Today, green hydrogen (GH2) barely exists. A handful of facilities currently exist around the world, but they’re not yet operating on a large scale. Electrolysis is particularly tiny, the world’s total annual capacity is just 180 kilotonnes, less than 1% of current global hydrogen production. However, thanks to recently adopted policies in the U.S. and the EU that heavily subsidize GH2, as well as China’s ongoing leadership on the buildout of clean energy infrastructure, the pipeline of GH2 projects under construction/ consideration is now huge.
Electrolyzers are extremely power-hungry. The IEA estimates that between 44-90 GWs of renewable energy sources (RES) will be dedicated to hydrogen production over the next four years. But who exactly is going to buy all of this GH2 once it’s available?
Ideally, only the industries for which direct electrification is not a viable option. If batteries or RES can do the job (for instance, power a passenger vehicle or heat a home) it doesn’t make sense from an economic or energy-efficiency perspective to bring hydrogen into the mix.
In the near term, the most promising anchor customer for GH2 is the fertilizer industry, which, alongside oil refining, is one of the biggest consumers of conventional dirty hydrogen. Though more hydrogen is used for refining, analysts see fertilizer companies as more likely end users for clean hydrogen; oil & gas companies are less likely to voluntarily swap their fossil-fuel-based hydrogen for a version produced with RES.
BNEF, for its part, foresees exponential growth in total hydrogen demand starting in the 2030s, once much of today’s planned GH2 production capacity is online, with industries such as steelmaking, aviation and shipping to lead the way in terms of new demand as they begin to work GH2 into their processes.
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