Deloitte | Hydrogen, Making it happen

Decarbonization has become a global imperative. The 27th Conference of the Parties (COP27) of the United Nations Framework Convention on Climate Change (UNFCCC) sought to push the Paris Agreement targets further, and move from pledges to practical action, with the drive to implement decarbonization solutions and lower emissions now a priority. Clean hydrogen will most likely play an important role in the future energy system – particularly in decarbonizing sectors that cannot be realistically electrified; the so-called "hard-toabate" sectors. By 2030, clean hydrogen is expected to be used in sectors such as methanol, refining, aviation and road freight, and expand into other sectors such as shipping thereafter .

According to Deloitte analysis, announcements of clean hydrogen supply projects are accelerating, but it is uncertain whether many projects will materialize, and they are not sufficient to meet the expected demand outlined in the IEA ‘Net-Zero Emissions by 2050’ Scenario (NZE). Indeed, three times the capacity announced so far will be needed by 2030 to stay on track for the NZE Scenario by 2050.

This report sets out the practical solutions needed today to help drive the large-scale deployment of clean hydrogen and meet imminent emission-reduction targets: • Natural demand: Addressing natural demand (i.e., demand emerging without regulatory support in specific sectors) through new ‘green’ value propositions and aggregation of off-takers is important to send clear signals to the market, to stimulate regulated demand, and accelerate investment in supply. • Regulation: Adopting simple and synchronized regulations across supply and demand – based on a new nomenclature and certification around the emission intensity of hydrogen (for example, a Hydrogen Emission Intensity Index) – with fast release of permits can accelerate hydrogen deployment and emission reduction. • Technology: Aligning on the decarbonization technologies to adopt within each sector, and maturing them quickly, will dictate the speed of demand pick-up for clean hydrogen.

On the supply side, a ‘think big, start small, and scale fast’ approach to production development is needed, to quickly balance largescale needs and short-term supply chain constraints. • Assets, infrastructure and supply: Faster asset cycle changes are needed on the demand side, coupled with infrastructure re-use where possible, with large-scale investment in renewable capacity, grids, and infrastructure. • Collaboration: Collaboration is essential for clean hydrogen production, with new commercial and business models to address the systemic challenges and inertia that can delay investments.

These proposed solutions (Figure 1) can be brought together by forming hubs: geographic areas that combine sufficient, low-cost resources for hydrogen production and/or a large enough cluster of industry off-takers; supportive regulations; and a willingness to collaborate on reducing hydrogen costs, through both economies of scale and reduced infrastructure requirements. These hubs will help to kick-start the hydrogen economy, and reduce the fragilities of existing global energy markets

Stay informed:  Hydrogen Networks