Lex in depth: how the hydrogen hype fizzled out

Lex in depth: how the hydrogen hype fizzled out

Once viewed as a superfuel that could decarbonise large chunks of the economy, the likely uses are shrinking dramatically

Camilla Palladino in London

Not so long ago, hydrogen looked like the next big thing, offering a way to decarbonise great swaths of the economy and perhaps even heat homes.

At one point, scenarios for low-carbon hydrogen saw demand rising from virtually nothing to as much as 800mn tonnes per annum (Mtpa) by 2050, or around 20 per cent of the global net zero energy mix. The vast majority of this was expected to be “green”, produced by splitting water molecules using renewable electricity, with a residual share for “blue”, made by stripping out and capturing the carbon in natural gas.

As well as big, hydrogen appeared to be imminent. To be on track for 2050, the world needs perhaps 70Mtpa of green hydrogen capacity by 2030, according to the International Energy Agency’s 2021 net zero scenario. Europe alone set itself a target of 20Mtpa.

Such sizeable near-term numbers galvanised the hydrogen ecosystem. Developers fell over themselves in their haste to announce projects, equipment manufacturers pledged to scale up and reduce prices, and policymakers promised hefty subsidies.

Last year Lex took its own look at the hydrogen industry’s projected development, describing how it was being held up by the high cost of the first waves of projects — even though governments in the EU and the US were hoping to get the ball rolling with subsidies Fast forward 12 months, and the mood is increasingly despondent. Costs for the first lot of hydrogen projects have been revised up, in some cases as much as doubling.

Subsidies have not yet delivered anything like the required shove. Indeed, Michael Liebreich of Liebreich Associates calculates that perhaps $200bn of subsidies may be disbursed in time to generate hydrogen by 2030 — compared to the $2tn-4tn that would be required to meet the targets proposed by policymakers who have enshrined hydrogen at the heart of their plans for net zero. Hydrogen’s ramp-up is much slower than expected, and 2030 targets now look woefully unattainable. 

Matt:  This is a really important article.  Please drill down on this link to download the full article on FT.  Lex in depth: how the hydrogen hype fizzled out (ft.com)