The Future of Hydrogen

Seizing today's opportunities

"Hydrogen is today enjoying unprecedented momentum. The world should not miss this unique chance to make hydrogen an important part of our clean and secure energy future."
Fatih Birol, Executive Director, IEA

Hydrogen and energy have a long shared history – powering the first internal combustion engines over 200 years ago to becoming an integral part of the modern refining industry. It is light, storable, energy-dense, and produces no direct emissions of pollutants or greenhouse gases. But for hydrogen to make a significant contribution to clean energy transitions, it needs to be adopted in sectors where it is almost completely absent, such as transport, buildings and power generation.

The Future of Hydrogen provides an extensive and independent survey of hydrogen that lays out where things stand now; the ways in which hydrogen can help to achieve a clean, secure and affordable energy future; and how we can go about realising its potential.

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Demand for hydrogen

	Refining	Ammonia	Other
1975	6.2	10.877	1.077
1980	6.831	16.171	1.456
1985	8.563	20	1.847
1990	12.033	21.411	1.9
1995	15.829	21.96	2.042
2000	21.449	28.565	2.484
2005	25.257	26.141	2.691
2010	30.974	28.345	3.105
2015	35.965	31.921	3.813
2018e	38.243	31.458	4.188
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Growing support

	Incentives without targets	Targets without incentives	Combined incentives with targets
Passenger cars	5	2	8
Vehicle refuelling stations	0	3	7
Buses	3	2	5
Electrolysers	0	5	1
Trucks	1	3	1
Buildings heat and power	0	1	1
Power generation	1	1	0
Industry	2	0	0
Other fleet vehicles	1	0	0
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Hydrogen production

Hydrogen can be extracted from fossil fuels and biomass, from water, or from a mix of both. Natural gas is currently the primary source of hydrogen production, accounting for around three quarters of the annual global dedicated hydrogen production of around 70 million tonnes. This accounts for about 6% of global natural gas use. Gas is followed by coal, due to its dominant role in China, and a small fraction is produced from from the use of oil and electricity.

The production cost of hydrogen from natural gas is influenced by a range of technical and economic factors, with gas prices and capital expenditures  being the two most important.

Fuel costs are the largest cost component, accounting for between 45% and 75% of production costs. Low gas prices in the Middle East, Russia and North America give rise to some of the lowest hydrogen production costs. Gas importers like Japan, Korea, China and India have to contend with higher gas import prices, and that makes for higher hydrogen production costs.

	CAPEX	OPEX	Natural gas
	0.34	0.17	0.49
	0.61	0.37	0.54
	0.34	0.17	1.22
	0.61	0.37	1.34
	0.34	0.17	0.6
	0.61	0.37	0.66
	0.34	0.17	1.27
	0.61	0.37	1.4
	0.34	0.17	0.43
	0.61	0.37	0.47
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While less than 0.1% of global dedicated hydrogen production today comes from water electrolysis, with declining costs for renewable electricity, in particular from solar PV and wind, there is growing interest in electrolytic hydrogen.

Keeping an eye on costs

	Blank	Natural gas	Natural gas with CCUS	Coal	Renewables
Natural gas	0.9	1.3	0	0	0
Natural gas with CCUS	1.5	0	1.4	0	0
Coal	1.2	0	0	1	0
Renewables	3	0	0	0	4.5
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With declining costs for solar PV and wind generation, building electrolysers at locations with excellent renewable resource conditions could become a low-cost supply option for hydrogen, even after taking into account the transmission and distribution costs of transporting hydrogen from (often remote) renewables locations to the end-users.

Hydrogen costs from hybrid solar PV and onshore wind systems in the long term

Various uses for hydrogen

  • Hydrogen use today is dominated by industry, namely: oil refining, ammonia production, methanol production and steel production. Virtually all of this hydrogen is supplied using fossil fuels, so there is significant potential for emissions reductions from clean hydrogen.

  • In transport, the competitiveness of hydrogen fuel cell cars depends on fuel cell costs and refuelling stations while for trucks the priority is to reduce the delivered price of hydrogen. Shipping and aviation have limited low-carbon fuel options available and represent an opportunity for hydrogen-based fuels

  • In buildings, hydrogen could be blended into existing natural gas networks, with the highest potential in multifamily and commercial buildings, particularly in dense cities while longer-term prospects could include the direct use of hydrogen in hydrogen boilers or fuel cells.

  • In power generation, hydrogen is one of the leading options for storing renewable energy, and hydrogen and ammonia can be used in gas turbines to increase power system flexibility. Ammonia could also be used in coal-fired power plants to reduce emissions.

Near term, practical opportunities for policy action

Hydrogen is already widely used in some industries, but it has not yet realised its potential to support clean energy transitions. Ambitious, targeted and near-term action is needed to further overcome barriers and reduce costs.

The IEA has identified four value chains that offer springboard opportunities to scale up hydrogen supply and demand, building on existing industries, infrastructure and policies. Governments and other stakeholders will be able to identify which of these offer the most near-term potential in their geographical, industrial and energy system contexts.

Regardless of which of these four key opportunities are pursued – or other value chains not listed here – the full policy package of five action areas listed above will be needed. Furthermore, governments – at regional, national or community levels – will benefit from international cooperation with others who are working to drive forward similar markets for hydrogen.

Hydrogen value chains
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