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Industry • Boosted by the recovery, the “hydrogen economy” gains credibility

Hydrogen is gaining in popularity and raising hopes as a strategic energy vector in a low-carbon world. Companies in the oil and gas sector are turning to hydrogen to diversify and achieve carbon neutrality. The hydrogen boom also brings new hope for sectors that seemed to be unable to reduce their emissions.

Publication date

2021

Editor

Climate Chance Observatory

Largely unknown to the general public a few years ago, hydrogen now enjoys strong public support, based on the hope that it will become a strategic energy vector in a low carbon world. But where do things actually stand? Are today’s hydrogen projects really centred on decarbonization? Have the numerous announcements been followed up by numerous investments? With carbon neutrality acting as the new international climate barometer, oil and gas companies concerned by the need to diversify have rapidly positioned themselves on the hydrogen market. The hydrogen boom also brings new hope for sectors that seemed to be unable to reduce their emissions, i.e., heavy industries.

  • Still in its nascent stage, low-carbon hydrogen garners the support of several States. However, current hydrogen production is far from low-carbon, accounting for just 1.4% of total hydrogen production. This low proportion is due to production costs that are not very competitive with carbon-based alternatives.
  • When the old meets the new: Hydrogen offers a glimpse into a green future for the largest emitters.
  • Oil and gas companies are particularly active in installing hydrogen production capacities, drawing from their investment capacities and their willingness to diversify, and also from their transport infrastructures, since hydrogen can be transported by gas pipeline.
  • Despite announcements and investments that are still insufficient, the low-carbon hydrogen sector is gradually developing, raising great expectations in complex decarbonization sectors such as transport, although electrification is currently receiving more attention.

Investments in hydrogen picked up strongly in 2020 with a view to use the gas in highly emitting sectors that are currently difficult to decarbonize: transport and heavy industry. Oil and gas companies looking for ways to diversify into low-carbon services have got the message, and rapidly positioned themselves on hydrogen markets, taking advantage of their pipeline networks and investment capacities. Green hydrogen, produced from renewable electricity still remains much less competitive than its blue equivalent, produced from the combustion of gas and capture of CO2, which is less beneficial for the climate. Announcements of funding for blue and green hydrogen projects and partnerships between industries have also flourished in line with the pace of government commitments, pointing to a favourable situation for this breakthrough technology which many are counting on to decarbonize the economy.