Future of Hydrogen Market

The future of hydrogen study comprehensively examines the hydrogen generation and storage in different forms, demand of hydrogen storage tanks in the upstream, followed by an analysis of the demand for hydrogen conversion, transportation and distribution (tanks, vessel, shipping and pipileine) in the midstream. Furthermore, it delves into the demand for hydrogen fuel cell vehicles, assesses developments in the hydrogen fuels mobility including the aerospace and marine applications and scrutinizes major advancements undertaken by original equipment manufacturers (OEMs). The global hydrogen generation demand is projected to grow from USD 158.8 billion in 2023 to USD 257.9 billion in 2028, growing at a CAGR of 10.2%. The global hydrogen fuel cell vehicle demand is projected to grow from 20 thousand units in 2022 to 1,280 thousand units by 2035, at a CAGR of 37.6%.

The global shift toward a more sustainable and renewable energy mix is propelling the demand for hydrogen across the upstream, midstream, and downstream sectors. Hydrogen, renowned for its versatility as an energy carrier and storage solution, plays a pivotal role in seamlessly integrating renewable sources like wind and solar into the energy system. Leading original equipment manufacturers (OEMs), including Thyssenkrupp Nucera, Siemens Energy, Nel ASA, and ITM Power PLC, are actively engaged in the production of large-scale electrolyzers for industrial hydrogen production. The focus also extends to hydrogen storage and transporatation methodologies, with options ranging from high-pressure tanks and salt caverns to pipelines. Esteemed OEMs such as Linde plc, Air Liquide, and Praxair not only manufacture but also install storage tanks catering to various hydrogen applications.

In the midstream sector, dynamic trends were reshaping the realm of hydrogen, spanning transportation, conversion, and distribution. There was a notable surge in enthusiasm for Power-to-X applications, leveraging hydrogen as a feedstock to create synthetic fuels, chemicals, and additional value-added products. Furthermore, efforts were underway to expand hydrogen pipeline infrastructure, aiming to enhance the seamless and widespread distribution of hydrogen.

As the downstream landscape unfolds, factors such as rising demand for low-emission commuting and government subsidies and tax breaks for zero-emission vehicles, abundant fuel availability, ease of refueling and lower environmental degradation will create new opportunities for hydrogen fuelled vehicles. They are expected to be an alternative for EVs in the coming years. Leading OEMs have already started providing/developing hydrogen powered vehicles such as FCEVs, H2-ICEVs and FCHEVs across different vehicle categories. OEMs such as Hyundai, Toyota and Riversimple have also started developing new business models around hydrogen fuelled vehicles. Riversimple, for instance has its own pay per mile business model, where cars are not sold to users, but leased out. Similarly, Toyota provides direct sales, as well as innovative business models such as subscription based services as well as fuel card plans. Further, Hyundai has also developed on direct sales and fleet based business models. Such developments are expected to drive the demand for hydrogen market in the coming decade.

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Market Dynamics:

Driver: Lower emissions

Hydrogen, and hydrogen-derived fuels are low-emission options that are important in reducing carbon emissions in industries that have difficulties with direct electrification, such as heavy industry and long-distance transport. Currently, these fuels only account for about 1% of global final energy consumption in 2021. Hydrogen is a particularly clean transportation fuel, producing less CO2 emissions compared to other fossil fuels. There has been an increase in hydrogen production, driven by tighter environmental regulations and stricter engine manufacturer specifications. For instance, India plans to introduce Bharat Stage VI regulations by 2020, while China is expected to implement emission regulations equivalent to Euro V standards by 2018. The demand for cleaner fuels is expected to increase significantly in the future due to a 10% growth in automotive sales in the Asia Pacific region, the development of premium quality cars, and a rise in consumer fuel spending patterns.

The use of hydrogen fuel presents a significant reduction in emissions compared to Diesel or Gasoline fuelled ICE vehicles. Hydrogen combustion in fuel cells primarily produces water vapor, minimizing carbon dioxide emissions. In contrast, traditional ICE vehicles emit substantial amounts of CO2 during the combustion of fossil fuels. Additionally, hydrogen combustion generates negligible carbon monoxide and virtually eliminates NOX emissions, pollutants commonly associated with internal combustion engines. This cleaner combustion profile positions hydrogen fuel as a promising alternative for mitigating environmental impact and addressing climate change concerns.

Restraint: Highly Flammable

Safety becomes one of the concerns for hydrogen storage vehicles in the event of crashes and accidents. As per the Department of Energy (US), numerous tests such as hydrogen tank drop test, tank leak test, and garage leak simulations can be performed to produce and store hydrogen safely.

Hydrogen is highly flammable. It has a wide flammability range and low ignition energy requirements, making it more susceptible to ignition compared to conventional fuels. This heightened flammability necessitates stringent safety measures in the design and handling of hydrogen fuel systems in vehicles. Safety concerns surrounding hydrogen combustion can hinder consumer acceptance and erode trust in the technology. This flammability factor not only influences consumer perception but also invites increased regulatory scrutiny, potentially resulting in stricter safety standards. To counter these challenges, industry players must invest in advanced safety technologies, conduct public awareness campaigns to educate consumers, collaborate with stakeholders to shape industry standards, and consider diversifying hydrogen applications beyond the automotive sector.

Opportunity: Lower environmental degradation

Germany’s H2Mobility program is supporting the adoption of fuel cell vehicles by developing fueling stations, which opens opportunities for the deployment of hydrogen storage tanks. Moreover, Europe's Hydrogen for Innovative Vehicles (HyFIVE) project aims to expand its hydrogen fuel cell network, developing stations in Italy, the UK, Austria, and Denmark. Additionally, major automobile players, such as Honda (Japan), Toyota (Japan), and Nissan (Japan), are forming joint agreements with gas companies to develop a 100-station hydrogen highway within Japan. Indian Oil (India) is the largest hydrogen producer in India and aims to build a strong hydrogen distribution network. The company has invested USD 40 million in a demonstration project for hydrogen fuel cell vehicles.

In the pursuit of sustainable transportation, hydrogen fuelled vehicles present a compelling advantage over electric vehicles in mitigating environmental degradation during development. Unlike EVs, which rely on resource-intensive processes such as lithium mining for batteries, hydrogen FCVs donot require large batteries, significantly reducing the ecological impact of production. Additionally, FCVs bypass the need for rare earth elements, minimizing habitat disruption associated with their extraction. As the market navigates through the evolving landscape of sustainable transportation, the environmental edge of hydrogen fuelled vehicles in will become pivotal alternative to electric vehicles.

Challenge: Poor hydrogen Infrastructure and energy loss across hydrogen value chain

Continual energy loss occurs across the entire value chain of hydrogen production. Approximately 30% of the energy required for electrolysis is lost in the production stage, and an additional 10-25% is lost during conversion into other forms. The process of delivering green hydrogen for use in vehicles or energy pipelines demands additional energy input. The utilization of hydrogen in fuel cells introduces further energy loss.

A significant obstacle to the widespread adoption of hydrogen-fueled vehicles is the restricted availability of hydrogen refueling stations, impeding market demand. As of 2022, there were only around 91 H2 refueling stations in the US, most of which were in California. Similarly, in Europe, only Germany and France had 105 and 44 hydrogen refueling stations, while rest countries had less than 20 hydrogen refueling stations. In Asia Pacific, China, Japan and South Korea had 138, 165 and 149 hydrogen refueling stations with support from OEMs and government. The sparse refueling infrastructure limits the convenience and accessibility of hydrogen refueling, discouraging potential buyers and fostering consumer reluctance due to concerns about range anxiety and the inconvenience of finding a nearby station. This is one of the major reasons, for hydrogen fuelled vehicles having a limited demand around the world in the current scenerio. Further, in the commercial sector, the dearth of refueling options disrupts the integration of hydrogen FCVs into fleets, impeding the transition to cleaner transportation solutions. This can be seen from the low presence of H2 powered commercial vehicles in most countries outside China.

Market Ecosystem

The electrolysis & physical storage segment to be the fastest growing during the forecast period

The hydrogen production technologies is birfurcated into steam methane reforming, partial oxidation, coal gasification, and electrolysis. The electrolysis segment is expected to grow at a faster rate in the future of hydrogen study. Continuous research and development are resulting in advances to hydrogen production systems, making them more cost effective and efficient. Advances in electrolysis, for instance, are lowering the costs of producing green hydrogen resulting in the further growth of electrolysis technologies. In 2022, global CO2 emissions were estimated at >50 Gigatons. There is a potential of reducing 2% (1 GT) of total emissions from the existing applications within chemical and industrial markets by shifting towards green hydrogen.  The hydrogen storage technologies has been segmented into physical storage and material-based. The physical storage segment is expected to grow at a faster rate during the forecast period. Physical storage systems can be divided into two main types: compressed gas storage and liquefied hydrogen storage. Compressed hydrogen storage entails compressing hydrogen gas to high pressures before storing it in high-strength composite or metal containers. The use of compressed hydrogen storage is increasing, particularly in applications like hydrogen fuel cell vehicles and industrial settings, which contributes to the growth of physical hydrogen storage during the forecasted period.

“Compression to be the largest segment based on hydrogen conversion during forecast period”

Hydrogen is typically produced at relatively low pressures (20–30 bar) and must be compressed prior to transport. Most compressors used today for gaseous hydrogen compression are either positive displacement compressors or centrifugal compressors. Hydrogen is frequently transported across long distances from manufacturing plants to end consumers via pipelines or as compressed gas in trailers or containers. Compression is an essential step in preparing hydrogen for transportation, ensuring efficient and safe transmission. Compressed hydrogen provides a high-density storage method, enabling for more hydrogen to be stored in a given container. This is particularly important for applications where space constraints are a consideration.

The passenger car segment to be the largest segment during the forecast period

The passenger car segment accounts for the largest market share of the hydrogen fuel cell vehicles. Some leading passenger car FCEV models available in the market include Toyota Mirai, Honda Clarity, Mercedes-Benz GLC FCEV, Nissan X-Trail FCEV, and Riversimple RASA. Other OEMs are also planning to launch new hydrogen fuelled models in the coming years, realizing the significant potential. For instance, BMW has announced plans to introduce the fuel-cell technology developed with Toyota in the BMW X5, X6 and X7 models by 2025. Further, Hyundai also announced plans to launch its new generation of NEXO FCEV in 2024. Similarly, Honda has also announced plans to launch its upcoming CR-V FCEV in 2024. Kia also plans to launch its Carnival FCEV in 2026.  

Asia Pacific to be the prominent market for hydrogen during the forecast period.

Asia Pacific has been leading the market with growing demand for hydrogen fuelled vehicles. Countries such as China, India, South Korea, Japan, and Australia are leading the demand for hydrogen in the region. China is now focusing on supplying hydrogen for zero-emission vehicles in ten global cities. However, the country may eventually participate in international hydrogen trading. China is currently the largest market for Hydrogen Trucks and Buses around the world, while South Korea and Japan are amongst the largest passenger car FCEV markets. In 2022, more than 10,000 fuel cell passenger cars sold in South Korea, making it the country with largest FCEV sales. It held around 60% of market share in Asia Pacific, and more than 45% of global market share.  China on the other hand, had around 4,400 FCEVs sold, most of which were trucks and buses. Simialrly, Japan also sold 1,040 FCEVs, majority of them being passenger cars. Regulations for hydrogen refueling station across countries in the Asia Pacific region, are expected to increase demand for hydrogen fuelled vehicles in the region. India, for instance, plans to produce 5 Million tons of green hydrogen per annum by 2030; with H2 to be the main alternative for electric transport. Similarly, China announced plans for over 50,000 H2 fuel-cell vehicles sold by 2025 and planned multifold increase in green hydrogen production. Japan announced plans to set up 320 H2 refueling stations by 2025 and have 800,000 FCEVs on road by 2030. Similarly, South Korea announced plans for 6.2 Mn FCEVs and 1,200 H2 refueling stations by 2040. Further, Australia is already the top LNG exporter in the region and has built commercial relations with other Asian countries. The country has abundant coal and renewable resources that can be transformed into low-carbon hydrogen to meet the growing demand from Japan and Korea. Australia is currently creating a national Hydrogen Strategy, with a focus on exports over domestic use in the near future..

Key Market Players

The hydrogen upstream & midstream space is dominated by established players such as Linde plc (Ireland), Air products and Chemicals, Inc. (US), Air Liquide (France), Chevron Corporation (US), Saudi Arabian Oil Co., (Saudi Arabia), Uniper SE (Germany) among others. While, the hydrogen fuel cell vehicles space is dominated by established players such as Toyota Motor Corporation (Japan), Hyundai Motor Company (South Korea), Honda Motors (Japan), BMW Group (Germany), Stellantis (Netherlands) among others. These companies develop new technologies in the hydrogen fuelled vehicles domain. They have invested in R&D for related technologies and offer best-in-class products to their customers.

Recent Developments

• In June 2023, Air Liquide partnered with TotalEnergies to form an equally owned joint venture to build a network of hydrogen stations aimed at heavy-duty vehicles along major European highways.
• In April 2023, Linde plc entered into a long-term agreement with Evonik to provide green hydrogen.
• In February 2023, GM and Honda announced the joint development of FCEV powertrains for their upcoming models
• In September 2022, Hyundai and IVECO Group showcased their new eDaily FCEV
• In August 2022, Toyota and BMW Group announced a partnership to develop FCEVs
• In July 2022, Toyota launched H2 Trucks developed in partnership with Isuzu and Hino Motors
• In July 2021, Volvo and Daimler Trucks announced plans to develop H2 fuel cell for long-haul heavy trucks

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