Global low-carbon hydrogen market requires bare-minimum US$600bn investment

LONDON/HOUSTON/SINGAPORE, 06 April 2022 – The global market for low-carbon hydrogen will require a bare minimum of US$600 billion of investment and policy support by 2050, according to latest hydrogen strategic planning outlook report by Wood Mackenzie, a Verisk business (Nasdaq:VRSK).

Flor Lucia De la Cruz, Senior Research Analyst at Wood Mackenzie, said: “Substantial investments are required to accommodate the anticipated growth for the global low-carbon hydrogen market up to 2050. Developers will need to invest at least US$600 billion by 2050, and consumers will be required to commit to off-take hydrogen not yet contracted. The opportunity is huge.”

As electrolyser capital expenditure falls 35-65% in the next decade, sub-US$2/kg green hydrogen is achievable in most markets at source by 2040, according to Wood Mackenzie analysis.

Hydrogen demand will also see exponential growth, with global low-carbon hydrogen demand set to increase from below 1 million tonnes (Mt) today to 223Mt by 2050. At first, global hydrogen will be driven by ammonia with 48% of demand by 2025, but by 2036 power demand will overtake, making power the primary demand sector to 2050, with 31% of total demand.

De la Cruz added: “Energy security and net zero commitments will drive hydrogen demand in many sectors such as power, steel, shipping and aviation.”

Hydrogen co-fired as ammonia in coal plants with traditional fossil-fuelled power is set to drive demand in power up to 9Mt by 2030. Post 2030, Wood Mackenzie expects to see hydrogen co-fired with natural gas ramped up in Europe, bringing the total power demand to 63Mt by 2050.

In terms of hydrogen supply, the market will see a new wave of project announcements, with 50 million tonnes per annum (Mpta) of hydrogen capacity already announced to date and the total pipeline expected to reach approximately 80Mtpa this year, according to the Wood Mackenzie report.

Bridget van Dorsten, Research Analyst at Wood Mackenzie, said: “Green hydrogen is expected to dominate the pipeline, with Australia leading in green hydrogen supply, holding 47% of supply by 2029. Post-2030, we expect to see supply quickly ramp up worldwide, and China becomes the largest supplier in the late 2040s.”

Australia continues to be the leading supplier of green hydrogen until the mid-2040s. The Middle East, North Africa, Canada, Chile and Brazil are likely to emerge as hydrogen exporters leveraging access to cheap renewables.

Building on Wood Mackenzie’s proprietary Midstream Model, the report considers losses of hydrogen from domestic trade of hydrogen, approximately 4%, as well as from exports which could be up to approximately 34%.