Our assessment of green hydrogen for industrial heat

Meeting a 1.5°C climate goal

Over half of industrial sector emissions come from fossil fuel combustion to generate process heat. Decarbonizing industrial process heat, and overcoming the many technological, market, and policy barriers that prevent companies from decarbonizing heat, is essential.

More and more governments and companies are committed to climate action across the global economy. They are examining and implementing various decarbonization tools with governments offering new policy incentives, and investment in RD&D, and renewable energy generation accelerating across renewable thermal energy solutions. Among these solutions, hydrogen¹ has a critical role to play in decarbonizing industrial process heat. The industrial sector often needs high heat for production. Green hydrogen, made from electrolysis powered by renewable energy, is a strong candidate to decarbonize high-heat industrial processes, such as manufacturing steel, chemicals, and cement.

Reflecting its importance, green hydrogen is gaining momentum

Globally and in the United States, hydrogen was named a specific priority for 2023 at the 27th United Nations (UN) Conference of the Parties (COP27),ⁱ where leaders discussed the importance of mobilizing capital to develop and scale green hydrogen projects, the role of policy as an instrument to drive down costs, and the need for standards and a certification system to enable trade.

In the United States, recent federal legislation—including the Infrastructure Investment and Jobs Act (IIJA; also known as the Bipartisan Infrastructure Law [BIL])ⁱⁱ and the Inflation Reduction Act (IRA)ⁱⁱⁱ,—has put meaningful policy and billions of dollars of funding behind the push for clean hydrogen, including investment in research, development, and demonstration (RD&D) and tax credits directly incentivizing clean hydrogen investment and production. The Department of Energy (DOE) recently announced its National Clean Hydrogen Strategy and Roadmap, a vital plan to build industry alignment and a path forward for the clean hydrogen economy.^iv

This paper sets out to explore the role that hydrogen can play in decarbonizing industrial heat

This paper provides insights and considerations for large corporate energy buyers and other key market and policy stakeholders to scale green hydrogen for industrial heat applications. Based on this analysis, energy buyers interested in scaling green hydrogen for industrial heat applications may want to consider the following three key takeaways:

1. The IRA aims to dramatically lower green hydrogen production costs. However, infrastructure and cost barriers persist in other parts of the hydrogen value chain. Transportation, storage, and retrofitting investments required on the end-use side still pose challenges to scaling the demand for green hydrogen. Overcoming these challenges will require additional policy support.
2. Green hydrogen will be a key component of the decarbonization strategy for chemicals, cement, and iron and steel. Therefore, energy buyers in these sectors will be early adopters and should begin to take advantage of current policies, such as the IRA and regional hubs, as part of a broader plan to decarbonize.
3. Buyers outside these subsectors can still participate by leveraging their geographic proximity to green hydrogen hubs and establishing early relationships with hub developers. By taking proactive early actions other sectors could have the opportunity to enter buyers’ consortia or partnerships with larger buyers to explore innovative procurement options. These early efforts will be important in accelerating the growth of the broader hydrogen economy.

End notes

¹For the purposes of this paper, where hydrogen is referenced it refers to pink, blue, turquoise, and green hydrogen unless noted otherwise.
ⁱAidan Lea, “COP 27: Breakthrough Agenda set hydrogen priorities,” Argus Media, November 11, 2022.
ⁱⁱWhite House, “Delivering results from President Biden’s Bipartisan Infrastructure Law,” accessed January 2023.
ⁱⁱⁱSally M. Benson, “Launching a transformative decade of climate action,” The White House, September 20, 2022.
^ivUS Department of Energy, DOE National Clean Hydrogen Strategy and Roadmap, September 2022. The DOE uses “clean hydrogen” in its publications, while this report uses “low-carbon hydrogen.”

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