Global Energy Perspective 2023: Hydrogen outlook

Hydrogen demand today is largely supplied by fossil fuel-based steam methane reforming and driven by fertilizer production and refining. These industries are expected to lead the uptake of blue and green hydrogen until 2030 in the slower scenarios, as they switch their hydrogen-based operations to clean hydrogen. In parallel, “new” emerging applications—for instance in steel, in the production of synthetic fuels, and in heavy road transport—may begin to emerge in the faster scenarios.

Nearly all hydrogen consumed today is grey hydrogen (approximately 90 million tons¹Metric tons: 1 metric ton = 2,205 pounds. per annum [Mtpa]). However, demand for grey hydrogen is projected to decline as demand for clean hydrogen rises and costs of the green molecules eventually become more competitive.²Clean hydrogen includes both green hydrogen (hydrogen produced by the electrolysis of water using renewable energy as a power source) and blue hydrogen (hydrogen produced through steam reforming of natural gas or methane with carbon capture, utilization, and storage [CCUS]), and contrasts with grey hydrogen (hydrogen produced through the same process as blue hydrogen but without CCUS). By 2050, clean hydrogen demand could account for up to 73 to 100 percent (125 to 585 Mtpa) of total hydrogen demand, with only between less than 1 and 50 Mtpa of demand being met by grey hydrogen, depending on the scenario.

After 2025, nearly all new hydrogen production coming online is expected to be clean hydrogen. This coincides with the start of the expected phaseout of grey hydrogen, driven by the growing cost competitiveness of clean hydrogen and commitments to decarbonize. Until 2030, clean hydrogen uptake is projected to be driven by existing applications switching from grey to blue and green hydrogen, but between 2030 and 2040 the uptake of hydrogen in new applications without existing demand is expected to drive the increase in clean hydrogen demand.

After 2040, private and public sector commitments are projected to drive the uptake of clean hydrogen and hydrogen-based fuels in emerging applications in the Further Acceleration and Achieved Commitments scenarios. Potential mechanisms that would be required to support demand growth of hydrogen and hydrogen derivatives in these applications include the implementation of, or increase in, CO₂ pricing, quotas on sustainable fuels in aviation, or CO₂-reduction targets in maritime transportation. On the other hand, in the Current Trajectory and Fading Momentum scenarios, hydrogen uptake is projected to be driven by a continuation of the current cost decline and the underlying growth in some of the fertilizer and chemicals markets that use hydrogen today, with limited new policy support.

Some geographies, such as the European Union and United Kingdom, are expected to fully phase out grey hydrogen by 2050 in all scenarios except Fading Momentum. Grey hydrogen will likely play a larger role in the Fading Momentum scenario than in the faster energy transition scenarios, due to slower uptake of clean hydrogen in new sectors. In these sectors, uptake of clean hydrogen is projected to be limited until 2050.

Applications with existing demand will likely account for the majority of clean hydrogen demand throughout the 2020s, potentially driving the increase in clean hydrogen’s share of total hydrogen demand from less than 1 percent today to around 30 percent by 2030 in the Further Acceleration scenario.

By 2040, clean hydrogen could play a larger role in new applications—especially in mobility, which is expected to be the largest “newcomer” for clean hydrogen demand by 2040 in the Further Acceleration scenario. Applications could range from fuel cell electric vehicles in long-haul, heavy-duty trucking to synthetic kerosene in aviation. The second largest newcomer is expected to be hydrogen used in (mainly industrial) heating, displacing natural gas. Combined, clean hydrogen uptake in existing applications and emerging applications could drive clean hydrogen’s share of total demand to 75 percent by 2040.

By 2050, in the Further Acceleration scenario, mobility applications are projected to remain the largest drivers for clean hydrogen uptake, with road transport accounting for around 80 Mtpa and aviation around 50 Mtpa, with the remaining 15 Mtpa coming from maritime. Existing industrial applications and heating are projected to drive further clean hydrogen uptake, potentially resulting in clean hydrogen accounting for 95 percent of total hydrogen demand in 2050.

However, uncertainties around demand growth remain. For example, power could drive an additional demand upside of between 60 and 70 Mtpa by 2050, on top of the projected demand in the Further Acceleration scenario. This could happen if hydrogen-fueled turbines or stationary fuel cells prove more competitive or have more public support than alternative technologies for the last-mile decarbonization of the energy system, such as long-duration energy storage technologies and carbon capture, utilization, and storage (CCUS).

In the Fading Momentum scenario, the already existing end use of hydrogen in fertilizer production is expected to drive consumption far beyond 2030 corresponding with the lower total growth.

The only sector that is not projected to see an increase in total hydrogen demand in 2050 compared to today is refining, with demand expected to peak in the late 2020s or early 2030s, depending on the scenario, driven by lower oil demand across scenarios.

Going forward, the decarbonization agendas of governments and companies are expected to drive hydrogen uptake in new applications, as well as the decarbonization of existing grey hydrogen applications. However, in most regions, there is significant uncertainty around projected hydrogen uptake in these new applications across scenarios.

The uncertainty surrounding hydrogen demand in emerging applications stems from a combination of factors, including lack of clarity in government support, the development of enabling infrastructure, and evolving competitive dynamics with other decarbonization technologies. For example, hydrogen’s role in decarbonizing aviation could depend on government support, as well as market dynamics and competition. First, sustainable aviation fuel (SAF) quotas are needed across geographies to drive a switch from fossil fuel-based kerosene to clean alternatives. Second, hydrogen-based synthetic fuels would have to prove competitive with the main SAF alternatives, for instance biokerosene, either based on costs or constraints in the availability of feedstock necessary to produce biokerosene.

Similarly, there is uncertainty about the switch from grey to clean hydrogen. Active mandates, such as CO₂ prices and subsidies, will likely be needed to facilitate the decarbonization of existing hydrogen demand, as the switch will likely not be attractive based on economics alone.

In key sectors, the timely deployment of infrastructure across the whole supply chain is projected to be needed to meet clean hydrogen demand.

Several key enablers—mostly physical infrastructure—would have to be rolled out by 2050 to facilitate the future hydrogen economy. In the Achieved Commitments scenario, over 163,000 refueling stations for trucks would be needed globally, alongside a network of more than 40,000 kilometers of hydrogen pipelines in Europe alone.

Technological advancements may also be needed to ensure the uptake of hydrogen in sectors where hydrogen technology is not yet mature, such as the further development of fuel cells for heavy-duty vehicles and marine vessels.

Coordination between government and the private sector may be needed to ensure the required infrastructure is in place to meet hydrogen demand at the pace necessary to meet decarbonization commitments and with an attractive business case.

The extent of the growth and advancement necessary to establish a hydrogen economy is not without precedent—historical adoption of natural gas in the European Union since the 1960s and 70s shows that it is possible to rapidly change an established energy system if the necessary competitiveness and support are in place.

Despite uncertainties in regional and sectoral demand, Asia is projected to remain the biggest hydrogen consumer across scenarios, largely driven by the demand from chemicals that already exist today, and, to a lesser extent, the transport, iron, and steel sectors in China and India. In Japan and South Korea, a significant share of hydrogen demand is expected to come from electricity generation as ammonia and hydrogen are blended in existing coal and gas plants, respectively. As Asia will likely not produce enough hydrogen to meet its growing demand, the region might rely on imports from Oceania or the Middle East, for instance.

In Europe and the United States, the chemicals sector is projected to remain a significant driver of hydrogen demand, but new applications in sectors including steel and production of synthetic fuels for aviation, maritime, and heavy road transport are also expected to contribute significantly to demand growth.

By 2050, green hydrogen is expected to dominate the global supply mix, with a share of between 50 and 65 percent across scenarios, as cost reductions in renewables and electrolyzers make this production route more cost competitive. Blue hydrogen is projected to account for the next largest share of supply, at between 20 and 35 percent.

The ratio of blue to green hydrogen production is expected to differ significantly by region, driven mainly by cost factor developments. Blue hydrogen production is projected to be concentrated in regions with cost-competitive natural gas and CCUS, such as the Middle East and North America. By 2050, blue hydrogen production could require as much as around 500 billion cubic meters of natural gas (between 10 and 15 percent of global natural gas demand in the Further Acceleration scenario), and capacity to capture and store 750 to 1,000 megatons of CO₂.

Green hydrogen production is projected to have a higher share in regions with abundant and cost-competitive renewable resources, such as Australia and Iberia. The production of green hydrogen could potentially be constrained by a lack of renewable power. Globally, approximately a quarter of renewable electricity generation (around 14,000 terawatt-hours) could be required to produce the green hydrogen needed by 2050 in the Further Acceleration scenario. Further potential bottlenecks to be tackled to achieve strong green hydrogen uptake include large-scale investments and deployment of at-scale manufacturing of electrolyzers, with cost competitiveness being strongly dependent on the latter.

Clean hydrogen production costs are expected to drop significantly by 2030–50, with large differences across regions under the scenarios explored. Cost differentials among regions could drive an increased mismatch between supply and demand centers and thus lead to the development of major hydrogen and hydrogen-derivatives export hubs.

Regions with cost-competitive natural gas resources and CCUS, such as the Middle East, Norway, and the United States, are expected to have the highest cost competitiveness and could potentially account for 30 percent of exports at production costs of below $1.5/kg by 2050.

Regions with access to low-cost renewable power, such as Australia or North Africa, could make up an additional 60 percent of exports at production costs of between $1.5/kg and $2/kg.

The growing hydrogen trade could enable uptake in countries that have strong decarbonization ambitions but lack the necessary energy resources for clean hydrogen production, such as parts of Europe, as well as Japan and South Korea.

Major hydrogen trade flows are expected to evolve to connect export hubs with favorable renewable power or natural gas resources to two main demand regions: Asia and Europe.

Europe could meet most of its demand from within the region, importing from countries with low gas prices or abundant hydro and solar power, such as Iberia and the Nordics. The remainder could be sourced from the Middle East, North Africa, and North America. Asia could source hydrogen from countries and regions like Australia, Latin America, the Middle East, and North America.

Regions with favorable routes to market—either by producing and shipping as derivatives or building a strategic network of hydrogen pipelines toward off-takers, potentially re-using existing natural gas infrastructure—may also emerge as production hubs.

While major trade flows in Europe will likely depend heavily on pipelines, shipping could prove critical to enable overseas trade. Hydrogen shipping could be expedited by converting hydrogen to synfuels (such as ammonia or methanol) at export hubs. Liquid hydrogen shipment could be one way to enable the global hydrogen trade after 2030, potentially increasing to approximately 20 Mtpa traded in 2050 in the faster scenarios.

Although this projected ramp-up of the global hydrogen trade is ambitious, it does have historical precedent—similar growth was observed in the first 25 years of LNG development.