HydrogenInsights2022AnupdatedperspectiveonhydrogenmarketdevelopmentandactionsrequiredtounlockhydrogenatscaleSeptember2022ExecutivesummaryThepipelineofhydrogenprojectsiscontinuingtogrow,butactualdeploymentislagging.In2022some680large-scalehydrogenprojectproposals,equivalenttoUSD240billionindirectinvestmentthrough2030,havebeenputforward–aninvestmentincreaseof50%sinceNovember2021.Yet,onlyabout10%(USD22billion)havereachedfinalinvestmentdecision.Europeishometoover30%ofproposedhydrogeninvestmentglobally.However,otherregionsareleadingtheimplementationontheground:80%ofoperationalgloballow-carbonhydrogenproductioncapacityisinNorthAmerica,whileChinahassurpassedEuropeinelectrolysiswith200megawatts(MW)operational,versus170MWinEurope,drivenbystronggovernmentsupport.SouthKoreaandJapan,inturn,areleadingonfuelcells,drivenbystronggovernmentandcorporateambitions:morethanhalfofthe11gigawatts(GW)ofglobalfuelcellmanufacturingcapacityislocatedthere,andJapanhasrampedupdeploymentofhydrogen-readycombinedheatandpower(CHP)plants,with425,000suchsystemsinstalled.Theurgencytoinvestinmaturehydrogenprojectstodayisgreaterthanever.Thereboundofcarbonemissionstoabovepre-COVIDlevels,theinvasionofUkraine,andthegrowingconcernsaroundenergysecurityresultingfromthewarinEuropemakeonethingclear:oureconomiesneedcleanhydrogen,andactionisneededtoconvertproposalsintoactualdeployment.OutofthemoreThepipelineofhydrogenprojectsiscontinuingtogrow,butactualdeploymentislagging.680large-scaleprojectproposalsworthUSD240billionhavebeenputforward,butonlyabout10%(USD22billion)havereachedfinalinvestmentdecision(FID).WhileEuropeleadsinproposedinvestments(~30%),Chinaisslightlyaheadonactualdeploymentofelectrolyzers(200MW),whileJapanandSouthKoreaareleadinginfuelcells(morethanhalfoftheworld’s11GWmanufacturingcapacity).Theurgencytoinvestinmaturehydrogenprojectstodayisgreaterthanever.Fortheworldtobeontrackfornetzeroemissionsby2050,investmentsofsomeUSD700billioninhydrogenareneededthrough2030–only3%ofthiscapitaliscommittedtoday.Ambitionandproposalsbythemselvesdonottranslateintopositiveimpactonclimatechange;investmentsandimplementationonthegroundisneeded.JointactionbythepublicandprivatesectorsisurgentlyrequiredtomovefromprojectproposalstoFIDs.Bothgovernmentsandindustryneedtoacttoimplementimmediateactionsfor2022to2023–policymakersneedtoenabledemandvisibility,rolloutfundingsupport,andensureinternationalcoordination;industryneedstoincreasesupplychaincapabilityandcapacity,advanceprojectstowardsfinalinvestmentdecision(FID),anddevelopinfrastructureforcross-bordertrade.iiiHydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&CompanyPublishedinSeptember2022bytheHydrogenCouncil.Copiesofthisdocumentareavailableuponrequestorcanbedownloadedfromourwebsite:www.hydrogencouncil.comThisreportwasauthoredbytheHydrogenCouncilincollaborationwithMcKinsey&Company.Theauthorsofthereportconfirmthat1.Therearenorecommendationsand/oranymeasuresand/ortrajectorieswithinthereportthatcouldbeinterpretedasstandardsorasanyotherformof(suggested)coordinationbetweentheparticipantsofthestudyreferredtowithinthereportthatwouldinfringetheEUcompetitionlaw;and2.Itisnottheirintentionthatanysuchformofcoordinationwillbeadopted.WhilstthecontentsoftheReportanditsabstractimplicationsfortheindustrygenerallycanbediscussedoncetheyhavebeenprepared,individualstrategiesremainproprietary,confidentialandtheresponsibilityofeachparticipant.Participantsareremindedthat,aspartoftheinvariablepracticeoftheHydrogenCouncilandtheEUcompetitionlawobligationstowhichmembershipactivitiesaresubject,suchstrategicandconfidentialinformationmustnotbesharedorcoordinated–includingaspartofthisReport.than680projectsannounced,45projectsworthUSD29billionareinthefront-endengineeringdesign(FEED)phaseand120projectsworthUSD80billionareundergoingfeasibilitystudies.However,onlyUSD22billion(about10%ofproposals)havereachedfinalinvestmentdecision(FID)orareunderconstructionoroperational.ThisnumberhasonlygrownbyUSD2billioninthelasthalfyear,significantlyslowerthangrowthinprojectannouncements.Thekeybarrierthatprojectdevelopersfacetodayisalackofdemandvisibility–manyareawaitingdecisionsontheenablingregulatoryframeworksandfundingtoincentivizeofftakerstoenterlong-termhydrogensupplycontracts.Suchlong-termofftakeiskeytounlockingprojectfinanceandsupportfromfinancialinvestors.Capturingthemaximumclimatevalueofhydrogentodeliverthe2050netzerotargetrequiresatriplingofinvestmentinhydrogenby2030toUSD700billion–inotherwords,additionalinvestmentsofUSD460billionintohydrogenprojectsthrough2030.Thissoundsenormousbutinfactisequivalenttolessthan15%oftheinvestmentcommittedtoupstreamoilandgasinthepastdecade.Acrossthevaluechain,investmentininfrastructureconnectingsupplyanddemandisparticularlylaggingasvisibilityondemandislacking,withaninvestmentgapofmorethan80%betweenprojectproposalsandwhatisneededtoreachnetzero.JointactionbythepublicandprivatesectorsisurgentlyrequiredtomovefromprojectproposalstoFIDs.Forpolicyambitionandprojectproposalstomaterializeintoactualinvestmentsandstartdeliveringenvironmentalandsocio-economicbenefits,enablingconditionsarenecessarytoday.Below,asetofmutuallyreinforcingpriorityactionsforpolicymakersandindustryfor2022to2023toprogressfromproposalstoinvestments,scaleuphydrogendeploymentinregionsandenableglobalhydrogentrade(Exhibit1).Thesearecriticalformovingfromambitiontoaction,acceleratinghydrogendeployment.Exhibit1–SynchronizingtheeffortsofgovernmentsandtheindustryPolicy-Priorityactionsfor2022-2023:1.Enabledemandvisibilityandregulatorycertaintybyadoptinglegallybindingmeasures.Createdemandvisibilitythroughmeasuressuchastargetsorquotasforhydrogenconsumptionacrossend-usesectors,alongsidepublicprocurementmeasuresorcompetitivebiddingfor(carbon)contractsfordifference.Thiswillbridgethegaptocostcompetitiveness,boostinvestorconfidenceandhavearippleeffectthroughoutthevaluechain,enablinginvestmentsinhydrogensupply,equipmentmanufacturing,andinfrastructure.2.Fast-trackaccesstopublicfundingforhydrogenprojects.Introducemeasuressuchasgrants,loans,taxcredits,aswellasfundingsupportschemesbasedoncompetitivebidding.Policymakersacrossgeographieshaveputforwardplanstorollouttherelevantinstrumentsdesignedtostimulatehydrogenuptake.Rightnow,itiscrucialtomovefromvisiontoaction,andproceedwiththeimplementationoftheseinstruments.Rapidrolloutofsupportschemesforhydrogenwillliftmatureprojectsoffthegroundandacceleratehydrogendeploymenttosupportglobalclimategoalswithinthisdecade,whilebringingthecostsfurtherdown.3.Ensureinternationalcoordinationandsupportcrediblecommonstandardsandrobusttradeablecertificationsystems.Acommonstandardmethodologyforassessingallhydrogenproductionpathwaysisessentialtoallowthehydrogenwiththelowestcarbonfootprinttorevealitsclimatebenefits.Robustcertificationsystemsareinstrumentalinbuildingconsumertrustandpavingthewayforglobalhydrogentrade,whichinturnwillsupportscale-upandminimizehydrogencost.Industry-Priorityactionsfor2022-2023:1.AdvanceprojectproposalstoFIDbycommittingtofundingandresourcedeployment.Asregulatorycertaintyisbeingstrengthenedandfundingsupportstartsrollingout,industryshouldcommittodeployingresourcestomatureprojectstowardsFIDbyconductingfeasibilityandFEEDstudiestorealizetheUSD240billionprojectproposals.Furthermore,newprojectsmustcontinuetobedevelopedtobridgetheUSD460millioninvestmentgaptonetzerotowardtheendofthisdecade.Projectdevelopersshouldfocusonbuildinglong-termrelationshipsbetweenhydrogensuppliersandofftakers,andactivelymitigatetheperceivedriskofinvestinginhydrogenprojectsbystagingprojectsandbyworkingwithestablishedpartnerswithstrongtrackrecords.2.Scaleuphydrogensupplychaincapabilityandcapacity.Asgovernmenttargetstranslateintoregulatoryactionandconfidenceinasustaineddemandoutlook,committoincreasingsupplychaincapabilityandcapacity.Theindustryshouldstartrampingupcapacitytoenabledeploymentatscale.Alignmentandsynchronizationbetweenthepolicy,infrastructure,andend-useapplicationsisessential.Theindustryneedstoensuretheprojectproposalsandequipment(e.g.,electrolyzers)areavailableastheindustryscales.Supplychainsmustbereadied,andonlyindustrycandoit.Increasingrenewablepowercapacityatscaleremainsvitaltoscaleuprenewablehydrogendeployment.3.Buildinfrastructureforcross-bordertrade.Globaltradeunlocksthefullbenefitsofhydrogenastransportable,cleanenergy.Butprojectproposalstodevelophydrogeninfrastructurearelacking,andindustryshouldconcentrateitseffortstowardestablishinginfrastructuretoenablecross-bordertrade(e.g.,throughbuildingoutterminals,large-scalestorage,andhydrogenconversiontechnologies).Asinternationalcooperationbetweengovernmentsadvances,theindustryshouldactivelyhelptoprioritizeactionstoenableinternationaltradeflowsmatchsupplyanddemandinanefficientmanner.ProgressprojectsandscaleupdeploymentinregionsEnableinternationalhydrogentradeEnabledemandvisibilityScaleupsupplychaincapabilityandcapacityFast-trackaccesstopublicfundingAdvanceprojectproposalstoFIDEnsureinternationalcoordinationBuildinfrastructureforcross-bordertradePriorityactionsforpolicymakersPriorityactionsforindustryivHydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&CompanyvHydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&CompanyContextandobjectivesTheurgencytoinvestinmaturehydrogenprojectstodayisgreaterthanever1Includes14EUmemberstatesthathavenotannouncedtargetsbutfallundertheEU’soverarchingnet-zerotargetby2050,PurchasingPowerParitymethodologyusedforGDPcalculation,definitionandlistgatheredfromOxfordNetZeroTracker2Cleanhydrogeninthispublicationdefinedasbothrenewable(fromelectrolysisandrenewables)andlow-carbon(fromfossilfuelreformingwithcarboncaptureandstorage)3TheEUplantocutgreenhousegasemissions55%by20304Initiativedrivenby31infrastructureoperatorsClimatechangemustbeaddressed,urgently.ItisclearerthaneverthatclimatechangeurgentlyneedstobeaddressedashighlightedinthemostrecentIPCCreportpublishedinMay2022.Stakeholdersaremakingcommitmentstocurbemissionsrapidly:131countriescovering90%ofglobalGDPhaveintroducednet-zerotargets,1and46countrieshaveimplementedorannouncedcarbondioxideemissionspricingortradingschemes.Globally,40nationalhydrogenstrategieshavebeenannouncedascountriessetpathwaystotapintohydrogen’spotentialtodecarbonize,ensureenergysecurity,andspursustainableeconomicgrowthfromstrandedenergyresources.Stakeholdersfromgovernmentstoindustriestoconsumersthemselvesincreasinglyrecognizethathydrogenisneededtoachievenet-zeroemissions.Theenergysystemneedshydrogen.Hydrogencanacceleratetheenergytransitionbyallowingcleanenergytobestoredandlargevolumestobetransportedoverlongdistancesviapipelinesandships.Itcanfostergreaterresilience,cost-efficiency,andoptimizationatasystemlevel.Hydrogenisaversatileclean2moleculethatplaysmultiplerolesacrossend-usesandgoeshand-in-handwithotherdecarbonizationleverssuchasdirectelectrification,carboncaptureandstorage,biofuels,andenergyefficiencymeasures.Forexample,itcanserveasafueldirectlyusableinfuelcellsusedinmobilityorstationarypower,orforhigh-gradeheatneededforcementproduction,orgridpowergeneration.Itisafeedstocktoproduceammoniaorsyntheticfuelsforuseinthemaritimeandaviationsectorsorothercleanchemicals,andareductantforprocessingironoreforcleansteelmaking.Globalpoliticalandeconomictrendsinfluencehydrogendeployment.Thepaceofdeploymentisinfluencednotonlybyregulations,ascriticalastheyare,andprivatesectorcommitments,butalsobyfactorssuchasthestateoftheglobaleconomy,geopolitics,commodityprices,andthestateofglobalsupplychains.TheworldisrecoveringfromtheCOVID-19pandemic,resultinginrapidgrowthineconomicactivitywithrecentsupplychaindisruptionsandhighinflationrates.Economicdevelopmentisunevenacrossgeographiesandthegrowthoutlookisuncertain.Thesefactorsinfluencehydrogendeployment,butnotnecessarilyinanegativefashion:recentdevelopmentssuggesttheseshiftshavestrengthenedthefocusonhydrogeninthepastmonths.However,on-the-grounddeploymentisnotmovingfastenoughandneedstoacceleratetorealizethebenefitsofhydrogen.Beyonditsimportanceindecarbonization,hydrogenisgainingtractionasawaytoincreaseenergysecurity.Countriesareincreasinglypursuingenergyindependenceanddiversificationofenergysupplies,particularlyconsideringthecurrentwarinEuropeanduncertaintiesinglobalpolitics.IntheEU,thewarinUkrainehasledtobolderambitionsforcleanhydrogentostrengthenenergysecurityandspurdecarbonizationbeyondthe“Fitfor55”3package.TheEU’sREPowerEUcommunication,announcedjustthreeweeksafterthestartoftheUkrainewar,raisedtheambitionfrom5.6millionmetrictons(MT)ofrenewablehydrogendeployedby2030to10millionMTofrenewablehydrogenproduceddomesticallyandanother10MTofimportedcleanhydrogen.StakeholdershaveacceleratedplanstodevelophydrogenpipelinetransmissionsaslaidoutintheEuropeanHydrogenBackboneinitiative,4whichnowtargets28,000kmin2030.Formanycountries,hydrogenisaboutmonetizingdecentralizedenergyresourceslikerenewablesinChile,Brazil,Australia,andEgypt,orensuringenergysecurityandself-sufficiency,whicharekeycomponentsoftheChinesehydrogenstrategy.Theyincludebuildingadomesticindustryaroundtechnologyforseabornehydrogentradeanduseinthepowerandautomotivesectors,suchasinJapanandSouthKorea.Incentiveschemestoacceleratehydrogenadoptionaretakingshapeacrosstheglobe–theseneedtoberolledout,fast.IntheEU,forinstance,thefirstImportantProjectsofCommonEuropeanInterest(IPCEI)pre-notificationsweremadeatnationallevelin2021,withfirstapprovalsfromtheEUCommissionreceivedinJuly2022.Furthermore,thedevelopmentofacarboncontractsfordifference(CCfD)schemeforrenewablehydrogenhasbeenannouncedonEUlevel.CountriesinEuropearedevelopingnationalsupportschemesforhydrogen.Forexample,GermanyandDenmarkarepursuingjointpurchasingagreementsandCfDschemesforcleanhydrogenimports.Otherregionsarenotstandingstill,withvariousincentiveschemesemergingaroundtheglobe.Forinstance,theUShasallocatedUSD9billioninfundingtodevelopcleanhydrogenhubsandadvanceandscaleupelectrolyzertechnologywhilegrantingtaxcreditsforcarboncaptureandstorage,whileJapan’sGreenInnovationFundisallocationaboutUSD2billiontodevelopcarbonneutralprojects,supportingdevelopmentofliquidhydrogenvaluechains,amongstothertechnologies.Omaniswaivinggridfeesforrenewablehydrogenproduction,whileIndiaisconsideringapproachessuchasgridtariffreductions,cleanhydrogenblendingmandatesinrefineries,andelectrolyzercapitalexpendituresubsidies.Butspeedisoftheessence–importantcontrolsandbureaucracyneedtobeadaptedtomatchtheurgencyofthesituationandthetypicalcommercialproductdevelopmentrhythm.Hydrogen’sfutureisbright–rightnow,jointactionisrequiredtoscalethehydrogeneconomyasfastasneeded.Decarbonizationisanurgentneedastheworldisexpectedtoexhaustitsremainingcarbondioxideemissionsbudgetofabout400gigatons(GT)by2030toremainwithin1.5degreesCelsiuswarming.Therecentmomentuminthehydrogeneconomyispositive,butambitionandproposalsbythemselvesdonottranslateintoapositiveimpactonclimatechange;investmentsandimplementationonthegroundareneeded.JointactionbythepublicandprivatesectorsisurgentlyrequiredtomovefromprojectproposalstoFIDs.HydrogenInsightsshedslightonthestateoftheindustry–andwhatneedstobedoneforambitionandproposalstomaterializeintoinvestmentsanddeploymentHydrogenInsightsistheHydrogenCouncil’sperspectiveonthehydrogenindustry’sevolution.Itsummarizesthecurrentstateoftheglobalhydrogensectorandoffersauniqueviewintoactualhydrogendeployment.Thispublicationhasthreesections:Momentum:Industryannouncementsshowcurrentinvestmentmomentumintheglobalhydrogenindustry.Actualdeploymenttodayoffersuniqueinsightsintotherealdeploymentofhydrogenacrosssectorsandgeographies.Priorityactionsforpolicymakers&industrysuggestasetofpriorityactionsforpolicymakersandindustryforthecomingyeartoovercomethekeychallengespreventinghydrogendeploymentatscale.Thisperspectiveisco-authoredbytheHydrogenCouncilandMcKinsey&Companyandrepresentsacollaborativeefforttoshareanobjective,holistic,andquantitativeperspectiveonthestatusquooftheglobalhydrogenindustrydevelopment.TheHydrogenCouncilcounts141members(Exhibit2),upfrom60in2020,representingUSD8.2trillioninmarketcapitalization,6.8millionemployees,andrevenuesofUSD5.2trillionin2021.2HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Company3HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Company8.26.85.2Exhibit2–HydrogenCouncilMembersMomentum:IndustryannouncementsmarketcapitalizationUSDtrillionFTEsworldwiderevenuesUSDtrillionmillionWhilethenumberofprojectproposalscontinuestogrowglobally,lessthan10%ofhydrogenprojectshavereachedFIDGlobally,theindustryhasannounced680large-scalehydrogenprojectproposals(Exhibit3)asoftheendofMay2022,anincreaseofmorethan160projectssinceourpreviouspublication(HydrogenforNetZero,November2021).Ofthese,534aimtofullyorpartiallycommissionthrough2030andrepresentUSD240billionofdirectinvestmentsneededinhydrogenvaluechainsby2030(upfromUSD160billioninthepreviouspublication).Ofthese534projectproposals,aboutathirdareundergoingfeasibilityandFEED(front-endengineeringdesign)studies,representingUSD109billionininvestments.However,onlyUSD22billion(about10%)havereachedafinalinvestmentdecision(FID),areunderconstruction,orareoperational.ThisnumberhasonlygrownbyUSD2billioninthelasthalfyear,significantlyslowerthanthegrowthinannouncements.Giga-scaleprojectproposals(over1GWofelectrolysisforrenewableormorethan200,000metrictonsayearoflow-carbonhydrogensupply)accountfor61projects,ofwhich18havebeenannouncedsincethepreviouspublication.Ofthese61proposals,45arerenewableand16arelow-carbonhydrogen.51oftheseareplanningfullorpartialcommissioningby2030,while33areundergoingfeasibilityorFEEDstudies,andthreehavereachedFID(linkedtolow-carbonhydrogeninNorthAmerica).Giga-scaleprojectproposalsarefoundacrossallcontinentsandarefocusedonexportstodemandcentersinEuropeorAsiaoronservingdemandinlargeindustrialhubs.Europeishometoover30%ofproposedhydrogeninvestmentsglobally(aboutUSD76billion),withnearly314projectproposalsintotaland268aimingforfullorpartialcommissioningthrough2030.Ofthis,aboutUSD32billionisintheplanningstagesandUSD6billioninvolvescommittedinvestment.Inthepastsixmonths,about50newprojectproposalswereannouncedinEurope,withmostnewadditionsfocusingonthedecarbonizationoflarge-scaleindustrialuses.NorthAmericaandLatinAmericafollowEuropeintermsofannouncementswithabout20%eachofproposedinvestments.Infact,sincethepreviouspublication,theproposedinvestmentsinthesetworegionshavegrownatthefastestrate,withUSD20billionaddedinNorthAmericaandUSD34billioninLatinAmerica.InLatinAmerica,projectproposalsworthUSD30billionareundergoingfeasibilityorFEEDstudies.InNorthAmerica,projectproposalsworthaboutUSD13billionareundergoingfeasibilityorFEEDstudies,andUSD8billioniscommittedcapital(mainlydrivenbyexistinglow-carbonhydrogenprojects).Maximizingtheclimatevalueofhydrogentodeliverthe2050netzerotargetrequiresatriplingofinvestmentinhydrogenby2030,toUSD700billion.Inotherwords,anadditionalUSD460billionhydrogenprojectproposalsby2030areneeded,evenifallcurrentproposalsarerealized.AnincreasingnumberofprojectproposalsareundergoingfeasibilityandFEEDstudies,yetFIDsarelackingOftheUSD240billionannouncedthrough2030,nearlyhalfisintheplanningstage,i.e.,undergoingfeasibilityorFEEDstudies(Exhibit4).Sincethepreviouspublication,thenumberofprojectproposalsundergoingengineeringstudieshasincreasedfrom115to165,anincreaseof70%intermsoftargetedinvestment,fromUSD64billiontoUSD109billion.Despitethemomentum,manyprojectproposalshavenotreachedFIDandareawaitingthedevelopmentofsupportiveregulationandincreasedvisibilityondemandforcleanhydrogenanditsderivatives.Whilethereispositivemomentuminfurthermaturingprojects,thereisaslowdownwhenlookingattheFIDs,whichonlygrewbyUSD2billion(about10%).Thekeybarrierthatprojectdevelopersare4HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Company5HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&CompanyExhibit3–GlobalhydrogenprojectannouncementsOutof5341large-scaleprojectsworthUSD240bnannouncedglobally……165–aboutonethird–areundergoingfeasibilityandFEEDstudies……andonlyabout10%ofinvestmentshaveachievedfinalinvestmentdecisionUSD240bninvestmentsrequiredforannouncedprojectsuntil2030512624012853Giga-scaleproductionLarge-scaleindustrialuseInfrastructureprojectsTransportIntegratedH2economyEuropeNorthAmericaLatinAmericaOceaniaJapan,Korea,restofAsiaChinaAfrica#ofprojects7664719433315USD109bninvestmentsuntil2030,relatedtoprojectsinplanning338672613Giga-scaleproductionLarge-scaleindustrialuseInfrastructureprojectsTransportIntegratedH2economy#ofprojects63243213130EuropeNorthAmericaLatinAmericaOceaniaJapan,Korea,restofAsiaChinaAfrica377196129Giga-scaleproductionLarge-scaleindustrialuseInfrastructureprojectsTransportIntegratedH2economyUSD22bninvestmentsuntil2030,relatedtocommittedprojects#ofprojectsEuropeNorthAmericaLatinAmericaOceaniaJapan,Korea,restofAsiaChinaAfrica2<1<168<16Exhibit4–AnnouncedinvestmentsbymaturityDirecthydrogeninvestmentsuntil2030,USDbillion1096410876End-use&offtakeProduction&supply202220212021Infrastructure2022202120222022USD240bntotalannouncedinvestmentsCommittedPlanningstageAnnouncedProjectsthatareatthefeasibilityoffront-endengineeringanddesignstageProjectswhereafinalinvestmentdecisionhasbeentaken,thatisunderconstruction,commissioned,oroperationalProjectsinpressannouncementsorpreliminarystudystagesfacingtodayisthelackofdemandvisibility,asmanyareawaitingdecisionsontheenablingregulatoryframeworksandfunding(includingtheexistingframeworkssuchasIPCEIinEuropeorhydrogenhubsintheUS)toincentivizeofftakerstoenterlong-termhydrogensupplycontracts.ThelargestvolumeofcommittedinvestmentisinNorthAmerica(about35%,partiallyduetooperationallow-carbonhydrogenprojects),followedbyEurope(drivenbyasomewhatclearerregulatoryenvironmentandindustrydecarbonizationtargets)andAsia(excludingChinaandOceania),bothatabout25%.Alongthevaluechain,about65%ofthetotalannouncedinvestmentsofUSD240billionfocusoncleanhydrogensupply,followedbyend-use(25%)andtransmissionanddistribution(10%).Consideringonlyprojectproposalsintheplanningstage,theshareofhydrogensupplyisabove70%ofthetotalassociatedinvestmentofUSD109billion.However,thesupplyshareofinvestmentsdeclinestoabout50%whenconsideringonlycommittedinvestments,whiletheshareofinvestmentstargetinghydrogentransmissionanddistributionincreasestomorethan20%.Thisisadoublingfromabout10%shareofinvestmentswhenconsideringprojectsacrossallmaturitylevels.Thiscouldbeduetotheinfrastructurecomponentofaprojectmaturingafterthehydrogensupplyaspectisclearer,orduetoasignificantcurrentmomentumaroundhydrogensupplyspecifically.Hydrogensupply:AnnouncementsreachonethirdofnetzerotargetCompanieshaveannouncedprojectproposalsaddinguptoabout26millionMTofcleanhydrogencapacitythrough2030(Exhibit5),anincreaseofabout8MTsincethepreviouspublication.Thisamountstoaboutathirdofthe75MTrequiredby2030tobeontracktowardnetzero(aslaidoutintheHydrogenforNetZeroreport).Announcementsaddupto7.3MTofcleanhydrogenby2025,upfrom6.5MTinthepreviouspublication.About60%oftheannouncedvolumesthrough2030featurerenewablehydrogen,whileabout40%consistoflow-carbonhydrogen.Themajorityofthiscapacityisatanearlyprojectdevelopmentstage,withabout15MTintheplanningstageundergoingfeasibilityorFEEDstudies,andonly2MT(about7%oftotalannouncedAsofMay8,2022AsofMay8,20221680projectsannouncedgloballyofwhich534are(partially)deployeduntil20306HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Company7HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Companypositivedevelopment,infrastructureisthevaluechainstepthatseesthelargestgapininvestmentsrequiredtobeontracktonetzero,withprojectproposalscoveringlessthan15%oftheinvestmentrequirement.Developersareconsideringmultiplehydrogencarriertechnologiesforglobalhydrogentransmission,includingammonia,LOHC5,andliquidhydrogen.Mostoftheprojectsannouncedthrough2030withdefinedhydrogencarriershavecurrentlyoptedforammonia(about35%byvolumehydrogen),followedbyLOHC(about10%),andliquidhydrogen(about5%).However,abouthalfoftheprojectshavenotyetselectedtechnology,andevenforthosethathave,thefinaldecisionsonconcept,design,andinvestmenthavenotyetbeenmade.Hydrogenend-use:MobilityandsteelaredrivinginvestmentsAnnouncedinvestmentsinhydrogenend-usesthrough2030accountforaboutUSD60billionandencompass,forexample,fuelcellvehicles,thedeploymentofmethanolandammoniasynthesisplants(ofwhichsomecapacityisintendedforexport),ortheuseofhydrogenincleansteelmakingorpowerapplications.Ofthis,aboutUSD23billioniscurrentlyundergoingfeasibilityorFEEDstudies,whileUSD6billioniscommittedcapital.Groundtransportisthesegmentwiththehighestshareofcommittedcapital,with25%oftotalinvestmentproposalsatFIDormoreadvanced,followedbypowerwheretheshareisabout15%.Mostannouncedinvestmentstargetthemobilitysectorandnewindustryend-usessuchassteelmaking,eachatabout30%ofinvestments,followedbyexistingindustryuses,likeammoniaandrefining,atabout25%ofannouncedinvestments.Announcedinvestmentsinexistingindustryuses,wherecleanhydrogendirectlysubstitutesforfossil-based(“grey”)hydrogen,havemorethantripledsince2021(fromUSD5to16billion).However,alargeshareofthisgrowthisfromadditionalammoniaproductionprojects,manyofwhichtargetenergyexporttodemandcentersinAsiaandEurope,ratherthansubstitutinggreyhydrogeninfertilizermarkets.Investmentsinnewindustryuses5LiquidorganichydrogencarrierExhibit6–GlobalfuelcellandelectrolyzermanufacturingcapacityElectrolyzerandFuelcellmanufacturercapacity,2025GWp.a.byHQregionManufacturingcapacityannouncements,GWEuropeJapanandKoreaChinaUSA1GW10GW2021–installed2025–announced3.5FuelcellElectrolyzer11.045.028.0capacity)atFID,underconstruction,oroperational.Consideringtheproposalscurrentlyintheplanningstage,about55%ofcapacityisrenewableand45%islow-carbonhydrogen.Fortheprojectswithcommittedcapital,themajorityislow-carbonhydrogen(about70%oftotalvolumes),drivenlargelybyoperationallow-carbonhydrogenprojectsinNorthAmerica.Fromaregionalperspective,Europe,NorthAmerica,andLatinAmericaaccountforover70%ofthetotalannouncedcleanhydrogensupplyvolumes,withthehighestvolumesfoundinEurope(about8MTinannouncedsupply).LatinAmericahasthelargestannouncedsupplyofrenewablehydrogen(4.8MTby2030),whileNorthAmericahasthelargestvolumeoflow-carbonhydrogen(4.7MT).LatinAmericaandNorthAmericaaretheregionswiththehighestgrowthinannouncedvolumessincethepreviouspublication,adding3.6MTand2.8MT,respectively.Aboutthree-quartersofprojectproposalsfocusedonhydrogensupplyareundergoingfeasibilityorFEEDstudiesinEurope,LatinAmerica,Oceania,andtheMiddleEast,indicatingthattheindustryisinvestinginmaturinghydrogensupplyprojectsfurther.Beyond2030,anadditional15MTofcleanhydrogencapacityhasbeenannouncedglobally,bringingthetotaltoabout41MT.Ifalltheannouncementswererealized,itwouldreflectabout6%ofthe660MTrequiredby2050toreachthenet-zerotarget.Morecleanhydrogensupplyprojectproposalsareneededtobeontracktonetzero.Hydrogentransmission&distribution:LargestgaptonetzeroCompanieshaveannouncedapproximatelyUSD24billionininvestmentsinhydrogeninfrastructurethrough2030,encompassingrefuelingstations,pipelines,terminals,andships,forexample,upfromaboutUSD22billionreportedinthepreviouspublication.AbouthalfoftheseannouncedinvestmentstargettheAsia-Pacificregion,whileEuropeaccountsforabout25%,followedbytheMiddleEastat15%.AboutathirdiscurrentlyundergoingfeasibilityorFEEDstudies,withthemajorityinEurope(about30%),followedbyChinaandOceania(eachabout20%ofvolumes).DespitethisExhibit5–AnnouncedcleanhydrogenproductionvolumebypathwayCumulativeproductioncapacity,MTp.a.Announced1Low-carbonhydrogenRenewablehydrogen2728262526.2242320202220302921Announced1Planning2Planning22019Announcedasof2022Committed3Committed3202020211Preliminarystudiesoratpressannouncementstage2Feasibilitystudyorfront-endengineeringanddesignstage3Finalinvestmentdecisionhasbeentaken,underconstruction,commissionedoroperationalAsofMay8,2022AsofMay8,20228HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Company9HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&CompanyCleanhydrogendeploymentisincreasingacrossthevaluechainThedeploymentofhydrogentechnologiesandprojectsisgraduallygrowingacrossthevaluechain,withprogressinhydrogensupply,transmissionanddistribution,andend-usesinthepastyear(Exhibit7)Hydrogensupply:800ktlow-carbon,550MWelectrolysisdeployedUpuntilnow,theglobalindustryhasinstalledabout800kilotons(kt)perannumoflow-carbonhydrogencapacityandabout550MWofwaterelectrolysisforrenewablehydrogensupply.Operationallow-carbonhydrogenvolumesarespreadacross18projects,withabout90%ofthecapacityinNorthAmerica.Installedelectrolyzercapacitygrewabout80%from2020totheendof2021,withmostofthegrowth(160MW)inChina.Chinaiscurrentlytheworld’slargestmarketforelectrolysis,withabout200MWcapacityinstalled(mostofwhichinvolvesa150MWplantcommissionedin2021).Europeisthesecond-largestmarketwithabout170MWofelectrolyzersinstalled(with40MWaddedin2021).Abouttwo-thirdsofthisservedemandfromindustrialend-usessuchasammoniaplantsorrefineries,followedbymobilityatabout10%oftotalcapacity.About75%oftheinstalledelectrolyzersarealkalinetechnology,followedbyproton-exchangemembrane(PEM)solutions,whichaccountformostoftheremaining25%.MostPEMelectrolyzercapacityisinstalledinEurope,whileotherregionshavehighersharesofalkalinetechnology.Exhibit7–Hydrogendeploymentacrossthevaluechain1Notethatgreyammonia(i.e.,producedfromnaturalgaswithoutcarbonsequestration)isshippedtodayatscaleActualdeploymenttodayhavegrownbyabout25%sincethepreviouspublication,primarilyreflecting26steelprojects(ofwhich20areinEurope).Momentumaroundproposedprojectstargetinghydrogenend-usesisstrongestinEurope,wherehalfoftheproposedinvestmentshavebeenannounced,followedbytheAsia-PacificregionandNorthAmerica(eachabout15%).Thereissignificantvariationinthefocussegmentsacrossregions.InEurope,mostend-useinvestmentsfocusonsteel(60%),whereasLatinAmericasees60%ofinvestmentsrelatedtoammoniaproduction(majorityofwhichisintendedforexport).TheAsia-Pacificregionfocusesonpowerandtransport(about40%each),whileinNorthAmericaabouthalfoftheinvestmentstargetmobility(groundtransportationandsustainablefuels).Hydrogentechnologysupplychainsarepreparingforarapidscale-upAnticipatinghydrogenmarketgrowth,technologyprovidersareplanningtorampupfast(Exhibit6)–ifdemandmaterializesandregulatoryframeworksareputinplace.Forexample,electrolyzerOEMannouncementsworldwideaddupto45GWofannualmanufacturingcapacityby2025,morethantentimesthecapacityinstalledbyendof2021.EuropeanOEMsarethemostambitious,accountingfor40%oftheannouncedcapacity.ChineseOEMsfollowwithabout35%ofannouncedcapacity,potentiallydrivenbysupportivegovernmentpoliciestowardcleanhydrogensupply.FuelcellOEMshaveannounced28GWinstalledcapacityuntil2025,upfrom11GWinstalledtoday.About60%ofexistingcapacityisconcentratedinJapanandSouthKorea,wheresomeoftheworld’sleadingvehicleOEMsarebased.SupplyTransmissionanddistributionManufacturingcapacityEnd-use3.5GWElectrolysismfg.capacity+3.5GWin202250%inEurope3H2shippingpilotsLH2,cleanNH3,LOHCshippedtoJapanfromAustralia/MiddleEast550MWElectrolysiscapacityoperationalin2021200MWinstalledinChina11GWFuelcellmfg.capacityin2021+2GWin202250,000FCEVsfleetontheroad+50%salesin2021700HRSoperational425,000Stationaryfuelcellsinstalled800ktpaLow-carbonhydrogencapacityin2021110HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Company11HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&CompanyHydrogentransmissionanddistribution:InitialstepstodevelopahydrogentradesystemarebeingtakenRegionalandglobalhydrogeninfrastructureisgraduallydevelopingandmaturing,andthisishappeningacrosspipelines,refuelingstations,andglobalhydrogenshipments.Globalseabornehydrogentradeisslowlyevolving.Small-scaledeliveriesofcleanhydrogenbyshiphavetakenplace.Threepilotprojectscarryingcleanammonia,liquidhydrogen,andliquidorganichydrogencarriers(LOHC)havealreadysailedinthepastthreeyears,deliveringhydrogenfromAustraliaandtheMiddleEasttoJapan.TheJapanesegovernmentfocusesonhydrogenasacleanenergyvector,andistakingstepsto,forinstance,developtheworld’sfirstinternationalvaluechainfortransportingliquidhydrogenbetweenJapanandAustralia.Otherregionsarestartingtofocusmoreonhydrogentradingaswell.EuropeancountriesareconsideringimportsfromseveralpotentialexportcountriesintheMiddleEast,NorthernAfrica,andelsewhere,whileSingaporeisconsideringimportinghydrogenfromAustralia.Severalregionsarepositioningthemselvesasexportersofrenewableorlow-carbonenergy,includingAustralia,LatinAmerica,NorthAmerica,NorthernAfrica,andtheMiddleEast.Hydrogenpipelinesareadvancing.Thereisabout4,500kmofhydrogenpipelineinstalledglobally,transmittinggreyhydrogentoindustrialend-users,showcasingthefeasibilityoftransmittinghydrogenviapipelines.Severalinitiativesarecurrentlyexploringpipelinetransmissionsofhydrogen.Forinstance,pipelineexportsofhydrogenfromenergyresource-richareasinNorthernAfricaorNorwaytocontinentalEuropearebeingconsidered,whiletheUKandCalifornia,amongothers,aretestingtheblendingofhydrogeninnaturalgaspipelines.Thedeploymentofhydrogenrefuelingstationscontinuestogrow.About700hydrogenstationswereinstalledgloballybytheendof2021,reflectingabout25%annualgrowthfromtheendof2020.AbouthalfoftheseareinJapan,SouthKorea,andChina,withabout100stationsaddedinthepastyear,reflectingannualgrowthofabout35%.Europeaccountsforabout230stations,whiletheUShas80operationalstationsconcentratedinthecoastalstates.Annualgrowthinthesetwomarketswasabout20%,notablyslowerthaninAsianmarkets.Hydrogenend-use:65%growthinvehicles,cleanammoniaproducersleadinindustrysegmentHydrogenisadvancinginmobility.Salesoffuelcellvehiclesgrewbyabout65%from2020to2021,withtotalsalesofabout17,000vehicles(upfrom11,000in2020).Commercialvehiclesaccountforabout10%oftotalvehiclesales,withaboutthree-quartersconsistingoffuelcellbusesandtheremainderoftrucks.However,thesetwosegmentsgrowatdifferentrates.Whereassalesoffuelcelltrucksgrewsevenfoldinayear,mainlyinChinafollowedbyEurope,bussalesdeclinedby30%drivenbylowersalesinChina.Salesoffuelcellpassengervehiclesgrewabout80%,totalingabout15,000vehiclessoldworldwidein2021.MostsaleswereinSouthKorea(55%ofsales),NorthAmerica(20%),andJapan(15%).ThehighestrelativegrowthoccurredinNorthAmerica(nearlyquadrupled)andJapan(morethantripled),reflectingsupportingregulatoryschemesandavailablerefuelinginfrastructure.Progressishappeningwithoff-roadvehiclesaswell,wherehydrogenhasaroletoplayforheavy,long-durationusesinsectorslikemining,construction,orrail.Multipleprojectshaveretrofittedminingtruckswithfuelcells,whileOEMshavedevelopedcrawlerexcavatorsthatrunonhydrogen.Hydrogen-fueledtrainsweredeployedinseveralcountriesinEuropeandAsia.Morethan10trainscurrentlyoperateglobally,withordersforover60moreinplace.Industrialhydrogenend-useshavehighactivitylevels,butlarge-scaleplantshaveyettobebuilt.27renewablehydrogenprojectshavereachedFID,ofwhichabout20areinEurope,encompassingtheproductionofcleanammonia,methanol,steel,andsyntheticfuels.Amongthese,ammonialeadsthewaywithsevenprojectshavingreachedtheFIDstageandthreeoperationalprojects(upto20MWelectrolyzers).Meanwhile,cleanmethanolproductionprojectsarematuring,withsevenattheFIDstageandthelargestoperationalplanthavinga10MWelectrolyzer.Anotherfiverenewablehydrogenprojectsfocusonrefining,foursmall-scaleprojectstargethydrogen-basedsteelmaking,andfourotherswillproducesyntheticfuels.Muchofthismomentumisdrivenbyprivatesectorcommitments,evenbeforeregulatoryframeworksandpotentialgovernmentsupportareclear.Forinstance,twolargeglobalcontainershipoperatorshaveplacedtheworld’sfirstordersformethanol-fueledoceangoingcontainerships,whileautomotivecompaniesarecommittingtosourcing“greensteel.”However,nofull-scaleplantshavereachedtheFIDstage.Energyandheatingend-usesareprogressing.Examplesincludetheblendingofhydrogeninnaturalgasturbinesaswellasthedevelopmentofhydrogen-readyturbinesandhydrogenforhigh-gradeheatapplications,aswellasthereplacementofcoalwithcleanammoniainpowerplants.Notably,JapanandSouthKoreahavedeployedcombinedheatandpower(CHP)fuelcellsystemsthatcanrunonhydrogen,withabout425,000suchsystemsinstalledacrossJapan.TechnologysuppliershaverampedupmanufacturingcapacityHydrogendeploymentisgraduallyevolving,andalthoughdemandvisibilityislimited,suppliersarereadyingandhaveinstalledmanufacturingplantsforequipmentsuchaselectrolyzersandfuelcells.Electrolysis.Companieshaveinstalledabout3.5GWofelectrolysismanufacturingcapacitygloballybytheendof2021,withanother3.5GWannouncedtobeaddedduring2022.EuropeanOEMshavedevelopedabouthalfoftheexistingcapacity,whileChineseOEMshaveannouncedthemostambitioustargetsfor2022andareplanningtoinstallanadditional1.5GWthisyear.Two-thirdsofexistingcapacityisatmosphericalkalinetechnologytoday,whereastheshareofpressurizedelectrolyzertechnologiesshouldgraduallyincreaseasnewmanufacturingcapacityrollsout.Fuelcells.Thecurrentlyinstalledfuelcellmanufacturingcapacityisapproximately11GW,withabout60%ofthiscapacitydevelopedbySouthKoreanandJapaneseOEMs,followedbyChineseandAmericanOEMs.Announcednear-termgrowthislimited,withatargetof13GWtotalinstalledcapacityin2023,andmostgrowthwilloccurinSouthKorea.Vehicleplatforms.VehicleOEMshavedeveloped87fuelcellvehicleplatformstodate,upfrom61in2021(about70%areinChina).Mostofthecurrentplatformsareforfuelcellbuses,followedbytrucksandlightvehicles.Mostofthenewplatformstargetfuelcelltrucks,followedbylightvehiclessuchasvansorpassengervehicles.DevelopersandfinancialinvestorsareinvestinginhydrogenCompaniesareactivelyinvestinginhydrogen,bothtodevelopprojectstosupplyandconsumecleanhydrogen,andinhydrogencompaniesthemselves(e.g.,technologyproviders).Companiesareinvestinginmaturinghydrogenprojectproposals.StakeholdersareinvestingaboutUSD4billioninfeasibilityorFEEDstudiesforprojectsthathaveyettoreachFID.About40%oftheseinvestmentsarecenteredintheAsia-Pacific,followedbyEurope(about35%).Historically,companieshaveinvestedaboutUSD2billioninsuchstudiestodevelopprojectsthathavealreadyreachedFIDorhavebeendeployed–theseprojectsimplyanestimatedcommittedinvestmentofUSD22billion.Financialinvestorsarefollowingsuit.Globally,investorsspentaboutUSD7billiononfuelcellandelectrolyzersuppliersin2021,nearlydoublinginayear.Bothprivateandpublicmarketsareactive,withsignificantgrowthseenacrossalltypesofinvestments.Notably,privateinvestmentinpublicequity(PIPE)doubled,whilemergerandacquisition(M&A)activitygrewfivefoldfrom2020to2021.Averagedealsizesincreasedby60%yearonyear,withanaveragedealworthUSD41millionin2021.12HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Company13HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&CompanyPriorityactionsforpolicymakersandindustryJointactionbythepublicandprivatesectorsisurgentlyrequired6SeePathtoHydrogenCompetitiveness,January2020,andHydrogenInsights,February2021Thereisnoclimatesolutionwithoutcleanhydrogen.Scalingituprapidlyiscrucialforstayingontracktonetzerobutdoingsowillnothappenbydefault.Thetwomostimportantprioritiesforpolicymakersandindustryinthenextfewyearsare:i)toprogressfromproposalstoinvestmentsandscaleuphydrogendeploymentinregions,andii)toenableglobalhydrogentrade(Exhibit1).1.ProgressfromproposalstoinvestmentsandscaleuphydrogendeploymentinregionsAcceleratinghydrogendeploymentatscaleiscritical,anditwillhelppushthecostsofcleanhydrogenfurtherdown.Todoso,policymakerscancreatedemandvisibilityandregulatorycertaintyaswellasfast-trackaccesstopublicfundingformatureprojects.Inparallel,industryshouldmatureprojectstowardsFIDandfurtherincreasesupplychaincapacityandcapabilities.Policyaction1:Enabledemandvisibilityandregulatorycertaintybyadoptinglegallybind-ingmeasuresCurrently,about680large-scalehydrogenprojectproposalsareonthetable.Tomovetheseprojectsforward,investorsarelookingforvisibilityonfuturedemand,whichdependstoalargedegreeontheregulatoryframeworkforofftakers.Measuressuchasbindingtargetsandquotasfortheconsumptionofcleanhydrogen(forinstanceinsteelmaking,roadmobility)andhydrogenderivatives(suchassyntheticfuelsandcleanammonia),contractsfordifference(CfDs)andpublicprocurementmeasureswouldincreasethisdemandvisibility.Ifenacted,thesepolicieswillcreatearippleeffectthroughthevaluechain,enablinginvestmentsinhydrogensupply,equipmentmanufacturing,andinfrastructure.Withtheincreasedscale,costswillcomedown,bridgingthegaptowardscostcompetitiveness.Inelectrolysis,forexample,anestimated70GWofinstalledelectrolysisissufficienttobringdowncoststobeonparwithgreyhydrogen.6Severalcountrieshaveproposedschemestoincreasedemandvisibility.TheNetherlandshaveenactedSDE++,acarboncontract-for-differenceschemethatprovidesareliableandrobustcarbonpricetosupportdecarbonizationprojects.GermanyisimplementingtheH2Globalschemetofacilitatehydrogenimportsbymatchinglong-termsupplycontractswithshorter-termofftakecontracts.IntheUnitedStatesofAmerica,California’sLowCarbonFuelStandard(LCFS)hasproventobeacost-effectivedemand-pullmeasureincentivizingfuelswitchingfromfossilfuelstolowcarbonalternativesinthetransportsector.MeanwhileSouthKoreahas,aspartofitshydrogenroadmap,launchedambitiouspublicprocurementmeasuresforfuelcellelectricvehicles.Policyaction2:Fast-trackaccesstopublicfundingforhydrogenprojectsGovernmentshaveearmarkedUSD80billiontokickstartthehydrogeneconomy.Thefundingaimsatsupportingearlyhydrogendeployment,creatinginfrastructureandclusters,andspeedingupcostreductionsashydrogenreachesscale.Suchannouncedmeasuresacrossdifferentregionsinclude:—FundingprogramforregionalhydrogenhubsandproductiontechnologydevelopmentintheUS(USD9billion),aswellasproductiontaxcredits(PTC)forcleanhydrogenproductionwithsupportofuptoUSD3kgakilogramdependingoncarbondioxidecontent.—AlongsidefundingfromtheImportantProjectsofCommonEuropeanInterest(IPCEI)intheEU,fromwhichfirstapprovalsfromtheEUCommissionwerereceivedinJuly2022,releasefundingforrollingoutcarboncontractsfordifference(CCfD)schemeforrenewableandlow-carbonhydrogenattheEUlevel.Further,severalnationalhydrogenstrategieshavepledgedfundingforgrowinghydrogendeployment(e.g.,Germany,Spain).—InJapan,thegovernmenthaspledgedaboutUSD2billionforthedevelopmentofalarge-scaleliquefiedhydrogensupplychain.Mostofthesefunds,however,remainpledgestodate,andonlyasmallsharehasbeenassignedtospecificprojects.Followingthroughwithrapidimplementationoftheseinstrumentstosupporthydrogendeploymentisessentialandwillallowliftingmatureprojectsofftheground.Forinstance,acrossEuropethereareprojectproposalsworthUSD32billionundergoingfeasibilityorFEEDstudies–anaccelerationoffundingcouldhelppropelthemforward.Governmentactionandsupportforcleanhydrogendeploymenttodayiscriticaltomovefromvisiontoactionandacceleratehydrogenuptake,whilehelpingindustriesthataredecarbonizingtoretaintheircompetitiveness.Industryaction1:AdvanceprojectproposalstoFIDbycommittingtofundingandre-sourcedeploymentAsgovernmentsincreaseregulatorycertaintyandfundingsupportstartstorollout,matureprojectswillmovetowardFID.InvestinginfeasibilityandFEEDstudieswillberequiredtobringtheUSD240billionofprojectproposalsclosertodeployment.Inaddition,moreprojects–anestimatedUSD460billionofinvestmentsuntil2030–areneededtobeontracktonet-zeroin2050.Projectdeveloperswouldneedtostepupthedevelopmentofmoreproposalsspanningtheentirehydrogenvaluechain,boostinghydrogensupply,investmentsinend-use,andtheinfrastructurethatconnectssupplywithdemand.Tolowerrisksforbothofftakersandsuppliers,newpartnershipsacrossthevaluechainarealreadyemerging.Projectdevelopersareelicitingdemandfrompotentialofftakers,forexample,bywayoforganizingtheminprojectconsortiatogetherwithpotentialhydrogensuppliersandinfrastructureplayers.Astheprojectconceptmatures,bindingofftakeagreementsareconcluded,whichinturnallowthesuppliersandinfrastructureplayerstoraisefundingandcommitfurtherinvestments.Bycoordinatingacrossthevaluechain,sharingrisks,leveragingexistinginfrastructureandbuildinginphases,suchprojectsaresolvingthechicken-eggprobleminaniterativefashion.Industryaction2:ScaleuphydrogensupplychaincapabilityandcapacityAsdemandvisibilityincreases,theindustrywillbeabletorampupmanufacturinganddeploymentcapacityacrossalltypesofequipment.Forexample,electrolyzerOEMsneedtoexpandcapacityfromthecurrent3.5GWinstalledbyendof2021toatleast50GWayearby2030tobeontracktonetzero.Furthermore,scale-upisrequiredalongthefullvaluechain,startingwiththematerialsthatgointothecomponentsandultimatelytheequipmenttoproduce,store,convert,transportandusehydrogen.Tosucceed,companiesneedtodeploycapitalearlytobuildmanufacturingexperience,prepareproductdesigns,optimizemanufacturingprocesses,andgainexperienceinbuildingtheplants.Projectsrequirealignmentandsynchronizationalongthevaluechain,bothintermsofregulationsaswellaswithinfrastructureandend-useapplications.Partnershipsalongthevaluechain–forexamplebetweenelectrolyzersuppliersandprojectdevelopersandbetweencomponentmanufacturersandfuelcellstackmanufacturers–canbeusedtojointlydevelopproductsandsynchronizescaleup.7InternationalOrganisationforStandardisation2.EnableglobalhydrogentradeGlobaltradeinhydrogenallowstobringcleanhydrogenfromregionswithabundantenergyresourcestothedemandcenterstherebyacceleratinghydrogenuptakeandreducingcosts.Thisrequirescommonglobalstandardsforhydrogen,robusttradeablecertificationsystemsandcross-borderinfrastructure.Policyaction3:EnsureinternationalcoordinationToenabletradeofhydrogenanditsderivatives,internationalcoordination,crediblecommonstandardsandrobustcertificationsystemsforhydrogenarerequired.AcommonglobalISO7standardmethodologyforassessingthecarbonfootprintofdifferenthydrogenproductionpathways14HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Company15HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Companyisessentialtoallowthehydrogenwiththelowestcarbonfootprinttorevealitsclimatebenefits.TheHydrogenCouncilissupportingthedevelopmentofthesaidISOstandard,withtheIPHEguidelines8servingastheseeddocument.Meanwhile,robustcertificationsystemsareinstrumentalinbuildingconsumertrustandpavingthewayforcross-borderhydrogentrade,whichinturnwillsupportproductionscale-upandbringthecostofhydrogenfurtherdown.TheupcomingHydrogenCouncilpublicationsontheglobaltradeofhydrogenandonhydrogencertificationwillexplorethesetopicsinmoredetail.Industryaction3:Buildinfrastructureforcross-bordertradeThebiggestgapbetweenannouncedprojectsandprojectsrequiredtoachievenetzeroisinhydrogeninfrastructure.Only10%ofcurrentlyproposedinvestmentsfocusonhydrogeninfrastructure,highlightinganinvestmentgapofabout85%totherequiredUSD200billioninspendingthrough2030.Theindustryneedsmoreproposalsintheseareasandshouldconcentrateitseffortsonestablishinginfrastructuretoenablecross-bordertrade.Suchproposalswouldinvolveterminals,large-scalestorageofhydrogen,hydrogencarriers,conversiontechnologies,andrefuelingstationnetworks.Asinternationalcooperationamonggovernmentsadvances,industryshouldactivelyhelpprioritizeactionstoenabletradeflowsthatefficientlymatchsupplyanddemandacrossborders.8IPHEWorkingPaper,MethodologyforDeterminingtheGreenhouseGasEmissionsAssociatedwiththeProductionofHydrogen16HydrogenInsightsReportSeptember2022HydrogenCouncil,McKinsey&Company
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