Energy professionals identify lack of investment in infrastructure as the joint-highest risk their organisations face in relation to hydrogen – and a significant majority (78%) say repurposing existing infrastructure will be crucial to developing a large-scale hydrogen economy.
DNV’s report Rising to the Challenge of a Hydrogen Economy draws on a survey of more than 1,100 senior energy professionals and in-depth interviews with industry executives, on emerging hydrogen value chains, from production to consumption. It suggests that more than just ambitions, the hydrogen pledges, plans, and pilots of recent years have now evolved into concrete commitments, investments and full-scale projects.
Some 84% of senior energy professionals believe that hydrogen has the potential to be a major component of a global, low-carbon, energy system, while three quarters (73%) say Paris Agreement targets will not be possible without a large-scale hydrogen economy.
“To meet the targets of the Paris Agreement, the world needs to transition faster to a deeply decarbonised energy system. In addition to energy efficiency gains, this will require greater renewable power generation and electrification, and the scaling of technologies to remove the carbon from fossil fuels. Hydrogen will be needed to connect and enable these paths,” says Ditlev Engel, CEO of Energy Systems at DNV.
A strong majority of energy companies (71%) only began their involvement with hydrogen within the past 5 years, while 55% only commenced within the past 3 years. For many in DNV’s survey (45%), hydrogen accounts for less than 1% of their organisation’s revenue today.
By 2025, 44% of energy companies involved in hydrogen expect it to account for more than a tenth of their revenue, rising to 73% of companies by 2030. This is up significantly from just 8% of companies today.
On the other side of this new energy value chain, 33% of hydrogen consumers expect hydrogen to represent more than a tenth of their organisation’s energy and/or feedstock spending by 2025, rising to 57% by 2030. This is up from just 9% today.
Taking revenue earners and consumers together, a quarter (26%) of energy professionals expect hydrogen to account for half of their organisation’s revenue/spending by 2030.
“Hydrogen has a new status in 2021 as an important, viable and rapidly developing pillar of the energy transition. Yet ambitions and the rate of change in the hydrogen economy are demanding, and the industry needs to prepare,” says Engel.
Three quarters (74%) of energy professionals say that the outlook for a hydrogen economy improved significantly in the past 12 months, while two thirds (67%) expect this will continue in the next 12 months.
“Just a year ago, in DNV’s Heading for Hydrogen research, we said that the challenge for the hydrogen economy is not in the ambition, but in changing the timeline: from hydrogen on the horizon to hydrogen in our homes, businesses, and transport systems. We see that the energy industry is rising to this challenge, and increasingly pursuing hydrogen as a profitable business opportunity,” says Engel.
Energy professionals are aware of the significant challenges involved. Some 71% believe current hydrogen ambitions tend to underestimate the practical limitations and barriers, while 43% believe that the majority of national and organisational hydrogen goals are realistic.
Profitable business opportunities are the biggest driver of involvement in hydrogen, while infrastructure and costs are two of the biggest hurdles. Repurposing existing infrastructure has a key role to play, and the right regulations are deemed to be the most powerful enabler, followed by carbon pricing specifically. Some 80% say the hydrogen economy needs effective carbon-pricing regulations before it can scale-up.
Hydrogen safety is only the seventh highest risk among energy professionals. Work is already well underway to prove the safety case, perhaps explaining why safety is on the radar of energy professionals but not among the top risks and enablers.
Energy transitions take decades and there are still many open questions about the future hydrogen economy. Some commentators focus on competition between electrification and hydrogen. However, 80% of energy professionals believe that hydrogen and electrification will work in synergy, helping both to scale up. On the debate between green and blue hydrogen, the majority of energy professionals (77%) believe that both blue and green hydrogen need to work in synergy to successfully scale the hydrogen economy.
Several challenging questions remain, with the view split inconclusively on whether hydrogen trade will become a fully globalised market (42%) or regional market (52%), or whether hydrogen will be priced like oil and gas with free market forces (41%), or like electricity with a regulated or stable rate of return (43%).