Hydrogen is emerging as a viable, low-carbon energy source for some industrial and transportation uses and depending on incentives and uptake, the demand for hydrogen could nearly triple by 2050. Bain & Company has researched three scenarios for the growth of the hydrogen market, taking into consideration the full range of potential future applications, hydrogen’s ability to play a meaningful role against zero-emission alternatives, based on whether hydrogen is the right solution, as well as factors such as cost competitiveness, and the readiness of technology and supply to meet demand.
- Base case scenario: an integrated industry. This points toward a global market of 300 million metric tons (Mtons) by 2050 with the potential to establish a profit pool of more than US$250 billion. This would represent an initial period of modest growth from 2020 to 2030, with demand accelerating after that.
In this scenario, Bain & Company assumes most major industries will increase the demand for hydrogen, some more than others. For example, in transportation, battery electric vehicles are expected to become the standard for most vehicle categories, and hydrogen to play a role in specific vehicle classes like heavy-duty trucks, or for specific applications where hydrogen has an advantage over alternatives—for example, where batteries would be too heavy. In this scenario, transportation and industrial applications would make up 80% of the demand, with power, heat, and other uses making up the rest. Since some of these high-potential applications will require significant investments in infrastructure (for example, hydrogen fuel stations for transportation) or process changeovers (such as replacing traditional blast furnaces to enable a direct reduced iron process in steel production), short-term opportunities may be found in other industrial or power applications.
- Accelerated uptake scenario: Hydrogen plays a role as fuel for power production or energy storage for renewables, depending on the decarbonisation plans of major power utilities. However, given the uncertainties in the uptake of technologies and relative competitiveness of hydrogen, adoption could be much slower.
- Focused uptake scenario: with an estimate of 185 Mtons by 2050.
Both blue and green hydrogen (that is, hydrogen from low-carbon and zero-carbon sources) make up less than 1% of total hydrogen production today. Significant advances in technology and experience will have to occur to make these competitive, along with more renewable energy, infrastructure for the transport and storage of hydrogen, and a large installed base of industrial applications to nurture growth. Public investments will be required to create the right initial opportunities and catalyse market growth until hydrogen, blue or green, can be competitive at scale on its own.
In its report “Five Imperatives to Thrive in a Hydrogen Future”, Bain & Company details how companies can ready themselves for the role that hydrogen will play in the energy mix in the near future. Companies can begin to build and extend a strategic advantage in hydrogen by developing a greater understanding of market factors and the underlying constraints and opportunities. Customer focus, collaborations with key partners, selective M&A activity, and subsidised pilot projects can help companies build market position as prices decline.