Global Green Hydrogen Supply Needs $9.4 Trillion Investment By 2050: Deloitte
Raising the funds is manageable if the decline in oil and gas spends can be channeled to clean hydrogen, the report said.
Setting up the global supply chain for green hydrogen will require a cumulative investment of $9.4 trillion by 2050 to achieve the net-zero targets, according to Deloitte Touche Tohmatsu India LLP.
The business consulting and services firm estimates $3.1 trillion of the total investments to go towards developing economies, it said in a report issued on June 27.
Although these numbers may seem high, they are considerably less when spread out, it said. "Raising $9.4 trillion in financing over a 25-year period corresponds to 23 times global investment in oil and gas production of the year 2022."
Raising the funds is "manageable" if the decline in oil and gas spends could be channeled to clean hydrogen, the report said. "It is something that international oil and gas companies have already started doing."
Some of the main consumption regions, such as China, Europe and North America will require expenditure of $2 trillion, $1.2 trillion and $1 trillion, respectively.
According to the report, funding should also be raised in developing countries for export purposes, including almost $900 billion in north Africa, nearly $400 billion in South America and nearly $300 billion each for sub-Saharan Africa and central America. "This is likely to pose significant challenges."
The hydrogen economy's emergence can be a unique opportunity to attract foreign investment in the global south, a trend that may already be under way—the 250 million euro German PtX Development Fund is an example of it.
According to Deloitte's outlook, green hydrogen production will account for the bulk of investments, with over 75% of the total requirements or around $7.2 trillion, posing industrial and deployment challenges.
Power generation, and manufacturing and installation of 7,900 gigawatt of solar photovoltaic and 1,300 GW of wind capacity will require $3.1 trillion and $1.5 trillion in investments, respectively. Electrolysers will require an additional investment of $2.6 trillion for 7,500 GW capacity by 2050.
Ramping up the value chain of green hydrogen requires the timely scale-up of equipment manufacturing and a seamless deployment of renewable energy assets. Blue hydrogen capital expenditure of $600 billion are concentrated in the first half of Deloitte’s outlook period, as this technology helps to support market ramp-up before peaking around 2040, it said.
Global Demand
To achieve climate neutrality by 2050, the clean hydrogen market capacity can grow to 170 million tonne of hydrogen equivalent (MtH2eq) in 2030 and to 600 MtH2eq in 2050. Demand is expected to initially build on the decarbonisation of existing industrial uses of hydrogen close to 95 MtH2eq, most notably for fertiliser production, the report said.
By 2050, industry (iron and steel, chemicals, cement and high-temperature heating) and transport (aviation, shipping and heavy road transport) can account for 42% and 36% of total clean hydrogen demand, respectively.
Overall, this outlook shows clean hydrogen delivering crucial carbon emission reductions. Decarbonising current and developing new end uses, it can abate up to 85 giga tonne of carbon dioxide equivalent (GtCO2eq) in cumulative emissions by 2050, more than twice global CO2 emissions in 2021.
While demand is expected to quickly ramp up in industrialised economies, clean hydrogen can also represent a major sustainable growth opportunity for developing countries, leading to the progressive structuring of a truly global market, it said.
Government support may be needed until clean and especially green hydrogen, catches up in terms of costs, leveraging economies of scale and tightening CO2 pricing.
"The breakeven point can be reached by 2030 for ammonia, 2035 for gaseous hydrogen, 2045 for methanol and 2050 for sustainable aviation fuel," it said. "Therefore, with time, green hydrogen can stand on its own feet."
By 2050, the global hydrogen market can reach maturity as supply capacities massively scale up to meet the demand, underpinned by new end uses in industry and transport. The market growth is expected to allow spot markets to dominate price formation, improving resilience and channeling investments to the most competitive geographical areas.
Cost Component
Costs are one of the fundamental drivers of the clean hydrogen uptake—and, early on, an obstacle to overcome.
Clean hydrogen is currently more expensive to produce and transport than its fossil-based competitors, such as grey hydrogen prepared from methane or coal.
According to Deloitte's analysis, the production cost of green pure hydrogen would range between $2.50 and $5 per kg in 2025, at least $1.5 per kg more than grey hydrogen.
Most critical clean hydrogen technologies—including electrolysers and storage—are still at an early stage, while legacy alternatives such as steam methane reformers and coal gasification plants benefit from decades of infrastructure and deployment.
As with other abatement technologies, economies of scale can over time reverse the current ranking of costs, according to the report.
The sharp decline in the cost of renewable electricity is a case in point. Sparked by public support, mass deployment of wind and solar power plants triggered a virtuous cycle of learning by doing, it said. Between 2010 and 2021, production costs fell dramatically for solar (88%), onshore wind (68%) and offshore wind (60%), according to the report.
Subsidies and advocacy are likely needed to do the same for clean hydrogen, the report said.
