
- The Economics Of Blue Hydrogen – Due to low gas prices, the high cost of electrolysers and no carbon taxes, the cost of blue hydrogen is more competitive than green hydrogen. With the possible introduction of carbon taxes on imported fuels as well as the cost of renewables and electrolysers likely to fall, the economics in blue hydrogen may see the EU revising ambitions in green hydrogen.
- Supply Constraints – We have to remember that the electrolysis industry is still in the early stages of development. With an increased acceleration implied in the EU Hydrogen Strategy, it could create supply restraints in equipment as well as cost inflations.
Green Hydrogen In Europe
The European Commission recently published its 2030 Hydrogen Strategy. This document is the first to details the pivotal role that hydrogen will play in the European economy. The EU Hydrogen Strategy gives us an insight into an entirely new hydrogen industry largely based on green hydrogen.
With over two-thirds of the investment in hydrogen in Europe to be in dedicated renewable capacity, how does this look?
| Capex to 2050 | % of e-Hydrogen addressable market | Function | |
| Renewables | 1.4 trn Euros | 65% | Powering 500 GW of electrolysers |
| Hydrogen Power Plants | 0.4 trn Euros | 15% | 450-500 GW of peaking capacity to meet 10% of EU demand |
| Electrolysers | 0.4 trn Euros | 15% | 500 GW of electrolyzers |
| Gas Infrastructure | 0.1 trn Euros | 5% | Pipeline reconfiguration |
| Total | 2.2 trn Euros | 100% |
With estimations of a global addressable market for hydrogen standing at almost €10trn by 2050E, what is the estimated hydrogen addressable global market?
| EU | USA | Asia | |
| Electricity Consumption in PWh | 2.9 | 3.9 | 10.4 |
| Installed Capacity in GW | 1,055 | 1,095 | 3,129 |
| Renewables Capacity in GW | 312 | 144 | 480 |
| Population in mn | 447 | 327 | 480 |
| GDP current prices in $ trn | 15.9 | 20.6 | 31.5 |
| Hydrogen addressable market in €trn | 2.2 | 2.9 | 4.4 |
What Will The Electricity Demand Be For Green Hydrogen?
With the rise of a new customer in the energy market, estimations predict that the electricity demand will double by 2050.
As the production of green hydrogen is highly electricity-intensive, it is estimated that for us to achieve the assumption of 500 GW electrolysers in the EU’s 2050 hydrogen strategy, we will see the power demand double versus current levels.
So, how do we meet the new power demand?
Well, for the EU’s 500 GW electrolyser ambitions, it is calculated that 1,100-1,300 GW of dedicated RES capacity would be required. This is equivalent to investments in renewables of €1.4 trillion.
This would almost triple the addition estimates for wind and solar to 90 GW per year.
What Does Green Hydrogen Mean For Gas Grids?
As stated earlier, the gas grids will require a major reconfiguration. With green hydrogen becoming more and more decentralised with transport and factories seeking demand, there will be a sharp, intense rise in the need for a hydrogen ready infrastructure.
From ten of the largest European gas transport system operators, a recent study estimated that by 2040, €27-€64 bn of investment would be needed to reconfigure gas pipelines. This would create a dedicated hydrogen infrastructure, providing sufficient movement of hydrogen across Europe.
What Does Green Hydrogen Mean For Power Plants?
With there being a new wave of power plants, it provides a second life for legacy generators. From Goldman Sachs estimates, after 90% of production from renewables is reached, there would be several challenges and issues that power systems would have to face.
- Hours of excessive RES production – This would result in curtailments. It is estimated that at a 90% share in the power generation mix, 20% of the output would have to be curtailed.
- Hours of insufficient wind and solar production – From the insufficient production, responsive backup generation would be needed.
- Increased pressure on the resilience of the power grid – Due to the high output volatility.
However, from these problems, there is a solution. Green hydrogen could solve the first two issues, all whilst allowing for zero emissions. There is an anticipation of an increased wave of backup power plants, such as hydrogen turbines (H2T) that are fuelled by hydrogen. This would be a carbon-free form of backup.
What Does Green Hydrogen Mean For The Energy Map?
In the UK, along with the EU, there is a present goal of becoming net-zero and decarbonising its economy. This will result in a sharp rise in clean hydrogen, becoming the primary energy consumption.
This would result in the upstream energy map shifting in favour of low-electricity cost producers, including countries like Spain.
This could also see offshore wind becoming highly instrumental in supporting electrolysis. With the huge potential of developing wind in the Baltic and the North Sea, as well as the high capacity factor of offshore wind.
The EU 2030 Hydrogen Strategy
The European Commission recently announced the hydrogen strategy, aimed at supporting the 2050 carbon neutrality goal. With investments of up to €400 bn needed, the strategy details a roadmap, highlighting the creation of an efficient hydrogen ecosystem.
Today, there isn’t a plan in place. However, thanks to the target of 40 GW of electrolysers, as well as the reconfiguration of gas pipes we can support the creation of green hydrogen.
To produce 10mt of green hydrogen, what sort of investments would be needed?
A total investment of €400bn, broken down into the following areas:
- €280bn on dedicated RES.
- €35bn on electrolysers.
- €11bn on retrofitting existing plants with CCUS.
- €65bn on infrastructure.
Phase 1, 2 & 3 Of The EU Hydrogen Strategy
Phase 1 of The EU Hydrogen Strategy covers 2020 to 2024. The first phase is cleaning up the existing hydrogen production.
The EU have a plan in place to decarbonise existing hydrogen production. This is through the installation of at least 6 GW electrolysers. For the refining oil industry and fertilizing industry, hydrogen will continue to be used.
Phase 2 covers 2025 and 2030. By 2030, the EU is aiming for the installation of at least 40 GW of renewable hydrogen electrolysers. They will be able to utilise up to 10 million tonnes of renewable hydrogen.
It is expected that hydrogen will be used more and more in transports and industrial processes.
Furthermore, hydrogen would start to play a huge role in the balancing of a RES-based electricity system This would provide flexibility, as well as being used for daily/seasonal storage.
Phase 3 covers 2030 and 2050. It is expected that renewable hydrogen technologies will reach maturity, being deployed at a large scale. This would then reach a wider scale of sectors in the economy such as:
- Aviation
- Commercial
- Shipping
- Hard-to-decarbonise industrials
There would need to be a vast increase in RES production. By 2050, the EC expects 25% of renewable electricity to be used for renewable hydrogen production.
Hydrogen Demands
Goldman Sachs estimate that to meet the EU’s 2050 ambitions, hydrogen adoption could become highly widespread in Europe. This would mean that from Europe alone, incremental demand would roughly be 15% more than the present global demand.
The Bottom Up hydrogen demand analysis from Goldman Sachs shows that in Europe, hydrogen demand could grow to a multiple of what it is today. This demand is driven by factors such as:
- The decarbonisation of the transport sector through widespread adoption of fuel cells. This would see an uptake for buses, trucks, ships and planes.
- The decarbonisation of industrial processes, with the adoption of zero emission hydrogen. This would be as a substitute to grey hydrogen and an alternative to oil, gas and coal as a fuel for high grade heat processes.
- Adoption of hydrogen as the source of energy. Estimates show hydrogen could supply up to 10% of European power demand.
Bottoms Up Hydrogen Demand Model
| Growth Drivers | ||
| Industry Substitution | Transport Adoption | Power Generation |
| 100% – for high grade heat processes using fuels with 0% underlying growth in energy use | 25% – for LCVs | 5 to 10% – for power generated from hydrogen power plants |
| 100% – for current hydrogen demand with zero emission hydrogen with 2% underlying growth in energy use | 50% – for medium and heavy commercial vehicles | |
| 75% – for buses | ||
| 100% – for aviation and maritime transport |
Hydrogen And Reaching Net Zero
At a high level, we could see hydrogen as an alternative fuel source to natural gas and diesel according to the Goldman Sachs Carbonomics report.
However, to generate hydrogen, other sources of energy are required. These include electricity, water or natural gas.
This is one of the reasons why the production of hydrogen is less efficient and more expensive than electricity and natural gas, both which are input costs to produce hydrogen.
In our increasingly decarbonising world, hydrogen could offer the solution to reaching the “last mile” of decarbonisation.
In another Goldman Sachs report, the Green Upside there are demonstrations of the task that is faced to fully decarbonise the European economy. It can be summarised into five main parts:
| Process | Amount of EU Emissions |
| Manufacturing and industrial processes | 20% |
| Transport | > 20% |
| Power generation | > 20% |
| Heating | 15% |
| Agriculture and food production | 10% |
Clean hydrogen could be particularly suitable for the hard-to-decarbonise parts of the economy due to its clean nature. These hard-to-decarbonise sectors include:
- Heavy-duty transport.
- Industrial processes using high-temperature-combustion.
- Seasonal storage in power generation.
What Are The Easy Parts Of The Economy To Decarbonise?
Did you know? – For 80% of the economy, it could be seen as a reasonably straightforward exercise to decarbonise.
With plenty of technology available, at relatively good costs, decarbonisation is a reality.
Power generation for example can be decarbonised due to the use of renewable wind and solar energy, therefore decreasing the need for fossil fuel power plants. We could also see electricity being used for many manufacturing processes.
For transport, there has been a rise in electric vehicles and heating has seen an increase in heat pumps using electricity. Both transport and heating could see overall consumption levels vastly reduced through these energy efficiency measures.