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Green hydrogen investments accelerate revolution

20 Mar 2023

Hydrogen Revolution Accelerates as Green Hydrogen Investments Soar

The Hydrogen Revolution Accelerates: Investments and Policy Changes are Driving Growth in the Clean Hydrogen Industry

Hydrogen is quickly gaining traction as a crucial tool in the fight against climate change. With its high specific energy per unit mass and flexibility, hydrogen is uniquely capable of removing emissions from the harder-to-decarbonize parts of the global economy. It can be used as an energy fuel, energy vector, feedstock, and can also be used to store energy over the long term. Hydrogen can propel heavy vehicles and heat furnaces for the manufacture of steel, among other heavy industrial uses.

According to a new report from Goldman Sachs Research, "green" hydrogen, which is produced by using renewable energy sources to electrolyze water and split it into hydrogen and oxygen, is one of the most promising alternatives to "gray" hydrogen, which relies on natural gas supplies and produces carbon dioxide that then needs to be released or stored.

The clean hydrogen industry is still in its infancy, with only about 0.3 GW of capacity installed at the end of 2020. However, based on projects that have been announced, GS Research estimates as much as 137 GW will be installed by the end of 2030, about 1.7 times more than last year’s estimate of 80 GW. The average size of hydrogen projects is also increasing by more than 600 times from the current dimensions.

The United States has historically lagged the rest of the world in clean hydrogen development, but the incentives in the Inflation Reduction Act have spurred a development boom in the U.S. By 2030, the planned installed capacity of clean hydrogen projects is expected to jump to 12 GW from 2 GW. The increase will help the U.S. narrow the gap with the rest of the world, but likely not close it since projects in Europe, Australia, and other parts of Asia are also accelerating.

Europe is expected to drive the growth of installed capacity, adding 50 GW of cumulative capacity by 2030, followed by Australia with 34 GW, Africa with 25 GW, and Latin America with 17 GW. The report estimates that the size of clean hydrogen projects is measured by the gigawatts (GW) used to power the electrolysis used in production.

Government incentives are powering major strides in green hydrogen investments, particularly in the United States. The Inflation Reduction Act offers several key incentives, including production tax credits for developers who produce clean hydrogen, investment tax credits for energy storage, clean vehicle credits, and alternative fuel credits.

By the team’s estimation, a $3 tax credit for every two kilograms of hydrogen produced would lower the cost of clean hydrogen to that of hydrogen currently produced with fossil fuels. "This effectively fully bridges the cost gap between grey hydrogen and green hydrogen from renewable power," according to the report.

The hydrogen revolution is rapidly accelerating, with investments and policy changes driving growth in the clean hydrogen industry. The increasing size of clean hydrogen projects, combined with government incentives and policy changes, is positioning hydrogen as a key player in the transition to a low-carbon economy.

Hydrogen infrastructure, hydrogen economy, hydrogen distribution, and hydrogen utilization are all critical components of the clean hydrogen industry. Gray hydrogen, which relies on natural gas supplies, and blue hydrogen, which captures carbon dioxide emissions from gray hydrogen production, are also key considerations in the transition to clean hydrogen.

Power generation is another area where hydrogen is poised to play a significant role. Hydrogen fuel cells are an attractive alternative to traditional combustion engines, with zero-emissions and improved efficiency. With continued investment and policy support, the clean hydrogen industry has the potential to revolutionize the energy sector and help combat climate change.

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