ESG
- Blue and green hydrogen are poised to play a major role in decarbonising heavy industry, supporting electrification and enabling more sustainable economic growth.
- The US Inflation Reduction Act is a game-changer that should unleash a wave of capital expenditure, lifting supply and demand for clean hydrogen.
- The pace of decarbonisation will be dependent on upgrading power grids and other advances. Low-cost renewable energy will be vital for clean hydrogen solutions to become cost-competitive with fossil fuels.
- Disruption among steel producers, commercial vehicles and generally across the energy complex are three areas of potential fertile ground for selective investors who can take a long-term view.
Why is hydrogen important for the energy transition?
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2020 actual, 2025-2050 based on net zero scenario estimates as at October 2021. *Other includes ammonia, grid injections, buildings, NH3 – fuel and synfules. Source: International Energy Agency (IEA)
Hydrogen can be used as a carrier of energy, and as an input into chemical and industrial processes. Clean hydrogen is, therefore, a crucial decarbonisation tool for a range of industrial activities including steel, aluminium, iron and chemical production. We also see it as an option to decarbonise commercial transportation, and, notably, the energy and utilities sector.
Significant demand will likely initially come from today’s users of grey hydrogen (see hydrogen rainbow on next page), such as oil refiners and chemicals producers. But as the world progresses toward net zero, that usage could eventually be overtaken and then dwarfed by growing demand from heavy industry and energy storage.
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Source: SYSTEMIQ analysis for the Energy Transitions Commission 2021
Note: Readiness refers to technical readiness, economic competitiveness and ease of sector use. High-temperature heat refers to industrial heat above 800 degrees centigrade. Current hydrogen use in refining is higher due to oil consumption.
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