Decarbonised Hydrogen

Hydrogen is a molecule with a multitude of advantages: It serves both as an industrial raw material and a key energy vector capable of replacing fossil fuels (oil, gas, coal). Historically, its production has largely relied on oil and natural gas processes, which generated significant CO₂ emissions. Therefore, replacing this 'carbon-intensive' or 'grey' hydrogen with cleaner alternatives is a fundamental step towards achieving meaningful decarbonisation.

Over the past decade, decarbonised hydrogen has emerged in two main forms: 'green' hydrogen and 'blue' hydrogen.

Green hydrogen is predominantly produced by the electrolysis of water. This process is powered by renewable energy sources and allows water molecules to be split into hydrogen and oxygen, without generating any carbon emissions.

Blue hydrogen, on the other hand is derived from fossil fuels (oil or gas), but its CO₂ emissions are captured, reused, or stored long-term, significantly reducing its carbon footprint.

Decarbonised Hydrogen: A Key Lever for Decarbonisation

Hydrogen is used as a raw material in several industries with high CO₂ emissions, such as oil refining, steel production, and the manufacture of fertilisers and chemicals. With appropriate adaptations, it can also substitute natural gas in industrial furnaces, thereby contributing to emission reductions in sectors such as cement and steel.

It also plays a growing role in decarbonising the transport sector. On the road, it's found in fuel cell electric vehicles or in hydrogen combustion engines. In maritime and air transport, hydrogen derivatives such as ammonia, methanol, and sustainable aviation fuel (SAF) serve as low-carbon alternatives to replace petroleum-based fuels.

This significant potential has led to a wave of announcements for green and blue hydrogen production projects globally since 2020.

The Global Surge in Hydrogen Projects

To track this rapidly evolving sector, Enerdata has developed a tool that lists all large-scale decarbonised hydrogen projects. Currently, over 830 projects are listed worldwide, each with an electrolyser capacity of at least 100 MW. These have the potential to produce approximately 200 million tonnes of decarbonised hydrogen, as well as 470 million tonnes of clean derivatives (ammonia, methanol, methane, and jet fuel).

As electricity consumption accounts for approximately 70% of hydrogen production costs, regions rich in low-cost renewable resources have a significant advantage (Egypt, Australia, Chile, and Morocco, followed by the United States, China, India, and Europe).

Current Progress and Challenges of Decarbonised Hydrogen

Following a surge in project announcements between 2020 and 2023, 2024 has brought a dose of reality: Many projects are struggling to get past the initial phase or feasibility study and haven't reached a final investment decision. Some projects deemed unrealistic (such as 'Spirit of Scotia' in Canada – 43 million tonnes per year, or 'Western Green Energy Hub' in Australia – 3 million tonnes per year), have even been cancelled. Many other projects can't even secure off takers for the hydrogen they would produce.

Enerdata estimates that only 7% to 9% of announced projects are in an advanced phase, representing a maximum of 75 projects out of the 830 listed. This proportion remains broadly consistent across regions, including Europe and France, with slight variations.

France has announced over 28 large, decarbonised hydrogen projects, with a potential production capacity of over 1.4 million tonnes over the next 10 to 20 years. This contrasts with current hydrogen consumption of approximately 0.6 million tonnes (mostly grey). However, only 3 projects, totalling a combined production capacity of 0.1 million tonnes of decarbonised hydrogen, are in an advanced phase. The French government, also recently updated its national hydrogen strategy, revising the target to 0.5 million tonnes of decarbonised hydrogen, by 2030.

Despite these challenges, some projects are progressing thanks to off-take agreements and final investment decisions. For example, TotalEnergies has partnered with Air Liquide and RWE to supply decarbonised hydrogen to its European refineries. Verso Energy, a French developer, is advancing several green hydrogen projects to produce decarbonised jet fuel (SAF) in France and Finland. The 'Scatec Green Ammonia' project in Egypt is the first hydrogen import project into Europe to secure an off-take agreement and European subsidies.

These successful projects share common characteristics. To bridge the price gap between grey and green hydrogen, developers and buyers rely on a combination of demand- and supply-side subsidies, including local and regional support schemes—essential measures for ensuring economic viability. Public policy also plays a critical role in stimulating demand, using both incentives and regulatory pressures. For example, European regulations set emissions thresholds for refineries and mandate the use of sustainable aviation fuel (SAF) in the aviation sector. Carbon pricing further supports the shift toward decarbonised hydrogen.

In some cases, green hydrogen buyers pass on some of the additional costs to end-consumers. For instance, the marginal cost of green steel in electric vehicle production is often accepted by consumers, who are willing to pay a premium for a less carbon-intensive product.

Policies and Geopolitics: Catalysts for Hydrogen

The energy transition and geopolitical upheavals — notably the war in Ukraine — have heightened concerns about energy security and supply risks. In response, major policy changes, preferential legislation, and support mechanisms have been introduced to promote cleaner, more local, and diversified energy sources.

Legal frameworks such as the US Inflation Reduction Act (IRA), as well as the European RED III directive and the Carbon Border Adjustment Mechanism (CBAM), directly support the development and deployment of clean hydrogen. The European Hydrogen Strategy and the RePowerEU initiative have set ambitious targets: to produce 10 million tonnes of renewable hydrogen locally and import an additional 10 million tonnes by 2030.

Green hydrogen, classified as a Renewable Fuel of Non-Biological Origin (RFNBO) by the European Union, is eligible for various financial incentives (European Innovation Fund, European Hydrogen Bank). Furthermore, industries using these fuels can meet their emission reduction targets while avoiding carbon tax penalties, as is the case for refineries.

Overcoming Obstacles to Green Hydrogen Adoption

Despite the growing momentum and considerable public support, the decarbonised hydrogen industry faces significant financial, technological, and technical challenges. The primary obstacle remains its high production cost (approximately €6/kg in Europe) compared to traditional grey hydrogen (approximately €2/kg).

Beyond cost, the complexity of these projects is heightened by the need to develop additional solar and wind farms, secure water supplies, ensure proximity between production and consumption to limit transport, and adhere to strict environmental, social, and safety standards.

In Europe, to qualify as a Renewable Fuel of Non-Biological Origin (RFNBO) and retain its 'green' label, a project must comply with three strict principles: additionality, geographical correlation, and temporal correlation between renewable electricity production and green hydrogen production. The need for Rigorous synchronisation and thorough documentation throughout the process further increase costs and complexity.

For projects aiming for international export, hydrogen transport is a major challenge. Its low volumetric density requires it to be compressed to very high pressure, liquefied, or converted into more easily transportable liquid vectors (ammonia or methanol). These processes are energy-intensive and increase technical complexity as well as the necessary investments.

Decarbonised Hydrogen: Realistic Prospects for a Sustainable Future

The decarbonised hydrogen industry is an emerging sector that follows a typical technological maturation curve. This development will involve a learning process, the selection of the most resilient projects, a mix of setbacks and successes, and valuable lessons. These challenges are inherent to any new technology and should not deter investment in this promising energy vector. Hydrogen is, and will continue to be, a viable solution for decarbonising many industries.

However, this potential must be evaluated by considering economic opportunities, technical limitations, and available alternatives. Hydrogen should not be seen as the sole solution to carbon emissions, but rather as one option among others, to be assessed on a case-by-case basis. The relationship between emission reduction and associated cost must guide public investments and subsidies.

While road transport can largely be decarbonised through battery electric vehicles, hydrogen is better suited for heavy transport applications. Continued investment and innovation are essential in marine engines using ammonia and methanol derived from green hydrogen. The maritime transport sector, a significant contributor to CO₂ emissions, currently lacks viable alternatives to fossil fuels.

Priority should also be given to developing industrial clusters with sufficient hydrogen demand, supported by associated infrastructure (such as gas pipelines repurposed for hydrogen transport) to enhance efficiency. Simplifying authorisation procedures for renewable energy projects and reducing investment risks will help lower development costs and accelerate the deployment of decarbonised hydrogen.

The French industrial value chain plays an important role in the hydrogen ecosystem, both in Europe and globally. It is among the most developed in the world and includes equipment manufacturers, project developers, and other value-creating players, thereby contributing to French industrial leadership in various regions worldwide – a positive trend that deserves recognition and support.

Ahmed ABBAS

Senior Clean Technologies Analyst at Enerdata