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By 2030, nearly two-thirds of energy and utility companies will invest in low-emission hydrogen
Hydrogen, produced with low carbon emissions(1), is emerging as one of the most promising tools to decarbonize previously high-emission industries. A new study from the Capgemini Research Institute is titled “Low-Carbon Hydrogen – A Path to a Greener Future” shows that 62 percent of companies from energy-intensive industries(2) are considering switching to low-CO2 hydrogen. On average, energy and utility companies expect that by 2050, climate-friendly hydrogen will cover 18 percent of all final energy consumption. Along the hydrogen value chain, they invest in particular in the development of the hydrogen infrastructure, in economical electrolysers and fuel cells.
According to the study, the majority of companies assume that climate-friendly hydrogen will contribute to achieving their emission reduction and sustainability goals in the long term. 63 percent of energy and utility companies see hydrogen produced with low carbon emissions as crucial to decarbonizing the economy. 62 percent believe that climate-friendly hydrogen can help countries reduce their dependence on fossil fuels and promote energy autonomy. Those surveyed estimate its share of the hydrogen mix in 2050 at up to 55 percent.
64 percent of energy and utility companies plan to invest in climate-friendly hydrogen by 2030; almost all want to do this by 2050. For the year 2030, they envisage an average of 0.4 percent of sales for low-CO2 hydrogen. They invest primarily in the transport and distribution of hydrogen as an energy source (53 percent), in its production (52 percent) and in research and development (45 percent).
“Hydrogen produced in a climate-friendly manner is a crucial element for a sustainable energy mix. We need it in particular to decarbonize critical sectors with high emissions – such as industry and transport. This requires considerable investments: in research and development, cooperation along the value chain, in transparent strategies for partnerships and the evaluation of the respective entrepreneurial benefit”, comments Guido Wendt, Head of Energy & Utilities at Capgemini Invent in Germany. “Companies need to build appropriate collaborations across the entire value chain and use technologies such as simulations, digital twins and traceability solutions to successfully scale up their low-carbon hydrogen initiatives. This is the only way we can make the future climate-neutral and limit global warming.”
Green hydrogen: demand and investments are growing
The demand for hydrogen has increased by more than 10 percent in the last three years across sectors and countries. Companies expect further growth, especially in the classic areas of application of hydrogen: 94 percent of the oil refineries expect a significant increase in demand by 2030, as do 83 percent of the chemical and fertilizer companies.
In new application areas – such as heavy-duty transport, aviation and shipping – the demand for hydrogen is expected to grow. Although these technologies may take some time to mature, the study shows that companies in these sectors see their potential. They are already developing innovative business models and cost-cutting strategies to expand the use of hydrogen. However, the decisive potential of hydrogen lies in those sectors in which electrification is not an option and application scenarios can be realized in the short term with locally available quantities. Almost three quarters (71 percent) of energy suppliers consider climate-friendly hydrogen to be suitable for storing energy from intermittent renewable energy sources such as sun and wind and making it available for other areas of application.
Challenges in production, technology and infrastructure
Although demand for low-carbon hydrogen is increasing across all sectors, hydrogen production is known to face challenges as current methods are neither cost-effective nor environmentally friendly. There is a need to increase supply and demand simultaneously, as well as to invest heavily. This will only be possible through partnerships and ecosystems with greater collaboration between established hydrogen industry players and new market entrants, and through the development of transparent and open markets.
Despite the challenges of sourcing renewable energy and the current high cost of electrolysers for hydrogen production, energy and utility companies are confident: almost half (49 percent) of organizations worldwide expect the cost of climate-friendly hydrogen production to steadily decrease through 2040. In Germany, 54 percent of suppliers assume that.
Incidentally, most companies are still busy with feasibility studies or are in the pilot phase. Only 11 percent of the energy companies worldwide – in Germany with 22 percent almost twice as many – and 7 percent of the end consumers worldwide (in Germany 2 percent) have fully introduced projects with climate-friendly hydrogen in their market. In order to achieve widespread commercialization and dissemination of this hydrogen, critical technical and infrastructural problems must be solved in addition to cost and energy issues.
The study also shows that companies from different branches of industry face difficulties specific to each sector. For example, 65 percent of companies in heavy-duty transport regard the expansion of the production of hydrogen fuel cells as their greatest infrastructural and technical challenge. In aviation, for 58 percent of those surveyed, it is necessary to change the design of aircraft in order to be able to use hydrogen produced with low emissions as a fuel. In the steel industry, 72 percent consider modernization of the infrastructure necessary for large-scale hydrogen-based steel production.
In addition to the financial, infrastructural and technological issues, according to 60 percent of the companies, the lack of experience and expertise is one of the biggest challenges in the spread of hydrogen technology. Skill shortages are particularly acute at end-user organizations in Spain (70 percent), and energy and utility companies in Japan (65 percent), France and Australia (63 percent each). In Germany, 48 percent of suppliers and 52 percent of end user companies see the shortage of skilled workers as one of the biggest challenges for hydrogen projects.
The full study is available for you here.
methodology of the study
The Capgemini Research Institute conducted a survey in 13 countries with the aim of understanding how energy and utility companies (EVU) worldwide can realize the potential of climate-friendly hydrogen for themselves. It surveyed 500 executives from electric utility companies with annual sales of more than US$500 million and 360 executives from consumer sectors(3) such as heavy-duty transport, aviation, ocean freight, steel, chemicals and refining with annual sales of over US$1 billion. Respondents are involved in the planning and development of low-emission hydrogen initiatives and work across disciplines such as strategy, product and service development, innovation and engineering, operations (manufacturing/supply chain with a focus on procurement, transportation, etc.), and business units, who are specialized in hydrogen, renewable and new forms of energy, decarbonization, environment, sustainability, energy transition or end-uses (hydrogen for fuel cells / engines) etc.
In addition to the quantitative surveys, the institute conducted more than 21 in-depth interviews with supply- and demand-side organizations as well as with start-ups, venture capitalists, researchers and officials from regulators.
About Capgemini
Capgemini is one of the world’s leading partners for companies to steer and transform their business through the use of technology. The group is driven every day by its purpose to advance human potential through technology – for an inclusive and sustainable future. Capgemini is a responsible and diverse organization with a team of 360,000 people in more than 50 countries. A 55 year history and in-depth industry expertise are the reasons why clients entrust Capgemini with the full spectrum of their business needs – from strategy and design to business operations. The company relies on the rapidly developing innovations in the areas of cloud, data, AI, connectivity, software, digital engineering and platforms. The group’s turnover in 2022 was 22 billion euros.
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About the Capgemini Research Institute
The Capgemini Research Institute is Capgemini’s in-house digital think tank. The institute publishes research on the impact of digital technologies on large companies. The team draws on Capgemini’s global network of experts and works closely with academic and technological partners. The institute has research centers in India, Singapore, UK, and USA.
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(1) In order for hydrogen production to be considered low in CO2 emissions, it must fall below the threshold set by the EU of 3.38 kg CO2 equivalent (CO2e) per kg hydrogen. This is 70 percent below the benchmark for fossil fuels, including transport and other non-production emissions. In the US, the equivalent emissions limit for granting tax benefits for hydrogen production is within the Inflation Reduction Acts at 4.0 kg CO2e/kgH2.
Although low-emission hydrogen production can also include pyrolysis of biomass, the focus of this study is on hydrogen produced by electrolysis based on renewable energy or nuclear energy that causes no or minimal CO2 emissions – also “green hydrogen” or ” called “pink hydrogen”.
(2) Refers to the end-user sectors – including heavy transport, aviation, ocean freight, steel, chemicals and refining.
(3) The end-use sectors were selected and included in the survey based on their potential to use hydrogen.
Press contact:
Kora Alice Lejko
Capgemini Germany | Frankfurt
Tel.: +49 151 4025-1298
E-Mail: [email protected]
Original content by: Capgemini, transmitted by news aktuell
