Hydrogendecarbonization
pathwaysPotential supply scenarios
January 2021

Published in January 2021 by the Hydrogen Council. Copies of this document are available uponrequest or can be downloaded from our website: www.hydrogencouncil.com.
This report was authored by the Hydrogen Council with analytical support from Ludwig-BölkowSystemtechnik GmbH (LBST) and McKinsey & Company.
The authors of this report confirm that:
1. There are no recommendations and/or any measures and/or trajectories within the report that
could be interpreted as standards or as any other form of (suggested) coordination between theparticipants of the study referred to within the report that would infringe EU competition law; and2. It is not their intention that any such form of coordination will be adopted.
While the contents of the report and its abstract implications for the industry generally can be
discussed once it has been prepared, individual strategies remain proprietary, confidential and the
responsibility of each participant. Participants are reminded that, as part of the invariable practiceof the Hydrogen Council and the EU competition law obligations to which membership activities are
subject, such strategic and confidential information must not be shared or coordinated – including aspart of this report.

Contents

Introduction and methodology

4

Hydrogen momentum is accelerating further

4Life-cycle emissions are coming into focus

4

Hydrogen supply needs to be decarbonized

4

Aims and methodology of this assessment

4

Hydrogen supply scenarios

6

A fully decarbonized hydrogen supply is feasible and underpins our vision forhydrogen scale-up

7

Various hydrogen production pathways can achieve very low emissions

7

Decarbonized hydrogen supply has a clear path towards competitiveness7

The world has sufficient resources to meet hydrogen demand through either
green or blue sources8

Thought experiment: A “green hydrogen world”

9Thought experiment: A “blue hydrogen world”

10

A combined hydrogen decarbonization scenario can achieve lower averagehydrogen costs than either boundary scenario

11

The realistic future supply mix will depend on a range of factors –technical, economic, and societal

13

Hydrogen decarbonization pathways
Potential supply scenarios

3Introduction and methodology

Hydrogen momentum is accelerating further
Over the last two years, the Hydrogen Council launched the studies “Hydrogen, Scaling Up” (in 2017)and “Path to Hydrogen Competitiveness: A Cost Perspective” (in 2020). Together, they represented
a cross-industry plan for a step-change in hydrogen deployment globally, showing that hydrogencan play an important role in the decarbonized energy system, and that hydrogen can be a costcompetitive decarbonized solution in a large number of applications before 2030.
Since then, hydrogen has built unprecedented momentum. Large-scale projects have beenannounced, companies have undertaken strategic moves across the value chain, and there are
increasing M&A and investment activities in the sector. In parallel, governments are committing tohydrogen as a part of their climate change strategies, with some deploying significant funds andregulatory support through newly launched hydrogen strategies and funding programs in the context
of Covid-19 economic recovery packages.

Life-cycle emissions are coming into focus
Given that hydrogen is one of the keys to the energy transition, it is not only important to make it
economically viable, but also to maximize its decarbonization potential and minimize its impact on
resources, such as water. The European hydrogen strategy and the targets of many EU member
states are geared to place most of their support on renewable hydrogen production, while countries
such as China, Korea, Japan as well as parts of the United States are increasingly introducing support
mechanisms for low-carbon hydrogen routes. Countries with abundant renewable and/or fossil andcarbon capture and sequestration (CCS) resources are looking to optimize the value of these attributes
in destination markets. In all cases, the decarbonization potential of hydrogen is critical.

Hydrogen supply needs to be decarbonizedCurrently, the vast majority of hydrogen is produced through fossil pathways. To take the role in theenergy transition that the Hydrogen Council envisaged in its “Scaling Up” report, the existing useof hydrogen – and all its many potentials new roles – need to be met with decarbonized sources. It
is therefore key to develop a perspective with conditions under which a “decarbonized” or “clean”
hydrogen supply is possible, and which pathways can play a role in the decarbonized hydrogenecosystem of the future.

Aims and methodology of this assessment
This short note develops a perspective on hypothetical scenarios for decarbonized hydrogen supply.
Its aim is to determine whether the vision of a dramatic growth in the role of hydrogen in the energy
system – as formulated in the “Hydrogen, Scaling Up” study – is possible, and what would benecessary to make it a reality.
The note draws heavily on two reports previously published by the Hydrogen Council – “Hydrogen,Scaling Up” for a vision of future hydrogen demand, and “Path to Hydrogen Competitiveness” for aperspective on the costs of various hydrogen production pathways. It also refers to the concurrently
published LCA study “Hydrogen Decarbonization Pathways – A Lifecycle Assessment” for aperspective on the carbon footprint of the pathways in question.

4

Hydrogen decarbonization pathways
Potential supply scenarios

The hypothetical scenarios presented in the following note try to answer the question of whether
a decarbonized hydrogen supply is possible and what it would entail – they do not constitute a
prediction nor recommendation on the optimal future hydrogen supply. The scenarios are basedon a simplified model on resource availability, hydrogen production costs, and life-cycle emissionsof green and blue hydrogen production routes in six global regions.1 Two of the scenarios arehypothetical boundary cases, in which the entire hydrogen demand is met with either renewable(“green”) or low-carbon (“blue”) hydrogen only.2 Their goal is to answer whether the world has
sufficient resources to produce clean hydrogen, and what the consequences of a 100% green or
blue pathway would be. The third scenario is a combined case, in which hydrogen is decarbonizedwith both green and blue pathways. The model uses a simple algorithm that chooses between
green and blue hydrogen as a (weak) function of their relative costs – we purposefully assume
limited price sensitivity to reflect the importance of societal and political constraints (such as thepolitical will to favor one source of hydrogen over the other) as well as the variations in regionalcosts (the ratio between green and blue hydrogen differs between various European locations, forinstance).3
A detailed, cost-optimized, localized supply model would take a much more granular regional
perspective, include a wider range of hydrogen production pathways, consider regulatory
restrictions on technologies such as CCS, and include scenarios on international hydrogen trade –such research is not covered by this paper but is highly encouraged to inform the debate.

1

Europe, Middle East and Africa, North America, China, Japan and Korea, rest of world.

2

In this report „green“ or renewable hydrogen is shorthand for hydrogen production through water electrolysis from renewableelectricity; „blue“ hydrogen is shorthand for hydrogen production through a reforming process with carbon capture andstorage. For green hydrogen production, we assume a mix of electrolysis from solar PV and offshore wind; for blue hydrogenproduction, we assume a mix of region-specific fossil sources (coal and natural gas) and a mix of ATR and SMR reforming
technologies with 90-98% carbon capture rates. The focus on these two main pathways does not exclude other production
pathways that can form part of a hydrogen economy, such as the biogas reforming, methane pyrolysis, and other options.

3

Our algorithm chooses between green and blue hydrogen in inverse proportion to their costs. For instance, if the cost of greenhydrogen production in a given year and region exceeds the cost of blue hydrogen production by a factor of two to one, twothirds of new hydrogen installations in the region will be blue and one-third of the installations green.

Hydrogen decarbonization pathways
Potential supply scenarios

5Hydrogen supply
scenariosA decarbonized hydrogen supply is feasible and underpins our vision
for hydrogen scale-up
Today, the vast majority of hydrogen is used in (petro-)chemical processes and produced throughfossil pathways, such as steam methane reforming (SMR) or autothermal reforming (ATR) andgasification.
The Council’s “Scaling Up” report presented a rather different vision of the role for hydrogen in the
global energy system: one in which global hydrogen demand increases tenfold until 2050, as themolecule takes a central role in the energy transition and the decarbonization of the residential,
transportation, and industrial sectors. To play such a role in the decarbonized energy system, thehydrogen supply of course needs to be decarbonized (produced from renewable and low-carbon
sources). This note aims to show that such a decarbonized hydrogen supply is feasible, and presents
a potential scenario of how the industry could get there.
Various hydrogen production pathways can achieve very low emissions
Which hydrogen production pathways are relevant in a decarbonized energy system?
As “A Life-cycle Assessment” shows, several hydrogen production pathways – including renewable(“green”) or low-carbon (“blue”) pathways – can achieve very low CO2 emissions and consume only
limited amounts of resources such as water. This study focuses on two of these pathways: waterelectrolysis using renewable power (referred to here as “green hydrogen”), and reforming of natural
gas or coal-derived gas with carbon capture and sequestration (SMR/ATR+CCS; referred to as“blue hydrogen”). Carbon capture rates well above 90% are possible for blue hydrogen production,
allowing both routes to produce hydrogen with less than 1.5 kg of CO2eq emitted per kg of hydrogenproduced under favorable conditions (I.e., in regions with low upstream emissions and use of best
technologies and processes)4 – large reductions compared to today’s grey hydrogen production,
which emits around 10 kg of CO2eq per kg of hydrogen produced.5
Decarbonized hydrogen supply has a clear path towards competitivenessThe second factor that determines feasibility of decarbonization is the cost competitiveness ofdifferent hydrogen production pathways.
The “Path to Hydrogen Competitiveness” report showed that green and blue hydrogen production
pathways have a clear path to competitiveness with grey hydrogen production. The competitivenessof green hydrogen is driven by steep cost reductions for electrolyzer capex (around -75% between
2020 and 2030) as well as the ongoing reductions in renewables costs across regions. Since power
consumption contributes 60% to 70% of green hydrogen production costs, regions with abundant
low-cost renewables can break even sooner than less abundant regions. The latest cost projections

4“Hydrogen Decarbonization Pathways – A Life-cycle Assessment” assumes 90% carbon capture rates for SMR and 98%
carbon capture rates for ATR. It should be noted that a 90%/98% carbon capture rate does not reduce emissions by 90%/98%,
as additional energy is needed to power the capture and sequestration process, and as some GHG emissions occur upstream.
For instance, the 2030 CO2 emissions of Norwegian blue hydrogen transported to Europe over a distance of 1,700 km amountto 1.5kg CO2eq/kg H2 using SMR with 90% CCS and 1.2 kg CO2eq/kg H2 using ATR with 98% CCS. CO2 emissions of Russian bluehydrogen transported over a distance of 5,000 km amount to 3.9 kg CO2eq/kg H2. See “Hydrogen Decarbonization Pathways –A Life-cycle Assessment” for details.

5

Biomethane reforming and electrolysis with nuclear power can also achieve minimal emissions, but the supply of sustainably
sourced biomass is expected to be limited while nuclear electrolysis is expected to be outcompeted by renewables in many
regions. The following therefore focuses on “green” (wind, solar, and to a limited extent, hydropower) and “blue” pathways(natural gas and coal with CCS) only.

Hydrogen decarbonization pathways
Potential supply scenarios

7indicate that green hydrogen can break even with grey hydrogen production before 2030 in regionswith optimal renewables, and before 2035 in regions with “average” renewables availability.6
The competitiveness of blue hydrogen, in contrast, depends primarily on the scale-up of CCS
facilities and the value that is attributed to the CO2 that is sequestered. Given the low potential costsof large-scale CCS, blue hydrogen can outcompete grey hydrogen as soon as moderate carbon
prices or taxes of USD 50/ton are applied – a level in line with the near-term milestones of major
economies with net-zero commitments, e.g., in the EU by 2030.7 Exhibit 1 summarizes the main
assumptions for selected hydrogen production pathways.

Exhibit 1: Core assumptions for selected hydrogen production pathways
Grey
Natural gas reformed to H2 andCO/CO2 in a Steam Methane
Reformer (SMR)

CO2 emissionskg/kg H2
(lifecycle)

Green

Blue

9.2-11.1

Natural gas reformed to H2 andCO/CO2 in an Autothermal
Methane-Reformer (ATR); remaining
CO2 stream is sequestered (CCS)

Water is split into H2 and O2 using
renewable electricity in anelectrolyzer (Alkaline, PEM or
SOEC)

8.8-11.1MaxMin

1.2-3.9

0.8-3.9
0.3-1.0

Production cost1
USD/kg0.3-0.6

3.7-6.1
0.8-4.9

Co2 taxMaxMin

0.6-1.9

0.8-2.1

2020

30

2050

1-2.2

1-2.1

2020

30

1.8-2.7

1-2.6

0.9-1.9

2050

2020

30

2050

1 Costs for hydrogen produced in new installations; Assuming CO2 tax of USD 28/ton in 2020, USD 48/ton in 2030, USD 300/ton in 2050, excluding vectorization/transport

Source: LBST; Hydrogen Council – Path to Cost Competitiveness; McKinsey

The world has sufficient resources to meet hydrogen demandthrough either green or blue sources
In theory, green and blue hydrogen would both be able to fuel the hydrogen economy by themselves.
In the “Scaling Up” report, the Hydrogen Council formulated a vision in which hydrogen provides
some 78 EJ or 21,800 TWh of hydrogen in 2050 – a tenfold increase over current hydrogenconsumption. While these quantities require enormous amounts of energy, they would neither exceed
global renewable energy resources nor the estimated geological carbon sequestration potential.
However, a “green-only” or “blue-only” world would create a different set of challenges:
A “green-only” world would require an exponential growth of electrolyzer capacity of more than
30% per year starting today – a huge undertaking, but one previously achieved by the build-out of

6

Hydrogen Council: Hydrogen Insights (2021)

7

See, e.g., ArgusMedia, September 17, 2020: “EU ETS price €32-65/t under 2030 scenarios.”

8

Hydrogen decarbonization pathways
Potential supply scenarios

solar PV (35% p.a., 2010 to 2019) and offshore wind (30% p.a., 2010 to 2018). More importantly, agreen hydrogen world would require significant amounts of additional renewables capacity – at a time
when the decarbonization of the grid already requires further efforts for renewable power expansion.
It would also likely require public support to fund the initial capex gap for renewables assets andelectrolyzer equipment in the period until green hydrogen starts to break even with grey – before
2030 in “optimal” regions (with very low-cost renewables), but as late as the late 2030s or 2040s in
regions without abundant renewable energy.
A “blue-only” world would also require a massive scale-up of SMR/ATR and CCS storage facilities,
but would likely relieve some pressure on upstream and production supply chains, given the higher
maturity of the natural gas sector and the reforming equipment industry relative to the renewables
and electrolyzer value chain. However, it would not achieve the benefit of domestic hydrogenproduction in countries without suitable fossil resources and CCS reserves. A blue hydrogen world
would allow for lower costs in the short to medium term and may (under best-case assumptions) alsoachieve life-cycle GHG emissions almost as low as those of hydrogen from solar, wind, and water. It
remains, however, more expensive in the long term, as it would not allow the world to benefit from theenormous longer-term cost-down potential in green hydrogen production.
An optimal supply would therefore likely select different mixes of green and blue across regions andover time. It would include both domestic production as well as international transport of hydrogenfrom lowest-cost locations in order to fully leverage the complementarities in fossil and renewable
resources around the world.
Thought experiment: A “green-only world”
A “green-only” world would require about 10,000 GW of dedicated renewables capacity in 20508 –a formidable amount, but much less than is required to decarbonize the electricity grid. Achieving
this would require the world to build out renewables at a pace of 10.5% per year over the next three
decades (compared to roughly 9% per year without hydrogen) – again, a daunting growth rate, butwell below the build-out rates seen by solar PV and offshore wind over the last decade (35% and30%, respectively)9. By 2050, the renewables required to produce all the world’s hydrogen would
include solar PV farms of the size of Italy or New Zealand and offshore wind parks along an area
equivalent to half the mainland exclusive economic zone (EEZ) of Chile or China10. Electrolyzer
capacity would have to grow from about 0.1 GW to more than 600 GW by 2030, and continue togrow at a CAGR of more than 10% to an installed base of approximately 5,500 GW by 2050.
The energy required for hydrogen production in a “green-only” scenario, about 28,800 TWh in 2050,
is still less than 10% of the estimated global renewable potential11. Since renewable resources,
population density, energy demand, and consumption lifestyles vary throughout the world, someregions – especially Japan and Korea, but likely also parts of the EU and China – would have toimport at least some green hydrogen from more resource-abundant regions.

8

Our estimation is based on a combination of solar PV and off-shore wind with regional capacity factors, and uses data from
(McKinsey Energy Insights, Global Energy Perspectives 2020, Accelerated Case).

9Note that current renewables capacity is to a large extent hydropower, while additional renewables demand will be met
primarily with solar PV and offshore wind. The growth rates required for these renewables sources are therefore higher than the
9% to 10.5% suggests.

10

Solar: Assuming a solar farm efficiency of 29 MW/km2 (currently achieved, e.g., at San Luis Obispo, US) and a share of solar between
45% (Europe) and 95% (Middle East) of regional energy demand for green H2. Wind: Assuming 5 MW/km2 energy density for offshore
wind (Source: ECN 2018) and a wind share between 5% (Middle East) and 55% (Europe) of regional energy demand for green H2.

11

The conservative estimates for the global renewables potential are 245,000 TWh (low estimate with strict constraints) to
1,000,000 TWh (high estimate with weaker constraints) (Deng et al., 2015, Quantifying a Realistic Worldwide Wind and Solar
Electricity Supply)

Hydrogen decarbonization pathways
Potential supply scenarios

9Overall, the cumulative costs of a “green hydrogen world” would amount to approximately
USD 3 trillion at present value12 – approximately 75% of which for renewables, 25% for electrolyzers.
This amounts to USD 100 billion p.a., at present value, about 5-10% of the USD 1.5 trillion invested
in the entire energy system in 202013. Initially, green hydrogen production would be significantly more
expensive compared to blue hydrogen production. From the late 2020s onwards, the levelized costof green hydrogen production is expected to start to break even in regions with abundant renewables
and further decrease below that of blue hydrogen in many parts of the world. In less advantaged
areas, the break-even point would only materialize after 2030 or even 2040 (see our latest “Hydrogen
Insights” report for the latest data).
Thought experiment: A “blue-only world”
A “blue-only” world is not constrained by natural gas or coal availability – since fossil fuel consumption
is expected to stagnate and eventually decline in a net-zero world, the incremental demand fromhydrogen does not create a major need for additional exploration. Carbon sequestration facilities
in contrast would have to be proven and scaled up at an unprecedented rate – to approximately
50 Gt by 2050 (from less than 0.1 Gt today). The total amount of carbon sequestered by 2050 would
nevertheless fill only approximately 2% of the estimated global sequestration capacity, meaningthat we could continue to indefinitely store more than 500 years of 2050’s annual CO2 emissions(amounting to about 5 Gt; not considering other industrial emissions that would have to be stored).14
60% of estimated global natural gas reserves are concentrated in just five countries: Russia,
Iran, Qatar, Norway, the United States, and the Kingdom of Saudi Arabia. A blue-only world
would therefore rely heavily on trade of hydrogen from these regions into major demand centers.
Independent certification and monitoring would be needed to ensure that best available technology
and operational practices are applied as assumed in this study.
Overall, the cumulative costs of a “blue hydrogen world” would amount to approximately
USD 0.5 to 1 trillion in cumulative capex until 2050 at present value15. The vast majority of thiswould flow upstream (e.g., into natural gas exploration, coal gasification and carbon capture andsequestration facilities); a minority into conversion equipment such as reformers. Per year, thetotal capex amounts to approximately USD 15-30 billion at present value – significantly less thana “green-only” world, albeit at a higher opex in the medium to long term. While blue hydrogencosts less than half to produce as much as green hydrogen production in 2020, the costs in 2050
would exceed those of producing green hydrogen in many regions and in the global average(assuming that all greenhouse gas emissions in the hydrogen production process are taxed at
rates that are consistent with a 1.5°C climate change target). A “blue hydrogen world” would emit
20 to 25 Gt of CO2 over the period of 2020 to 2050 compared to approximately 10 Gt in a “greenonly” world – 8 Gt of which (in both cases) stem from the phase-out of grey hydrogen16. As a

12

Based on region-specific capex (Source: McKinsey Energy Insights, Global Energy Perspectives 2020, Accelerated Scenario);
discounted to 2020 at 7% cost of capital.

13

IEA (2020): World Energy Investments. Of the USD 1.5 trillion in total investments, roughly USD 300 billion were invested into
renewables.

14

The conservative estimate of the geological CCS potential is based on Global CCS Institute (2016): Global Storage Portfolio(lower bound estimate). The sequestration need is based on a conservative mix of natural gas and coal inputs as well as SMR
and ATR technologies with carbon capture rates between 90% and 98%. Assuming a complete shift to ATR with 98% carbon
capture for blue hydrogen production would require fewer CCS capacities.

15

Discounted to 2020 at a 7% cost of capital.

16

The CO2 emissions generated from blue hydrogen production are based on a conservative mix of natural gas and coal inputs aswell as SMR and ATR technologies with carbon capture rates between 90% and 98%. Assuming a complete shift to natural gas
ATR with 98% carbon capture for blue hydrogen production would reduce CO2 emissions by approximately 5Gt.

10

Hydrogen decarbonization pathways
Potential supply scenarios

reference, the remaining carbon budget to limit global warming to well below 2°C, as agreed in the
Paris Agreement, is estimated between 235 and 985 Gt17. Of course, the use of both green andblue hydrogen would contribute to reducing emissions from other energy sources and carriers –between 60% and 90% across the applications described in the concurrently published Life-Cycle
Assessment report.

A combined hydrogen decarbonization scenario can achieve lower
average hydrogen costs than either boundary scenario
While both green and blue worlds are possible, the regional complementarity of renewables andgas resources suggests that the global production portfolio will contain a mix of both hydrogenproduction pathways. Exhibit 2 illustrates a range of combined scenarios that could achieve
a completely decarbonized hydrogen supply from 2040, implying an ambitious phase-out orconversion of existing global hydrogen production capacities.

Exhibit 2: Combined scenario for decarbonized hydrogen
Hydrogen production scenario, global
Mtpa

Key scenario assumptions

600

Existing grey hydrogen capacity is phased out
over 20 years
The total hydrogen production volumes meet theambition defined in the Hydrogen Council“Scaling Up” report

500

400

Blue

Announced projects and government targets are
implemented as announced
Remaining hydrogen demand is met using a mixof blue and green, based on an inverse proportion
to cost1

300

All optimizations are conducted per region using
regional hydrogen demand and regional hydrogenproduction based on the Hydrogen Council “Pathto Competitiveness” report

200

100
Grey
0
2020

Green
25

30

35

40

45

New green / blue projects have a 25-year lifetimeand continue to produce at constant costs
throughout their operations

2050

1 I.e., if the cost of green hydrogen production in a given year and region exceeds blue hydrogen 2:1, 2/3 of new hydrogen installations will be blue and 1/3 green

Source: Hydrogen Council, McKinsey, LBST

Like the boundary scenarios, this range of scenarios is based on the hydrogen demandenvisioned in the “Scaling Up” report and assumes a (very ambitious) linear phase-out of greyhydrogen production over the next two decades. It first takes into account existing targets andannouncements on green and blue hydrogen. Beyond these targets and announcements, newcapacities are added in proportion to region-specific production cost differentials between green
and blue hydrogen. This model results in a balanced supply pathway range, with an important role

17

IPCC (2018): Special Report on Global Warming of 1.5°C. From the start of 2020, the remaining carbon budget is estimated at
985 Gt CO2 to limit warming to 2.0°C with a 66% probability, 395 Gt CO2 to limit warming to 1.5°C with a 50% probability, and
235 Gt CO2 to limit warming to 1.5°C with a 66% probability.

Hydrogen decarbonization pathways
Potential supply scenarios

11in blue hydrogen in decarbonizing the 2030 supply base and an increasing role for green hydrogenfrom 2040 to 2050 (and beyond).
While a green-only and blue-only hydrogen world would result in an average hydrogen cost of about
USD 2.2 per kg over the next 30 years (including taxes on all upstream emissions generated in theprocess), the combined scenario results in less than USD 2.0 per kg – lower than either of the purescenarios. In reality, hydrogen costs are likely to be even lower in a combined scenario, as regionallyand locally optimal hydrogen sources can be used. Given the enormous hydrogen demand in our
scenario, a 10% cost difference would imply savings of about USD 1 trillion – almost a third ofGermany’s GDP today.
The combined scenario also makes it easier to develop the hydrogen economy. It is still ambitious:
decarbonizing 21,800 TWh of hydrogen through a mixture of green and blue sources would require
up to 40% more renewable energy in 2050 than without any green hydrogen – an amount that canbe provided through solar panels covering an area 40% the size of Spain, or offshore wind turbinescovering the waters surrounding the United Kingdom and Ireland (see Exhibit 3)18. However, this issignificantly below the renewables required for the green-only boundary case. Similarly, the need for
CCS build-out is roughly halved relative to the green-only scenario.

Exhibit 3: Renewable energy requirements for decarbonized hydrogen scenarios
A combined scenario would require2

Renewable energy installations(PV and offshore wind only)in 1000 GWp1
28

Necessary
additional
installation
for full-green
scenario
Necessary
additional
installation
for combined
scenario

26
24
22
20
18
16
14

Solar panels coveringa land mass equivalent
to 40% of Spain

12
10

Base case fordecarbonizedelectricity
generation

8
6
4
2
0
2020

30

40

2050

Offshore wind parks coveringa sea area almost the size ofthe combined coastal watersof Great Britain and Ireland

1 Base case: IRENA Global Renewables Outlook 2020, accelerated case; variable renewable energy supplying 61% of the electricity generation in 2050; assuming best-in-

region load factors for renewables installation to supply green hydrogen
2 Excluding baseline hydrogen demand

Source: Hydrogen Council, McKinsey, LBST

18

12

Not including the renewables required for the baseline energy demand.

Hydrogen decarbonization pathways
Potential supply scenarios

The realistic future supply mix will
depend on a range of factors –technical, economic, and societal
The combined scenario presented here is based on a simple model and takes into account theestimated green and blue hydrogen costs in large global regions. In reality, the supply mix will
depend on a range of factors, including local hydrogen production costs, existing infrastructure (suchas power transmission networks or natural gas pipelines), and emerging hydrogen trade routes.
A range of factors can impact the role of each source, even within a decarbonization scenario – somesensitivities are shown in Exhibit 4.

Exhibit 4: Potential sensitivities on the decarbonized hydrogen scenario
Effect vs. baseline
FactorPotential direction of change

Technical

Breakthrough in electrolyzer industrialization/ commercialization

Economical

Higher base lending rate (vs. currently 7%)

Higher blue share

Higher green share

Higher financial risk premium for fossil investments

Societal

Regulatory focus on green and/or customer willingness to pay
for green increases (cost sensitivity decreases)
NIMBY-ism limits speed of renewables build-out
Stronger efforts to build out blue export infrastructure in gas
exporting nations
Stronger efforts to monetize renewables/export green hydrogenin renewables-rich nations
Global CO2 tax does not reach levels consistent with 1.5°C(current assumption ~50 USD/t 2030; ~300 USD/t 2050)

While green and blue hydrogen both have significant potential, it is likely that the “optimal” or realistic
decarbonized path will contain a combination of different renewable and low-carbon hydrogenproduction pathways that are suited to local conditions, political and societal preferences, and thedevelopments in the green and blue hydrogen supply chains.

Hydrogen decarbonization pathways
Potential supply scenarios

13