Carbonomics | The Clean Hydrogen Revolution

Clean hydrogen has emerged as a critical pillar to any aspiring global net zero path, aiding the de-carbonization of c.15% of global GHG emissions, we estimate, with TAM for hydrogen generation alone having the potential to double to c.US$250 bn by 2030 and reach >US$1 tn by 2050. We believe it is now time to revisit the clean hydrogen theme as policy, affordability and scalability seem to be converging to create unprecedented momentum for the clean hydrogen economy.

Policy support is strengthening globally, with >30 national hydrogen strategies and roadmaps pledging a >400-fold increase in clean hydrogen installed capacity this decade vs 2020 and supportive of a c.50-fold increase in the pace of annual average green hydrogen new builds. Scalability is already revolutionizing the green hydrogen projects pipeline, with scope for average project sizes to increase 100x+, from 2MW in 2020 to >200MW by 2025 and a GW scale by 2030, leading to cost deflation of 40% for electrolyzer systems by 2025E, similar to what has been observed for batteries over the past five years. Affordability is rapidly improving with green hydrogen likely to be at cost parity with grey in advantageous regions by 2025E (US$1.5/kg H2) and hydrogen cost parity with diesel in long-haul heavy road transport likely as early as 2027E.

We believe clean hydrogen can develop into a major global market, impacting geopolitical patterns in energy supply, and we examine the case for international trade, concluding that 30% of global hydrogen volumes have the potential to be involved in cross-border transport, higher than for natural gas. Regions such as MENA, LatAm, Australia and Iberia could emerge as key clean hydrogen exporters, while Central Europe, Japan, Korea and East China could emerge as key importers. With US$5.0 tn cumulative investments required in the clean hydrogen supply chain, on our estimates, we examine the hydrogen case for 11 industrial cconglomerates with growing exposure to the theme and also initiate coverage on three leading hydrogen pure-plays.