Gradual growth has been seen across the value chain, with progress in hydrogen supply, transmission and distribution, and end-uses in the past year, according to a Hydrogen Council and McKinsey report.
Tuesday (September 20) saw the release of the Hydrogen Insights 2022 report which highlighted a need to push hydrogen projects over the final investment decision (FID) line, with key recommendations for policymakers and industry to accelerate the market.
Despite the need for more work to done, the Hydrogen Council and McKinsey noted significant progress across the entire hydrogen industry, suggesting the wheels are in motion.
In terms of hydrogen supply, the report estimated that the global industry has installed approximately 800 kilotonnes (800,000 tonnes) per year of low-carbon hydrogen capacity, with around 550MW of water electrolysis.
According to the report, installed electrolyser capacity grew by around 80% between 2020 and the end of 2021, with 160MW of growth seen in China alone, seeing the country become the world’s largest market for electrolysis at about 200MW capacity installed.
Europe sits as the second-largest market, with 170MW of electrolysers installed, and 40MW having been added over the course of 2021. The report estimates that about two-thirds of the capacity serves industrial end uses such as ammonia plants or refineries, with mobility taking approximately 10% of total capacity.
Transmission and distribution
The report recognises that regional and global hydrogen infrastructure is gradually developing and maturing with further developments across pipelines, refuelling stations, and global hydrogen shipments.
With approximately 4,500km of hydrogen pipeline installed across the globe transmitting grey hydrogen to industrial end-users, the report recognises that the feasibility of transmitting hydrogen through pipelines is being showcased. The report noted that several initiatives in Northern Africa, Europe, the UK, and California, US, are testing the blending of hydrogen in natural gas pipelines.
It suggests that around 700 hydrogen stations were installed globally by the end of 2021, reflecting a 25% annual growth from 2020. It estimates that nearly half of the stations are in Japan, South Korea, and China, which saw a 35% annual growth. Despite still seeing progress, Europe and the US both saw slower growth at around 20%.
Noted in the report is the slow evolution of seaborne hydrogen trade, with small-scale deliveries of clean hydrogen by ship having taken place over the 2020-2021 period. Additionally, it highlights three pilot projects having carried clean ammonia, liquid hydrogen, and liquid organic hydrogen carriers (LOHC) that have sailed in the past three years.
Hydrogen end use
From 2020 to 2021 there was a 65% boost in the sales of fuel cell vehicles. According to the report, total sales sat at approximately 17,000 vehicles, up from 11,000 in 2020. Commercial vehicles accounted for 10% of vehicle sales, with around three quarters consisting of fuel cell buses and the remaining being trucks.
Passenger vehicles also saw significant growth, with an 80% uplift to around 15,000 vehicles sold worldwide in 2021; 55% of sales were seen in South Korea, with 20% in North America, and 15% in Japan.
Industrial end use for hydrogen have high levels of activity, but large-scale plants have yet to be built, says the report. It states that 27 renewable hydrogen projects have reached FID, with 20 of those in Europe, used for the production of clean ammonia, methanol, steel and synthetic fuels.
Ammonia leads the way, in fact, with seven projects having reached FID and three projects operational. Similarly, methanol features another seven projects having reached the FID stage.
The report reads, “Much of this momentum is driven by private sector commitments, even before regulatory frameworks and potential government support are clear. For instance, two large global container ship operators have placed the world’s first orders for methanol-fuelled oceangoing container ships, while automotive companies are committing to sourcing ‘green steel’. However, no full-scale plants have reached the FID stage.”
Technology manufacturing capacity
Given the gradual build-up of infrastructure and end-uses seen globally and highlighted by the report, the Hydrogen Council and McKinsey have found that suppliers are readying and have installed manufacturing plants for equipment such as electrolysers and fuel cells.
It estimates that companies have installed approximately 3.5GW of electrolysis manufacturing capacity globally, with another 3.5GW expected to be added during 2022. Fuel cells currently boasts an installed capacity of around 11GW.
The report found that vehicle OEMs have developed 87 fuel cell vehicle platforms to date, up from 61 in 2021, with the majority of platforms being fuel cell buses, followed by trucks and light vehicles.
Investments in hydrogen
In line with the growth seen across the value chain, the report observes that companies are actively investing in hydrogen, both to develop projects to supply and consume clean hydrogen, and in the hydrogen stakeholders and innovators themselves.
Its research found that stakeholders are investing approximately $4bn in feasibility studies for projects that are yet to reach an FID. The report stated, “Historically, companies have invested about $2bn in such studies to develop projects that have already reached FID or have been deployed – these projects imply an estimated committed investment of $22bn.”
Additionally, the report notes that globally, investors spent around $7bn on fuel cell and electrolyser suppliers in 2021 – nearly doubling in a year. Most notably, it said that private investment in public equity (PIPE) doubled, while merger and acquisition (M&A) activity grew as much as five times from 2020 to 2021. Additionally, it found that average deal sizes grew by 60% year-on-year, averaging at around $41m in 2021.