In recent years, the potential role of clean hydrogen in achieving Net Zero has captured the attention of policy makers and industry players around the world. In 2020 alone, nine governments published strategies earmarking a role for clean hydrogen in everything from buses to power generation. Industry initiatives have promised the likes of hydrogen-powered jet engines and hydrogen-heated homes. The hype around hydrogen has reached such a fever pitch it would be easy to forget that less than 1% of current global hydrogen production is clean. Also, in most modelled scenarios for Net Zero, clean hydrogen is expected to remain costly throughout the 2020s, meaning that deployment will need to be carefully prioritised. 

In this briefing, we provide some clarity by setting out our systems-led vision for the role of clean hydrogen in achieving Net Zero.

What is clean hydrogen?

Currently, most global hydrogen production is provided by ‘grey’ hydrogen, or by ‘black’ hydrogen. This carbon-intensive hydrogen is produced by splitting methane (CH4) into carbon dioxide (CO2) and hydrogen (H2), or by partially burning coal to isolate hydrogen. CO2 emissions are therefore a key by-product of current hydrogen production: for every kilogram of grey hydrogen produced, approximately 10 kilograms of CO2 are emitted into the atmosphere. Across global hydrogen production, 900 megatonnes of CO2 are emitted each year; roughly the same quantity of emissions produced by the UK and Indonesia combined. 

Novel methods would lower or eliminate greenhouse gas emissions from hydrogen production processes. Whilst clean hydrogen is a term that has no official definition, it is generally agreed that it is made using either of the following two production methods:

1. The first method creates ‘blue’ hydrogen. The production process is exactly the same as with grey hydrogen, however the majority (around 90 – 95%) of the resulting CO2 emissions are captured and stored using Carbon Capture and Storage (CCS) technology. CCS technology has not yet been deployed commercially at the scale required to deliver the high rates of capture needed for blue hydrogen production. As some CO2 emissions are inevitable even with high rates of CCS, blue hydrogen is not directly compatible with Net Zero. 
2. The second method creates ‘green’ hydrogen. Instead of using gas or coal to produce hydrogen, electrolysis powered by renewable energy sources is used to split hydrogen out from water molecules. The CO2 emissions from this production method are therefore nil at the point of generation.

Potential risks of clean hydrogen

The colours of hydrogen refer only to the production method used. The resulting hydrogen does not produce CO2 emissions when in use, regardless of the production method used. However, recent research has shown that combustion of hydrogen can create significant nitrous oxide (NO_x) emissions, which are a harmful air pollutant. Though NO_x emissions are accounted for under international obligations on air pollutants, the risks must be carefully monitored and managed down to avoid unintended consequences of increased hydrogen usage throughout the 2020s. 

Further research has shown that if hydrogen leaks, it can interact with other greenhouse gases in the atmosphere to increase their global warming potential. To ensure green hydrogen supports the delivery of Net Zero emissions, and precious resources of clean hydrogen are conserved, this leakage risk must also be carefully managed.  

The scale up of clean hydrogen, particularly green hydrogen, also requires a systems-led approach to the conservation of renewable energy resources and scarce water resources. The production of green hydrogen through water electrolysis requires a significant amount of renewable energy, indicating that increased green hydrogen production will place demands of local renewable energy capacity. It is important that this risk is managed to ensure local users of renewable energy are not crowded out in favour of green hydrogen developers. A similar consideration is required for water. Research shows that for every kilogram of green hydrogen produced, nine kilograms of water are required.¹ The demand for green hydrogen must therefore be managed in line with conservation of water resources. 

Why markets should aim for green hydrogen production

Clean hydrogen production is rare at present (less than 1% of current production), however the International Energy Agency (IEA) has modelled that to stay on track for Net Zero, around half of global hydrogen production will need to be clean by 2030, with two thirds of this coming from green hydrogen, and the remaining third from blue hydrogen.

This weighting towards green hydrogen is essential to drive investment towards the most sustainable form of clean hydrogen production. Blue hydrogen risks fossil fuel lock-in – a situation in which markets are compelled to continue using fossil fuels – as well as stranded assets from the 2040s onwards, when blue hydrogen is expected to be mostly replaced with green hydrogen and so blue hydrogen production facilities will no longer be required. It is also reliant on emerging CCS technology that has not been deployed at the commercial scale required to support high rates of emissions removal. For most markets, especially those that have huge potential to scale up renewable energy supplies, green hydrogen production should be the focus of policy and investment. Large-scale green hydrogen production also presents an attractive export opportunity for these markets.  

However, there are some circumstances in which blue hydrogen may be needed to enable and accelerate the decarbonisation of high-emitting sectors and the electricity system. For instance, in markets where renewable energy supply pathways have had limitations placed on them through policy decisions, blue hydrogen can help to stimulate economy-wide demand for hydrogen by lowering costs through economies of production and scale. 

Any use of blue hydrogen must be supported by strict regulation and enforcement to ensure at least 95% of CO2 emissions are captured and stored. This use of blue hydrogen supports overall decarbonisation of the economy by ensuring that where renewable energy supplies are limited, they are directed towards the sectors where they can deliver the most impact.

Clean hydrogen should be prioritised for sectors where it can deliver maximum decarbonisation impact

Across all Net Zero modelling scenarios, resources of clean hydrogen are expected to be relatively scarce across the world in the 2020s, as production will be costly and will require a significant amount of renewable energy. It is therefore vital that hydrogen resources are prioritised for use in sectors where they can deliver maximum decarbonisation impact at the lowest cost, and where alternative decarbonisation options are limited. As clean hydrogen is scaled up around the world, investment and policy decisions should be guided towards deployment of hydrogen in these sectors. 

The Carbon Trust’s view is that clean hydrogen should be prioritised for sectors where it can deliver significant decarbonisation benefits at a systems level, avoiding sectors where mature electrification technologies should be the primary focus of policies and investment.

Sectors and key areas for which clean hydrogen could deliver high levels of decarbonisation: 

1. Existing hydrogen production: Carbon-intensive hydrogen is currently used in industrial processes, such as oil refining and chemical production. As hydrogen is the only feasible feedstock for these processes, it is the responsibility of these high-emitting sectors to urgently invest in the research and development required to enable a switch to clean hydrogen. While fossil fuel production will need to be drastically scaled back to achieve Net Zero, it is likely that some regions will continue to partially rely on fossil fuels for decades to come. This makes the need to eliminate the use of grey hydrogen in oil refining absolutely critical to minimise the environmental impact of residual fossil fuel usage.
2. Industrial processes: Fossil fuel combustion for heat is responsible for a large proportion of industrial emissions. Heat is often used to melt or vaporise substances or to enable chemical reactions, for instance in the making of steel. Hydrogen has comparative advantages for industrial heat above other clean options as it is likely to face fewer barriers in terms of securing a network connection (a barrier for electrification) or sourcing fuel (a barrier for biomass). 
3. Unlocking grid flexibility: Decarbonisation of the energy system will be almost impossible without production of electricity from stored hydrogen at times when energy demand is not matched by renewables supply. The long-term, inter-seasonal storage capacity of hydrogen enables it to be produced at times of lowest cost to the wider energy system and re-electrified when needed. Provision of flexibility to the energy system should therefore be explored further as a future role for hydrogen.
4. Hard-to-abate sectors, including shipping and aviation: Some sectors, such as long-haul aviation and shipping, are almost impossible to electrify due to fundamental physical limitations of battery technology. Hydrogen and hydrogen-derived fuels can play a role here, but there is a huge need for innovation and cost reduction to make it scalable. De-risking investment in hydrogen will be essential to enable hydrogen innovation in these hard-to-abate sectors.

Sectors for which clean hydrogen is highly unlikely to deliver significant decarbonisation in comparison to electrification alternatives:

1. Home heating: The overwhelming majority of evidence² indicates that hydrogen boilers would be less efficient and more expensive³ to run than electrified heat, such as heat pumps. Retrofitting hydrogen heating infrastructure is highly complex and cost-intensive, even in the UK where there is an existing gas network for residential heating. While there may be a limited number of applications for hydrogen-based heating as part of a regional cluster approach (e.g. where the primary hydrogen use is for industry), hydrogen should not be pursued as the primary route to decarbonisation of home heating. 
2. Personal transport: Electric vehicles (EVs) are a mature, efficient, low carbon solution to petrol and diesel vehicles. EVs are an efficient use of renewable energy supplies due to their direct charging mechanism (only around 20% of energy is lost from production through to powering the vehicle) and have the potential to support grid resilience through demand-responsive charging. Hydrogen fuel-cell vehicles on the other hand are significantly less efficient for the overall energy system, as around 60% of energy is lost from production to powering the vehicle. While hydrogen fuel-cell vehicles were seen as a viable contender for the decarbonisation of personal transport a little over a decade ago, market developments have established EVs as the most efficient, readily available solution, with ever-expanding infrastructure to support wide-scale use. Use of hydrogen fuel-cell vehicles in return-to-home fleet transport may be an efficient approach to decarbonisation of heavy transport and applications requiring rapid refuelling, but their cost effectiveness is yet to be conclusively evidenced.

Five focus areas to unlock the role of clean hydrogen in Net Zero

Renewables and electrification will deliver the most significant emissions reductions required for Net Zero, however clean hydrogen is increasingly recognised as one of several other early-stage technologies that will be critical to a decarbonised economy. To take clean hydrogen from its current low level of production and use, global policy makers and industry players should focus efforts on five key areas:

1. Existing users of grey hydrogen should deliver an urgent transition to clean hydrogen, for instance through the introduction of quotas or targets to drive shifts in production method. Governments should support this transition through clear policy signals. A transition from grey to clean hydrogen will help to support the development of clean hydrogen technologies and infrastructure whilst stimulating demand in the market.
2. Industry should come together to lower the end-to-end costs of clean hydrogen and reduce investment risk, through automation of electrolyser production, as an example. Lowering of production costs is crucial to reducing investment risk, which is currently a major barrier to the financing of clean hydrogen. An example of how to do this is the UK-Government-supported Clean Hydrogen Innovation Programme, led by the Carbon Trust, which aims to reduce end-to-end costs by targeting supply chain innovation needs and solutions. Awareness-raising of the risks and opportunities of the scale-up of clean hydrogen amongst lenders could also help to alleviate barriers to investment. 
3. Governments and industry should collaborate to identify and implement regional clean hydrogen solutions, recognising that one approach will not be appropriate for all markets. For instance, some markets may require initial investment in blue hydrogen as well as green, whereas others can move directly to green hydrogen, perhaps taking advantage of significant export opportunities.
4. Governments should conduct supply and demand ‘matchmaking’ exercises to stimulate the global market for clean hydrogen and support the decarbonisation of hard-to-abate sectors. Clusters’ of potential hydrogen demand could be identified (such as a port) to help guide efficient markets for clean hydrogen production. Supply and demand matchmaking can also be undertaken at a national or international level. For example, the German government’s recent hydrogen strategy outlines how Germany’s large steel industry will be decarbonised in part through establishing it as an attractive import market for green hydrogen.
5. Governments should provide clear policy signals to guide the deployment of clean hydrogen in the sectors where it can deliver the most decarbonisation impact. This will ensure system-led decarbonisation by enabling electrification initiatives in home heating and personal transport are supported to progress at pace, while guiding investment in clean hydrogen towards its role in decarbonising hard-to-abate sectors and supporting overall energy system flexibility.

Conclusion

Clean hydrogen is a vital new energy technology for achieving Net Zero. However, to ensure it is scaled in a way that aids system-wide decarbonisation, governments and industry must adopt the right priorities and manage potential risks. Clean hydrogen is not a silver bullet decarbonisation solution and needs to be pursued with eyes open to its potential promises and pitfalls.

^[1] Rebecca R. Beswick, Alexandra M. Oliveira, and Yushan Yan, ‘Does the Green Hydrogen Economy Have a Water Problem?’, ACS Energy Letters, 2021 6 (9), 3167-3169: Does the Green Hydrogen Economy Have a Water Problem? | ACS Energy Letters

^[2] Jan Rosenow, ‘Is heating homes with hydrogen all but a pipe dream? An evidence review’, Joule, Volume 6, Issue 10, 19 October 2022, Pages 2225-2228: Is heating homes with hydrogen all but a pipe dream? An evidence review - ScienceDirect

^[3] Up to nine times the current cost of natural gas heating.