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#GetTheFutureYouWant

A PATH TO A GREENER FUTURE

INTRODUCTION

The energy transition and the global imperative towards

sustainability have driven organizations to explore new

energy models and solutions. Low-carbon hydrogen

is gaining recognition as one of the possible routes to

accelerating decarbonization of high-emission sectors

such as industry and heavy mobility. Many countries

including US, China, Japan as well as many European

Union countries amongst others have announced major

investments to accelerate its development.

However, today prominent production pathways for

hydrogen continue to rely on the use of fossil fuels. The

move to “low-carbon hydrogen” could avoid the annual

emission of 830 million tons of CO2 currently emitted by

conventionally produced hydrogen,1 a vital contribution

to securing a clean-energy future. Francesco La Camera,

Director-General of the International Renewable Energy

Agency (IRENA), comments: “Cost-competitive low-carbon

hydrogen can help us build a resilient energy system that

thrives on modern technologies and embraces innovative

solutions t for the 21st century.”2 This fuel source is

creating new commercial opportunities throughout the

value chain – including alternative revenue streams, as

well as new business models – but it must present an

economically competitive alternative to carbon-based

hydrogen if businesses are to consider it as viable in the

long term.

To understand how organizations could capitalize on

low-carbon hydrogen's potential, we conducted a global

survey across 13 countries, with responses from 500

executives from energy and utilities (E&U) rms and

360 executives from end-user sectors, including heavy

transportation, aviation, maritime transport, steel,

chemicals, and rening3. To complement the quantitative

insights, we also conducted more than 20 in-depth

interviews with supply- and demand-side organizations,

startups, venture capital (VC) organizations, academics,

researchers, and regulators.

Capgemini Research Institute 2023

Low-Carbon Hydrogen: A Path To A Greener Future

In this report, we will be exploring ve major themes

The decarbonization

potential of low-

carbon hydrogen

Evolving business

models, as well

as existing and

emerging use cases

Investments

in low-carbon

hydrogen, from

regulatory/policy

and organizational

perspectives

Key challenges and

major roadblocks

across the value

chain

Key business,

organizational,

and technological

factors in

accelerating low-

carbon hydrogen

projects

INTRODUCTION

1 2 3 4 5

Capgemini Research Institute 2023

Low-Carbon Hydrogen: A Path To A Greener Future

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#GetTheFutureYouWantAPATHTOAGREENERFUTUREINTRODUCTIONTheenergytransitionandtheglobalimperativetowardssustainabilityhavedrivenorganizationstoexplorenewenergymodelsandsolutions.Low-carbonhydrogenisgainingrecognitionasoneofthepossibleroutestoacceleratingdecarbonizationofhigh-emissionsectorssuchasindustryandheavymobility.ManycountriesincludingUS,China,JapanaswellasmanyEuropeanUnioncountriesamongstothershaveannouncedmajorinvestmentstoaccelerateitsdevelopment.However,todayprominentproductionpathwaysforhydrogencontinuetorelyontheuseoffossilfuels.Themoveto“low-carbonhydrogen”couldavoidtheannualemissionof830milliontonsofCO2currentlyemittedbyconventionallyproducedhydrogen,1avitalcontributiontosecuringaclean-energyfuture.FrancescoLaCamera,Director-GeneraloftheInternationalRenewableEnergyAgency(IRENA),comments:“Cost-competitivelow-carbonhydrogencanhelpusbuildaresilientenergysystemthatthrivesonmoderntechnologiesandembracesinnovativesolutionsfitforthe21stcentury.”2Thisfuelsourceiscreatingnewcommercialopportunitiesthroughoutthevaluechain–includingalternativerevenuestreams,aswellasnewbusinessmodels–butitmustpresentaneconomicallycompetitivealternativetocarbon-basedhydrogenifbusinessesaretoconsideritasviableinthelongterm.Tounderstandhoworganizationscouldcapitalizeonlow-carbonhydrogen'spotential,weconductedaglobalsurveyacross13countries,withresponsesfrom500executivesfromenergyandutilities(E&U)firmsand360executivesfromend-usersectors,includingheavytransportation,aviation,maritimetransport,steel,chemicals,andrefining3.Tocomplementthequantitativeinsights,wealsoconductedmorethan20in-depthinterviewswithsupply-anddemand-sideorganizations,startups,venturecapital(VC)organizations,academics,researchers,andregulators.2CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureInthisreport,wewillbeexploringfivemajorthemesThedecarbonizationpotentialoflow-carbonhydrogenEvolvingbusinessmodels,aswellasexistingandemergingusecasesInvestmentsinlow-carbonhydrogen,fromregulatory/policyandorganizationalperspectivesKeychallengesandmajorroadblocksacrossthevaluechainKeybusiness,organizational,andtechnologicalfactorsinacceleratinglow-carbonhydrogenprojectsINTRODUCTION123453CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureEXECUTIVESUMMARYUnderpinnedbyaglobalshifttowardsdecarbonization,hydrogenisgainingsignificanceasanenergyvector,especiallyforhigh-emissionsectorsthatdonotuseelectricitydirectly.Mostorganizationsinourresearchbelievethatlow-carbonhydrogenwillbealong-termcontributortoachievingemissionsandsustainabilitygoals:•63percentofenergyandutilities(E&U)organizationsseeitisasakeytooltodecarbonizeeconomies•62percentofend-userorganizationsarelookingtointroducelow-carbonhydrogentocarbon-intensivepartsoftheirbusiness•E&Uorganizationsexpectlow-carbonhydrogentomeetupto18percentofenergydemandby2050Withgovernmentsupport,decliningrenewable-energycosts,rapidtechnologicaladvances,andagrowingfocusondecarbonizationandsustainableenergysolutions,thedemandforlow-carbonhydrogenisexpectedtoincreasemultifold.Sectorswithtraditionalhydrogenapplications,particularlyinpetroleumrefining,chemicalsandfertilizers,andsteel,havehighpotentialforadoptionoflow-carbonhydrogen.Demandforhydrogeninnewapplicationssuchaslong-rangegroundmobility(forheavy-dutytrucks,coaches),long-haulaviationspecificallysustainableaviationfuel(SAF),ormaritimeisexpectedtopickup.Ourresearchsuggeststhatamajority(64percent)ofE&Uorganizationsareplanningtoinvestinlow-carbonhydrogeninitiativesby2030;and9in10plantodosoby2050.Onaverage,0.4percentoftotalannual4CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuturerevenueisearmarkedforlow-carbonhydrogenbyE&Uorganizations.Investmentsareflowinginacrossthehydrogenvaluechain–especiallyintodevelopmentofcost-effectiveproductiontechnology(52%oforganizationsinvesting),electrolyzersand,fuelcells(45%),andhydrogeninfrastructure(53%)tohelpcreatealternativerevenuestreamsandaidindecarbonizationefforts.Fromtheregulatoryside,80+countriesacrosstheworldsupportclean-hydrogenproduction,eitherthroughhydrogenpoliciesorroadmaps,orbyprovidingsupportforlow-carbonhydrogenprojectsandR&Dviasubsidiesoremission-tradingschemes,orbylevyingtaxesoncarbon-intensivehydrogen.However,substantialchallengesremain.Today,low-carbonhydrogenis2–3timesmorecostlytoproducethancarbon-basedhydrogen.Moreover,storage,transportationandenergylossesacrossthevaluechainincreasethetotalcostofoperations(TCO).Finally,technology,engineering,infrastructural,andskill-relatedchallengesarealsoimpedimentstomorerapidhydrogenadoption.Whiletheemergingmarketforlow-carbonhydrogenisbothhighlycomplexandfragmented,itholdsrealdecarbonizationpotential.Toseizethisopportunity,mitigatecosts,andscaleatpace,organizationswillneedtoaddressthreeaspects:•Strategic:Toscaleuphydrogenproduction,investmentsmustbesharedbetweenpublicandprivateplayersandcustomerdemandmustbestrong.Organizationsshouldevaluatenewbusinessmodelsfromsustainabilityaswellastotalcostofownershipperspectives.Toenablethesemodels,definingagovernancestructurededicatedtolow-carbon-hydrogenproductionalongwithafocusoneducationEXECUTIVESUMMARY5CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureEXECUTIVESUMMARYandupskillingprogramsisrequired.•Technological:Organizationsmustharnessthepotentialoftechnologyanddigitalengineeringtomitigatechallengesrelatedtoasset-levelmeasurementofcarbonintensity,cost-optimization,efficiency,safety,performance,profitability,andreal-timedecision-making.Technologiessuchasdigitaltwins,artificialintelligence(AI),analytics,andblockchaincanhelpaddresstheseimplementationchallengesbymodellingvariousscenariostomaximizeROIandallowingdata-drivendecision-makingthroughoutthelifecycleandacrossecosystems.•Ecosystem:Finally,toemergeasapreferredpartnerforend-userorganizations,andtobringlow-carbonhydrogenasaviablealternative,organizationsshouldbuildpartnershipswithelectrolyzerproviders,renewable-energyproducers,storageproviders,andsupply-chainentitiestofacilitateproductionatscale.6CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureAnnRosenbergCo-FounderofSDGAmbitionatUnitedNationsGlobalCompact"Whileit'sstillintheearlystages,Ibelievethathydrogenhasthepotentialtobeoneofthemostmaturerenewabletechnologies,capableofacceleratingourtransitiontowardssustainableenergy."7CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureWhatislow-carbonhydrogen?Hydrogenisthesimplest,lightest,andmostabundantelementintheuniverse.Itdoesnotexistfreelyinnaturebutratherisproducedfromsourcessuchasfossilfuels,renewables,andnuclear,usingarangeofextractionandproductiontechniques.Hydrogen’svaluableattributes–suchashighenergycontentperunitmass(threetimesmorethangasoline)4lackofCO2emissionsatpointofuse;andpotentialasastoragemediumforelectricity–makeitanattractiveenergyvectorandfuel.Moreover,itsabilitytobestoredandtransportedinvariousforms(gaseous,liquid,orevenconvertedtoothermolecules)makesitapowerfulenablerfordecarbonization–bothinrelationtoenergysystemsandend-useapplications.However,notallhydrogeniscreatedequal.Mosthydrogeniscurrentlyproducedviasteammethanereformingofnaturalgas,emittinghighlevelsofCO2duringproduction.Figure1highlightsthevarioushydrogenproductionmethodsandtheirassociatedcarbonintensity.Whilethecolorsofhydrogenareahelpfulwaytocategorizetheproductionpathways,whatismoreimportantistheresultingcarbonintensity,whichcanvarysignificantlyevenwithinagivencolor.Low-carbonhydrogenForhydrogenproductiontobeconsideredlow-carbon,itmustcomeundertheEU’sproposedemissionsthresholdof3.38kgCO2-equivalentperkgofhydrogen5,whichis70%lowerthanthatofthepredefinedfossilfuelcomparator,includingtransportandothernon-productionemissions.6IntheUS,thecorrespondingcarbonintensityvaluetoqualifyforhydrogenproductiontaxcreditsundertheIRAis4.0kgCO2e/kgH2.7Althoughlow-carbonhydrogencanincludebiomasspyrolysisaswell,inthisresearch,ourmainfocusincludesrenewableornuclear-energy-poweredelectrolysis-producedhydrogenemittingnoormarginalcarbon.WHATISLOW-CARBONHYDROGEN?8CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureGasiﬁcationCoal25kg11kg0.03–0.37kgNaturalgasBiomassRenewablesNuclearSteammethanereforming(SMR)#PyrolysisPyrolysisElectrolysisElectrolysisSMRwithcarboncapture,utilization,andstorage(CCUS)#Low-carbonhydrogen(<3.38kgofCO2emittedperkgofhydrogenlifecycle)11–13kgofCO2isgenerated3–6kgisemittedBrownhydrogenGreyhydrogenBluehydrogenTurquoisehydrogenSupergreenhydrogenGreenhydrogenPinkhydrogenNoormarginalCO2producedNoormarginalCO2producedBiomasspyrolysiswithstorageofsolidcarbonisanegativeemissiontechnologyPrimarysourceKeyproductiontechnologiesAmountofCO2emittedperkgofH2producedAlsocalled...WHATISLOW-CARBONHYDROGEN?Fig.1DifferentpathwaysofhydrogenproductionvaryincarbonintensityNote:Thischartcoversthemainmethodsofhydrogenproductioncurrentlyinuse.Forfurtherdetailsofdifferenthydrogen-productiontechnologies,pleaserefertotheappendix.Thepyrolysisofbiomethane,biomass,waste,orwastewater,withsubsequentstorageofsolidcarbon,isanegative-emissiontechnology,sincetheCO2previouslyremovedfromtheatmosphereandneutralizedinthebiomethaneisnotreleasedduringthepyrolysisreactionoruseofthehydrogenproducedand,consequently,noclimate-damaginggreenhouse-gaseffectsareproduced.#CO2-eqemissionscouldbehigherthanindicatedabovewhenconsideringtheefficiencyoftheCCUSprocess,methaneleakageinthesystem,andthetimehorizonbetween20and100yearsfortheGlobalWarmingPotential(GWP).Source:CapgeminiResearchInstituteAnalysis;WorldEconomicForum;IEA;EnergyCities;Enel;InstitutPolytechniquedeParis;HydrogenEurope;Capgemini,“Thepathtolow-carbonhydrogen,”October2022.9CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureLOW-CARBONHYDROGENISAKEYTOOLFORDECARBONIZINGHIGH-EMISSIONSECTORS0110CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureOrganizationsseelow-carbonhydrogenasanimportantvectorforenergytransitionTheglobalenergycrisisinitiatedbytheCOVID-19pandemicandexacerbatedbyongoinggeopoliticaltensionshasbolsteredthecaseforlow-carbonhydrogen.Governmentsandorganizationsacrossregionsarelookingtoreducedependencyonfossilfuels,aswellasadvanceprogresstowardsdecarbonizationandenhancingenergysecurity:•Inourresearch,61percentofenergyandutilities(E&U)organizationsbelievethatthecurrentcrisishaslednationstoreconsidertheirenergymixes•Almosttwo-thirds(62percent)ofE&Uorganizationsbelievethatlow-carbonhydrogencanhelpnationsreducedependenceonfossilfuelsandpromoteenergyindependence62%ofE&Uorganizationsbelievethatlow-carbonhydrogencanhelpnationsreducedependenceonfossilfuelsandpromoteenergyindependence11CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuturePetroleumreﬁningAviationHeavytransportSteelMaritimetransportChemicalsandfertilizersAverageOilandgasextractionIntegratedoilandgasEnergyservicesAlternativeenergyReﬁning,marketing,anddistribution(includingretail)Multi-utilitiesElectricutilitiesWaterutilitiesGasutilitiesAverage%OFORGANIZATIONSAGREEINGWITHTHESTATEMENT:"LOW-CARBONHYDROGENISONEOFTHEKEYLONG-TERMSOLUTIONSFORDECARBONIZINGECONOMIES"62%63%UtilitiesEnergy75%67%61%57%81%72%64%57%55%72%71%64%61%59%43%%OFORGANIZATIONSRANKING"TOREPLACECARBON-INTENSIVESECTIONSOFOURBUSINESSASPARTOFADECARBONIZATIONINITIATIVE"AMONGTHETOP3OBJECTIVESFOREXPLORINGLOW-CARBONHYDROGENFig.2Organizationsstronglybelieveinthepotentialoflow-carbonhydrogenfordecarbonizationSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations;N=447respondentsfromuniqueenergyandutilitiesorganizations.12CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureHydrogenusewouldmakeitpossibletodecarbonizearound15percentoftheeconomythatisnotsuitableforthedirectuseofelectricity.Researchsuggeststhat86millionmetrictons(MMt)ofCO2emissionscouldbeavoidedannuallyintheEU,EuropeanFreeTradeAssociation(EFTA),andUKbyusinglow-carbonhydrogeninindustriessuchassteel,chemicals,fertilizers,oilrefining,etc.8Mostorganizationsalsobelievethatlow-carbonhydrogenwillbealong-termcontributortoachievingemissionsandsustainabilitygoals.AnnRosenberg,Co-FounderofSDGAmbitionatUnitedNationsGlobalCompact,says,“Thecurrentsituationhasheightenedtheurgencytodevelopnewenergytechnologies,andI'moptimisticaboutthegrowingfocusonhydrogenasapotentialsolution.Whileit'sstillintheearlystages,Ibelievethathydrogenhasthepotentialtobeoneofthemostmaturerenewabletechnologies,capableofacceleratingourtransitiontowardssustainableenergy”AsFigure2shows:•62percentofend-userorganizationsarelookingatlow-carbonhydrogentoreplacecarbon-intensivesystems•almost3in4organizationsinchemicalsandfertilizersandthemaritimetransportsectoraredoingthesame•63percentofE&Uorganizationsagreethatlow-carbonhydrogenisoneofthekeylong-termsolutionsfordecarbonizingeconomiesWulf-PeterSchmidt,DirectorSustainability,AdvancedRegulation&ProductConformityatFord,says,“Weareconsideringtheuseoflow-carbonhydrogen(greenhydrogen)inourlogisticsandsupplychain.Forexample,afundamentalconditionfornear-zeroemissionsteelisgreenhydrogen.Butalsoingeneral,greenhydrogeniskeytoensurecarbonneutralityacrossindustriesgoingforwardandthat'swhereweareworkingtogetherwithdifferentpartnersandtheindustry.AndwecommittedourselvesbybeingpartoftheFirstMoverCoalition.”13CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureSouthernCaliforniaGasCompany(SoCalGas)iscollaboratingwithvariouspartnerstocreateaninnovativegreen-hydrogenstoragefacilityforitsColoradocampus.Theelectrolyzeronsitewilluserenewablesourcesandproducegreenhydrogentobestoredinfuelcellstoproducerenewableelectricityondemand.9Atthesametime,organizationsaretryingtofindsolutionstochallengesrelatedtothecostandefficiencyofpowertogastopower(P2G2P)technologies.Fortheenergytransitiontosucceed,anotherpressingchallengeneedstobeovercome:theissuearoundtheintermittencyofrenewable-energysources.Oursurveyshowsthatnearlythree-quarters(71percent)ofE&Uorganizationsbelievethatlow-carbonhydrogenisaviablemethodofenergystoragefromintermittentrenewablesources,actingasabatteryandmakingrenewableenergysuchassolarandwindavailabletoevenmoreapplications.France-basedHDFEnergy,ahydrogen-to-powercompany,isevaluatingnewmodelsinthisspace.MathieuGeze,DirectorAsia,says,“WithourRenewstable®powerplants,wecombinerenewableenergy,hydrogen,andbatteriestodeliversomethingnon-intermittenttothegrid.Thesepowerplantsarecomposedofanintermittentrenewablesourceandalong-termon-sitehydrogenenergystorage.Thebeautyofthoseprojectsisthatwedon’tsellhydrogeninthoseprojects.Wesellkilowatthours.Thehydrogenisjustusedtostoreelectricity.”71%ofE&Uorganizationsbelievethatlow-carbonhydrogenisaviablemethodofenergystoragefromintermittentrenewablesources14CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFig.3E&Uorganizationsexpectlow-carbonhydrogentomeetone-fifthofenergydemandby2050Note:Thisrepresentssubjectiveorganizationalexpectationsoflow-carbonhydrogenandisnotbasedonpresentcapabilitiesandinvestmentlevels.Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=447respondentsfromuniqueenergyandutilitiesorganizations.EXPECTEDSHAREOFLOW-CARBONHYDROGENINTHETOTALENERGYCONSUMPTIONOFYOURCOUNTRYBY205018%25%22%22%21%21%21%20%20%17%16%14%14%CanadaUSUKGermanyJapanSpainNordicsItalyFranceAustraliaIndiaNetherlandsGlobalOrganizationsareoptimisticandambitiousaboutlow-carbonhydrogenGlobalhydrogenproductionstandsataround75milliontons(Mt)H2/yraspurehydrogenandanadditional45MtH2/yraspartofamixofgases.Thisisequivalentto3percentofglobalfinalenergydemand.10Low-carbonhydrogen’sshareoftotalfinalenergyconsumption(TFEC)waslessthan0.1percentin2020.TheInternationalRenewableEnergyAgency(IRENA)estimatessuggestthatitcouldcontributeupto12percentofTFECby2050.11WealsoaskedE&Uexecutivesinoursurveytoestimatelow-carbonhydrogen’sshareofTFECintheircountryby2050.AsFigure3showsbelow,organizationsareevenmorepositivethanthepublishedestimates.Onaverage,theyexpectlow-carbonhydrogentomeet18percentofTFECby2050.Theyconsiderdecliningcostsofelectrolyzersandrenewableenergy–especiallysolarandwindenergy–asakeyenablerofthisshift.15CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureOftotalhydrogencurrentlyproduced,76percentcomesfromnaturalgasand23percentfromcoal.Theshareoflow-carbonhydrogenislessthan1percentofthetotalhydrogenmixtoday,12butthisisexpectedtoincreasewiththetailwindsofgovernmentsupportandloweringproductioncosts:E&Uorganizationsexpectittocontributeupto55percentofthetotalhydrogenmixby2050(seeFigure4).Fig.4E&Uorganizationsexpectlow-carbonhydrogen’sshareofthetotalhydrogenmixtoincreasesignificantlyby2050Note:Thisrepresentsubjectiveorganizationalexpectationsforlow-carbonhydrogenandisnotbasedonpresentcapabilitiesandinvestmentlevels.Source:IEA,HydrogenTrackingReport,September2022;CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizations.GreyBlueLow-carbonOthersHydrogenmixexpectedin2050Hydrogenmixtoday71%22%21%55%23%5%1%3%-49pp+16pp+54pp-20pp16CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureMathieuGezeDirectorAsia,HDFEnergy“WithourRenewstable®powerplants,wecombinerenewableenergy,hydrogen,andbatteriestodeliversomethingnon-intermittenttothegrid.Thesepowerplantsarecomposedofanintermittentrenewablesourceandalong-termon-sitehydrogenenergystorage.”17CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture“Blue”hydrogenisoftenclassifiedas“clean”becauseitisproducedusingcarboncapture,utilization,andstorage(CCUS)technology.Itcurrentlyhasacostadvantageoverhydrogenproducedwithelectrolysis($2.27/kgforhydrogenproducedwithSMRCCUSvs.$5.96/kgforhydrogenproducedwithrenewableelectrolysis),andalsorequireslesscapitaloutlayasexistingnatural-gasinfrastructurecanbeused.HydrogenwithCCUSisrapidlyprogressingincertaincountries,suchastheUS.AroundnineUSstatesintheMidwest,Southwest,andGulfCoastarecompetingforfederalfundingtodeveloptheirCCUShydrogeneconomies.13Recently,US-basedoilandgascompanyExxonMobilunveiledplansforitsnewhydrogenproductionplant,whichwilluseCCUStechnologyatitsrefiningandpetrochemicalfacilityinBaytown,Texas.Theproposedfacilitywouldproduceupto1billioncubicfeetperday(cuft/day)ofhydrogen.TheCCUSinfrastructurewouldhavethecapacitytotransportandstoreupto10millionmetrictons(MMt)ofCO2peryear.14AnotherexampleincludesAirLiquide,ChevronCorporation,LyondellBasellandUniperSEformingaconsortiumtoproducehydrogenusingnaturalgaswithCCSandrenewablehydrogenviaelectrolysisintheUSGulfCoasttosupplyend-usemarkets.15However,thereissomedebatearoundtheefficiencyofthetechnology:•Researchcurrentlysuggeststhat10–20percentofcarbongeneratedduringtheproductionofhydrogencannotbecaptured;16however,thereareeffortsunderwaytodeveloptechnologiesthatwouldcapturemorethan95%ofcarbon.•Thereisalsoanadditionalriskofmethane(themostpotentgreenhousegasorGHG)leakageduringtheproductionofhydrogen;inoursurvey,61percentofend-usersand51percentofE&UorganizationsbelievethatevenhydrogenproducedwithCCUSisnotenvironmentallysustainable.•Lastly,asthepriceofCCUS-producedhydrogenisstronglyinfluencedbythepriceofnaturalgas–whichthecurrentgeopoliticalcrisishaspushedup–itscost-competitivenessmaydrasticallydiminishinthenearfuture,especiallyinEurope;overhalfofend-userorganizations(53percent)and44percentofE&Uorganizationsbelievethistobethecase.HydrogenwithCCUS:Hopeorjusthype?18CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFigure5showsthatamajorityoforganizations(62percentofend-userorganizationsand59percentofE&Uorganizations)believethathydrogenproducedwithCCUStechnologyisonlyastageinthelong-termshifttolow-carbonhydrogen.Lessthanone-third(28percentofE&Uand30percentofend-user)organizationsbelievethatCCUStechnologyisheretostay.Fig.5OrganizationsarequestioningthedecarbonizationpotentialofhydrogenproducedwithCCUS…technologyisheretostay…willbeuncompetitiveintheneartermasaresultofrisinggasprices…isnotenvironmentallysustainable,evenwithcarboncapture…isjustastageintheshifttolow-carbonhydrogen%OFRESPONDENTSAGREEINGWITHTHEFOLLOWINGSTATEMENTS:"HYDROGENPRODUCEDWITHCCUS..."59%62%51%61%44%53%30%28%EnduserorganizationsE&UOrganizationsSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations;N=500respondentsfromuniqueenergyandutilitiesorganizations.19CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureDEMANDFORLOW-CARBONHYDROGENISGROWINGACROSSKEYSECTORS0220CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureThereisstrongemergingpotentialforlow-carbonhydrogenGlobalhydrogendemandwasmorethan94Mtin2021,a5-percentincreaseover2020.17Oursurveyhighlightsthatoveralldemandforhydrogenacrossindustriesandgeographieshasincreasedbymorethan10percentinthepastthreeyears,withastrongdemandemerginginthechemicalsandpetroleumrefiningsectors.Asperoursurveydata,demandforhydrogenfrommorethanhalfoforganizationshasgrownbymorethan10percentinFrance,India,theUK,Japan,theUS,Germany,andSweden.80%ofrespondentsfromtherefiningandfertilizersandchemicalindustriesbelievethatlow-carbonhydrogenwillhaveahighimpactontheirindustryby2030.Morethan21CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFig.6Industriessuchasrefining,fertilizers,andchemicalswillwidelyharnesslow-carbonhydrogen%OFRESPONDENTSWHOSEEHIGHPOTENTIALFORLOW-CARBONHYDROGENINTHEIRRESPECTIVEINDUSTRIES94%Highpotentialby2030100%83%99%56%96%43%74%41%30%85%81%Highpotentialby2050HeavytransportAviationMaritimetransportSteelFertilizersandchemicalsPetroleumreﬁningNote:Respondentsfromeachsectoransweredaboutpotentialfortheirownindustryonly.Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizationsAlthoughthedemandforlow-carbonhydrogenisexpectedtoincreaseacrosssectors,thestrongestdemandiscomingfromsectorswheretheopportunityforelectrificationisminimalandusecasescouldberealizedintheshortterm,givenlocalizedvolumes.Demandandpotentialoflow-carbonhydrogenremainshighfortraditionalhydrogenapplications,particularly22CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureinpetroleumrefining,chemicals,fertilizers,etc.Demandforhydrogeninnewapplications,suchasinheavy-dutytransportation,aviation,andmaritime,isexpectedtopickupslowlyincomparisonwithotherindustrialsectors(seeFigure6).Oursurveyrevealsthatmorethan80percentofrespondentsfromtherefining,andfertilizersandchemicalindustriesbelievethatlow-carbonhydrogenwillhaveahighimpactontheirindustryby2030.23CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations;N=500respondentsfromuniqueenergyandutilitiesorganizations.Avarietyoflow-carbonhydrogenusecasesareemergingacrossvariousindustriesApartfromthetraditionalhydrogen-usersectors,sectorswithlimitedopportunitiestoelectrify,suchasheavy-dutytransportation,aviationormaritime,etc.,arealsoexploringlow-carbonhydrogenusecases,mainlytoachievetheirsustainabilitytargetsandcutemissions.Organizationsexpectdifferentapplicationstomatureatdifferentratesandcostreductionandinnovativebusinessmodelswillberequiredtoscaleup.An,ExecutiveVice-PresidentatIndia-basedsteelcompany,says:“Thebiggestuseoflow-carbonhydrogeninthesteelindustrywillbemakinghydrogen-basedDRI[directreducediron]plants,followedbyuseinblastfurnaces.”Figure7highlightsrisingusecasesoflow-carbonhydrogen.24CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFig.7Newlycommercializedapplicationsofhydrogenareopeningupopportunitiesintransportationandotherenergy-relatedsectors18,19,20,21,22,23,24,25,26IndustryLow-carbonhydrogenusecasesexisting/emergingintheshorttermLow-carbonhydrogenusecasesemergingby2025Low-carbonhydrogenusecasesemergingby2030IndustryexamplesPetroleum(reﬁning)•Createpetroleumproducts,includinggasolineanddiesel(hydrocracking)•Desulfurization•Cleanfeedstockforoilreﬁning(hydrotreating)•ExxonMobilisoperatinganadvancedhydrocrackerunitinRotterdam,NetherlandstocreateproductssuchasEHCGroupIIbasestocksandultra-lowsulfurdiesel18Chemical&fertilizer•Ammoniaforindustrialuse(refrigerator,puriﬁcator&chemicalstabilizer)•Ammoniaforhouseholduse(ammoniumhydroxideforcleaningproducts)•Ammoniaasfertilizer•Methanol(fuels&additives,andasachemicalprecursor)•Industrialheat(usedinindustrialburnersandboilerstoprovidelow-carbonheat)•YaraCleanAmmonia,aglobalunitofYaraInternational,iscurrentlyexploringthepossibilityofproducinggreenammoniaasfertilizerusinggreenhydrogen19Steel•ReducingagentinH2-DRI(directreducediron)•Hydrogeninjection•ArcelorMittalhassuccessfullytestedtheabilitytopartiallyreplacenaturalgas(6.8%)withgreenhydrogenintheproductionofDRIatitssteelplantinContrecoeur,Quebec20•Hydrogenburners•Hydrogenplasma-smeltingreductionHeavy-dutytransport(includingbuses/trucks,etc.)•Combinationofelectricbatteriesandhydrogenfuel-cellelectricvehicles(HFCEVs)•e-fuels(carriersofhydrogeninliquidform-eMethanol,ammonia,ethanol,biofuels,biogas,synthetice-fuels)forbuses/trucks•Hydrogeninternalcombustionengines•HFCEVs-trucks/coachesetc.•DAFTrucksisworkingondevelopinganinternalcombustionenginerunningonhydrogen21•VolvoisdevelopingFCEVtruckspoweredbyhydrogen22•EngineersattheUniversityofNewSouthWalesareworkingondevelopingnewhydrogen-dieselhybridenginesforheavyvehiclessuchasminingtrucks,etc.23•Hydrogen-blendedcompressednaturalgas(H-CNG)clean-fuelcoaches/trucks•PoweringhydrogenrefuelingstationsMaritime•Synthetice-fuelsderivedfromhydrogen,suchasammonia•Hydrogenfuelcellsforlargevessels•Hydrogenfuelcellsforportvehiclesandequipment•MANEnergySolutionshaslauncheda20%hydrogen-ﬁred,stationaryengineforthemarinesectorin2021andiscurrentlyworkingondevelopinga100%hydrogencombustionenginesforlaunchby203024•Hybridsolutions–hydrogenfuelcellsandtraditionalpropulsionforlargevessels•Hydrogencombustionengines•Electriﬁcationofportterminalsandbattery-operatedequipmentAviation•Liquid-hydrogenfuelcells•Airbusisdevelopingaliquid-hydrogen-poweredfuelcellengineandplanstotestitonthelargestcommercialairplanesby2026,tobefullyoperationalby203525•Rolls-RoyceandEasyJethavesuccessfullyconvertedaregularairplaneenginetorunonliquidhydrogenfuel,initiallyforshort-haulﬂightsandthetrialwillthenexpandtolong-haulﬂights26•Synthetice-fuels•Liquidhydrogencombustionengines•Gaseoushydrogenfuelcell•Gaseoushydrogencombustionengines25CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureINVESTMENTINLOW-CARBONHYDROGENISONTHERISE0326CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureOrganizationsareinvestingacrossthehydrogenvaluechainLeadingE&Uorganizationsareturningtowardslow-carbonhydrogentotransformintointegratedenergyproviders.Hydrogenproductioncapacityisestimatedtoreach4.5milliontonsperannum(mtpa)worldwidebytheendof2023.AsofJanuary2023,93percentofbothactiveandpipelinehydrogenprojectsweregreen-hydrogenprojects.27Forinstance:•Frenchmultinationalutilitycompany,ENGIE,isinvestinginoneoftheworld’sfirstindustrial-scalerenewable-hydrogenprojects.TheA$87million($60million)projectinWesternAustraliaincludesa10-MWelectrolyzertoproducerenewablehydrogen;an18-MWsolarPVsystemtopowertheelectrolyzer;andan8-MW/5-MWhlithium-ionbattery28•EDFEnergy,alsoFrench-owned,hasfloatedtheideaofproducinghydrogenatSizewellCintheUK,aplanned3.2-GWnuclear-powerstation.2993%AsofJanuary2023,93%ofbothactiveandpipelinehydrogenprojectsweregreenhydrogenprojects.27CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFig.8AmajorityofE&Uorganizationsareplanningtoinvestinlow-carbonhydrogeninitiatives%OFORGANIZATIONSTHATAREINVESTING/PLANNINGTOINVESTINLOW-CARBONHYDROGEN26%64%98%202220302050Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=447respondentsfromuniqueenergyandutilitiesorganizations.Ourresearchshowsthatamajority(64percent)ofE&Uorganizationsareplanningtoinvestinlow-carbonhydrogeninitiativesby2030;and9in10plantodosoby2050(seeFigure8).64%ofE&Uorganizationsareplanningtoinvestinlow-carbonhydrogeninitiativesby203028CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureOftheE&Uorganizationsthatareplanningtoinvestinlow-carbonhydrogenby2030:•Nearlythreeinfour(74percent)plantoinvestlessthan0.5percentoftheirexpectedrevenue•Oneinfour(24percent)plantoinvest0.5–1percentoftheirexpectedrevenue•Onaverage,0.4percentoftotalannualrevenueisearmarkedforlow-carbonhydrogenbyE&UorganizationsOrganizationsarealsoincreasinglyrealizingtheneedtoacceleratecommercializationanddeliversignificantreductionsinCO2emissions;hence,massiveinvestmentisbeingmadeinthelow-carbonhydrogensupplychain,includingthedevelopmentofcost-effectiveproductiontechnology.Investmentshavebeenmade/plannedinareassuchaselectrolyzers,fuel-celltechnologies,refuelingnetworks,andhydrogeninfrastructuretohelpcreatealternativerevenuestreamsintheenergysector,aswellassupportdecarbonizationefforts(seeFigure9).Fig.9E&Uorganizationsaremakinginvestmentsacrossthelow-carbonhydrogenvaluechain%OFORGANIZATIONSINVESTINGORPLANNINGTOINVESTINDIFFERENTAREASOFLOW-CARBONHYDROGENVALUECHAIN45%52%15%7%53%R&DandinnovationProductionStorageTransportanddistributionEnd-to-endvaluechainSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizations.29CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureResearch&development:Ourresearchfoundthat45percentofE&Uorganizationsareinvestinginhydrogen-relatedR&D.Ofthose:•Morethan70percentrankedelectrolyzertechnologyenhancement(includingalkaline,proton-exchangemembrane[PEM],anionexchangemembrane[AEM],andhigh-temperatureelectrolyzerssuchassolid-oxideelectrolysiscell[SOEC])amongthetopfivetechnology-enhancementinvestmentareas.In2020,Spanishelectricutilitycompany,Iberdrola,establishedaseparatecompany–Iberlyzer,dedicatedtoelectrolyzertechnology.30Organizationsarefocusingon:–Improvingefficiencyandscalingproduction.PaolaBrunetto,HeadofHydrogenBusinessUnitatEnelGreenPower,says:“Toreducethecostoflow-carbonhydrogen,afocusoninnovationisveryimportant.Electrolyzersarenotyetproducedatscale,sothecostshoulddecrease,butwealsothinkthatinnovationiscrucial.Today,theefficiencyofelectrolyzersisjust60–65percent.Weneedtohavehigherefficiencyinordertoreducetheelectricityusedtoproducelow-carbonhydrogeninacost-effectiveway.”InMay2022,Hysata–anelectrolyzertechnologycompanybasedinAustralia–developedacutting-edgetechnologyinwhichtheelectrolyzeroperatesat95-percentsystemefficiency.31–R&Dforreplacementofrare-earthmetals(suchasplatinum,iridium,ruthenium,etc.)usedinelectrolyzers.Extractingtheserare-earthmetalsalsoposesseveralchallenges,suchastheenvironmentalcostofminingalongwithgeopoliticalchallengesassociatedwiththelocation30CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureofthesemetals.AnexecutiveatIndiabasedsteelorganization“InIndia,anotherbigissueforelectrolyzersistherare-earthmetalsusedinthem.Wehavetoimporttheserare-earthmetals–whichisanothercost,aswellasatechnicalchallenge.”•Organizationsareexploringothertechnologies,suchasthermolysisorusageofbiomass,forhydrogenproduction–thisisrankedamongthetopfiveR&Dprioritiesby69percentofE&Uorganizations.USoilgiantChevronrecentlycommitted$25milliontoaCaliforniagreenwaste-to-hydrogenproject.32Houston-basedArborRenewableGasproducesrenewablegasolineandlow-carbonhydrogenfromgasificationofwoodwasteandforestresidue.33US-basedH2EnergyGroupuseswoodybiomassinapyrolysisprocessthatproduceshydrogen-richsyngas(amixofhydrogen,carbonmonoxide,carbondioxide,andmethane).COOatH2EnergyGroupDonTurneradds:“ThesyngascaneithergothroughageneratororaturbinetoproduceelectricityorapostprocesstoproduceHydrogen.Thepostprocessessentiallyinvolvesapressureswingadsorptiontopurifythehydrogento99.999%.Wealsoabsorb13.2tonsofCO2inourenergygrassperacreperyear.Fifteenpercentofallinputtedbiomasscomesoutasbiocharfromthereactor.Biocharcomingoutofreactorsisessentiallyhighlyporouspurecarbonthatcanbeusedforlivestockfarmingasfeedsupplement,aswellasinagriculturetopromotesoilhealth.Italsorepresentsafeedstockforthemakingofgraphene–oneofthemostpromising"supermaterials.”31CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture•Fifty-ninepercentalsorankedfuelcellsamongthetopfiveinvestmentareas.OurrecentresearchonResourcesAwarenessandCircularEconomyStrategy(RACES)showcasingmeritordersinautomotivealsohighlightsthecriticalityofhydrogenfuelcellelectricvehicles(FCEVs).Theresearchshowsthathydrogenvehiclesarelessresource-criticalperkmthanbatteryvehicles,butthehydrogenconsumedinFCEVsismorecriticalthanelectricity.Production:AsignificantproportionofE&Uorganizationsgloballyaredevelopinginfrastructuretosupportproductionoflow-carbonhydrogen.BPisleadingthe$36billionRenewableEnergyHubprojectinWesternAustralia’sPilbararegiontoinstall26GWofsolarandwindfarms.Atfullcapacity,itwillproducearound1.6MMtofhydrogenor9MMtofgreenammoniaperyear.34AirProducts,alongwithglobalenergycompanyAESCorporation,planstobuilda$4billionlow-carbonhydrogenplantinTexas,thebiggestsuchplantintheUS,withcapacitytoproduce200Mtofhydrogenaday,aswellas1.4GWofwind-andsolar-powergeneration.35Storage:Hydrogenmustbestoredeitherathighpressureoratlowtemperature,whichiscostlyandtechnicallychallenging.Ourresearchrevealsthat,oftheE&Uorganizationsinvestinginstoragetechnologies:•Fourin10(41percent)prefercompressedgaseoushydrogenasthestoragemode;SalahMahdy,GlobalDirector–RenewableHydrogenatHowden,agloballeaderofhydrogencompressionsolutions,says:“Therearethreemajortechnologyareasthatarecriticaltocostreductionofhydrogen:powergeneration,electrolyzers,andcompression.Wespecializeindevelopedhighlyinnovativecompressionsolutionsforourcustomersfocusedonoptimizingtheavailabilityandreliability,whichresultsinreducingtheTCO(totalcostofownership)ofourcustomers’operations.”32CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture“Toreducethecostoflow-carbonhydrogen,afocusoninnovationisveryimportant.Today,theefficiencyofelectrolyzersisjust60–65percent.Weneedtohavehigherefficiencyinordertoreducetheelectricityusedtoproducelow-carbonhydrogeninacost-effectiveway.”PaolaBrunettoHeadofHydrogenBusinessUnitatEnelGreenPower33CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureTransportationanddistribution:Whilehydrogencanbetransportedviaroad,rail,water,orpipelines,costscanvarysignificantly.AccordingtoanalysisfromBloombergNEF,transportinghydrogenbypipelineover100kmwouldcostamaximumof$0.23/kg;thesameoperationbyroadcouldcostasmuchas$1.73/kg.37SpanishoilandgasgroupCepsahasrecentlysignedadealwiththeDutchportofRotterdamtoshiplow-carbonhydrogenintheformofhydrogenderivativessuchasammoniaormethanolfromsouthernSpaintonorthernEuropethroughthefirst“greenhydrogencorridor.”38OfE&Uorganizationsinvestingorplanningtoinvestintransportationanddistributionoflow-carbonhydrogen,one-third(33percent)areplanningtoexploreexistingnatural-gaspipelinesforhydrogendistribution.TheEuropeanHydrogenBackbone(EHB)initiativeconsistingagroupofthirty-twoenergyinfrastructureoperatorsexpecttore-purpose69%ofnaturalgaspipelinestotransporthydrogenacrosstheEuropeby2040.39•Nearlyaquarter(24percent)areexploringliquefied-hydrogen-storagetechniques•19percentareinvestinginliquidorganichydrogencarriers(LOHC)technologies•Theremaining16percentareexploringderivatives,suchasammoniaormetalhydridesOrganizationsarealsoexploringthepotentialofundergroundhydrogen-storagefacilities.MitsubishiPowerAmericasalongwithMagnumDevelopmentaresettobeginconstructionofa300-GWhundergroundhydrogen-storagefacilityintheUS.3634CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureCédricVanHoonacker,KeyAccountManagerforNextgridH2&CO2atFluxys,aBelgium-basednatural-gastransmissionsystemoperator,comments:“Pipelinetransportoffersacost-efficientsolutiontoconnectareasofhydrogenexcesssupplywithregionswithhydrogendemand.Wearealreadylookingatrepurposingofnatural-gaspipelines.AsmentionedinhydrogenstrategyandstudiesattheEuropeanlevel,by2050,75percentofthehydrogengridwillconsistofrepurposednatural-gaspipelines.”ItappearsfromoursurveythatthetopthreeinvestmentprioritiesforE&Uorganizationsinthetransportationanddistributionareaare:•ImprovingdistributionnetworksforH2transport•Safehandlingofhydrogen•Managingleakages,ashydrogenleakageswillalsohaveanimpactonatmosphericcomposition,aswellasanindirectwarmingeffectontheclimate4035CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureDonTurnerCOOatH2EnergyGroup“ThesyngascaneithergothroughageneratororaturbinetoproduceelectricityorapostprocesstoproduceHydrogen.Thepostprocessessentiallyinvolvesapressureswingadsorptiontopurifythehydrogento99.999%.Wealsoabsorb13.2tonsofCO2inourenergygrassperacreperyear....”36CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureCountriesacrosstheglobehavesetambitioustargetsforlow-carbonhydrogenDevelopingahomegrownnationalhydrogenindustrypresentsatripartitechallenge:41•Environmental:toreduceGHGemissionsandfulfillnetzeroanddecarbonizationcommitments•Economic:tocreateaddedvalueandjobs•Sovereignty:todevelopenergyindependence,orevenanewexportableresourceCountriesareinvestinginbothsupply-anddemand-sidefacilitiesand“hydrogenhubs”tocreatesupplychains,lowercosts,promoteassetsharingandcollaboration,andmaximizeeconomiesofscale.Moreover,policiesandregulationsaremakingitmoreprofitableforprivate-sectorcompaniestoinvestinlow-carbonhydrogen.Forinstance,theEUapproveda€5.2billionpublicgranttosupporthydrogenprojects.Thisisprojectedtounlockanadditional€7billionininvestmentfromtheprivatesector.42Intotal,80countriesaresupportingclean-hydrogenproduction.Below,wehighlightafewkeyinitiativesinvariousgeographies.(NB:thelistbelowisnotexhaustiveforanycountry/region.)80countriesaresupportingclean-hydrogenproduction.Morethan37CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureTHEEU’SHYDROGENROADMAPTO2050:•Inthisphase,theEUwillfocusoninstallationofatleast6GWofrenewablehydrogenelectrolyzersandproductionofupto1Mtofrenewablehydrogen.202024•Inthisperiod,theEUwillfocusonmakinghydrogenintrinsictothebloc’sintegratedenergysystem,whichaimstoinstallatleast40GWofrenewable-hydrogenelectrolyzersandtorampuphydrogenproductionto10milliontonnesby2030.202530•From2030onwards,theEUaimstodeploygreenhydrogeninalllarge-scalehard-to-decarbonizesectors.203050In2020,theEuropeanCommissionlauncheditsambitioushydrogenstrategyforaclimate-neutralEurope,whichsetsoutaplantoestablishanintegratedhydrogen-energynetworkinEuropeby2050.43ThistransformationisacceleratingfollowingthepublicationoftheREPowerEUplaninMay2022,whichproposesareductionofEUdependenceonRussianfossilfuelsbyacceleratingseveralclimate-relatedtargets.REPowerEUsetsatargetof10Mtofdomesticrenewable-hydrogenproductionand10Mtofrenewablehydrogenimportsby2030.44Moreover,EU’sRenewableEnergyDirectivedefineshydrogenproducedbyrenewables-basedelectricityandliquidfuels,suchasammonia,methanolore-fuelsproducedfromrenewablehydrogenasRFNBOs(renewableliquidandgaseousfuelsofnon-biologicalorigin),whichwillaidingrowthoflow-carbonhydrogenanditsderivatives.45TheEU’shydrogenroadmapto2050:38CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureOverthecomingeightyears,Franceintendstospend€9billiontoencouragethetransitionofheavyindustrytohydrogen,includingscalingnationalgreen-hydrogenproductionto6.5GWby2030.46In2021,theGermangovernmentsetuptheH2Globalinitiativeforgreen-hydrogenimportsproducedoutsidetheEU.Itfeaturesacontractsfordiﬀerence(CfD)thatoﬀerscompensationforalimitedtimeforthediﬀerencebetweenthepurchaseprice(productionplustransportcosts)andthesaleprice(thecurrentmarketpriceforfossilhydrogen)ofrenewablehydrogenandderivedproducts.47TheUKplanstoinvest£4billion($4.8billion)increatingalow-carbonhydrogenindustryby2030.Itistargeting5GWofannualproductioncapacity,suﬃcienttopoweraround3millionhomes,aswellasheavyindustry.48Spainintendstoinvest€1.5billiontodevelopgreenhydrogenproductionoverthenextthreeyears.49TheBelgiangovernmenthasinvested€95million(around$100million)intheconstructionofahydrogenandCO2pipelinenetwork.Ithasalsoearmarkedanannualbudgetof€25millionforR&Dand€16millionforthecreationofahydrogenexpertisecenterin2022.Belgium'shydrogenstrategyfocusesonfourpillars:positioningthecountryasanimportandtransithubforrenewablesinEurope;developingBelgianleadershipinhydrogentechnologies;establishingarobusthydrogenmarket;andfocusingoncollaborationandcooperation.50Selectedcountry-specificinitiatives–Europe:39CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture•TheUSDepartmentofEnergy(DOE)hasinitiatedan$8billionprogram(expectedtobeawardedinsummer2023basedontheapplications)todevelopahubnetwork(H2Hubs)forproducingcleanhydrogen.51Thenetworkwillconnecthydrogenproducers,consumers,andlocalinfrastructure.ByNovember2022,applicationsfornearly$60billiontotaloffederalfundingwerereceivedfromorganizationsthatarewillingtoinvest$150billionoftheirowncapital.52•UndertheInﬂationReductionAct(IRA)of2022,aproductiontaxcreditforcleanhydrogenwasissued,withthecreditamountvaryingaccordingtothecarbon-intensityofhydrogenproduced,withamaximumcreditrateof$3/kgforthelowest-carbonhydrogen.53•Anindustryconsortium,OpenHydrogenInitiative(withE&UorganizationssuchasEQT,Exxonmobil,NationalGrid,andShellasfoundationalsponsors)hasbeenformedtomeasureandcertifythecarbonintensityofhydrogenattheproductionplantlevel.54US•TheGovernmentofCanada’sCleanFuelsFundwillinvestCA$1.5billion($1.1billion)tobuildneworexpandexistingproductionfacilitiesforcleanfuel,includinghydrogen.55•CanadianfederalandprovincialgovernmentshavealsoannouncedapproximatelyCA$475millioninprojectfundingforAirProducts'netzerohydrogenenergycomplexinAlberta.•TheHydrogenStrategyforCanada,2020outlinesastrategytocreateaCA$50bndomestichydrogenmarket.Speciﬁctargetsincludemakinghydrogen30%oftheenergymixby2050atacostof$1.20–2.80/kg.56CANADASelectedinitiativesinNorthAmerica40CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture•Indiahasapproveda$2.4billionNationalGreenHydrogenmissiontoboostproduction,utilization,andexportationofgreenhydrogenanditsderivatives.Themissionexpectstorealize125GWofrenewableenergy.57•TheIndiangovernmentexpectsindustrytoinvest₹8trillion($96billion)ingreenhydrogenanditsderivative,greenammonia,by2030.58•TheAustralianRenewableEnergyAgency(ARENA)hasannouncedafurtherA$50minfundingacrossfourhydrogenprojectslistedundertheGerman-AustralianHydrogenInnovationandTechnologyIncubator(HyGATE)initiative.Germanyinvestedanadditional€40minthejointinitiative,focusedonestablishingagreen-hydrogensupplychain.59•Japan'sMinistryofEconomy,TradeandIndustry(METI)proposedtoallocate¥300billion($2.3billion)tothedevelopmentofthehydrogenimportationandsupplychain.•Inaddition,¥70billionistobeusedtodeveloplarge-scaleelectrolyzerprojectsforhydrogenproduction.60INDIAAUSTRALIAJAPANSelectedinitiativesinAPAC:41CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureCOST,ENGINEERING,ANDSKILLSCHALLENGESAREYETTOBEADDRESSED0442CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureOurresearchsuggeststhat64percentofE&Uorganizationswillbeinvestingsignificantlyinlow-carbonhydrogenby2030.However,amajorityoforganizationsarecurrentlyatproof-of-concept(PoC)orpilotstages.Figure10highlightsthecurrentmaturityofE&Uandend-userorganizationsontheirlow-carbonhydrogenjourneys.Highproductioncosts,lowenergyefficiency,andalackofinfrastructureandskilledresourcesarethecurrentbarrierstolow-carbonhydrogenscalability.Wediscussthesechallengesindetailbelow.Fig.10AmajorityofE&Uandend-userorganizationsarestillattheinitialstagesoftheirlow-carbonhydrogeninitiativesSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations;N=500respondentsfromuniqueenergyandutilitiesorganizations.12%E&Uorganizations8%42%33%24%33%11%19%11%7%End-userorganizationsCURRENTBUSINESS-READINESSLEVELOFLOW-CARBONHYDROGENPROJECTSCURRENTTECHNOLOGY-READINESSLEVELOFLOW-CARBONHYDROGENPROJECTSFullyembeddedinmarketoroﬀeringsScaledMVPcreatedTeambuiltandplandevelopedInitialconceptdeﬁnitionActualsystemproveninoperationalenvironmentSystemmodelorprototypedemonstrationinoperationalenvironmentTechnologyvalidatedinrelevantenvironmentExperimentalproofofconceptformulatedTechnologyconceptformulated13%E&Uorganizations10%32%30%30%33%13%19%12%8%End-userorganizations43CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureThecostoflow-carbonhydrogeniscurrentlyhighThecostofproducinglow-carbonhydrogenismainlybasedonthreefactors:thecostoftheelectricitythatpowerstheelectrolyzers;thecostofinstallingtheelectrolyzers;andfinally,theloadfactorresultingfromtheintermittencyofrenewableresources.Fallingrenewable-energyprices,coupledwithimprovementsinelectrolyzertechnology,haveincreasedthecommercialviabilityoflow-carbonhydrogen.However,itstillcosts$5–6perkgtoproduce.Comparinglow-carbonhydrogentootherfuels,asperestimates:61•Itis2–3timesmoreexpensivetoproducethanfossilfuels(consideringlong-termaveragefossil-fuelpricesof$75/barrelforoiland$4–6/gigajoulefornaturalgas)•Fuelcellsandstoragetanksforroadtransportaresignificantlymoreexpensivethaninternalcombustionengines•Syntheticfuelsforaviationarecurrently3–6timesmoreexpensivethanjetfuelfromfossiloil•Thecostpremiumforlow-carbonhydrogencomparedtofossil-basedoptionscanbe50–75percentforammonia,150percentformethanoland30–40percentforsteel•Producinglow-carbonhydrogenismuchmoreresource-criticalperkWhthanproducinganyothertypesofenergiesduetochallengesassociatedwithprocurement,technology,andenvironmentalimpact.Formoredetailsonmeritordersinenergy,pleaserefertoourpublishedreport:RACES:ResourcesAwarenessandCircularEconomyStrategy.44CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFig.11Low-carbonhydrogenisnotyetcost-competitiveCoalgasiﬁcationSMRSMRalongwithCCUSNuclearelectrolysisRenewableelectrolysisAVERAGEHYDROGENPRODUCTIONCOSTBYPRODUCTIONTECHNOLOGY,2020(IN$/KG)5.965.582.272.081.34Low-carbonhydrogenSource:IEA,GlobalDataPowerWebinar-HydrogenMarket,“Ridingthesustainabilitywave,”February3,2022.2–3Low-carbonhydrogenis2–3timesmoreexpensivethancarbonizedhydrogen.Figure11highlightstheglobalaveragelevelizedcostofhydrogen(LCOH),byenergysource,in2020.Low-carbonhydrogenisaroundthreetimesmoreexpensivethancarbonizedhydrogen.45CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFig.12Organizationsarefacingcost-relatedchallengesthroughoutthehydrogenvaluechainTOPCOST-RELATEDCHALLENGESBYVALUECHAINSTAGER&DandinnovationProductionStorageTransportationanddistributionUsageHighTCOforlow-carbonhydrogen81%Highcostofstorage(costofatank,optimizingvolume,durability,etc.)79%Highcapitalcostofelectrolyzerunits46%Highcostofbuildingnewhydrogen-compatibleinfrastructureHighcostoftransportationofgaseoushydrogen62%62%Highcostoflow-carbon-hydrogenproductioninalternativeareas(e.g.,settingupoﬀshoreproductionfacilitiesduetounavailabilityofland)Highcostofrenewableelectricity64%51%Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations;N=500respondentsfromuniqueenergyandutilitiesorganizations.46CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureAmidsoaringnatural-gasprices,thecompetitivenessoflow-carbonhydrogenhasimprovedslightly;however,risinginflationandcostofmaterialshavecontributedtohigherCAPEXforprojects.Asperoursurvey,organizationsfacecostpressuresthroughoutthehydrogenvaluechain(seeFigure12).•R&Dandinnovation:Producingandoperatingelectrolyzersiscurrentlyexpensiveowingtolowtechnologyefficiency;thelargeamountofraremetalsrequiredforelectrolyzermembranes;andthelackofscaledproduction.AccordingtoIEAestimates,CAPEXrequirementsarecurrentlyintherangeof$500–1,400/kWeforalkalineelectrolyzersand$1,100–1,800/kWeforPEMelectrolyzers,whiletherangeforsolid-oxideelectrolyzercells(SOEC)is$2,800–5,600/kWe.62Inourresearch,46percentofE&UorganizationsrankhighercapitalcostofelectrolyzersamongtheirtopthreeR&Dchallenges.Analystsexpectthecapitalcostofelectrolyzerstodropby30percentby2025,asproductionscales.63Forinstance,inChina,theproductionofalkalineelectrolyzerscostsone-fifthtohalfofthatinEuropeorNorthAmerica.64ThecostofelectrolyzerstackreplacementisalsoamajorcomponentforOPEX(typicallyrequiredafteraround60,000hours).•Production:Inourresearch,morethanhalf(51percent)ofE&Uorganizationsrankedthepriceofrenewableenergyamongthetopthreeobstaclestothecommerciallyviablescalingoflow-carbonhydrogen.Availabilityofgreenelectricityalsoneedstobeensured.FortheEUtoreachitshydrogenobjectives,itmustadd40GWofrenewablescapacityby2026,–achallengingtarget.Includingnuclearelectricitysourcesforlow-carbonhydrogenproductioncan47CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuturehelptoovercomethesedifficulties.Moreover,consideringbackupenergyforlow-carbonhydrogenmanufacturingcanhelpinflatteningoutpeaksandtroughsinrenewableenergyproduction.Recently,energyconversionequipmentspecialistIngeteamhassuppliedabatteryenergystoragesystem(BESS)forIberdrola’sPuertollanofacilityinSpain–oneoftheworld’slargestoperationalgreenhydrogenplants.65•Storage:Hydrogen’slowmolecularweightandlowenergycontentbyvolumemakestorageexpensive–alargemajority(79percent)ofE&Uorganizationsrankthisamongtheirtopfivestorage-relatedchallenges.•Transportation:Inourresearch,around60percentofE&Uorganizationsrankthehighcostofbuildinghydrogen-compatibleinfrastructureandhighcostoftransportationofhydrogeninitsgaseousstateamongthetopfivetransportationchallenges.•Endusage:Amongendusers,totalcostofownershipisthemainchallenge.Anexecutiveataglobalautomotiveorganizationsays:“Youneedtomakealotofinvestmenttochangethehardware.Processessuchasheating,wherewecurrentlyusenaturalgas,cannotsimplyswitchbecauseofthedifferentcalorificvalueofhydrogen,differentleakageproblems,differentpressures,andsoon.”62%ofE&Uorganizationsrankthehighcostofbuildinghydrogen-compatibleinfrastructureamongthetopfivetransportationchallenges.48CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture“Wespecializeindevelopedhighlyinnovativecompressionsolutionsforourcustomersfocusedonoptimizingtheavailabilityandreliability,whichresultsinreducingtheTCOofourcustomers’operations.”SalahMahdyGlobalDirector–RenewableHydrogenatHowden49CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFig.13Amajorityoforganizationsinourresearchexpectthecostoflow-carbonhydrogentodecreasesteadilyto2040%OFORGANIZATIONSANTICIPATINGLOW-CARBONHYDROGENPRODUCTIONCOSTSTODECREASESTEADILYBY...20302035204020452050Don'tknow/Can'tsayNordicsUKIndiaFranceCanadaItalySpainNetherlandsGermanyAustraliaUSJapanAverage2%1%13%26%49%8%3%8%28%63%5%12%62%16%5%13%58%30%2%54%8%26%10%16%28%52%4%12%48%24%16%8%48%36%4%4%2%13%31%47%7%43%37%20%13%38%35%13%3%4%9%37%21%29%4%8%28%24%32%4%Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizations.Manyexpectimprovedeconomicviabilityoflow-carbonhydrogen50CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFig.14Organizationsseeimprovementsinelectrolyzers,afallingcostofrenewables,andscaledvolumesaskeycost-reductionleversLarge-scalehydrogenvolumesIncreasingmodulesize(production-facilitysize)oflow-carbonhydrogenproductionReductioninthecostoftransportationReductionincostofgreen-electricityproductionProductionofhydrogenforexampleatrenewable-energysitesImprovingelectrolyzertechnology%OFORGANIZATIONSAGREEINGTHATTHEBELOWARECOST-REDUCTIONLEVERSFORLOW-CARBONHYDROGEN64%65%63%65%60%63%Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizations.Organizationsandresearchersarealsodependingonfavorableregulatorymeasuressuchascarbontaxesorrenewable-energyincentivestofacilitatethisshift.Forinstance:•TheEuropeanCommissionoffersCarbonContractsforDifference(CCfD)subsidiesforgreenhydrogenthroughitsInnovationFund.TheprogramsupportsacompleteswitchfromnaturalgastorenewablesinproducingH2.UndertheCCfDscheme,EUgovernmentswillpayendusers,nottheproducers,acertainamountfornotemittingcarbon.66•TheEU’sCarbonBorderAdjustmentMechanism(CBAM),whichwillbeapplicablefromOctober1,2023,issettoapplyacarbonbordertaxonimportsofcarbon-intensivehydrogenandH2-derivedproductssuchasammoniaandmethanol.UndertheCBAMscheme,importersoftheseproductswillberequiredtopaythedifferencebetweencarbontaxespaidinthecountryoforiginandthepriceofemissionsallowancesunderEurope’scarbon-tradingscheme,theEmissionsTradingSystem(ETS).6751CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureEngineeringchallengesareyettobesolvedacrossthevaluechainCostchallengesaside,forlarge-scalecommercializationanddeploymentoflow-carbonhydrogen,variousengineeringchallengesmustbesolved.•Energylossesacrossthevaluechain:Reducingenergylossesisakeychallengefromaninnovationperspective:68–30–35percentoftheenergyusedtoproducehydrogenislostduringelectrolysis–13–25percentofenergylossesoccurwhileliquefyinghydrogenorconvertingintoothercarrierssuchasammonia–Transportinghydrogenrequiresadditionalenergyinputs,typicallyequalto10–12percentofthehydrogen'sownenergycontent–Usinghydrogeninfuelcellsresultsinanadditional40–50percentenergylossFig.15EnergylossesacrossthevaluechainareachallengeforendusersandE&Uorganizations%OFORGANIZATIONSRANKING“HIGHENERGYLOSSESATEVERYPOINTOFTHESUPPLYCHAIN”AMONGTHEIRTOPFIVECHALLENGES59%39%42%37%54%51%55%53%65%74%Chemicals&fertilizersPetroleum(reﬁning)SteelMaritimetransportationAviationHeavy-dutytransportationAverage–EndusersUtilitiesEnergyAverage–Energy&utilitiesNote:Figureshighlightedintheabovegraphareaspersurveyrespondents'viewsexclusivelyabouttheirownsector.Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations;N=500respondentsfromuniqueenergyandutilitiesorganizations.52CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture•Engineering-andinfrastructure-relatedchallengesarise:Efficiency,deterioration,durability,resilience,density,electrical-powercapacity,electrolysis-gradewateravailability,aswellascommonengineeringlow-carbonhydrogenstandardsavailabilitymustallbeaddressedacrossthevaluechainforlow-carbonhydrogentobeviable:–HighenergyconsumptionduringproductionisrankedamongthetopfiveproductionchallengesbyhalfofE&Uorganizations–Withhydrogenbeingahighlyvolatile,combustiblegaswithaverylowenergycontentbyvolume,storagepresentssignificantchallenges:•Highflammabilityraisingsafetyconcerns(rankedamongthetopfivechallengesby81percentoforganizations)•Lowdurabilityofstoragematerials–suchasfiber,metals,polymers,etc.(72percent)•Requiredspecificityofstorageconditions(suchashighpressure,cryogenictemperature,etc.)(69percent)–Infrastructurerequirementsfortransportinganddistributinghydrogenarecrucial:•Nearly7in10(68percent)E&Uorganizationsinvestinginlow-carbonhydrogentransportrank“insufficientexistinghydrogenpipelineinfrastructure”amongthetopfivechallenges•Researchisalsoongoingintousingexistinggaspipelinesforhydrogentransportbyblendinganddeblending;ifsuccessful,thiscouldhelpabsorbpricepressuresduringtheinitialphaseofthehydrogeneconomy•Policysupportisalsorequiredhere,as65percentofE&Uorganizationsinvestingintransportationrank“government-authorizedstoragesitesbeingfarfromconsumptionsites”amongthetopfivechallengesAsfigure15shows,59percentofend-userorganizationsand39percentofE&Uorganizationsseethisasaconsiderablechallenge.Organizationsareexploringdigitaltechnologiestomitigatethischallengeandgrowthehydrogeneconomy.Wetalkaboutthemindetailinthenextsection.72%ofE&UorganizationsbelievedigitaltechnologiessuchasAI,ML,IoT,digitaltwinswillbeakeyenablertooptimizeRoIforlow-carbonhydrogenprojects.53CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture–Certifications:Alackofinternationalstandardsonproofoforiginisachallenge.TheUKgovernment,forinstance,isseekingindustryviewsonthedesignofa"globallyrecognized"certificationschemeforlow-carbonhydrogenintheUK,tobuildtransparencyandconfidenceinthecarboncredentialsofhydrogen.69IndustryplayerssuchasExxonMobil,NationalGrid,DukeEnergy,Equinor,andothershaveformedaworkinggroupcalledtheOpenHydrogenInitiative(OHI)todevelopthemodelsthatwillbeusedforhydrogencertification.70Formoredetailsonengineeringchallenges,pleaserefertoourrecentlypublishedresearch:Unlockingthehydrogenage.Theseinfrastructureandengineeringchallengesalsoimpactendusers.Welistthetop-rankedchallengesbyend-usersector(seeFigure16).Fig.16Amajorityofend-userorganizationsrankinfrastructureandengineeringissuesamongthetopfivechallengesfortheirsectorNote:Thefigurehighlightsthepercentageofenduserorganizationsrankingthesaidchallengeamongtop5hydrogenchallengesfortheirrespectivesector.Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations.•Needtoscaleupproductionofhydrogenfuelcells•Lackofrefuelinginfrastructure65%63%•Modiﬁcationsinaircraftdesignrequiredforuseoflowcarbonhydrogenasfuel,etc.58%•Volumeofstoragespacerequiredforhydrogenfuelcellsoncargovessels55%•Signiﬁcantinfrastructureupgraderequiredforlarge-scalehydrogen-basedsteelproduction72%78%85%•Highsensitivitytofeedstockprices81%•Safetyconcerns•Requirementforcontinuoussupplyofhydrogen(notguaranteedwithlow-carbonhydrogen)HeavytransportAviationMaritimeSteelPetroleumChemicals54CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture“Digitaltechnologiesarecrucialtothehydrogenvaluechain–forsurveillanceofsystems;earlydetectionoffaultsandleaks;continuouscost-optimization,etc.Inthedevelopmentphase,digitaltwinsandaccuratemodelingaregoingtogainimportance.”ThomasHolmHydrogenresearcherfromtheInstituteforEnergyTechnology,Norway55CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureOrganizationsfacecritical-skillshortagesOurpreviousresearchonnew-energybusinessmodelsfoundthatthetransitiontoalternativedecarbonizedbusinessmodelsisbeinghindered:nearly70percentoforganizationscitealackofcapabilitiestodevelopnew-energybusinessmodels,whilearound62percentreportadeficitinin-houseskillsets.71AnalysisbytheUKDepartmentforBusiness,Energy,andIndustrialStrategy(BEIS)suggeststheUKhydrogenindustrycouldsupport12,000jobsby2030,and100,000jobsby2050acrossproduction,transport,andstoragetechnologiesfordomesticandexportmarkets.However,industryexpertsestimatetheretobe1,000–2,000individualsintheUKwhohaveveryspecific56CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuturehydrogen-relatedskills.72Moreover,withapplicationsandusecasesofhydrogenextendingtovariousindustries,hydrogentalentandskillsdemandisonlygoingtogrowfurther.Inourresearch,amajorityoforganizationsranklackofskillsandexpertiseamongthetopfivechallengestoscalehydrogen.Otherchallenges,suchasthelackofatransparent,open,andorganizedmarkettoenabletheexchangeofhydrogen,alsohinderscale.Despitethesechallenges,low-carbonhydrogencanplayacriticalroleinenergytransitionanddecarbonization.Fig.17Sixin10endusersandnearlyhalfofE&Uorganizationsrecognizelackofrequiredskills,expertise,andtrainingasachallengeNordicsFranceIndiaJapanGermanyAustraliaUKUSCanadaNetherlandsItalySpainAverage%OFORGANIZATIONSRANKING"LACKOFSKILLSANDEXPERTISE"AMONGTHETOPFIVECHALLENGESFORTHEIRORGANIZATIONINLOW-CARBONHYDROGENINITIATIVES58%49%70%48%67%48%32%67%53%67%62%End-userorganizations40%58%63%52%48%52%65%52%48%63%40%50%50%60%47%E&UorganizationsNote:EnduserdataforNetherlands,SpainandItalyisanalyzedatalowbaseSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations,N=500respondentsfromuniqueenergyandutilitiesorganizations.57CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureHOWCANENERGYANDUTILITIESORGANIZATIONSCAPITALIZEONTHELOW-CARBONHYDROGENOPPORTUNITY?0558CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureToseizetheopportunitiesinlow-carbonhydrogen,mitigatecosts,andscaleatpace,organizationswillneedtoansweranumberofquestions:•Strategic:Howtoestablishthebusinesscaseforhydrogen?Whichmarkets,segments,orusecasesshouldwetarget?Howtotransitiontoanewbusinessmodel?Whatshouldbethegovernanceandoperatingmodel?Whichskillswillberequiredtosucceedandhowtorecruitandtrainworkersinthem?•TechnologicalandIT:Whichsolutionstoselect?Aretheysufficientlymature?Howtoimplementthem?Howtodevelopandscalethemuptoanindustriallevel?Whichsteeringandsimulationtoolsshouldweselect?•Partnerecosystem:Howdoweselectapartner?Whatwillbetherespectiveroles?Howdowedesignandimplementprojectsinunprecedentedecosystemconfigurations(largegroups,smallandmedium-sizedenterprises(SMEs),startups,localauthorities,etc.)?Howdowesecureareliablepartnershipnetwork?Withthesekeyquestionsfrontofmind,anddrawingonoursurveyanalysisandinterviews,aswellasourownexperienceinthisarea,werecommendthefollowingstepstocapitalizeonthegrowinglow-carbonhydrogenopportunity:59CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureFig.18Actionsforscalinglow-carbonhydrogeninitiatives•Harnessthepotentialofdigital-twintechnologiestoreducecostandoperationalrisks•Developrobustdataandtechnologyfoundationstomaximizeagilityandresilienceinthesupplychain•Tailorthebusiness-caseassessmenttoyourorganization•Establishgovernancemodelstosupportnewbusinessmodels•Establishhydrogen-competencecentersforskillsdevelopment•Clearlyarticulatepartnershipstrategyanddesignappropriatetrade-oﬀswhilepartneringwith:-Primaryenergyproducers-Equipmentsuppliers-Storage-systemdevelopers-Infrastructureproviders-Endusers-End-to-endvaluechainACTIVATECOLLABORATESTRATEGIZEAccelerateandscalelow-carbonhydrogenSource:CapgeminiResearchInstituteAnalysis.60CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture1.Strategize:AlignorganizationalstrategyandcapabilitiestodevelopnewbusinessmodelsTailorthebusiness-caseassessmenttoyourorganization:Low-carbonhydrogentechnologyrequiresimprovementandscalinguptocontributepositivelytooverallcostreductions.Inparallel,thereisarequirementtoevaluatenewbusinessmodelsfromsustainabilityandTCOstandpoints.DetailedanalysisofbothCAPEXandOPEXisrequired.Assessandmonitorregulatorydevelopments:Asmentionedpreviously,governmentsacrosstheworldarefocusingheavilyondecarbonizedhydrogenthroughinvestments,low-carbonhydrogensubsidies,emissiontradingschemes,carbontaxes,etc.The58%oforganizationsbelievethatthecleanhydrogeneconomywillcreatewealthandsubstantialjobopportunities61CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureoflarge-scaledeploymentstobeakeychallengeforhydrogenR&D.OurresearchshowsthattheleadingE&Uplayersarefocusingonidentifyingthemarketandanalyzingendusagepotential.AnexecutivefromaGermanenergycompanyadds:“Inordertomakelargeprojectsbankable,youhavetoalignpotentialsupplywithdemand.Thatisstillachallengebecauseyouendupwithalargeupfrontinvestment,butuncertaindemandandpricing.Butwe'reidentifyingfirstcustomersandstartingtocommittocertainvolumes.”Thedesignofalow-carbonprojectwillalsoneedtoconsiderthestrengthoftheofftaker.Bycombiningmultipleofftakers,organizationscanshareinvestmentsandrisks.Smallerlocalofftakerscanalsobeapproachedforlower-costhydrogensupply,acceleratingoperationalbreakeven.Itisalsoimportantthatthepriceisattractivetobuyers.Toscaleuptheindustry,differentplayersinthevaluechainmustshareinvestmentsaswellasleveragepublicaid.Thereareotheruncertaintiesthatorganizationsmustassess,suchasnatural-gasprices,spotpowerprices,sufficientrenewable-powersupply,andavailableareasfortheproductionsite,whichcanbeexpandedfurtherbasedondemand,requirements,etc.regulatorylandscapeisfastevolving,soitiscrucialfororganizationstoassess,evaluate,andmonitortheseoptions.Ourresearchshowsthat64percentofE&Uorganizationsseeinadequategovernmentfundingtodayasakeyimpedimenttoprogressinthisspace.Securecustomerdemandandshareinvestmentsandrisksbetweenpublicandprivateplayers:Thelow-carbonhydrogenmarketiscurrentlyfacingaCatch-22situation.Tobuilduplarge-scaleproductionfacilities,producersneedguaranteedcustomerdemand.Atthesametime,tocommittoupfrontinvestments,end-usersareaskingforareliablesupplyoflow-carbonhydrogen.Inourresearch,68percentofE&Uorganizationsconsidertheuncertaintyofoutputs62CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureEstablishgovernancemodelstosupportnewbusinessmodels:In2020,Germany’sRWEsetupanewhydrogenbusinessunitwithinRWEGenerationSE,oneofthegroup'smaindivisions,whichholdsitsfleetofgas,hard-coal,hydro,andbiomasspowerplants.Spain'sIberdrolaSAhasalsoannouncedagreen-hydrogenbusinessunit.73Fig.19Amajorityoforganizationsareevaluatingaconcurrentbusinessmodelintegratingbothtraditionalandnewlow-carbonhydrogencapabilitiesintoone...ofE&Uorganizationshavelaunchedorplantolaunchaninitiativetointegrateexistingandlow-carbon-hydrogenbusinessmodelsforconcurrentoperation75%Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizations.63CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureEstablishhydrogen-competencecentersforskills-development:Ourpreviousresearchhighlightsthatonly38percentofE&UorganizationssaytheyhavethenecessarydigitalandITskillstodevelopalternativefuels(includinghydrogen).74Organizationsshouldestablishhydrogen-competencecentersandimplementeducationandupskillingprograms,aswellasmanagestakeholderexpectationsthroughcarefulstrategiccommunication.AspartofitsNextHyproject,EnelGreenPowerisdevelopingagreen-hydrogencenterofexcellenceinSicily,Italy.Aswellasengagingwithstartups,VCs,anduniversities,thefacilitywillhostwebinars,expert-leddisseminationevents,andtrainingcourses.75Organizationsmustfocusonexternalhiring,aswellasupskillingoftalent.OneoftheGermanenergycompaniesispromotingthetrainingandupskillingofspecialistsinhydrogen-relatedoccupationalfields.AnexecutivefromaGermanenergycompanyadds“Wearestronglyrampinguptheworkforceinthehydrogendivisionandalargeshareofthisworkforceisengagedinprojectdevelopment.Wearefocusingondevelopingengineeringcompetencetooperateandmaintainfutureprojectsofhydrogenproduction,understandingelectrolyzers,productionofhydrogenderivatives,etc.”Inourresearch,nearly6in10(58percent)ofE&Uorganizationsagreethataclean-hydrogeneconomywillcreatewealthandgeneratejobopportunities.64CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture2.Activate:Acceleratethelow-carbonhydrogeneconomythroughtechnologyanddigitalengineeringThomasHolm,ahydrogenresearcherfromtheInstituteforEnergyTechnology,Norway,says:“Digitaltechnologiesarecrucialtothehydrogenvaluechain–forsurveillanceofsystems;earlydetectionoffaultsandleaks;continuouscost-optimization,etc.Inthedevelopmentphase,digitaltwinsandaccuratemodelingaregoingtogainimportance.”Asthehydrogeneconomygrows,itisvitalfororganizationstolookatdigitaltechnologiesthatextendacrossthevaluechain.Ourresearchindicatesthatapproximatelythreeoutoffour(72percent)E&Uorganizationsbelievedigitaltechnologiessuchasartificialintelligence(AI),machinelearning(ML),InternetofThings(IoT),anddigitaltwinswillbekeyenablerstooptimizereturnoninvestment(ROI)forlow-carbonhydrogenprojects,helpingorganizationstoreducetheircapitalandoperatingcostandriskbyimprovinguptime,safety,andreliabilitywhilemaximizingagilityandresilienceinthesupplychain.Harnessthepotentialofdigital-twintechnologiestoreducecostandoperationalrisks:UK-basedelectrolyzermanufacturerITMPowerplanstobuildacommercialgreen-hydrogenelectrolysisfacilitywith1-GWcapacityinHumberside,UK.Torealizethis,thecompanyisusingdigitaltwins.76Digitaltwinscanhelporganizationsinthehydrogenvaluechainto:•modelmultipledesignsandscenariostomaximizeROI(estimatesindicatethatdigital-twinanalysiscantrimCAPEXby10–15percent,whilereducingriskinthehydrogenvaluechainby30–50percent);77•monitoroperationsinrealtimetoenhanceperformanceandprofitability;•optimizepreventivemaintenancetominimizecostlyunscheduleddowntime;87%oftheE&Uorganizationshavealreadybegunutilizingdataandanalyticsintheirhydrogenvaluechains65CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture•testcontrolsandsafetymeasures;•enablepredictivepreparationfordemandandresourcesdisruption;•improveemployeesafetyandfacilitatetraining;•allowdata-drivendecision-makingthroughoutthelifecycleandacrossecosystems;•enhancesustainabilitybylimitingtheuseofresourcesalongthevaluechain.Digitaltwinscanstrategicallydevelopeconomichydrogenproductionmodelswhileofferingdecision-makingsupportoninvestmentrisks,financialbenefits,andtheoptimalconfigurationoflow-carbonhydrogenproductionsystems.Digitalsolutionsandmodelingcanalsohelporganizationsdesignstoragespacesforhydrogenbyconsideringarangeoffactors,suchasstationaryormobileapplication,durationofstorage,etc.Thesemodelscanhelporganizationstopredictpressurechangesandfluidmovementsduringtransportationthatdamagetanksandcauseleakages.TheUK’sNationalGridhascollaboratedwiththeCentreforModelling&Simulation(CFMS),DNV,Premtech,andDurhamUniversity(UK)todevelopdigitaltwinstotesthydrogentransportation.78Ontheend-userside,Fordhasdevelopedafullyfunctionalprototypedemonstratortransitfuel-cellelectricvehicle(FCEV),andadigitaltwinthatisfullyvalidatedtocapturethekeyfunctionalfeaturesofthephysicalprototype.79Developrobustdataandtechnologyfoundationstomaximizeagilityandresilienceinthesupplychain:WithadvancedanalyticsandAI,organizationscanmaximizeyields,preventenergylosses,forecastfailures,modeldemand,optimizestorageandtransport,reducecosts,andde-riskinnovationandadoption.Oursurveyshowsthatnearly87percentofE&Uorganizationshavealreadybegunutilizingdataandanalyticsintheirhydrogenvaluechains;nearly60percentclaimthattheyuseAIextensivelyfortheirlow-carbonhydrogeninitiatives.Organizationsshould:•Unifydatafromsiloedsourcesandcreateanintegrateddata-managementsystem•Focusondata-landscapemodernization•Investindata-sharingecosystems•Incentivizeinnovationandfosteradata-poweredcultureVariousplatformprovidersareemergingtoguaranteetherenewableoriginofgreenhydrogen,whilealsoallowingconsumerstoquantify,record,andmonitorthedecarbonizationprocessoftheirownenergysupplyandtoverifythetransportationanddeliveryprocess.ZaneMcDonald,ExecutiveDirectoroftheOpenHydrogenInitiative,ledbyGTIEnergysays:“Astandardizedapproachtodataanddigitalizationplaysacriticalroleinunderstandingthecarbonintensityofhydrogen.Itensuresthathydrogeninvestorsandpolicymakerscanbasedecisionsoncredibleinformation,andthatwecanachievedeepeconomy-widedecarbonizationataneconomicallyviableprice.Weaspiretoincreasetheutilizationofmeasureddatathatcharacterizestheoperationalparametersofahydrogenproductionfacilityinreal-worldconditions.Defininghydrogen’sfacility-level66CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuturecarbonintensitycreatesanattributethatcanbeusedbydecisionmakerstoascribevaluetohydrogenbasedonitsenvironmentalbonafides.”Nobian,aGermany-basedchemicalscompany,ispilotingblockchainsolutionsforthecertificationofgreenhydrogentoensuretraceabilityacrossthevaluechain.80EnvisionDigital,whichspecializesinthedeploymentofIoTsolutionsdedicatedtorenewableenergy,partneredwithCapgeminiEngineeringtodevelopdigitaltwinsappliedtothegreenhydrogenvaluechain.Thesetoolswillallowthecontrolandstudyoftheavailabilityandprofitabilityofthedifferentsystemsandprocessesofitsvaluechain.Moreover,theywillcertifytheoriginoftheproducedhydrogen,aswellasenableanalyticalsolutionstocharacterizetheperformance,reliability,andcostofthevarioussystems.8167CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture"...Weaspiretoincreasetheutilizationofmeasureddatathatcharacterizestheoperationalparametersofahydrogenproductionfacilityinreal-worldconditions.Defininghydrogen’sfacility-levelcarbonintensitycreatesanattributethatcanbeusedbydecisionmakerstoascribevaluetohydrogenbasedonitsenvironmentalbonafides."ZaneMcDonaldExecutiveDirectoroftheOpenHydrogenInitiative,ledbyGTIEnergy68CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture3.Collaborate:Partnertoscalelow-carbonhydrogentechnologyGiventheuncertaineconomicenvironmentandhugecapitalrequirementtobuildthelow-carbonhydrogenvaluechain,partnershipscouldenableE&Uorganizationstosharerisksandcosts,aswellasthecapabilitiesthatarecriticaltoscaling.Partnershipswillalsoallowcompaniestosetupexploratoryprojectsacrossdifferentgeographies,technologies,andusecases,raisingtheprobabilityoffindingamarket-winningsolution.Partnershipscanalsoencourageco-ordinationbetweeninvestors,policymakers,andotherstakeholderstoshapethemarketanditsregulatoryframework.Theorganizationsthatcanidentify,negotiate,andstructurepartnershipsmosteffectivelywillhaveacompetitiveadvantageinthelow-carbon-hydrogeneconomy.Clearlyarticulatepartnershipstrategyandmakethoughtfultrade-offs:Firstly,organizationsmustfindanswerstokeyquestions,suchaswithwhomtopartnerinthevaluechain,andwhyandhowtocollaboratewithclients,peers,andotherplayerstogeneratescalebenefits,manageconversion,enhancethestorageanddistributionof69CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuturehydrogen,build/repurposeexistinginfrastructure,andaggregatedemand.Thesecouldbejoinedbytechnologyproviders,offeringtherequirednicheengineering,technical,anddigitalexpertise.Wefoundthat44percentoftheE&Uorganizationswesurveyedhighlightedintegratedsupplystructureand45percenthighlightedestablishingcollaborationacrossthevaluechainaskeysuccessfactorsforlarge-scalehydrogenprojects.Organizationsmustclearlyidentifythe“whitespaces”intheirlow-carbon-hydrogenstrategies(seeFigure20).Fig.20TherightpartnerecosystemcouldhelpE&Uorganizationsscalelow-carbonhydrogentechnologyPartneringwithequipment(electrolyzer)suppliersLowerproductioncoststhroughscalingPartneringwithhydrogen-storage-systemdevelopersConverthydrogentovariousderivatesforeﬃcientstorageandlong-distancetransportPartneringacrossthevaluechainEnd-to-endcollaborationtopromotecross-industrycoordinationPartneringwithendusersHydrogenproductiononcustomersitetolowertransportationcostandaggregatedemandPartneringwithhydrogeninfrastructureprovidersRepurposeexistinginfrastructureorbuildanewoneatlowercostPartneringwithprimaryenergyproducers/playersSecureaﬀordablerenewable/nuclearenergyatscaleSource:CapgeminiResearchInstituteanalysis70CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureAccordingtooursurvey,amajorityofE&Uorganizationsarepartneringtosharevariouscapabilitiesacrossthevaluechain(seeFigure21).Fig.21E&Uorganizationsarecombiningtheircapabilities%OFE&UORGANIZATIONSTHATHAVEALREADYACQUIREDORPLANTOACQUIRETHEFOLLOWINGCAPABILITIES60%30%40%40%50%30%38%25%50%50%29%14%AlreadyintegratedthesecapabilitiesPlantointegrateinthenext1–3yearsHydrogeninfrastructureproviders(dispense/pipes/development)Hydrogenprocesser(compress/separate/monitor/catalyze/purify)Hydrogenenergystorage-systemdevelopers(aircompression/liquidation/hydrogencarriers/solids)Oﬀshorehydrogenproduction-facilityoperatorElectrolyzertechnologyplatformproviderElectrolyzermanufacturerSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=33respondentsfromuniqueE&Uorganizationsinvestingacrossallareasofthevaluechain.61%organizationsbelievenewallianceswillformtodevelophydrogenprojectsthroughcross-sectorcollaborations71CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuturePartneringwithprimaryenergyproducers/players:Wefoundthat63percentofE&Uorganizationswesurveyedhaveenergypartnershipswithsolar-/wind-energyproducerstosecureelectricsupplytoproducelow-carbonhydrogen.Forexample,BPandSpanishclean-energycompanyIberdrolaformedajointventure(JV)forlarge-scalegreen-hydrogenproductioninSpain,Portugal,andtheUK.82Asanintermediatestepbeforecommittingtoaspecificproject,E&Uorganizationscouldalsoexplore:–commercialarrangementswithrenewable/nuclear-energyprovidersforlockinginvolumesandpricingunderapreferredpartnershipagreement(PPA)orpurchaseagreementwithathird-partyofftaker;–formingJVstodevelop,operate,andmaintainintegratedprimaryenergyandproductionfacilities;–joint-developmentagreementswithgreen-energycompaniestoco-developproductionfacilitiesandprovidegreenenergyatadvantageousprices.Partneringwithequipment(electrolyzer)suppliersandprocessdevelopers:ElectrolyzercostsarethegreatestcontributortotheoverallTCOoflow-carbonhydrogen.E&Uorganizationscouldsecureaccesstotheequipmentthroughoneofthefollowingapproaches:–formpreferred-supplierallianceswithelectrolyzerprovidersandinfluencetechnical-designspecifications–partnerwithengineering,procurement,andconstruction(EPC)partnerstostandardizeascalableapproachtoplantdesign–takeequitystakesintheequipmentsupplychainorofferastaketoanelectrolyzermanufacturerinproductionvolumestosharecapitalriskSeveralorganizationsareexploringthisroutetoreducingtheoverallproductioncost:•ShellIndiaandOhmiumInternational,agreen-hydrogencompanythatdesigns,manufactures,anddeploysPEMelectrolyzers,arecollaboratingtoPartneringwithhydrogenstoragesystemdevelopers:Unusedlow-carbonhydrogenmustbestored,atadditionalcost.E&Uorganizationshaveestablished/areplanningtoestablishpartnershipswithhydrogenstorage-systemdevelopersfortheirspecifictechnicalexpertise.Alternatively,low-carbonhydrogenproducerscanexplorepathwayssuchas:–securingapartnershiptoconverthydrogentootherforms,suchasmethylcyclohexane(MCH),makingiteasiertostoreandtransportoverlongdistances;–expansionofoperationstobecomeagreen-ammoniaproducer,tappingintotheexistingassessopportunitiesfromtechnical,commercial,andsafetyperspectives83•ChinaPetrochemicalCorporation(SinopecGroup)andCumminsInc.haveformeda50:50jointventuretoproducegreen-hydrogentechnologies;CumminswillinitiallyinvestRMB300million($47million)inPEMelectrolyzers8472CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureammoniasupplychain;anexampleisAirProducts,ACWAPower,andNEOM,whoarepartneringona$5billiongreen-hydrogen-basedammonia-productionfacilitypoweredbyrenewableenergytosupply650tonsofgreenhydrogenperdayforglobaltransportation.85Belgium-basednatural-gastransmissionsystemoperatorFluxysisdevelopingrenewablehydrogenimportfacilitiesandhaspartneredwithAdvario,aliquidstoragelogisticsplayer,toinvest,build,andoperatethesefacilities.CédricVanHoonackerfromFluxyscomments,“Thereisanecessityoftheimportfacilities,withtheroletoimportrenewablehydrogenfromcontinentswithmoresunandwind.WeneedtheimportfacilitieswithinBelgiumaswell.There,wepartneredupwithAdvariointheharborofAntwerptobuildandoperate,andtoinvestinimportfacilitiestogether.So,wehavepartnershipsforsomeprojects,forinstance,anammoniaimportfacility,ammoniastorage,ammoniahandling,andammoniacrackingtowardshydrogen,withconnectiontoourgrid.”Partneringwithhydrogeninfrastructureproviders:E&Uorganizationsarepartneringtostimulatedevelopmentoftransportationinfrastructureforlow-carbonhydrogen.E&Uorganizationsarealsosharingtheriskandcostassociatedwithdevelopingnewpipelines/infrastructurebymakingthempartnersintheirproductionplants.Partneringwithendusers:Low-carbonhydrogenproducersarealsopartneringbroadlywithpotentialenduserstostimulatemarketdemandandde-riskprojects.Thisrangesfromjointresearchanddevelopmenttobroadersectorcollaborations.End-userindustriessuchassteel,cement,mining,andfertilizersarelookingforguaranteedaccesstolow-carbonhydrogenandarewillingtotakeequitystakesinco-locatedprojectsthatexclusivelybenefittheirbusinesses.ASwedishsteelmaker,SSAB,hasenteredaJVwithpowerutilityVattenfallandmininggroupLKABtodevelopgreenhydrogentopowertheHybritsteelplantinLulea,Sweden.86AndVolvoCarswillbethefirstcarmakertosecureSSABsteelmadefromhydrogen-reducedironfromtheHYBRITpilotplantinLuleå,Sweden.87Inourresearch,69percentofend-userorganizationslisthydrogen-supplysecurity(broadavailabilityofgreenhydrogenonanindustrialscale)asakeysuccessfactorinlarge-scalehydrogenprojects.Halfoftheend-userorganizationswesurveyedexpecttosignlong-termlow-carbonhydrogensupplycontractswithE&Uorganizationspriortocommercialdeployment.73CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture“….WepartneredupwithAdvariointheharborofAntwerptobuildandoperate,andtoinvestinimportfacilitiestogether.So,wehavepartnershipsforsomeprojects,forinstance,anammoniaimportfacility,ammoniastorage,ammoniahandling,andammoniacrackingtowardshydrogen,withconnectiontoourgrid.”CédricVanHoonackerKeyAccountManagerforNextgridH2&CO2atFluxys74CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuturePartneringacrossthevaluechain:E&Uorganizationsarealsoformingend-to-endcollaborations.Multipleregionalgreen-hydrogenhubsareemergingtominimizeinfrastructurecostsbyconsolidatingrenewable-energygeneration,green-hydrogenproduction,andofftakeatcommercialscale.Manyofthesehubsalsocollaboratewithlocal,regional,andnationalgovernmentstopromotecross-industrycoordination,cuttingthroughredtapeandtappingintogovernmentsubsidies.CompanieslikePlugPowerandCumminsarebuildingaglobalecosystemofpartnershipswithpeerstoimproveR&D,createscalablesolutions,andconsolidateactivities,andwiththeircustomerstolockindemand,includingthroughselectiveequitystakesinhydrogenproductionprojects.Cross-industrypartnershipswouldalsoenableE&Uorganizationstolockinguaranteedofftakeforgreen-hydrogenproduction,reducingtheriskinvolvedincapitalinvestment.Wealsofoundthat61percentofE&Uorganizationswesurveyedbelievehydrogenprojectswillarisethroughnewcross-sectorcollaborations;55percentofend-userorganizationsbelievethesame.DevelopingyourownecosystemLargeindustrialplayersandgovernmentscouldalsoexploreotherpathwayssuchasdevelopingtheirownecosystemspanningacrossthevaluechaintoincludeownfunding,buildingandmanagingplantoperations,storage,marketinganddistributionofmoleculesaswellasdevelopinginfrastructurethatservesownersdirectlyplusthirdpartiesonatollingbasis.Thiswouldenablelargeplayerstoachievescalebenefitswithcompetitiveadvantage.Withgrowingdemandforcleanerenergysources,E&Uorganizationsmustscaletheirlow-carbonhydrogeninitiativeswithsomeurgencytomakeameaningfulimpactonthetotalenergymix.Thiscanalsoleadtofurtherproduction-costreduction,acleaneroverallenergyprofile,andpreferred-partnerstatuswithlargeend-userorganizationslookingtoreducetheircarbonprofiles–specificallyscope-1emissions.Onscaling,Pierre-EtienneFranc,CEOofHy24,ajointventurebetweenassetmanagersArdianSASandFiveTHydrogen,says:"Youcan'tmovefrom10-MWsizetogigawattsizejustlikethat.First,itisnecessarytobuildfacilities10timesthesizeofpilotprojectscurrentlyoperatinginEurope.Thosewillprovidetheoperationalknowledgeandtheelectrolyzer-manufacturingcapacitynecessarytoscaleuptothenextlevel.”88E&Uorganizationslookatscalingasacriticalleverforlow-carbonhydrogencostreduction.Oursurveyfoundthatalmosttwo-thirds(60percent)oforganizationssurveyedbelievethatlarge-scaleproductionisvitaltocostreduction.75CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureConclusionLow-carbonhydrogenisemergingasoneofthepromisingtoolsforemissionsreductionandisrecognizedgloballybygovernmentsandbusinessorganizationsasacrucialfacilitatorinachievingagreenerfuture.Althoughthepotentialvariesacrosssectorsandregions,theshareofrenewableandnuclear-producedhydrogenintotalhydrogenproducedisexpectedtogrowexponentially.Organizationsareworkingtowardsstrengtheningthelow-carbonhydrogensupplychainbyinvestingacrossthevaluechain.Countriesgloballyarepromotinglow-carbonhydrogenadoptionandaresettingupambitioustargets.End-usersinhard-to-abatesectorsarealsokeentoexplorethedecarbonizationpotentialoflow-carbonhydrogen.Despitethebroadsupportandstrongprojectpipeline,sizeablebarriersexistinturningambitiousvisionsintoreality.Regulatoryrequirements,commercialchallenges,engineeringbarriers,aswellassafetyandskillhurdlesareyettobetackled.Governmentshavebeenworkingtofillpolicygapsandprovideconfidencetoinvestorsandstakeholders.Organizationsneedtoidentifythesynergiesacrossthevaluechaintoovercomethebarriers.Thecomplexityassociatedwithdevelopingindustrial-scalelow-carbonhydrogenprojectscanbemanagedby:•evaluatingnewbusinessmodelsfromsustainabilityandtotalcostofownershipstandpointsandsecuringdemand•leveragingtechnologiessuchasdigitaltwins,AI,andanalyticstosolveengineeringandcostchallenges•identifyingsynergiesandcollaborationopportunitiesacrossthevaluechain.76CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureAppendixHydrogen-productiontechnologiescurrentlyavailableGasificationTheprocessconvertsorganicorfossil-basedcarbonaceousmaterialsintoCO,H2,andCO2.Black/brownhydrogenGrayhydrogenBluehydrogenTurquoisehydrogenGreenhydrogenPinkhydrogenThethermaldecompositionofmethaneisknownasmethanepyrolysisandproducessolidcarbonasaby-product.Hydrogengeneratedthroughelectrolysisofwaterpoweredbyrenewableenergysuchassolar/windpower.Hydrogenproducedfromelectrolysisofwater,usingnuclearenergy.Inthisprocess,methanereactswithsteamunder3–25barpressureinthepresenceofacatalysttoproducehydrogen,CO,andarelativelysmallamountofCO2.Inthisprocess,CO2iscaptured(85–90percent)attheproductionfacilityandstoredseparately(i.e.,notreleasedintotheenvironment).PyrolysisSteammethanereforming(SMR)Renewable-energyelectrolysisSMRwithcarboncapture,utilization,andstorage(CCUS)Nuclear-energyelectrolysisDescriptionTypeofhydrogenproduced77CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureTypeofelectrolyzersAlkalineelectrolysismakesuseoftwoelectrodessubmergedinanalkalineelectrolytesolution(suchaspotassiumorsodiumhydroxide);anon-conductiveporousmembranecalledadiaphragmisusedtoseparatetheO2andH2fromwater.AnSOECisasolid-oxidefuelcellthatrunsinregenerativemodetoachievetheelectrolysisofwaterbyusingasolid-oxide,orceramic,electrolytetoproduceH2andO2.PEMelectrolyzersuseasolidpolymermembranethatabsorbspositivelychargedhydrogenatoms(separatedfromoxygenusingelectricity)andallowsthemtoflowintoaseparatetank,wheretheyre-bondintoH2molecules.HydrogenproductionusingwaterelectrolyzersequippedwithanAEM.PEM(proton-exchangemembrane)electrolyzersAlkalineelectrolyzersAEM(anion-exchangemembrane)electrolyzersSOEC(solid-oxideelectrolyzercell)electrolyzersDescription78CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureTermsusedinthereport:•Powertogastopowertechnology:Processofproducinghydrogen(throughelectrolysisusingelectricity)andthenstoringittobeusedtogenerateelectricity.•DRI:Directreducedironistheproductofthedirectreductionofironoreinthesolidstatebycarbonmonoxideandhydrogen.•Hydrogenplasmasmeltingreduction:Theprocessofusinghydrogenthermalplasmatoreduceironoxides.•Hydrocracking:Processbywhichthehydrocarbonmoleculesofpetroleumarebrokenintosimplermolecules(gasolineorkerosene)bytheadditionofhydrogenunderhighpressureandinthepresenceofacatalyst.•Hydrotreating:Processofremovingcontaminantssuchassulfur,nitrogen,andmetalsfromcrude-oilfractions.•Levelizedcostofelectricity(LCOE):AccordingtotheUSEnergyInformationAdministration(EIA),LCOE“representstheaveragerevenueperunitofelectricitygeneratedthatwouldberequiredtocoverthecostsofbuildingandoperatingageneratingplantduringanassumedfinanciallifeanddutycycle.”79CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureTounderstandthegrowingprominenceoflow-carbonhydrogenfrombothorganizationalandregulatory/policyperspectives,alongwithevolvingbusinessmodelsandthecurrentmaturityoforganizations,wecarriedoutextensivequalitativeandquantitativeresearch.In-depthinterviewsWeconducted21in-depthinterviewswithindustryexecutivesfromvariousorganizations,includingseniorexecutivesfromenergyandutilities(E&U)firmsandend-userorganizations(petroleum,steel,chemicals,heavy-dutytransportation,maritime,aviation,etc.),policymakers,techstartups,academics,economists,etc.Intervieweesareinvolvedintheplanninganddevelopmentoflow-carbon-hydrogeninitiativesandworkacrossfunctionalareassuchasstrategy,product/servicedevelopment,innovationandengineering,operations(supplychain–procurement,transportation,etc./production),businessunitsspecificallydealingwithhydrogen,renewables,newenergies,decarbonization,theenvironment,sustainability,energytransition,endusage(hydrogenusedforfuelcells/engines),etc.ExecutivesurveyWesurveyedatotalof860respondentsfromuniqueorganizationsacross13countries,ofwhich:•500werefromuniqueE&Ufirmsworkingonlow-carbon-hydrogeninitiativeswithmorethan$500millioninannualrevenue•360werefromend-usersectors,includingpetroleum,steel,chemicalsandfertilizers,heavy-dutytransportation(includingcoaches/heavytrucks),aviation,andmaritimetransportation,withmorethan$1billioninannualrevenueTherespondentswereatdirectorleveloraboveandwereresponsibleforeitherplanningorimplementinglow-carbon-hydrogenprojects/initiativesintheirorganizationsorbeingcloselyassociatedwiththem.Thedistributionofrespondentsandtheirorganizationsisprovidedinthefollowingfigures.Thestudyfindingsreflecttheviewsofrespondentstoouronlinequestionnaireforthisresearchandareaimedatprovidingdirectionalguidance.PleasecontactoneoftheCapgeminiexpertslistedattheendofthereporttounderstandspecificimplications.Researchmethodology80CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureNetherlandsNetherlandsItalyAustraliaFranceIndiaGermanyUK%OFRESPONDENTSBYORGANIZATIONHEADQUARTERS(E&UORGANIZATIONS)%OFRESPONDENTSBYORGANIZATIONHEADQUARTERS(END-USERORGANIZATIONS)SwedenSwedenUSUSUKGermanyCanadaCanadaJapanJapanIndiaAustraliaFranceSpainSpainItalyNorway17%14%14%14%9%9%8%8%7%4%4%3%3%2%10%9%8%8%8%6%5%5%5%3%2%14%NorwaySource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizations.Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022,N=360respondentsfromuniqueend-userorganizations.81CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture>$50B$10B–$19.99B$1B–$4.99B%OFRESPONDENTSBYORGANIZATIONREVENUE(E&UORGANIZATIONS)%OFRESPONDENTSBYORGANIZATIONREVENUE(END-USERORGANIZATIONS)$500M–$999M$20B–$49.99B$1B–$4.99B$5B–$9.99B$5B–$9.99B$10B–$19.99B$20B–$49.99B>$50B7%61%13%11%9%7%49%15%13%9%7%Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizationsSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations82CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureOilandgasextraction%OFRESPONDENTSBYORGANIZATIONINDUSTRY(E&UORGANIZATIONS)EnergyserviceIntegratedoilandgasReﬁning,marketing,anddistribution(includingretail)Electricutilities(generation,transportation,distribution,energysupply)AlternativeenergyMulti-utilitiesGasutilities(transmission,distribution)Waterutilities19%12%9%6%4%21%16%7%7%Utilities(50%)Energy(50%)Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizations83CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureChemicals&fertilizers%OFRESPONDENTSBYORGANIZATIONINDUSTRY(END-USERORGANIZATIONS)SteelHeavy-dutytransportation(includingcoaches/heavytrucks/trains)AviationPetroleum(reﬁning)Maritime20%20%16%15%15%14%Source:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations.84CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureGeneralmanagement/businessmanagement/strategyandcorporatefunctionsEngineering/R&DOperations(supplychain,procurement,production,etc.)%OFRESPONDENTSBYDEPARTMENT/FUNCTION(E&UORGANIZATIONS)%OFRESPONDENTSBYDEPARTMENT/FUNCTION(END-USERORGANIZATIONS)SustainabilitybusinessunitInnovation33%10%9%4%4%3%3%22%30%26%24%18%2%10%13%14%4%3%1%1%Operations(supplychain,procurement,production,etc.)Environment/SustainabilityEnergytransitionRenewablePowergenerationDecarbonizationNewenergiesIndustryapplicationHydrogenbusinessunitEngineering/R&DInnovationGeneralmanagement/businessmanagement/strategyandcorporatefunctionsAcceleratorsprogramsPublic&regulatoryaﬀairsSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizationsSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations.85CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFuture%OFRESPONDENTSBYDESIGNANTION(E&UORGANIZATIONS)%OFRESPONDENTSBYDESIGNANTION(END-USERORGANIZATIONS)26%24%14%3%1%1%31%ChiefInnovationOﬃcerChiefStrategyOﬃcerDivisionalHeadExecutiveVicePresident/SeniorVicePresidentDirectorAssociateVicePresident/VicePresidentSeniorDirector23%21%15%3%1%1%2%1%33%ChiefProductOﬃcerChiefInnovationOﬃcerChiefStrategyOﬃcerChiefSustainabilityOﬃcerDivisionalHeadsSVP/EVPAVP/VPDirectorSeniorDirectorSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=500respondentsfromuniqueenergyandutilitiesorganizationsSource:CapgeminiResearchInstitute,low-carbonhydrogensurvey,November–December2022;N=360respondentsfromuniqueend-userorganizations86CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureReferences1.IEA,“Thefutureofhydrogen:Seizingtoday’sopportunities,”June2019.2.IRENA,“Makinggreenhydrogenacost-competitiveclimatesolution,”December2020.3.Note:Selectedend-usersectorsincludedinthesurveybasedonhydrogenusagepotential.4.USEnergyInformationAdministration,“Hydrogenexplained,”January2022.5.EuropeanCommission,“Commissionsetsoutrulesforrenewablehydrogen,”February2023;Euractiv,“EUParliamentbackspro-nucleardefinitionof‘low-carbon’hydrogen,”February2023.6.IEA,“NorthwestEuropeanHydrogenMonitor,”accessedMarch15,2023.7.DepartmentofEnergy,“U.S.DepartmentofEnergyCleanHydrogenProductionStandard(CHPS)draftguidance,”accessedMarch15,2023.8.HydrogenEurope,CleanHydrogenMonitor,2022,October2022.9.SoCalGas,“GKNHydrogen,SoCalGas,andtheNationalRenewableEnergyLaboratorycollaborateonnewhydrogenstorageproject,”June2022.10.IRENA,“Energytransitiontechnology:Hydrogen,”accessedFebruary3,2023.11.IRENA,“Worldenergytransitionoutlook2022,1.50pathway,”May202212.IEA,Hydrogentrackingreport,September2022.13.S&PGlobal,“USdevelopersstandbybluehydrogenassomequestionitscompetitiveness”,August202214.ExxonMobil,“ExxonMobilplanninghydrogenproduction,carboncaptureandstorageatBaytowncomplex,”March2022.15.BusinessWire,“AirLiquide,Chevron,LyondellBasell,andUnipertoPursueLowerCarbonHydrogenandAmmoniaProjectAlongtheU.S.GulfCoast,”October2022.16.WorldEconomicForum,“Grey,blue,green–whyaretheresomanycoloursofhydrogen?”July2021.17.IEA,Hydrogentrackingreport,September2022.18.ExxonMobil,“ConstructionbeginsonnewhydrocrackeratRotterdamrefinery,”June2016.19.OffshoreEnergy,“YarajoinsHyPilotprojecttotestuseofhydrogeningreenammoniaproduction,”September2022.20.ArcelorMittal,“ArcelorMittalsuccessfullytestspartialreplacementofnaturalgaswithgreenhydrogentoproduceDRI,”May2022.21.DAF,“Hydrogenaninterestingoptionforthefuture,”2023.22.Volvo,“VolvoTrucksshowcasesnewzero-emissionstruck,”June2022.23.BBC,“Theracetomakedieselenginesrunonhydrogen,”January2023.24.ManEnergySolutions,“Designingtheenginesofthefuture,”2023.25.Airbus,“Airbusrevealshydrogen-poweredzero-emissionengine,”November2022.26.Rolls-Royce,“Rolls-RoyceandeasyJetsetnewworldfirst,”November2022.27.OffshoreEnergy,“GlobalData:Hydrogenmarkettowitnessgrowthsurgein2023,”February2023.28.ENGIE,“ENGIEhasreachedanimportantmilestoneintheAustralianrenewablehydrogenprojectwithYara,”September2022.29.EDFEnergy,“HydrogenandSizewellC,”accessed29thMarch2023.30.PVMagazine,“IberdrolaandIngeteamsetupJVtoproduceelectrolyzersinSpain,”November2020.31.PowerTechnologyResearch,“Hightechstart-upHysatasecuresA$42.5millionfundingtoproduceworld’scheapest87CapgeminiR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rbonHydrogen:APathToAGreenerFutureDiscovermoreaboutourresearchSUSTAINABILITYTRENDSSUSTAINABILITYINAUTOMOTIVEDIGITALTWINS:ADDINGINTELLIGENCETOTHEREALWORLDSUSTAINABLEOPERATIONS–ACOMPREHENSIVEGUIDEFORMANUFACTURERSDATAMASTERYCONVERSATIONSFORTOMORROW–INTELLIGENTINDUSTRYREMODELINGTHEFUTURE:HOWENERGYTRANSITIONISDRIVINGNEWMODELSINENERGYANDUTILITIESDATAECOSYSTEMSINPUBLICSECTORConnectingthedotsDatasharinginthepublicsector#GetTheFutureYouWantDATAFORNETZERO94CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureSubscribetolatestresearchfromCapgeminiResearchInstituteFirstNameLastNameEmailFieldsmarkedwithanarerequiredCapgeminiResearchInstituteBysubmittingthisform,IunderstandthatmydatawillbeprocessedbyCapgeminiasindicatedaboveanddescribedintheTermsofuse.SubmitReceivecopiesofourreportsbyscanningtheQRcodeorvisitinghttps://www.capgemini.com/insights/research-institute/subscribe/95CapgeminiResearchInstitute2023Low-CarbonHydrogen:APathToAGreenerFutureCopyright©2023Capgemini.Allrightsreserved.AboutCapgeminiCapgeminiisagloballeaderinpartneringwithcompaniestotransformandmanagetheirbusinessbyharnessingthepoweroftechnology.TheGroupisguidedeverydaybyitspurposeofunleashinghumanenergythroughtechnologyforaninclusiveandsustainablefuture.Itisaresponsibleanddiverseorganizationof360,000teammembersinmorethan50countries.Withitsstrong55-yearheritageanddeepindustryexpertise,Capgeminiistrustedbyitsclientstoaddresstheentirebreadthoftheirbusinessneeds,fromstrategyanddesigntooperations,fueledbythefastevolvingandinnovativeworldofcloud,data,AI,connectivity,software,digitalengineeringandplatforms.TheGroupreportedin2022globalrevenuesof€22billion.GettheFutureYouWantwww.capgemini.com

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