The Reality Behind Green Hydrogen’s Soaring Hype

Renewably produced hydrogen has great potential and some powerful allies. But it’s not a decarbonization panacea.

Green hydrogen produced using renewable energy is increasingly seen as a key asset for grid and transport decarbonization.

Interest in the technology is surging. Shell believes the hydrogen sector deserves the same levels of support that went to solar energy over the years.

But at least in the medium term, the decarbonization potential of hydrogen is limited. In some areas, it’s “just not economical, and it won’t be,” said Wood Mackenzie senior analyst Ben Gallagher.

Green hydrogen remains relatively inefficient and expensive today. It has an end-to-end efficiency of around 30 percent, said Gallagher.

As a result, it’s hard to see it being used for electricity generation in markets such as the U.S., where natural gas prices are expected to remain low for the foreseeable future.

Similar challenges could hamper attempts to make hydrogen a viable alternative to electrification in the automotive sector.

“On the mobility side, you not only have the electrolyzer, you have a large distribution network that you need to build out,” said Gallagher. “Compared to either EVs or gasoline, I don’t understand how it’s going to be cost-competitive in any way, anytime soon.”

Not much “green” today

Gallagher’s views echo the findings of a major report on green hydrogen published by the International Renewable Energy Agency (Irena) in September, which warned that the fuel “should not be considered a panacea.”

“A hydrogen-based energy transition will not happen overnight,” Irena’s report states. “Hydrogen will likely trail other strategies such as electrification of end-use sectors, and its use will target specific applications. The need for a dedicated new supply infrastructure may limit hydrogen use.”

Despite the challenges, many are bullish on green hydrogen’s growth prospects.

In research published last month, Wood Mackenzie said more than 3.2 gigawatts of green hydrogen electrolyzer capacity might be deployed between now and 2025, a 1,272 percent increase on the 253 megawatts installed from 2000 to the end of 2019.

“The large increase in the 2019-2025 period is partially due to the nascency of the market,” Gallagher said. “But aggressive targets in East Asia and increased interest from major international stakeholders will drive deployment in the near term.”

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