Green hydrogen: Energizing the path to net-zero
Deloitte’s 2023 global green hydrogen outlook
Deloitte’s new economic analysis shows how green hydrogen can play a paramount role to achieve net-zero targets by 2050. It can give us a meaningful chance to decarbonize the planet, overcoming the existing limitations and challenges posed by fossil fuels and technologies that add to greenhouse gas emissions.
Those who act now can reap the benefits, both economic and environmental.
Recognized as a global leader in the hydrogen and fuel cell sector, Canada is a hub for technical expertise, intellectual property, and leading products and services. Canada is also one of the top ten global producers of hydrogen today, producing an estimated three million tonnes (Mt) annually via steam methane reformation (SMR) of natural gas. While SMR is not considered a means to clean hydrogen without carbon capture and storage (CCS), Canada is well placed to transition to clean pathways going forward. While there is a strong push globally to produce hydrogen through electrolysis, given the regional energy mix and policy variations in Canada, there will likely be diversified methods of hydrogen production technologies for each province. For instance, in provinces where there are large deposits of natural gas like Alberta and Saskatchewan, hydrogen production will likely be through SMR+CCS technology to leverage the natural resources of that sector. In provinces like British Columbia, where more than 98% of the electricity generated is from hydro and there’s a vast amount of NG reserves, there will likely be a combination of hydrogen production pathways, including methane pyrolysis, depending on the end use application. In Ontario, there will likely be production through renewable sources such as hydro, and in the Atlantic, there is a strong push for renewable hydrogen production through offshore wind for export.
Hydrogen Excellence Center | Deloitte Global
Deloitte supports clients in scaling up clean hydrogen to achieve large-scale decarbonization and drive tangible impact in the market to help realize a clean energy future.
Governments, executives, researchers, and other parties around the world are looking to accelerate the ongoing energy transition to reach carbon neutrality. Aligning economies with the targets laid out in the Paris Agreement—limiting global warming to well below 2 °C, while pursuing efforts to limit the increase to 1.5 °C—means replacing legacy systems powered by fossil fuels with low-carbon energy sources such as renewables.1
Green hydrogen could overcome these limits and become the key clean hydrogen supply option in the long run, being both economically viable and truly sustainable.
Either in its pure gaseous form or in the form of derivative molecules—ammonia, methanol, and synthetic aviation fuels (SAF)—green hydrogen can lead to significant emission savings in hard-to-abate sectors like heavy industry (such as steelmaking and chemicals) and heavy transport (such as aviation and shipping). Moreover, if wind and solar power continue to expand, hydrogen can provide flexibility and network stability to the power systems.
Emerging green hydrogen market to redraw the global energy and resource map as early as 2030, creating a $1.4 trillion per year market by 2050.
Unleashing opportunities
Deloitte’s outlook, based on the Hydrogen Pathway Explorer (HyPE) model, explores the emergence of a carbon-neutral, inclusive green hydrogen economy in the coming years. It showcases a steady market growth, from US$642 billion in annual revenue in 2030 to US$1.4 trillion per year in 2050, a recognized milestone to reach climate neutrality. This analysis reveals an opportunity for private and public leaders to accelerate the green energy transition and abate up to 85 GtCO2eq in cumulative emissions by 2050.
Global trade is key
Global trade is key to unlocking the full potential of the green hydrogen market, supported by diversified transport infrastructure. Our outlook shows that in 2050, global trade between major regions can generate more than US$280 billion in annual export revenues. The most common products are hydrogen derivatives—ammonia, methanol, and SAF—which are easier to transport over long distances.
By 2050, the main recipients include North Africa (US$110 billion per year), North America (US$63 billion), Australia (US$39 billion), and the Middle East (US$20 billion).
Free and diversified trade can significantly reduce costs, improve energy security, and foster economic development in developing and emerging markets. Export revenues from green hydrogen can bring economic development opportunities to developing countries and help offset declining revenue from oil, natural gas, and coal.
An investment worth making
Governments and companies should look to redirect spending on oil and gas to hydrogen. Deloitte’s outlook estimates more than US$9 trillion of cumulative investments are required in the global green hydrogen supply chain to meet net-zero compliance by 2050, including US$3.1 trillion in developing economies. Though daunting, the investment broken down to an annual average are significantly less than the US$417 billion spent on oil and gas production in 2022 globally.
Within developing markets, green hydrogen could support up to 1.5 million jobs per year worldwide between 2030 and 2050, and the benefits are not limited to developed economies. At the global scale, it could support up to two million jobs per year between 2030 and 2050. The impacts are significant to environmental, economic, and social prosperity.
Future-focused policy and global cooperation
Decisive policy support is essential to help scale up the clean hydrogen economy and ensure that green hydrogen plays its needed role on the path to climate neutrality.
Establishing a free and resilient market, focused on climate action and supported by favourable strategies and policies, can be accelerated by using targeted instruments to reduce the cost-difference between green and fossil-based technologies, giving a push to green hydrogen while ensuring long-term resilience. This can simplify the green hydrogen supply chain and promote a free market through international cooperation.
Policymakers should focus attention on three components:
- Laying the foundations for a climate-oriented market
- Creating a business case
- Ensuring long-term resilience
Download the full report and visit our Global Hydrogen Center of Excellence.
References:
1. United Nations, The Paris Agreement, accessed April 3, 2023.
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