The Green Hydrogen Revolution

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TAKEAWAYS

• Decisive climate action through investments, innovation, and policy development could make the green hydrogen industry competitive in less than 10 years.
• Green hydrogen has the potential to support up to two million jobs per year between 2030 and 2050, and create a global export market of US$280 billion.
• Decarbonising hard-to-abate sectors like steelmaking, chemicals, aviation, and shipping will likely require global hydrogen use to grow six-fold to nearly 600 million tons, by 2050.
• Developing economies will gain a competitive edge due to the widespread availability and decreasing cost of renewable energy production. Asia is forecast to capture 55% of the market in 2030, driven by skyrocketing demand in China, India and Indonesia.

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There has been a significant global push towards a net-zero future. Governments, scientists, and executives are racing to limit global warming to well below 2°C, while pursuing efforts to restrict the global temperature increase to 1.5°C to meet the targets defined in the Paris Agreement. To meet these targets, there is an urgent need to replace legacy systems powered by fossil fuels with low-carbon energy sources, such as renewables.

In this context, Deloitte’s Green hydrogen: Energizing the path to net zero report highlights that green hydrogen is a prime solution for hard-to-abate sectors, and investments to help accelerate the use of this breakthrough opportunity should take place now.

Green hydrogen, a form of renewable energy produced through electrolysis with solar and wind power, stands out as an economically viable and environmentally sustainable option. This is in contrast with the carbon-intensive conventional hydrogen production reliant on natural gas reforming and coal gasification.

Hydrogen production technologies

The industry uses colours to help differentiate technological families of hydrogen, distinguishing between carbon-intensive (grey and black/brown) and clean (green, blue, turquoise, white, and pink) hydrogen.

GREEN HYDROGEN PRESENTS HUGE OPPORTUNITIES IN THE MARKET

The emerging green hydrogen market is forecasted to surpass the liquid natural gas trade in value by 2030, reaching over US$1.4 trillion annually by 2050. This can be attributed to the significant emissions savings brought about by its versatility. Hydrogen can be stored and transported easily in its derivative form as ammonia, methanol and synthetic aviation fuels, which can later be converted back to pure hydrogen for fuel cells or electricity generation. This presents an opportunity for more energy-efficient trade and processes in hard-to-abate sectors such as heavy industry (steelmaking and chemicals) and heavy transport (aviation and shipping).

Deloitte’s Hydrogen Pathway Explorer (HyPE) model projects that clean hydrogen can contribute to a reduction of 85 gigatons of cumulative CO₂ emissions by 2050 – more than double the global CO₂ emissions recorded in 2021.

Greenhouse gas emissions abatement unlocked by clean hydrogen, 2030 to 2050

PROJECTED ECONOMIC DEMAND IN ASIA PACIFIC

Global trade, supported by diversified transport infrastructure, is key to unlocking the full potential of the green hydrogen market. Regions capable of producing cost-competitive hydrogen beyond domestic demand are positioning themselves as exporters to less competitive regions, facilitating the energy transition.

Come 2050, the HyPE model projects that more than 65% of the market will be in developing and emerging economies, and 15% of revenues will accrue in the Asia-Pacific region. Deloitte’s research also shows the Asia-Pacific market could capture a sizeable US$645 billion of the US$1.4-trillion global hydrogen market by mid-century. With the cost of renewable energy production becoming more affordable, green hydrogen can be produced virtually anywhere. Geographies, especially developing countries, can capitalise on this unique opportunity towards low-carbon advancement, while also fuelling economic growth and sustainable development.

Green hydrogen, especially in Asia Pacific, can be a catalyst for decarbonisation, helping countries meet net-zero targets while enhancing their energy security and independence.

Clean hydrogen market size (US$ billion per year), 2030 to 2050

Singapore’s Ministry of Trade and Industry recognises hydrogen’s potential as a low-carbon fuel through the National Hydrogen Strategy. The strategy outlines the potential gains from hydrogen and the necessary infrastructure and policy development required locally and internationally to support Singapore’s journey toward net-zero emissions by 2050.

The strategy involves pathfinder projects for advanced hydrogen technology, increased investment in hydrogen research and development, international collaborations to enable low-carbon hydrogen supply chains, long-term land and infrastructure planning, as well as workforce development.

Positioned as the world’s busiest container transshipment port and a prominent air hub, Singapore is poised to spearhead the global transition towards a more sustainable shipping and aviation industry.

PSA Corporation, operator of the world’s largest container transshipment hub in Singapore, plans to electrify its operations in Tuas Port and incorporate low-carbon sources like hydrogen by 2050¹.

In addition, in 2022, Airbus, Changi Airport Group and the Civil Aviation Authority of Singapore embarked on a two-year feasibility study to assess the potential for Changi Airport to serve as a regional hub for hydrogen fuel by 2035.

Singapore’s National Hydrogen Strategy articulates the country’s commitment to unlocking hydrogen’s potential as a decarbonising solution. It stands as a call to action for the industry and international community to come on board this transformative journey.

THREE KEY COMPONENTS REQUIRED TO UNLOCK THE FULL POTENTIAL OF GREEN HYDROGEN

Significant supply chain investments exceeding US$9 trillion are essential to optimise the global value of clean hydrogen and meet net-zero compliance by 2050. Within Asia Pacific, this translates to an average yearly investment of US$150 billion, to meet the global average requirement of US$375 billion. Despite current clean hydrogen projects, the global market’s estimated production capacity falls short of a quarter of the projected 2030 demand.

Therefore, to help early hydrogen projects compete on a level playing field, enter the market and trigger economies of scale, policymakers and business leaders should prioritise three key components:

• Laying the foundations for a climate-oriented market. Continue to establish national and regional strategies to enhance market credibility, create a robust and collaborative certification process for clean hydrogen to enhance transparency, and engage in international coordination to foster equitable competition.

• Creating a business case. Establish clear targets and/or markets for clean hydrogen-based projects and offer pointed instruments such as fiscal incentives and subsidies. These measures can bridge the cost gap between clean and fossil-based technologies, facilitating the integration of clean and fossil-based technologies.

• Ensuring long-term resilience. Diversifying value chains – from trade partners to raw material suppliers – will facilitate the transition to clean hydrogen, mitigating potential bottlenecks. Greater emphasis should be placed on enhancing infrastructure design for efficient transportation (via pipelines and marine routes) and storage (through strategic reserves) of clean hydrogen commodities.

The emergence of the clean hydrogen market presents opportunities and challenges at each stage of the value chain. This requires unprecedented ramping up of technological development (fuel cells, direct reduction for iron and steelmaking, and sustainable aviation fuels), manufacturing capabilities (electrolysers, solar panels, and wind turbines) and infrastructure (production, transport, and storage facilities). Establishing new supply chains and a global hydrogen trade adds complexity but offers abundant opportunities for decarbonisation. Given the narrowing window for meaningful climate action, it is paramount for governments, industry leaders, researchers, and stakeholders to seriously consider the role of green hydrogen in the energy transition.

Scan the QR code for the full report.

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Pradeep Philip is a partner leading Deloitte Access Economics in Asia Pacific; and Will Symons is the Deloitte Asia Pacific Sustainability and Climate Leader.

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¹ Ministry of Trade and Industry Singapore. Singapore’s National Hydrogen Strategy e-brochure, p33; accessed 6 November 2023