Green hydrogen H2 gas molecule. Stock image.
While fossil fuel-based hydrogen (grey hydrogen) as a fuel is not new, blue hydrogen (natural gas-based) and green hydrogen (renewables-based) are entering commercialization and are only just becoming established in energy commodity markets, market analyst Fitch Solutions notes in its latest industry report on the commodities of the future.
In fact, the ‘hydrogen as a commodity’ story has just started to unfold, with a notable rise in interest seen since 2020, and the sector will evolve at a fast pace in the coming years amid an ever-expanding project pipeline, Fitch says
Low carbon hydrogen has numerous potential industrial applications to decarbonise multiple sectors including power, or as fuel for manufacturing, transportation, and more.
Fitch forecasts green hydrogen production will rapidly accelerate and gain increasing market share at the expense of traditional grey hydrogen, rising from less than 1% of current global market supply to a forecast 10% by 2030. This rapid acceleration has been brought forward by declining renewable costs, wide geographical scope, short development times and its zero-carbon footprint, Fitch says.
FITCH FORECASTS GREEN HYDROGEN PRODUCTION WILL RAPIDLY ACCELERATE AND GAIN INCREASING MARKET SHARE AT THE EXPENSE OF TRADITIONAL GREY HYDROGEN, RISING FROM LESS THAN 1% OF CURRENT GLOBAL MARKET SUPPLY TO A FORECAST 10% BY 2030
In contrast, Fitch expects that blue hydrogen production growth will remain highly focused in several key markets and will be slower to gain market share owing to long development times, resource dependency and high levels of capital investment.
Overall, Fitch forecasts that all types of low carbon hydrogen will most likely grow in the coming years as the energy sector accelerates its transition towards lower emissions.
Hydrogen product demand will be most concentrated in large, highly developed markets, and Fitch’s new Green Hydrogen Suitability Index indicates the US, China, Western Europe and Canada as prime markets globally for the development of green hydrogen.
As demand and production capacity for this energy grows robustly in the coming years, the market will mature and require transparent pricing benchmarks, market liquidity and efficient risk management tools for suppliers and consumers in order for adoption to really pick up, Fitch predicts.
However, the analyst notes that the low-carbon hydrogen industry will face a number of key growth challenges, infrastructure development, logistical supply chain establishment, cost competitiveness and scalability.
In the commodities sector, besides powering operations and reducing emissions, green hydrogen presents opportunities as a new revenue stream for energy, mining and metal players, Fitch points out.
Many major oil and gas companies, particularly European firms such as Equinor, Shell, Total, Repsol, ENI and BP, will drive support for low-carbon hydrogen, in particular blue hydrogen, Fitch says. Some mining and metal players have recently announced their goal to be major producers and suppliers in the market, including steelmaker Posco and Fortescue Metals, the fourth largest iron ore producer.
(Read the full report here)