The report finds that 62 percent of heavy industry companies across sectors are looking at low-carbon hydrogen to replace carbon-intensive systems. On average, Energy and Utilities (E&U) companies expect low-carbon hydrogen to meet 18 percent of total energy consumption by 2050. They are unlocking investment across the hydrogen value chain, notably to develop hydrogen infrastructure, cost-effective electrolysers and fuel cells.
According to the report, most organisations believe low-carbon hydrogen will be a long-term contributor to achieving emissions and sustainability goals. 63 percent of E&U organizations view low-carbon hydrogen as critical for decarbonising economies, and 62 percent believe it can help nations reduce dependence on fossil fuels and promote energy independence. According to those surveyed, low-carbon hydrogen could meet up to 55 percent of hydrogen mix totals by 2050. On average, 0.4 percent of total annual revenue is earmarked for low-carbon hydrogen by E&U organisations by 2030, in particular for hydrogen energy transport and distribution (53 percent), production (52 percent) and R&D (45 percent).
“Low-carbon hydrogen is crucial in the clean energy mix for decarbonising priority high-emission sectors such as industry and transportation, and thus combating global warming” said Florent Andrillon, Group ClimateTech Lead at Capgemini. “Scaling the initiatives we see today will require significant investment in R&D, collaboration across the value chain, clear partnership strategies, and tailored business-case assessments. Organisations must establish the right collaboration throughout the value chain, secure their offtake, develop hydrogen-competence centers, and harness technologies like simulations, digital twins and traceability solutions to scale their low-carbon hydrogen initiatives successfully. While achieving measurable success won't be easy, we have the opportunity to create a decarbonised future.”
Across industries and geographies demand for hydrogen has increased by more than 10 percent in the past three years. This demand is expected to continue to grow, particularly in traditional hydrogen applications such as petroleum refining, chemicals, and fertilisers: 94 percent of petroleum refining organisations anticipate a significant impact on their industry by 2030; similarly, 83 percent of chemicals and fertiliser companies expect a comparable effect.
New applications like heavy-duty transportation, aviation, and maritime are predicted to increase demand for hydrogen. Although these applications may take longer to mature, the report found that organisations in these sectors are optimistic about their potential and are exploring innovative business models and cost-reduction strategies to help scale. Yet, the real potential lies in those sectors where electrification is not an option, and the use cases can be achieved in the short term given localised volumes. For instance, nearly three-quarters (71 percent) of E&U organisations believe that low-carbon hydrogen is a viable solution of energy storage from intermittent renewable sources, acting as a battery and making renewable energy such as solar and wind available to even more applications.
Although the demand for low-carbon hydrogen is increasing across sectors, challenges with hydrogen production are well known, with current methods being neither cost-effective nor environmentally friendly. The scale of the investments required and the need to simultaneously grow supply and demand will require partnerships, ecosystems, and increased collaboration between the historical hydrogen players and new entrants, along with the development of transparent and open markets.
While the production of low-carbon hydrogen faces challenges with sourcing low-carbon electricity and high costs of electrolysers, E&U organisations are showing confidence in low-carbon hydrogen with almost half (49 percent) of organisations expecting its cost to steadily decrease by 2040.
In addition, most organisations are still at the proof-of-concept or pilot stage with hydrogen. Only 11 percent of E&U organisations and 7 percent of end-user organisations have fully embedded low-carbon hydrogen projects in their market. To achieve large-scale commercialisation and deployment of low-carbon hydrogen, critical engineering and infrastructure challenges need to be addressed in addition to cost and energy concerns.
The report also found that organisations in different sectors face sector-specific pain points. For instance, 65 percent of organisations in heavy transport cite scaling up production of hydrogen fuel cells as their biggest infrastructure and engineering challenge. In aviation, 58 percent of respondents cite the need for modification in aircraft design to use low-carbon hydrogen as fuel. Meanwhile, 72 percent of respondents in the steel industry say that a significant infrastructure upgrade is required for large-scale hydrogen-based steel production.
In addition to cost, infrastructure, and engineering issues, a lack of skills and expertise is also a top challenge to scaling hydrogen, according to 60 percent of organisations. The skills shortage is particularly pronounced for end-user organisations in Spain (70 percent) and for E&U organisations in Japan (65 percent), France and Australia (63 percent for each).
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