Hydrogen in the energy system of the future

Hydrogen (H₂) is taking an increasingly important role in the energy transition, as it has the potential to replace fossil fuels and serve as a long duration storage solution for renewable electricity generation to help balance our electricity system.

Hydrogen production process

To date, nearly all hydrogen produced worldwide is grey, meaning it is produced (mainly) with natural gas. Capturing and storing the CO₂ makes grey hydrogen blue. When the electricity needed for the production of hydrogen is from a renewable source, it becomes green hydrogen. Purple hydrogen is similarly produced, but the power is produced by a nuclear power plant.

Challenges in green hydrogen

The development of hydrogen technologies is accelerating due to advances in electrolysis and conversion and the decreasing cost of renewable energy. To achieve future market success, governments and companies are piloting and scaling up to gain experience. However, green hydrogen is currently significantly more expensive than grey hydrogen and business cases of many green hydrogen projects remain commercially unviable. Therefore, the biggest challenge is to identify green hydrogen applications that will generate sufficient return, both in the short and long run, and securing the offtake over a longer period of time. This requires companies to fully understand the market dynamics, value drivers and cost of the production process to identify key opportunities, as well as detailed alignment and contracting with stakeholders and government to ensure offtake. Moreover, companies face numerous challenges in obtaining financing, permitting, as well as managing and auditing the project. Navigating this complex world can be challenging. PwC can work with you, from strategy definition to business case development and execution.

How PwC can help

PwC supports companies and governments in adopting hydrogen as a sustainable and economically viable energy source by sharing comprehensive and up to date insights into the technology and market dynamics as well as relevant business case expertise and related legal factors and tax implications.

Our services include:

Developing hydrogen strategies considering emerging markets, technologies, M&A actions and partnerships
Helping build a business case and economic analysis for green hydrogen,
Assessing a business case in full
Establishing pilot projects; performing analyses of technical and economic feasibility, and examining financing options
Supporting in alignment with banks and banking consortia, corporate investors, venture capitalists and private equity
Providing legal consultancy including green incentives support (subsidies), tax structuring and environmental taxes implications, and novel insights derived from the EU regulatory framework
Managing the project from A to Z.
Integrating hydrogen-related projects into reporting
Developing KPIs for ESG reporting
Auditing H2 (pilot) projects
Advising policymakers on national strategies and implementations
And last but not least, helping you connect to other parties in the value chain

Hydrogen uptake is expected to accelerate after 2030

PwC evaluated the production cost trajectory of green hydrogen worldwide, giving us a better understanding of early movers and potentially large suppliers across countries and regions. The key results of our analysis include the following:

Through 2030, hydrogen demand will grow at a moderate, steady pace through many niche applications across the industrial, transport, energy and buildings sectors.
Through cross-sector collaborations, new alliances will form to develop hydrogen projects.
Hydrogen production costs will decrease by around 50% through 2030, and then continue to fall steadily at a slightly slower rate until 2050.
By 2050, green hydrogen production costs in some parts of the Middle East, Africa, Russia, China, the US and Australia will be in the range of €1 to €1.5/kg.
Over the same time period, production costs in regions with limited renewable resources, such as large parts of Europe, Japan or Korea, will be approximately €2/kg, making these markets likely importers of green hydrogen from elsewhere.
Even regions with good renewable resources but densely populated areas will import hydrogen, as land constraints limit the production of green electricity for direct use and conversion to hydrogen.
Many large countries—such as the US, Canada, Russia, China, India and Australia—have regions for both competitive and non-competitive hydrogen production, which could prompt them to develop in-country trading.
Export and import hubs will develop around the world, similar to current oil and gas hubs, but with new players in renewable-rich regions.

Future acceleration requires action now!

To gain practical experience and capitalise on efficiencies through learning curves and scale effects on production, transport and conversion equipment final investment decisions are needed on e.g. joint pilot projects.

As both demand and supply of hydrogen need to scale-up, governments play a pivotal role in stimulating investments through subsidies and taxes but also by matching supply and demand and mitigating long-term uncertainty. To create this environment, a broad view of market developments and value drivers, specialised knowledge on technology, taxes and incentives and extensive experience with stakeholder management and contracting are required. PwC has the required expertise to help organisations and governments navigate through this complexity.