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Could green hydrogen be the path to a more sustainable future for chemicals?
Across the world, there’s a strong push to change the way we produce and how we manage our economies—a shift that is reflected in the variety of green deals. In general, industries have responded by reducing their scope 1 and scope 2 emissions, especially in chemicals and process industries. But over the past few months, the discussion has shifted to the best way to define sustainable energy, with topics such as green hydrogen and the hydrogen economy moving into the spotlight.
As a source of energy, hydrogen is light, storable, and energy-dense, and it produces no direct pollutants or greenhouse gases—offering a logical albeit costly option for decarbonizing energy- and heat-intensive process industries. But hydrogen has the potential to help decarbonize other parts of the supply chain as well, including scope 3 emissions.
However, hydrogen is not just an energy-carrier; it’s also a key feedstock in the refining and chemicals industries, especially in the production of ammonia and methanol (see figure 1). To enable decarbonization, green hydrogen can replace brown hydrogen and the evolving blue hydrogen as a feedstock. In fact, market analysis shows that green hydrogen has the potential to disrupt the supply value chains soon—a shift that will be accelerated by trends in three areas:
Regulations and geopolitics
- There are different speeds in the United States and the European Union. Regulators will need to be bold and leverage the net-zero and global warming narrative to allow for extended subsidies.
- New trading and market mechanics can enable and incentivize a higher-priced alternative resource to make the shift.
- Recent geopolitical disruptions are affecting the supply of conventional energy.
Technical viability
- Transport and fuel alternatives are becoming more viable, such as a flight carrier committing to a larger share of sustainable aviation fuels.
- Gas networks can be rededicated and extended for hydrogen use.
- Technology advancements are minimizing energy loss, such as with large-scale fuel cells.
Economic viability
- Subsidies are mainly focused on reducing the levelized cost of energy (LCoE) to help improve the initial competitiveness of hydrogen, including green and blue hydrogen, compared with other energy carriers.
- Alternative production processes are becoming more efficient.
The viability of hydrogen is driven not only by the private sector but also by the world reacting to the energy crisis amid geopolitics and climate change. Hence, we expect this trend to accelerate.
The supply of green hydrogen is negligible, but already-pledged targets to reduce emissions necessitate its rapid expansion (see figure 2). We therefore expect an expansion of green hydrogen volumes, accompanied by an increasing cost competitiveness compared with conventional sources.
So what does that mean for your business? We encourage you to look at hydrogen as more than an energy carrier and consider it as a potential feedstock.
To make green hydrogen an integral part of your business, begin by answering eight questions:
- What are the hydrogen application areas in your business value chain?
- Which of these areas show potential for switching to green hydrogen?
- What role would you play in this transition—for example, supplier collaboration or co-investing?
- What would be the extent of the emissions reduction (scope 1, 2, and 3) achieved by using green hydrogen?
- What would be your key decision driver for accelerating your adoption of green hydrogen as a feedstock?
- What guidelines would you apply to assess the trade-off between green versus costs?
- Do you plan to charge a premium for greener products from the use of green hydrogen?
- What changes in the customer value proposition would justify the premium?
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