HydrogenInsights2023Anupdateonthestateoftheglobalhydrogeneconomy,withadeepdiveintoNorthAmericaMay2023HydrogenInsightsMay2023PublishedinMay2023bytheHydrogenCouncil.CopiesofthisdocumentareHydrogenCouncil,McKinsey&Companyavailableuponrequestorcanbedownloadedfromourwebsite:www.hydrogencouncil.comThisreportwasauthoredbytheHydrogenCouncilincollaborationwithMcKinsey&Company.Theauthorsofthereportconfirmthat:1.Therearenorecommendationsand/oranymeasuresand/ortrajectorieswithinthereportthatcouldbeinterpretedasstandardsorasanyotherformof(suggested)coordinationbetweentheparticipantsofthestudyreferredtowithinthereportthatwouldinfringetheEUcompetitionlaw;and2.Itisnottheirintentionthatanysuchformofcoordinationwillbeadopted.Whilstthecontentsofthereportanditsabstractimplicationsfortheindustrygenerallycanbediscussedoncetheyhavebeenprepared,individualstrategiesremainproprietary,confidential,andtheresponsibilityofeachparticipant.Participantsareremindedthat,aspartoftheinvariablepracticeoftheHydrogenCouncilandtheEUcompetitionlawobligationstowhichmembershipactivitiesaresubject,suchstrategicandconfidentialinformationmustnotbesharedorcoordinated–includingaspartofthisreport.2TheHydrogenCouncilhas145membersandisaglobalCEO-ledinitiativewithaunitedvisionandlong-termambitionforhydrogentofosterthecleanenergytransitionSteeringmembersSupportingmembersInvestors1HydrogenInsightsistheHydrogenCouncil’sperspectiveonthehydrogenindustry’sevolution.Itsummarizesthecurrentstateoftheglobalhydrogensectorandactualhydrogendeployment.TheHydrogenCouncilandMcKinsey&Companyco-authorthispublication.Itrepresentsacollaborativeefforttoshareanobjective,holistic,andquantitativeperspectiveonthestatusoftheglobalhydrogenecosystem.11DetailedmethodologydescribedinHydrogenInsights2021HydrogenInsightsMay20233HydrogenCouncil,McKinsey&CompanyHydrogenInsightsMay202301HydrogenCouncil,McKinsey&CompanyHydrogenmomentumcontinuestoaccelerate,butinvestmentdecisionsarelagging>1,000hydrogenprojectproposalsannouncedglobally,795ofwhichplanfullorpartialdeploymentby2030USD320billiondirectinvestmentsintohydrogenprojectsannouncedthrough2030,ofwhichUSD29billionhavepassedthefinalinvestmentdecision(FID)38Mtp.a.cleanhydrogensupplyannouncedglobally2030,lessthan1Mtp.a.deployedtoday4Exhibit11,046projects1112Hydrogenmomentumisstrong:684inMay2022Giga-scaleproductionmorethan1,000projectproposalshavebeenannouncedglobally553Globally,theindustryhasannouncedmorethanLarge-scaleindustrialuse1,000large-scaleprojectproposalsasoftheendofJanuary2023.Sincethepreviouspublication,2191morethan350newproposalshavebeenannounced.Ofthetotal,795aimtobefullyorMobilitypartiallycommissionedthrough2030andrepresenttotalinvestmentsofUSD320billionofdirect94investmentsintohydrogenvaluechainsthrough2030(upfromUSD240billion).IntegratedH2economyEuroperemainsthegloballeaderinhydrogen96projectproposals,withthehighesttotalinvestments(USD117billion,35%ofglobalInfrastructureprojectsinvestments)andhighestabsolutegrowth(USD40billion).LatinAmericaandNorthAmerica117$320BinvestmentsrequiredtodevelopfollowEurope,eachrepresentingabout15%of2023announcedinvestments.GrowthinNorthAmericaprojectsannouncedthrough2030increasedfollowingtheannouncementoftheIRA(seeSection03ofthispublication).4846Giga-scaleprojectproposals(over1GWof202234electrolysisforrenewablehydrogensupplyormorethan200,000ktp.a.oflow-carbonhydrogen)EuropeLatinNorthOceania21191817accountfor112projectproposals(requiringaboutAmericaAmericaAfricaChinaUSD150billioninvestmentuntil2030),nearlyMiddleJapan,doublingfrom61eightmonthsago.OftheseEastSouth112proposals,91arerenewableand21areKorea,low-carbonhydrogen.restofAsiaMomentumisstrong,andtheindustryisplanninginvestmentsintocleanhydrogen,yetmuchmore1.Focusonprojectsof>1MWneedstobedone.Tobeontracktonetzeroin2050,Source:Project&Investmenttracker,asofJan31,2023morethanadoublingofannouncedinvestmentsisneededby2030–andtheseneedtobematuredand5deployed.2HydrogenInsights2022withdatafromMay2022;comparisonsinthisreportarerelativetothispublicationunlessstatedotherwiseHydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit2Directhydrogeninvestmentsuntil2030,$B151TheprojectfunnelisgrowingFordeveloperstotakeFID,securingacrossprojectstages,yetofftakeandpotentiallygovernmentfunding108103$320Bremainsskewedtowardiskey.MostprojectsatorpastFIDhave80announcementseithercaptiveofftake,i.e.,developedEndusetotalannouncedbycompanieswithinternaldemandforandofftakeinvestmentsTotalannouncedinvestmentsuntil2030hydrogen,orlong-termofftakecontracts.haveincreasedby35%inthepastIntermsofgovernmentfunding,theInfrastructure$170Beightmonths–fromUSD240billiontolargestschemesareIPCEI3inEuropeUSD320billion.Allprojectmaturitystages(EUR10.6billiongrantedinthefirsttwomaturehavegrownby30%to40%yetremainrounds),theproductiontaxcredits(45V),investmentsheavilyskewedtowardearly-stageprojects:andcreditsforcarboncaptureandstoragealmosthalfoftheprojectsareannounced(45Q)intheUS.InJapanandSouthKorea,Production3729buthavenotyetenteredtheplanningfundinghassupportedinfrastructureandsupply2922stage,receivedgovernmentfunding,areinbuildout(e.g.,refuelingstations,liquidadvancedplanning,orhavetakenFID.hydrogenvaluechaininJapan),whereashydrogenclustershavereceivedOverall,investmentsinthecommittedgovernmentfundinginChina.categoryhaveaccelerated.Theygrewonly10%fromSeptember2021toDespiteapositivetrend,lessthan10%ofMay2022and30%fromMay2022untiltheUSD320billionannouncedinvestmentsJanuary2023,andthefirstlarge-scalethrough2030arerealcommittedcapital.projectshaveachievedFIDintheTheindustryismaturinginstrainedlastmonths.WhileEuropeleadsonsupplychains,laborshortage(e.g.,EPC),announcements,NorthAmericaleadswithincreasinginflationandinterestrates,andcommittedinvestments(USD10billion).lackofpublicsupportinmanymarkets,allEurope(USD7billion),theMiddleEastofwhichmayslowdeployment.By2030,(USD5billion),andChina(USD5billion)committedcapitalmustincreasemorethanfollow,withgrowthinChinabeingthetwentyfoldtotrackanet-zeroscenario.highestatmorethan200%.Forthistoresultincleanhydrogendeployment,theresourcesandequipmentmustbeavailabletoensuredeploymentofMayJanMayJanMayJanMayJancleanhydrogensupplyprojects,prevent20222023202220232022202320222023infrastructurebottlenecks,andenablehydrogen-readyend-userplants.AnnouncedPlanningAdvancedCommittedstageplanningFID,underFeasibilityFEED1construction,studiesstudiesoperational+35%65%investmentgrowthin8monthsofinvestmentsfocusonsupply3ImportantprojectsofcommonEuropeaninterest1.Front-endengineeringdesignSource:Project&Investmenttracker,asofJan31,2023HydrogenInsightsMay2023HydrogenCouncil,McKinsey&Company6Exhibit3Giga-scaleproductionLarge-scaleindustrialuseMobilityIntegratedH2economyInfrastructureprojectsEurope,NorthAmerica,andthe260projectsannounced172projectsinfeasibilitystudiesFarEasthavethelargestnumberofprojectswithcommittedcapitalPreliminarystudiesorpressannouncementstageThegeographicperspectiveontheprojectfunnel2811514713214219022108indicatesthatregionswithhighenergydemandandearlyfocusonhydrogenasadecarbonization83projectsinFEEDstudies280projectscommittedvector(e.g.,Europe,China,andNorthAmerica)haveadvancedmoreprojectstoFID.FIDtaken,underconstructionoroperationalInregionsexpectedtoexportcleanhydrogenand16140146761132783628itsderivatives(e.g.,LatinAmerica,Australia,MiddleEast,Africa)withlimitedlocaldemand,projectstendtobelargerandinearlierstagesofdevelopment(feasibilityorFEEDstudies).FewoftheseprojectshavepassedFID,andmanyaredevelopedinphases,potentiallyduetothelowerriskofdeployingasmallerprojectorlimitedcurrentmarketsizeforcleanhydrogenandhydrogenderivatives(e.g.,ammonia,methanol).TheaverageinvestmentsizeofaprojectthathaspassedFIDisaboutUSD100milliononaverage,whereasprojectsintheearlystage(i.e.,announced)requireaboutUSD600millioninvestmentonaverage,4showcasingthegrowingscaleofhydrogenprojects.795projectswithfullorpartial+251projectswithoutspecifiedCODcommissioning(COD)by2030orCODpost-2030(notshown)4Totalannouncedinvestmentvolumesdividedbynumber1.Formultiphaseprojects,phase1decidestheprojectmaturityofprojectsineachinvestmentstage(projectcountedbySource:Project&Investmenttracker,asofJan31,2023earliestmaturitystage,e.g.,aprojectwithphase1inFEEDandphase2inAnnouncedwillbecountedasFEED)7HydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit4Cumulativeproductioncapacityannounced,Mtp.a.38Low-carbonhydrogenAnnouncedproductionvolumesAnnouncedasAnnounced1increasedbymorethan40%to38Mtp.a.,ofJan2023reachinghalfthevolumeneededin2030Planning2tobeontracktonetzeroMay2022Committed3Companieshaveannounced38Mtp.a.cleanEoY2021Renewablehydrogenproductionplansgloballyfor2030acrosshydrogenlow-carbonandrenewablehydrogen(upfrom26Mtp.a.),ofwhichabouthalfisintheAnnounced1planningstageorhascommittedcapital.Morethantwo-thirdsofthe38Mtp.a.arerenewableEoY2020Planning2hydrogen(about25Mtp.a.),andtheremainderislow-carbon(about13Mtp.a.).Ofthe12Mtp.a.EoY2019supplyprojectsaddedinthepasteightmonths,about10Mtp.a.arerenewablehydrogendrivenCommitted3bythehighgrowthinannouncementsinrenewables-richregions(e.g.,Africa,MiddleEast).20202122232425262728292030Thedataalsorevealsthatdevelopinganddeploying>70%+16Mtprojectscantakelongerthaninitiallyestimatedbydevelopers.Forinstance,asofOctober2021,theshareofcapacityintop3marketsadditionalcapacity(low-carbonandindustryhadannouncedacumulativedeployment(Europe,NorthAmerica,LatinAmerica)renewable)announcedforpost-2030ofnearly6GWelectrolysisbytheendof2022(equivalenttoabout0.7Mtp.a.5renewablehydrogen1.Preliminarystudiesoratpressannouncementstagesupply),whileactualdeploymentasofJanuary20232.Feasibilitystudiesoratfront-endengineeringanddesignstagestandsatonly700MW.Thenextthreetofiveyears3.Finalinvestmentdecisionhasbeenmade,underconstruction,commissionedoroperationalrepresentasignificantscale-upchallenge:nearlySource:Project&Investmenttracker,asofJan31,20233Mtp.a.ofcapacityhaspassedFID(ofwhichonly0.8Mtp.a.isoperational)andshouldbedeployed8inthecomingyears,predominantlyinNorthAmerica(about70%ofvolumes),followedbyAsia-Pacific(about15%,mostofwhichisinChina)andtheMiddleEast(8%).In2030,38Mtp.a.isroughlyhalfwhatisneededtobeontracktoanet-zeroscenario6(75Mtp.a.in2030).Closingthisgapischallenging,asrenewablehydrogenprojectsarestrugglingwithslowpermitting,supplyofelectrolyzers,solarpanels,windturbines,andEPCcapacityconstraints.Low-carbonhydrogenprojectsalsofacechallenges;large-scaleinfrastructureforcarboncapture,transportation,andstoragemustbebuilt,whichrequirespermitting(oftencomplexandlengthy)aswellassignificantcapitalandlabor.5Assuming70%loadfactorand67%efficiency(lowerheatingvalue)6DetailedintheHydrogenforNetZeropublication(November2021)HydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit5Cleanhydrogenvolumesannounced,Mtp.a.EuropeisthelargestintermsofRenewableLow-carbonTotalannounced,Mtannouncedsupply,followedbytheAmericasandOceaniaRegion20252030Changein2030Europe2.2announcementsAnnouncedsupplyofcleanhydrogenisaglobal5.2fromMay2022phenomenon,andeachregionshowsgrowthin4.7toJan2023announcedsupply.ParticularlytheAfricancontinent2.0%hasannouncedsignificantnewcapacity(morethan1.5200%),ashastheMiddleEast,whereannounced1.113.065volumesmorethandoubled.Yet,EuropeandNorth0.8AmericaremainthelargestmarketsforannouncedNorthAmerica2.80.39.345hydrogensupply,with13Mtp.a.and9Mtp.a.,respectively.Notably,NorthAmericahasthelargestLatAm0.810volumesin2025,with2.8Mtp.a.announced,ofwhich70%islow-carbonhydrogen.Oceania0.620DespiteEurope’sclearpositionasleadingonMiddleEast0.9105announcedvolumes,thisisnotreflectedinthematurityoftheprojectfunnel,ofwhichonly5%Africa0.1200arecommittedvolumes.Otherregionshaveasignificantlyhighershareofmaturevolumes.China0.655OfthetotalannouncedsupplyinChina,about40%iscommitted,whileinNorthAmerica,theRestofAsia0.135shareis20%.ThelowannouncedvolumesinChinaparticularlycouldbeduetofewercompaniesJapanand0.2<1announcingtheirplansordifferentpublicsupportschemes.SouthKoreaInNorthAmerica,morethan70%ofthecapacity4.53.925.612.3announcedislow-carbonhydrogen,which,inmanycases,islowercostfortheenduser.DevelopersinSource:Project&Investmenttracker,asofJan31,2023theUShavereceivedtaxcreditstocaptureandstore9CO2(45QcreditinplacebeforetheIRA).Further,low-carbonhydrogenislesscapitalintenseataboutUSD2.5toUSD3.5billionperMtcapacityversusUSD4.5toUSD7billionperMtcapacityforrenewablehydrogen.ThiscouldexplainthehighermaturityoftheprojectpipelineinNorthAmerica.Source:US45QfederaltaxcreditHydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit6Cumulativeelectrolysiscapacity,1GWannounced(incl.allprojectmaturitystages)Morethan230GWelectrolysiscapacity232announcedtobeoperationalby2030,implyingamorethan300timesgrowth~232GWindeploymentisneededoverthenextJan2023sevenyearstorealizethis~175GWMorethan230GWofelectrolysisdeploymenthasMay2022beenannouncedthrough2030,nearly60GWmorethanpreviously.Morethanhalfofthiscapacity~115GW(about120GW)isconsideredmature,i.e.,Dec2021undergoingfeasibilityorFEEDstudies(nearly111GW)orhaspassedFID(about9GW).The~54GWvolumesofelectrolysiscapacityatorpastFIDnearlyDec2020doubledfrom5GWtomorethan9GW,withthemajorityinChina(about40%ofthe9GW)followed~18GWbyNorthAmericaandEurope(about15%each).TheDec2019highshareofmaturerenewablehydrogenprojectsinChinamaybeduetofewercompaniesannouncing20202122232425262728292030companiesorstrongerormorefocusedgovernmentsupport.+57GW>70%>80GWGeographically,Europeisthelargestmarket,withoverathirdoftheglobalannouncedcapacity(aboutincreaseinannouncedelectrolysiscapacityannouncementsfoundannouncedelectrolysis80GW),with40%ofvolumesattheplanningstagecapacityby2030inthepast8monthsin3regions,i.e.,Europe,Latincapacityby2030inEurope,orbeyond.However,lessthan1.5GWhaspassedAmerica,andOceaniathelargestglobalregionFID.LatinAmericaandOceaniafollowEuropeasthelargestmarketsforannouncedvolumes,with1.Forprojectswithoutknowndeploymenttimeline,capacityadditionswereinterpolatedbetweenknownmilestones20%and15%ofannouncedvolumes,respectively.Source:Project&Investmenttracker,asofJan31,2023Despitethevolumeofannouncementsinthesethreemarkets,thematurityoftherenewable10hydrogenprojectpipelineislow,withlessthan2%ofannouncedvolumescommitted.HydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit7Announcedandrequireddirectinvestmentsintohydrogenuntil2030,$BMoreinvestmentsareneededalong380700thehydrogenvaluechaintocloseaninvestmentgapofUSD380billionbyEnduse2030andofftakeGrowthintotalannouncedinvestments(fromInfrastructureUSD240billiontoUSD320billion)andprojects320passingFID(fromUSD22billiontoUSD29billion)ispositive.However,moreisneededregardingnewProductionprojectproposalsandinensuringexistingproposalsandsupplyarematuredtowardsFID.AnnounceddirectInvestmentgapTotalneedinlineThetotalinvestmentgapstandsatUSD380billioninvestmentswithanet-zerountil2030tobeonanet-zerotrajectorybythen,$135BassumingallannouncedprojectproposalsofUSD$110Btrajectory320billionaredeployeduntilthen.Thelargestgapisinvestmentgapininfrastructurewithinhydrogeninfrastructureandenduseataboutinvestmentgapinsupply$135BUSD135billioneach,abouttwo-thirdsofneededinvestments,followedbysupply(USD110billion).investmentgapinenduseTheinvestmentgap(about30%)incleanhydrogenapplicationssupplyislowerthanthegapinannouncedhydrogenvolumes(about50%oftheneeded75Mtp.a.inSource:Project&Investmenttracker,asofJan31,2023,McKinsey2030),likelydrivenbyrelativelylessannounced11investmentsinlow-carbonhydrogenthatrequirelesscapitalperMtp.a.capacity.TheinvestmentgapisnotablyhigherwhenconsideringinvestmentsatFIDorbeyondatmorethan95%acrossthevaluechain,asonlyUSD29billionoftheneededUSD700billioniscommittedcapital.Notallprojects,eveninadvancedplanningstages,willreachFIDandbebuilt.Forinstance,inearlyrenewableenergyprojectdevelopment,thetypicalsuccessrateofaprojectfunnelwasabout10%to20%frominitialdevelopmenttocommissioning.7Theimplicationisthattheindustryneedstodevelopsignificantlymoreprojectproposalstoenabletheneededdeployment.IfinvestmentsofUSD700billionaretobedeployeduntil2030,theylikelyneedtopassFIDbefore2027or2028,giventhetimeneededtobuildtheprojects.7Thefunnelsuccessratewillhavevariedbydeveloper,andtheestimatedfiguresarearesultofinterviewswithindustryexpertsHydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyHydrogenInsightsMay202302HydrogenCouncil,McKinsey&CompanyCleanhydrogendeploymentsteadilycontinues800ktp.a.operationalcleanhydrogensupplycapacitytoday,lessthan1%ofthegrayhydrogenmarkettoday700MWelectrolysiscapacitydeployedbytheendof2022,withabout9GWhavingpassedFIDglobally>1,070hydrogenrefuelingstationsdeployedglobally,withmorethan50%growthyear-on-year12Exhibit8SupplyTransmissionManufacturingcapacityEnduseDeploymentissteadilygrowingacrossthevaluechain;however,acceleration700MW9GW>130isneededtobeontracktonetzeroelectrolysiscapacityoperationalelectrolysismfg.capacityfuelcellvehiclemodelsSupply:About800ktp.a.cleanhydrogensupplyis2022EoY,equivalentaccordingtoOEMtobeassembledbyoperationalglobally,upfromabout700ktp.a.Aboutto90ktp.a.H2.announcements.OEMsin2023740ktp.a.arelow-carbonhydrogen(primarilyinNorthAmerica),andtheremainderisrenewable.In>300MWinstalled740ktp.a.+5.3GW80,0001,700additiontothisvolume,about2Mtp.a.haspassedinChinaFID,ofwhichmorethanhalfislow-carbonhydrogen.fuelcellvehiclesontheroad,hydrogenrefuelingstationlow-carbonhydrogen+30%in2022deployment:300+inInfrastructure:Infrastructuredeploymentiscapacityoperationalin2022China,>200inSouthprogressingandiscriticaltoensuring(low-cost)3Mtp.a.(EoY),upfrom640ktp.a.12GWcleanhydrogensupplymatchesthedemand.Korea,>270inEurope,Committedinvestmentsinhydrogeninfrastructurecleanhydrogencapacityinpreviouspublicationfuelcellmfg.capacity>160inJapanhavegrownfromaboutUSD5billiontoabouthaspassedFID(incl.todayaccordingtoOEMs.USD7billion,ofwhichmorethanthree-quarters0.8Mtoperational),9GWareinAsia.majorityofwhichis+1GWinNorthAmericaelectrolysiscapacityatFIDHydrogenenduse:Committedinvestments120intohydrogenendusesincreasedbyabout~4GWinChina,~2GWinUSD0.5billion,withthemostgrowthinNorththeMiddleEast,~1.5GWammoniaterminalsAmerica.Withinmobility,cumulativeFCEVsalesalreadyinplace-nowstandatabout80,000vehicles,up30%,inUSandEurope38exportand88importrepresentingannualsalesofabout17,000vehiclesterminalsgloballyin2022–lessthan1%ofglobalvehiclesales.VehicleOEMshaveannouncedmorethan130FCEVmodelsexpectedtobeassembledin2023,ofwhichthemajorityconsistsofcommercialvehicles(trucks,buses)inChina.Manufacturingcapacity:Electrolyzersandfuelcellmanufacturersarereadyingforscalingup.AccordingtoOEMstatements,growthinelectrolyzermanufacturingcapacityhasreachednearly9GW,agrowthof150%.Forfuelcellmanufacturing,thetotalglobalcapacitystatedbyOEMsstandsat12GW,withJapanandSouthKoreaasthelargestsupplymarkets.Source:HydrogenCouncil;McKinseyHydrogenInsightsMay202313HydrogenCouncil,McKinsey&CompanyExhibit9Globalcumulativeinstalledelectrolysiscapacity,MW(EoY)170MWelectrolysiswasdeployedinTechnology7002022,bringingthetotalto700MW,withAlkaline5301majorityofthecapacityaddedinChinaPEMOther/unknownDeploymentofelectrolysiscapacitygrew30%bytheendoftheyearin2022versus2021,reaching700300MW(upfrom530MW).Theinstalledcapacityequals240about90ktp.a.ofrenewablehydrogensupply8orabout10%ofinstalledcleanhydrogenproduction201920212022capacityglobally.Deploymentislagging:morethan200GW140300electrolysiscapacityisneededby2030totracknetzeroin2050–morethan200timesthecapacityEurope14installedtoday.TheslowdeploymentmaybeChinaduetolackinggovernmentsupportandofftakeNorth80commitments(i.e.,willingnesstopayagreenAmericapremium),constraintsinsupplychains,increasedRestofcostofdeployingprojects,EPCcapacity,orworldpotentiallylengthypermittingprocessesforprojects.Today,thelargestdeployedcapacityisinChina180(about300MW),followedbyEurope(about180MW).Notably,thegrowthappearstobe1.Growthfrom2020to2021drivenby150MWNingxiaProject;thecurrentlylargestoperationalelectrolyzerslowerfrom2021to2022.Growthin2021Source:IEAGlobalHydrogenReview2021and2022;Project&Investmenttracker,asofJan31,2023waslargelydrivenbyonelargeprojectinChina,accountingfor150MWoutofthe230MWgrowthfrom2020to2021.Theshareofalkaline,PEM,andotherelectrolyzertechnologieshasbeenrelativelystableinthepasttwoyears,withalkalineelectrolysistechnologyaccountingforabout60%,followedbyPEM(about30%).WithinChina,thelargestmarket,mostofthedeployedelectrolysiscapacityisalkalinetechnology,whereastheshareofPEMtechnologyishigherinEuropeandNorthAmerica.8Assumingrenewableenergysupply,70%loadfactor,and67%efficiency(lowerheatingvalue)HydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit10Committed1productioncapacityuntil2030,%3Mtp.a.cleanhydrogencapacity<1%NorthAmericahaspassedFID,withNorthAmerica5%Low-carbonhydrogenaccountsforandChinaleading~90%ofcommittedproductioncapacity8%inNorthAmerica(ofwhich~740ktp.a.About2.1Mtp.a.cleanhydrogenhaspassedFIDisalreadyoperational),withdemandinadditiontothe800ktp.a.operationalcapacity,3MtNearly17%drivenbyhydrogenforammoniapro-ofwhichabout1.1Mtp.a.islow-carbonhydrogen,p.a.ductionandrefiningandtheremaining1Mtp.a.isrenewable.Sincethepreviouspublication,thevolumesoflow-carbonandcleanhydrogenproductionAsia-Pacificrenewablehydrogenhavegrownnotably,withaboutcapacitycommitteduntil2030Chinaaccountsforalmost90%0.4Mtp.a.ofeachtechnologyhavingpassedFID.ofcommittedproductioncapacityAlllow-carbonhydrogenvolumesatorpastFIDare70%inAsia-Pacific,withseverallarge-inNorthAmerica,whereasrenewablehydrogenscalerenewablehydrogenprojectsismoregeographicallydispersed;Chinaisthe(>100MW)alreadycommittedlargestmarketat35%shareofvolumes,followedbytheMiddleEastandNorthAmericawithaboutMiddleEastandAfrica20%ofvolumeseach.AlthoughbeingthelargestCommittedproductioncapacitydriveninannouncedsupply,with13Mtp.a.announcedbygiga-scalerenewablehydrogenuntil2030,Europeaccountsforlessthan5%ofprojectinSaudiArabiacommittedsupplycapacity.ThismaybedrivenbyalackoftransparencyonregulatoryframeworkandEuropesubsidies,aswellashighenergypricesfollowingRenewablehydrogenaccountsforthewarinUkraine.closetoallcommittedproductioncapacity(>95%)inEurope,withindustryHydrogenInsightsMay2023feedstocksectors(e.g.,refining)drivingHydrogenCouncil,McKinsey&CompanydemandLatinAmericaSignificantprojectpipeline,butyettocommittolarge-scaleprojects1.Finalinvestmentdecisionhasbeenmade,underconstruction,oroperationalSource:Project&Investmenttracker,asofJan31,202315Exhibit11AmericaEuropeandMiddleEastAsia-PacificTotalnumberofHRSinoperationHydrogenrefuelinginfrastructuredeploymentisaccelerating,276>650particularlyinAsianmarketsstationsinEuropeandMiddleEaststationsinAsia-PacificMorethan1,070hydrogenrefuelingstationsarenowoperationalglobally,withdeploymentgrowingmoreNetherlandsthan50%fromtheendof2021to2022.MostofDenmarkthesestationsarelocatedinAsia,i.e.,China,Japan,andSouthKoreaasthelargestmarkets(morethan37650intotal),followedbyEurope(about280)and78NorwayNorthAmerica(about120).ThemajorityofnewstationsinthepastyearhaveIceland4Sweden210beendeployedinChinaandSouthKorea,withUnited1morethan200stationsaddedinChinaandnearlyKingdomSouthKorea100inSouthKorea.Incontrast,deploymentinEuropeandJapanappearstobeslowing,withless8121Latvia>300Japan163than50newstationsdeployedinEuropeandlessCanadaBelgium87Czechthan10inJapan.JapanhashadarelativelygoodSpain51Taiwanstationcoverage,withabout160stationsdeployed.105USARepublicMalaysiaInEurope,thecoveragevariessignificantlybycountry(e.g.,Germanyhasthehighestnumberof116CostaRica11stations).Currently,moststationsdeployedarerelativelysmall,stationsinAmericaCroatiaChinawithlessthan500kgperdaydispensingcapacity7sufficienttorefuelupto100passengervehicles2020Austriawitha5kgcapacitytank.Inthefuture,deploymentneedstoaccelerateoverall,andstationsneedtobe20211055621Saudi2largertoenablegrowthinthedeploymentoflargecommercialvehicles,suchasheavy-dutytrucks2022ItalyArabiaIndia1thatcouldneedmorethan50kgofhydrogenperrefuelingortentimesmorethanacar.Source:h2stations.org,asofFranceHydrogenInsightsMay2023Germany13HydrogenCouncil,McKinsey&CompanySwitzerland5Australia+25%545+55%690>1,07016HydrogenInsightsMay202303HydrogenCouncil,McKinsey&CompanyHydrogeninNorthAmerica:IndustrytailwindsandwhatitcouldtaketorealizetheopportunityUSD46billioninvestmentannouncedinhydrogenprojectsby2030UinpcetontUiveSsfDorc3le/aknghyHdro2genproduction17Exhibit12CurrentgrayH2demandlocationTotalH2consumptioninthearea,Mtp.a.NorthAmericahashigh-quality0.6energyresourcesforcleanhydrogen1.2production3.5TheUSandCanadacombinedarethesecond-largestconsumersofhydrogenintheworld,with9.5Solarandwindresources15Mtp.a.demandtoday,accountingforapproximately17%oftotalglobalhydrogendemand.forrenewablehydrogenToday’shydrogendemandinNorthAmericaisdrivenalmostentirelybythechemicalandrefiningNaturalgasandcarbonindustries,allofwhicharemetbygrayhydrogen.sequestrationresourcesforlow-carbonhydrogenHowever,abundantwindandsolar,alongwithlow-costnaturalgasandsequestrationresources,BothpositionNorthAmericaasaregionwithhighpotentialtoproducebothrenewableandlow-carbon15Mtp.a.>60%ofH2isconsumedbyrefineries~17%oftotalglobalH2demandhydrogenatlowcost.totalconsumptionofgrayH2Withtheseresources,NorthAmericacouldbeamajorregionforcleanhydrogen,withsizeableSource:McKinseyHydrogenInsightsandPowerSolutions;EnergyInsightsGlobalEmissionandSubsurfaceDatabase;McKinseyCCSHubExplorerTool;EPAFLIGHTdomesticdemandandthepotentialtoexport18hydrogen.Potentialimplicationsfor20509areasfollows:—NorthAmericaisexpectedtobeamongthetopregionsgloballyforhydrogenproduction,achievingaveragerenewablehydrogenproductioncostsofUSD1.1perkg.—20%ofenergydemandinNorthAmericacouldbeprovidedbyhydrogen,morethanhalfofwhichcouldbeusedinsectorssuchasroadtransportation,syntheticfuelproduction,andchemicals.—20%ofglobalhydrogencouldbeproducedinNorthAmerica–almostallpurehydrogenproducedintheUScouldbeconsumedlocally;however,hydrogenderivativessuchasammoniaandmethanolcouldbeexportedglobally.—Withbothsequestrationresourcesandabundantrenewables,theNorthAmericanhydrogensupplymixisexpectedtoberoughlya50:50splitbetweenrenewableandlow-carbonhydrogenproduction.9BasedonGlobalHydrogenFlowsperspectivefromOctober2022,updatedtoincorporatetheimpactoftheIRAHydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit13AnnouncedH2projectsinNorthAmericaCleanhydrogenmomentuminNumberofprojectsannounced170NorthAmericacontinues,with170cleanhydrogenprojectsGiga-scale11announcedprojectsannouncedacrossthecontinentproduction16%106oftotalannouncedTheindustryhasannouncedatotalof170hydrogenprojectsinNorthAmericaasoftheendofJanuaryIndustry(e.g.,projectsglobally2023,accountingforapproximately15%oftotalrefining,steel)announcedprojectsglobally.Inthepasteight$46Bmonths,about70newprojectswereannounced.Transport27Ofthe170totalprojects,135aimtobefullyorinvestmentrequiredtodeveloppartiallycommissionedby2030,representingIntegratedHprojectsannounceduntil2030USD46billionofannounceddirectinvestment215inhydrogenvaluechains.19economyOfthe135projectsproposedby2030,morethan40%havereachedafinalinvestmentdecision(FID),Infrastructure11areunderconstruction,orareoperational,and25%areundergoingfeasibilityandFEEDstudies.Theprojectsnumberofannouncedprojectsthrough2030hasgrownby60%inthepasteightmonths,whiletheSource:Project&Investmenttracker,asofJan31,2023shareofprojectsateachlevelofprojectmaturityhasstayedconsistent,indicatinganevendistributionofgrowthacrosstheprojectfunnel.Large-scaleprojectsforindustrialofftakersaccountformorethanhalfoftheannouncedprojects.Outof106large-scaleindustrialprojectsannounced,86areplanningfullorpartialcommissioningby2030–19projectsareundergoingfeasibilityorFEEDstudies,and35projectshavepassedFID.Thereareelevengiga-scaleprojectsannounced.Oftheseeleven,fiveareundergoingfeasibilityandFEEDstudiesandoneisattheFIDstage.Threeoutofelevengiga-scaleprojectsareontherenewablehydrogensupplywithintendeduseinsustainableaviationfuel(SAF)orforthetransportationsector.Outofatotalof175announcedprojects,134projectshavedisclosedtheirintendedofftakesector.Roadtransportistheofftakerfor40projects,followedbyammonia(34projects),andpower/blendingintogasgrid(25projects).HydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit14NorthAmericadirecthydrogeninvestmentsthrough2030,$B25MorethanhalfofannouncedinvestmentsinNorthAmericaarestill1211$46Binearlystages9EnduseannouncedAnnouncedhydrogenprojectsinNorthAmericaandofftakeinvestmentsthrough2030amounttototaldirectinvestmentsofInfrastructureUSD46billion,upfromUSD29billionintheprevious$20Bpublication.Alongthevaluechain,mostinvestmentsProductionarefocusedoncleanhydrogensupply,accountingandsupplymatureformorethanthree-quartersofinvestments,investmentsfollowedbyenduse(about15%)andinfrastructure(about5%).Theinvestmentgapinmidstreamand9endusehasincreasedaftertheInflationReduction8Act(IRA)astheincentivesfocusonhydrogenproduction.MayJanMayJanMayJan202220232022202320222023Committedinvestments(projectsalreadyatFIDorbeyond)accountfor20%ofinvestmentsinAnnouncedPlanningCommittedNorthAmericacomparedtoonly7%fortherestoftheworld.ThiscouldbeduetothefactthatFeasibilityorFID,underalmostthree-quartersofNorthAmericanprojectsFEEDstudiesconstruction,arelow-carbonprojects,comparedto20%operationalacrosstherestoftheworld.Thevaluechainforlow-carbonhydrogenproductionismoremature+55%+20%80%thanforrenewables,andtheprojectstendtobelarger.Additionally,thedeploymentprocessisfasterinvestmentgrowthingrowthin“mature”investmentsofinvestmentsfocuswhenretrofittingexistingsteammethanereformingthepast8monthsinthepast8monthsonsupply(SMR)facilities.Source:Project&Investmenttracker,asofJan31,2023Thepasteightmonthshaveseenanincreaseofmorethan50%intotalannouncedinvestments.20AlmosthalfoftheinvestmentsinNorthAmericaareconsideredmature(eitherintheplanningstageoralreadycommitted),havinggrownbyabout20%inthepasteightmonthstoUSD20billion.Estimatedinvestmentsinprojectsinanearlyannouncementstage(i.e.,beforethedetailedplanningandengineeringstage)havemorethandoubled,fromUSD12billiontoUSD25billion.ThisislikelydrivenbythepassageoftheIRAinAugust2022,spurringnewannouncementsthatarestillinrelativelyearlystages.Asmomentumaroundprojectannouncementsaccelerates,challengestodeployingatscaleremainfor–andinsomecasesareexacerbatedby–therapidlygrowinghydrogenindustry.Keypotentialchallengeswillbeexploredinthecomingpages.HydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit15NorthAmericacleanhydrogenproductioncapacityannouncedby2030,Mtp.a.AnnouncedrenewablehydrogenAnnounced1Planning2Committed3momentumhasacceleratedsincethepassageoftheIRA2.5Companieshaveannouncedprojectsthatwould1.6produceupto9.3Mtp.a.ofcleanhydrogencapacityby2030inNorthAmerica,anincreaseofabout2.53.8Mtoverthelasteightmonths.Thoughmorethan70%oftheannouncedcapacityisfromlow-carbon1.01.9hydrogen,renewablehydrogencapacityhasgrownby2.5timessinceMay2022.Thiscould,inpart,be1.1duetotheIRAproductiontaxcredit(PTC),whichscalesbasedonthecarbonintensityofthehydrogen0.9produced,favoringrenewablehydrogenproduction.1.21.11.8Since2021,thetotalannouncedproductioncapacityhasgrown1.5timesfasterinNorth0.10.11.00.4Americacomparedtotherestoftheworld.Further0.20.1accelerationisexpectedinthecomingyearsas0.30.2manydevelopersawaittheannouncementoftheRenewableLow-carbonIRAimplementationregulationsbeforefinalizingRenewableLow-carbonRenewableLow-carboninvestmentdecisions.January2023October2021May20223.7Mtp.a.ofannouncedcleanhydrogenproductioncapacityhasnotyetreacheddetailedplanning>70%3.5xstages,whereas3.6Mtp.a.isinplanningstagesundergoingfeasibilityorFEEDstudies,and2Mtp.a.shareofannouncedlow-carbonH2announcedrenewableH2capacity(about20%oftotalannouncedcapacity)haspassedcapacityinNorthAmericacomparedgrowthinthepast8monthsFID,isunderconstruction,oroperational.to20%intherestoftheworldNorthAmericaaccountsfor25%ofthetotal1.Preliminarystudiesoratpressannouncementstageannouncedcleanhydrogensupplyvolumesglobally,2.FeasibilitystudiesoratFEEDstagewiththehighestvolumeofannouncedproduction3.Finalinvestmentdecisionhasbeenmade,underconstruction,commissioned,oroperationalcapacityinEurope(about13Mtp.a.).NorthAmericaSource:Project&Investmenttracker,asofJan31,2023accountsforthelargestvolumeofannouncedlow-carbonhydrogenproductioncapacityinthe21world(about55%oftotallow-carbonhydrogencapacity),whileEuropehasthelargestvolumeofannouncedrenewablehydrogenproductioncapacity(8.7Mtp.a.,accountingfor35%).HydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit16KeyIRAprovisionsforhydrogenandhydrogenderivativesCCUS45Qcredit4:utilized-sequesteredCleanfuels:upto$1/galbaseTheIRAcouldhelpsignificantlyupto$1.75/galforSAFDAC:$130-180/tCO2acceleratecleanhydrogenintheUSPointsource:$60-85/tCO2HydrogenPTC/45V:upto$3/kgH2TheIRAwassignedintolawinAugust2022,Low-carbonhydrogencannotbeeligibleRenewablePTC2:$26/MWhwiththegoalofloweringUScarbonemissionsforbothcarboncapture45Qcreditandbytheendofthisdecade.OverUSD400billionofhydrogen45Vfundinginclimatespendinghasbeenbudgetedtowardtheenergyindustry,environmentaljustice,DetailsofthehydrogenPTC1,2Whatquestionsremain?cleantechmanufacturing,landandagriculture,andtransportation,withtheenergyindustryWhowillqualify?•Canproducerspowerwithgridelectricityreceivingthebiggestshare.•Projectsthatemit<4tCO2/tH2(withmax$3/kgwithRECstoreduceCI?TheIRAisexpectedtohavebroadandsignificantcreditavailabletofacilities<0.45tCO2/tH2)•WhatisCIcalculationmethodologyandimpactsonexistingenergytransitionsectorssuch•ProjectsthatarebasedintheUSvalidationprocess?asrenewables,batteries,andexistingnuclearpower,•Greenfieldprojectsputintoservicebefore2033aswellasonearlier-stagesectorssuchascarbon•Facilitiesthatdonotclaim45Qorcleanfueltax•Aretherefurtherdetailsonrulesrelatedtocapture,cleanhydrogen,andotherlow-carbonfuelsprevailingwagerateandapprenticeship(e.g.,SAF).creditsrequirements?HydrogenandhydrogenderivativescouldbenefitHowwillcreditswork?•CanCCUSandcleanfuelscreditsatseparatefromtheIRAthroughamixofincentivessuchas•Basedonthefulllifecycle,GHGemissionsfacilitiesbestacked(e.g.,canH2Co.selltotheextensionandexpansionofsolarandwindSAFCo.andeachclaimH2andSAFcredits,powerincentives,theintroductionofataxcreditforcalculatedwithGREETmodel3respectively)?hydrogenproduction,theexpansionoftaxcredits•Eligiblefor10yearsfromtheCODdate,with5forcarboncapture,utilization,andstorage(CCUS),andincentivesforSAFandothercleanfuels.Asofyearsofdirectpay,5yearsoftaxcreditsthetimeofpublication,manykeydetailsonhowthe•CanbestackedwithrenewablePTClegislationwillbeimplementedhavenotyetbeen•NocaponthecreditprogramreleasedfromtheIRS.Disclaimer:TheIRAhydrogenproductiontaxcreditiscalculatedIntendedtoprovideinsightbasedoncurrentlyavailablebasedonthecarbonintensityofthehydrogen.TocapturethefullUSD3perkgcredit,thecarboninformationforconsiderationandnotspecificadviceintensityofproducedhydrogenmustbelowerthan0.45tonsofCO2pertonofhydrogen.Renewable1.DoEhasupto1yeartoestablishfinalrulemakinghydrogenpoweredbyrenewablepowercanget2.Projectsthatdonotpayprevailingwageandapprenticeshiplose80%ofcreditvaluethefullUSD3.0perkg;low-carbonhydrogenwould3.<0.45tCO2/tH2=$3/kg;0.45–1.5=$1/kg;1.5–2.5=$0.75/kg;2.5–4=$0.6/kgrequirecarbonsequestrationtobelow4tonsof4.Low-carbonhydrogencanreceivethe45QcreditregardlessofcarbonintensityofthehydrogenCO2pertonofhydrogentoreceivetheminimumSource:USInflationReductionActof2022creditofUSD0.6perkgwithvariationbasedonupstreamemissions.22RenewablehydrogencouldbenefitfromtheIRA’srenewablePTCinadditiontothehydrogenPTC.Low-carbonhydrogencouldinsteadbenefitfromexpanded45QincentivesforCCUS;however,the45VhydrogenPTCand45Qarenotstackable,i.e.,alow-carbonhydrogenprojectcannotreceiveboth.HydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit17WiththeIRA,renewable—Conventionalhydrogenusestoday(e.g.,hydrogencouldbecomeammoniaproduction,refineries)couldcostcompetitivesoonerbecomecompetitivewithincomingyearsinmostpartsofthecountry.TheIRAwillimproverenewableandlow-carbonhydrogeneconomicsin—IfIRAcreditscanbecombinedthecomingyears.TheIRA’shydrogen(hydrogenPTC,carboncredits,andproductiontaxcreditofuptoUSD3perkgcleanfuelscredits),theIRAcouldhelphydrogenforthefirsttenyearsofaproject’stheUSgovernmentonitspathtowardsoperationsreducesthelevelizedcostofachievingatargetof3billiongallonsofhydrogenforcleanhydrogenbyUSD0.5toSAF–equivalentto10%oftheUS’sjet1.8perkgintheUSoverthelifetimeofthefuelconsumption.project.However,beyondthepureeconomics,TherenewablePTCcouldpotentiallymanyenduserscontinuetofacechallengesdecreasethecostfurtherbyuptothatpreventthemfromtransitioningUSD0.80perkgofhydrogen.tocleanhydrogen–suchasalackofmidstreaminfrastructureforcost-effectiveAsthemarketisrapidlyevolving,thesehydrogendeliveryandtheneedtoshiftnumbersarelikelytoshiftquicklyinthetheiroperations–forexample,forhydrogencomingyears.Manyfactorsthatvarybytrucking.projectwillimpactLCOH.Forexample,exactvaluecaptureislikelysituationallyDependingonhowtheprovisionsdependentbasedonvaluechaincontrolareimplemented,theIRA’s45V,45Dpoints.Forexample,ifelectrolyzerdemand(renewable),and45QincentivescouldfromannouncedprojectsoutstripsmaketheUSamongthemostcompetitivemanufacturingcapacity,therewouldbeaproductionregionforcleanhydrogen.shortageofelectrolyzersallowingOEMstoGlobalhydrogentradedynamicscouldbeextracthighermargins,whichwoulddrivesignificantlyaltered,thoughthiswilldependupthecostofhydrogenasproduced.onevolvingpolicy.OthercountriesarelikelytopasspoliciesinresponsetotheIRA.RetrofittingexistingSMRplantswithcarboncaptureandsequestrationcouldmakeCanadahasinstitutedpoliciesthatcouldlow-carbonhydrogencostcompetitivewithaccelerateCanada’scompetitivenessasgrayhydrogentoday.Manylow-carbonahydrogen-producingregion,includinghydrogenproducersarepursuingthe45Q,aninvestmenttaxcredit(ITC)of15%to40%asopposedto45V,tocapturevaluefromforhydrogenproduction–varyingbasedonIRAincentivesastheyawaitclarityonhowthehydrogen’scarbonintensity,aCCUSITCcarbonemissionswillbecalculatedfortheof50%applicabletoCCSequipment–45VPTC.andcleantechITCof30%forcleanelectricitygenerationsystems(e.g.,solar,IRAincentivescouldmakecleanhydrogenhydro,nuclear,andwind).Themajorityofeconomicformanyofftakersfivetotenthesecreditsbegintobephasedoutbyyearsearlier:2035.TheseincentiveswouldcomplementCanada’sexistingcarbonpricingandcredit—Heavy-dutyhydrogenfuelcelltruckssystems.couldreachbreakevenwithnewdieselvehiclesinthenextseveralyears.Source:USInflationReductionActof2022;Canada,Budget2023HydrogenInsightsMay202323HydrogenCouncil,McKinsey&CompanyExhibit18SupplySignificantproductionscale-up5OEMs.TomeettherequiredrenewableToenableinfrastructurescale-up:isrequiredtobringthecostdownhydrogendemandfornetzeroin2030,andenabletheshifttoclean14GWofadditionalelectrolyzerproductionAcceleraterenewabledeploymentScaleupelectrolyzermanufacturingcapacityhydrogenproductioncapacityisestimatedtoberequiredby2028.ThegapbetweenthedemandandEstimatedrequiredrenewablesUSelectrolyzermanufacturingcapacity2Despiteregulatorymomentum,producingcleanannouncedcapacityhasledtoashort-termdeploymentinUS,1GWGW/yearhydrogenismoreexpensivetodaythanitwassupplyshortagewhilethemanufacturingtwoyearsagointheUS,whichispotentiallycapacityscalesup.SincetheIRAcurrentlyTotalrenewableRenewablesforAdditionalproductionPubliclyannounceddrivenbyanincreaseinnationalaveragePPAdoesnotrequiredomesticallymanufactureddeployedtodayH2productioncapacitylikelyrequiredtocapacity(powerpurchaseagreements)pricesfromUSDelectrolyzers,partofelectrolyzerdemandmeet2030renewableH227perMWhin2020toUSD45perMWhin2022,willlikelybeimported.However,aglobalRenewablesfornetzero,excludingdemandfornetzero20501CumulativeUSEPCcapacityshortagesandincreasinglaborelectrolyzershortageisnotunlikelyifrenewablesneededforH2electrolyzertobecostsbyupto20%,aswellasatwo-tofourfoldrenewablehydrogenprojectsaccelerate.procured,3GWincreaseingasprice.ForcoststodecreaseinIncreasingelectrolysiscapacitynecessitatesthecomingyearsandasustainable,competitivescale-upofelectrolyzermanufacturing,2,900cleanhydrogenecosystemtodevelop,furthermaturityofsupplychains,anddevelopment650valuechainscale-upisrequired.andenforcementofindustrystandardsforhydrogensafetyandtransportation.1,70014Renewablehydrogenisprojectedtoaccountfor3006aboutone-thirdofthetotalhydrogenproductionInaddition,enablingproductionscale-upintheUSby2030andincreasetohalfofthelikelyrequires:90088productionby2050.10Enablingthiswould150requireasignificantliftoffonbothrenewable1.Askilledworkforceformanufacturing1deploymentandelectrolyzermanufacturingandEPCsthatcaninstallelectrolyzers,230capacity,amongothers:renewables,andlow-carbonhydrogenproductionequipment(e.g.,CCUS).12—MeetingtheUSgoalofanet-zerogridby2035Workforcedevelopmentcouldbeacceleratedandanet-zeroeconomyby2050isestimatedbytargetedtrainingprogramsandfacilitating202230402050202224262028torequirereaching900GWofrenewablesjobtransitionsfromadjacentindustriesin2030whichisonlyachievableatfour(e.g.,fromfossil-fuel-basedsectors).152565timesthecurrentrenewableinstallationrate.Potentialchallengesforscalingtherenewable2.StandardizationandaccelerationofStandardizeandDevelopindustryCreateafinan-Retainandindustrywouldprevail,withorwithoutpermittingprocesses,e.g.,forrenewables,acceleratepermittingstandards,e.g.,cingblueprintreskillworkforcehydrogen,sincetherenewablecapacityelectrolyzers,classVIwellsforCO2injections,processes,e.g.,forhydrogensafetyrequiredforhydrogenproductionaccountsfacilityretrofits/modifications,andpipelines.renewables,classVIstandardandfor15%to20%oftotalrenewablesneededinToday,permittingprocesscantakemultiplewells,electrolyzerstransferprotocols2030and2050,respectively.Nevertheless,years.Adequatededicatedstaffforhandlinghydrogenproducerscanstrategicallyplanpermitrequestsandguidingthepermit1.GlobalhydrogenflowmodeladjustedbasedonIRAimpactfortheirrenewablepower.Forexample,processes,aswellasstandardizationof2.Assumingeachnewfactoryrequires3yearstoreachpeakperformanceformissingproduction;assumingelectrolyzerpurchasingtheycouldbenefitfromco-locatingwithprocessesacrossagenciesandjurisdictionsrenewableprojectsstrugglingtoconnecttocouldhelpdecreasetheprocesstime.happens2yearsaheadofCODtheelectricitygrid–makinguseofotherwise3.Thiselectrolyzercapacityistomeetthedemandforoperationalelectrolysis2yearslaterstrandedrenewables.Also,largehydrogen3.Afinancialblueprintforinvestorscouldproducerscanunlockscalebenefits,decreaseriskandacceleratedeployment.24potentiallyviapartnershipswithrenewableThiscouldincludeeducationforinvestorsproducers,tosecurevolumes.andlendersonhydrogenprojecteconomics,risks,regulations,andofftakedynamics,—TotalelectrolyzermanufacturingcapacityaswellasfinancialmodelsforhydrogenannouncedintheUSin2028is8GWacrossprojects–ideallysupportedbyassumptionsandproofpointsfromdeployedhydrogenprojects.10FromGlobalHydrogenFlowsperspectivefromOctober2022,updatedtoincorporatetheimpactoftheIRAHydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit19InfraMidstreaminfrastructuretopipeline,whichcouldrequirebothNaturalgaspipelineH2pipelineH2productionunittransporthydrogendoesnotinfrastructureupgradestoenableexistatscaletodaytheexistingnaturalgaspipelineto500,000milesofexistingtransmission1,600milesofexistingH2accommodatehydrogenmolecules,Large-scale,cost-effectivetransportandthephasingoutofexistingnaturalnaturalgaspipelinespipelinesofhydrogencouldrequireahydrogengastransportinordertousethepipelinenetworkcomplementedbypipelinesforhydrogen.TheUS–unlikeTohelpenableinfrastructurescale-up:trucking-basedtransportfordistributedEurope–doesnothavemanyplacesenduses(e.g.,hydrogenrefuelingstations).withparallelnaturalgaspipelinesAggregateregionalRetrofitnaturalAddtwinlinestoStreamlineWithonly1,600milesofhydrogenpipelinesrunningthesameroutes,makingdemandgaspipelinesexistingnaturalpermittinginplacetoday,theUShydrogenindustrypipelineretrofitsalessviableoptionforgaspipelineswouldrelyontruck-baseddeliverydespitemostoftheUSascomparedtoEurope.higherunitcostsfornewusesoutsideofindustrialclusterswherehydrogen2.Buildingnewpipelinesmaybemorepipelinescurrentlyexist.TruckingcouldfeasiblethanretrofitsintheUS.addmorethanUSD1perkgtothecostofHowever,newpipelinesfacetheirdeliveredhydrogencomparedtopipelineownpotentialchallenges–primarilydelivery(costrangewillvarybasedonpermitting.Interstatepipelinesdistance,capacity,equipmentutilization,complicatetheprocessofobtainingandhydrogenform,e.g.,gaseousversusrightsofway,makingpermittingamulti-liquid).yearprocess.Projectionsshow60%ofUShydrogenInthemeantime,producersareproductionwillflowthroughpipelinesdevelopingalternativessuchasin2050.11However,thereareonlyco-locationofendusesandproduction1,600milesofhydrogenpipelinesinthefacilitiesandtruckingforhydrogenUStoday(primarilyconcentratedinmajordistribution,particularlytosmallerendindustrialclustersintheGulfCoastanduseslikerefuelingstationsandsmallCalifornia)–incontrastto500,000milesindustrials:ofnaturalgastransmissionpipelinestomovenaturalgasfromproducingregionsto—Producers,offtakers,andtransportersdemandcentersacrossthecountry.cancoordinatetoaggregateandconnectregionalsupplyanddemand.Buildingthelong-termnetworktoTheUSDepartmentofEnergy’sconnectpotentialhydrogenclusterswithhydrogenhubfundingismobilizingapproximatelytennorth-southpipelinestheseeffortsacrossthecountry.andfiveeast-westpipelinescouldrequireanestimatedUSD100billion.Investments—AddingtwinpipelinestoexistingnaturalofonlyUSD3billioninhydrogengaspipelinescouldacceleratetheinfrastructureprojectsuntil2030havebeenprocessinsomecasesbyutilizingannouncedinNorthAmericasofar.Arapidexistingpipelines’rightofway.ramp-upisneededtoenableapipelinenetwork.—InteragencyandinterjurisdictioncoordinationtostreamlinethepermittingPipelinestodistributehydrogencouldbeprocessandcreateconsistencyacrossdevelopedfrom:regionscouldhelptoreducetimelines.1.Retrofittingtheexistingnaturalgas11FromGlobalHydrogenFlowsreportSource:NationalRenewableEnergyLaboratory;EnergyInformationAdministration25HydrogenInsightsMay2023HydrogenCouncil,McKinsey&CompanyExhibit20Tohelpacceleratedemand:Enduse26TheIRAhelpskickstarttheUSMotivatedecarbonizationFacilitatecertaintyofhydrogenecosystem,however,potentiallywithregulations,availableandaffordabledemanduptakeislikelyneededforastandards,orincentivessupplysustainableecosystembeyondIRASecuringcommittedofftakeatscaleisessentialforasustainablehydrogenecosystem.Today,investmentsinproductionoutpaceofftake,andmanyofftakersarehesitanttosignlong-termcontracts.Inpart,thisisbecausecostscouldstillbeapotentialchallengeoncetheIRAsunsetsafter2032.Despitecontinuedtechnologyinnovation,scale-up,andmaturityofmanufacturingandsupplychains,withouttheIRAincentives,renewablehydrogenisstillexpectedtobemoreexpensivethangrayhydrogen.Inaddition,offtakershesitatetocommittocleanhydrogencontractswithoutcertaintyofreliable,long-termsupply.Toacceleratedemanduptake,theindustrylikelyneedsmechanismsthatgiveofftakerscertaintyabouttheavailabilityandaffordabilityofcleanhydrogenovertime.Forexample,contractscouldmitigaterisksforofftakers,andpoliciescouldsupportaliquidmarkettohelpcreatecertaintyforbothsuppliersandofftakers.AnexampleofthisisH2GlobalinGermany–asupportschemecreatedbythegovernmenttosupportproducersandofftakersbybridgingthedifferencebetweenthecostofcleanproductionandthemarketpricewithpublicfunding.Thoughthecostforcleanhydrogenwouldnotbecompetitivewithgray,tostayontrackfortheUS’sdecarbonizationgoals,ashifttowardcleanhydrogenanditsderivativesislikelyneeded.Codes,standards,andregulationsthatrequireemissionsreductionsandincentivesthatrewardlowercarbonintensityproductsandservicescouldcreatelong-termdemandforcleanhydrogen.Withlowercostachievedforrenewablehydrogeninthenexttenyears,stemmingfromthescale-upandmaturityofmanufacturingandsupplychains,cleanhydrogencouldbecomeaviabledecarbonizationoptionformanysectors.Source:BundesministeriumfürWirtschaftundKlimaschutzHydrogenInsightsMay2023HydrogenCouncil,McKinsey&Company
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