By 2050, the demand for hydrogen across the economy will grow fivefold to 600 million tons a year, according to a study by consulting firm McKinsey. However, the supply will amount to somewhere between 175 to 291 metric tons, the study found.
The study extrapolated from current trends in hydrogen investment and the development of needed infrastructure.
Hydrogen is having a moment. It’s seen as an increasingly important future fuel for heating buildings and making steel as well as powering cars, truck fleets, trains, and even airplanes.
Proposed uses for hydrogen are multiplying far faster than investments are being made and facilities are being planned, according to Pierre-Etienne Franc, CEO of the Hy24 hydrogen investment fund.
“A lot of announcements are coming onstream which have a lot of potential, but only 6 to 10 percent” have locked down their financing, he told The Wall Street Journal.
Hydrogen is still a nascent technology, so few investors are willing to put significant funds behind young projects, especially now when interest rates are high and bonds are offering both safety and a hefty return, Franc said.
“If you don’t have direct supply financing at low interest rates, it’s very difficult to speed up the shift” to hydrogen as a mainstream fuel, he added.
“Single-digit returns from core infrastructure [investments] were always going to be challenged in a higher [interest] rate environment,” CEO Jason Cheng of Kerogen Capital, a climate-focused hedge fund, said in a WSJ interview.
“Investors are now seeking higher-return opportunities outside commoditized areas such as onshore wind and solar,” he noted.
Another barrier: places where “green” hydrogen can be made from renewable resources are often removed from key markets. For example, the Great Plains generate large amounts of wind energy but U.S. industries tend to be concentrated elsewhere.
Still, national governments are offering as much as $300 billion in incentives for hydrogen projects, according to the World Platinum Investment Council, including $7 billion the U.S. energy department announced earlier this month.
Hydrogen analysts and advocates call for government regulatory and policy support that will push industry toward using green hydrogen in energy-intensive industries such as glass manufacturing and public investment in hydrogen infrastructure.
Permitting and licensing processes for hydrogen projects are too lengthy, according to the International Energy Agency. Regulatory agencies should “make licensing and permitting processes as efficient as possible,” the agency urged in a recent public statement.
TRENDPOST: Hydrogen will find a place in the energy economy but its arrival as a mainstream fuel will lag that of solar and other technologies by a considerable period. Other renewable fuels already are far less cumbersome to accommodate.
Unlike solar power, widespread use of hydrogen requires the development of a national production, delivery, and storage infrastructure.
Also, vehicles need to be designed to run on fuel cells, not internal combustion engines or electric motors; industrial plants need to be reconfigured to burn hydrogen instead of oil or natural gas.
As a result, hydrogen will not become a mainstream energy source until well into the 2030s.