Balancing priorities and unlocking opportunities in the hydrogen economy

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11 January 2023 | 5 min | Featured article

The climate change transition is not simply a move to cleaner fuels or a like-for-like replacement of raw material and energy exports. Instead, it is a complete metamorphosis of the energy and commodities ecosystem.

Such a fundamental shift in customer expectations and global market dynamics means there are significant opportunities for organisations and countries within the hydrogen economy to balance.

The utility value of hydrogen stems from its versatility as an energy carrier, storage medium, and chemical feedstock. It is expected to play a significant role in the deep decarbonisation of industries; however, it is more than that, with the potential to intermediate the provision of electricity, mobility, heat, movement, water and work.

Broadly, global investment markets are signalling that renewable and green hydrogen is the end game for supporting generational transition, diversification and emerging industries, as shown in Figure 1.

Figure 1: Hydrogen production, conversion, transport, distribution and end use across markets.

Enabling a hydrogen economy

Confidence in the hydrogen economy will be boosted from policy commitments from governments, as well as heeding lessons learned from other sectors, such as renewable energy. The shift to a successful and viable hydrogen economy will require a number of factors to ensure that the transition takes place safely and effectively.

Build demand

Nation-wide strategy and legislation to allow scaling of production and research into hydrogen use cases to encourage sectors to move away from fossil fuels use and therefore raise sufficient demand for hydrogen and its derivatives.

Supply chain infrastructure

A well-dimensioned network of end-user infrastructure, an ecosystem of transport and storage infrastructure, and capacity at ports (for both export of product and import of equipment) is the backbone of a hydrogen economy. Future workforce opportunities and broad economic growth are benefits of this factor.

Visibility and transparency

To enable a hydrogen economy, renewable power to hydrogen facilities need to proliferate, production methods need funding support to mature, and the costs of production need to be modelled as predictable revenue streams.

A culture of embracing change

Success in a hydrogen context will hinge heavily on how well organisations can adjust to new ways of doing business (adapting business models), upskill their people and capitalise on a culture of change.

Unlocking the hydrogen advantage

Projects to prove and develop hydrogen’s potential across a range of sectors is underway globally. As the opportunities to use hydrogen expands, demand for products will increase and production will scale-up. This in turn will bring down production costs, further attracting investment and demand.

These are the top 10 key factors to unlocking the hydrogen advantage:

Understanding customer demands – Which product they require, to what timeline, where is it from and where is it to be delivered to?
Familiarity with the technology – The maturity of technologies and whether they can be deployed on a project at an acceptable level of cost, performance and risk.
Facilitate collaboration – Strengthen bilateral cooperation on the development of technologies, and strike early contracts and relationships along the supply chains and with customers.
Optimise whole-of-system – Convergence of policy, investment and commercialisation to create long-term strategies for hydrogen. Right sizing the various supply chain components to ensure they are appropriate to the specific product being produced and able to overcome grid and generation bottlenecks to develop projects in line with future demand.
Use remote and regional locations – Prioritise fringe of grid and remote locations to deliver efficient outcomes at the demonstration scale for hydrogen conversion opportunities.
Integrate with existing sites – Scenario impact modelling to incorporate hydrogen production (or use) with existing assets, facilities or business models, all the way from the technical to strategy level.
Lock in financing and funding – Determining financing and funding streams, and how to finance the physical and soft network infrastructure.
Address environmental – Hydrogen utilisation patterns for better environment and sustainable development, such as consideration of water, renewable energy and equipment recycling, through lifecycle assessments.
Business model transitions – The capacity to deliver requires a labour market and equipment supply chain. Cultural and business model solutions, not just technical ones, will be crucial in navigating the climate transition.
Execute with safety – Achieving scale and supply chain ramp up by mitigating execution constraints. Making hydrogen safe for pipelines, facilities and in transportation with process systems that ensure safety. Agreement on codes and standards to ensure safety.

Industry partnerships are key to a thriving hydrogen future

Looking forward, the prospect of a hydrogen economy is very real. If organisations can remain competitive by taking a broader view than techo-economics alone, it will help this dynamic market flourish and thrive. This broader view includes adapting business models, upskilling teams and shifting incumbent business cultures.

We also recognise that it takes political will and alignment with investors and economy participants to accelerate an emerging economy.

As the certainty around hydrogen increases, hydrogen mobility application will be boosted. With this increase comes technical and product advances so that costs of production, distribution and use will becoming increasing affordable. The key to unlocking the hydrogen advantage is continuing partnerships between organisations, governments and educational institutions.

All sectors have the opportunity to play a leading role in shaping a hydrogen future with the ability to focus on areas for investment that offer the greatest certainty for growth to ensure that a hydrogen economy is a runaway success in the future.

Contributing author & reviewer: Megan Wheeldon