Viewpoint

The future of hydrogen and e-fuels
Will hydrogen be the new oil?

With intensified discussions to become carbon-free, hydrogen is back at the top of the agenda for some. Others see it
as over-hyped with too many limitations, especially with regard to efficiency. Similarly, e-fuels1 are controversial. Thus,
while battery electric vehicles are starting to take off, the future of hydrogen and e-fuels is very much in question. But now
players, ranging from nations, corporations, and energy and utility enterprises to start-ups, need to place their bets on
the future energy carrier that will replace fossil energy. Based on plans for a carbon-neutral economy in 20502, we want tointroduce a holistic framework to assess the real potential of hydrogen and e-fuels.

ADL Delphi study on the future of hydrogen
New energy solutions need to form a sustainable, CO2-neutral
economy in Europe and across the world. Hydrogen might be
one of them, but its application and role are highly uncertain.
That role is of the highest strategic relevance because it
determines future business models, investments, and thecharacteristics and sustainability of the overall energy andindustrial system. To gain insight into that, we conducted a study
on the future of hydrogen applications. Energy and application
experts have seen varying maturity, as shown below.

StationaryMobile

Technology maturity and economic efficiency of majorhydrogen applications
TrainsBuses
Heavy trucks
Passenger cars
Light vans
Motorcycles
Inland ships
Forklift trucks

2020

2025

2030

2035

Technology available in market,
but limited economic efficiency

Source: Arthur D. Little
13

They also estimate that up to 2030, mobile applications covering
trains, trucks and buses will provide the highest growthpotential. Hydrogen’s higher energy density and lower specificweight are assets in these applications. The market penetrationof stationary applications such as heating (CHP4) is initiallylimited because more cost-effective means of decarbonization
are preferred (e.g., energy savings and heat pumps), and thelack of hydrogen pipelines makes stationary applications difficult
to realize.

Introducing a holistic view

Emergency power
Micro CHP
Macro CHP

Developmentand piloting

In some areas hydrogen application is already mature and incommercial use (e.g., forklifts), while other sectors are in market
upscaling (e.g., passenger cars) or market entry (e.g., trucks). In
general, experts in industry and research expect the wide-scale
usage of green3 hydrogen within decades.

Fuels produced from renewable energy (e.g., solar, wind power)
Hydrogen generated from renewable energy

2040

Economicallyefficient operation

In our Delphi study, as well as through following public
discussion, we found that the view of hydrogen tended to bebinary. Hydrogen is either seen as the sole long-term option
for a CO2-neutral economy or rated as unsuitable and flawed.
Electric and battery electric applications are supposedly muchbetter for many reasons, mainly their much higher efficiency.
Although this view appears to be comprehensive at firstglance, it is really rather one-eyed. Hydrogen-related studies too
24Carbon neutral often means a net CO2 reduction by 95 percent compared to 1990
Combined heat and powerViewpoint

Definition of dimensions
Technology
maturity

Maturity of technology from developing to commercial availability

Production
efficiency

Energy production efficiency from power generation to consumer& application production efficiency including maintenance andrecycling

Consumption Energy efficiency during consumption from intake of energy toefficiency
heat or movement
CAPEX

Cost of application to produce and install, including incentives
and recycling

OPEX

Cost of application to run, including infrastructure, taxes
and duties

Regulation/
carbon price

Governmental actions to prohibit, restrict or enhance certain
applications or behaviors

Consumerpreferences

Degree to which consumers are willing to pay for certain
characteristics

Source: Arthur D. Little

Both FCEVs and battery electric vehicles (BEVs) arecommercially available and thus technologically mature. For
application production efficiency, BEVs have higher energy
demand in production, which is offset earlier or later in avehicle’s lifetime, mainly depending on battery size. For energy
production efficiency (upstream) we need to consider where theenergy comes from.
For simplicity, we compare two scenarios: First, 100 percent
local green energy, and second, imports of green energy from
the Middle East.
As shown below, locally produced hydrogen is much lessefficient than local green electricity. But when energy isimported from, for example, the Middle East, hydrogen’s
efficiency roughly doubles of that of electricity.

Upstream electricity scenarios
100%
Scenario I

A holistic view is needed instead. On the energy side, thisview differentiates between energy production efficiency(“upstream”), which is specific for each country, andconsumption efficiency (“downstream”), which is specific toeach application.

A holistic view of passenger vehicles

Electrolysis & H2 transport~45% loss

Hydrogen at ~55%
fueling station efficiency

Transportation~5% loss

Electricity at ~95%
charging station efficiencyElectrolysis & H2 transport~50% loss
Solar parkin Middle Electrolysis, H2 transport,
electricity production &Easttransport~75% loss

Hydrogen at ~50%
fueling station efficiency

Localgreen
electricity

100%

Scenario II

often set one important but unrealistic assumption, often only
implicitly: clean electricity is available at the exact amount, whenand where needed. While this may hold for some countries, it
seems unrealistic in the foreseeable future for large economies
such as China, the US, India, and Germany. Without thisassumption, elementary questions arise around, for example,the origin of energy and electricity.

Electricity at ~25%
charging station efficiency

Source: Arthur D. Little

As a first approach to the holistic view, we have identified seven
relevant dimensions to compare CO2-neutral alternatives. (Seethe above figure.) This model can be applied to assess hydrogen,battery electric, and e-fuels in general, for specific applications
or holistically. (See the below figure.) To illustrate, we explain thedimensions with the example of fuel cell electric (passenger)
vehicles (FCEVs), which are powered by hydrogen.
Holistic assessment model with hydrogen passenger
vehicle as an example
CAPEX?

Positioning compared to BEV:
Source: Arthur D. Little2?

Fuel cellpassenger?
vehiclesBetter

The future of hydrogen and e-fuels

EquallyWorseFCEV consumption efficiency is around 60 percent, much lower
than that of BEVs. CAPEX is decreasing for both BEVs andFCEVs as production scales – which is, for now, an advantage
for BEVs. For OPEX, it can be expected that the purchasing
price of electricity will be lower than that of hydrogen (at leastfor private chargers), but hydrogen prices will stay withinreasonable limits so non-electrifiable applications can become
CO2 neutral. This suggests that OPEX will likely be lower for
BEVs. Current EU regulation favors FCEVs and BEVs to thesame degree, and both will benefit over fossil-based fuels withtightening regulation. In general, FCEVs are suited to consumer
preferences because they have many similarities to combustion
engines (short refueling, long ranges). On the other hand,consumers might get accustomed to BEVs and their advantages(refueling at home, acceptance of low ranges, more availabilityof charging stations).
Overall, assessment of battery electric and, e.g., hydrogen,depend on the specific requirements of the application, such asrange and payload, as well as consumption efficiency. The oftenoverlooked decisive factor is the source of energy and related
energy production efficiency.

1Viewpoint

For passenger cars we conclude:
1. From an application and energy consumption point ofview, BEVs are favorable for lighter vehicles with lower
range requirements, while hydrogen and e-fuels are betterfor heavier vehicles with high-payload and long rangerequirements.
2. From an energy production point of view, BEVs are favorable
if clean electricity is regionally available all year.

Trucks and buses
Heavy-duty trucks and buses will benefit from hydrogen,especially in long-distance traffic: high reliability and lifetime
mileage that is comparable to or even exceeds diesel engines,
ranges of up to 1,300 km, and refueling times of seven to 12
minutes. Currently, the major downside of hydrogen trucks
is high investment costs, which significantly exceed those ofdiesel trucks. However, up to 2030, costs will decrease by morethan 50 percent, beating diesel engines in operational costs.
In the local public bus segment, hydrogen is in strong
competition with batteries. Economically attractive operationof hydrogen buses is estimated to be reached in 2025, whenhydrogen electric (HE) and battery electric (BE) buses will beequal in total cost of ownership.

and more cost-efficient district heating pipes and standard
electricity lines.
Already today, hydrogen can be fed into the natural gas
network up to 10 percent – soon to be 20 percent. A longterm perspective involves a fuel switch from natural gas tohydrogen for whole cities, or even whole countries. This,
however, will require a large-scale hydrogen supply. Other heat
decarbonization options, such as power-to-heat, solar heat andinsulation, are more realistic.
.Hydrogen concept for buildings
Electricity line
Hydrogen pipeline
H2H
H22HH
2 2CHP system

H2H2H2HH
2 2H2E-fuel assessment
Compared with hydrogen and electricity, e-fuels have anadvantage with transportation and storage. Thus, their very
low energy efficiency becomes irrelevant when e-fuels aregenerated from power that is excessively and cheaply available
and would be lost otherwise (such as in very remote places
with lots of clean energy), and that can be much more easilytransported to where it is needed. Although e-fuels burn much
more cleanly than fossil fuels, only hydrogen and battery electricvehicles are locally 100 percent clean.

Buildings
Combined heat and power (CHP) fuel cells provide electricity
and heating for buildings and entire urban districts. The fuel cell
itself is already widely available in the market, but used withhydrogen converted from natural gas. While the overall processis highly efficient, a CO2-neutral operation is only possible withgreen hydrogen. The CHP solution can be implemented in twoapproaches. (See the below figure.) Micro CHP serves smaller
apartment buildings with dedicated hydrogen connections.
Macro CHP supplies larger buildings or even whole urban
districts. Whereas the CHP system itself requires a hydrogenpipeline, the “last mile” of the network can consist of simpler
5H2

Heating pipeline
Source: Arthur D. Little

Industrial feedstock
To reach the 95 percent CO2 reduction target, almost all carbon
fuels would need to be eliminated. Consequently, current fuels
would need to be replaced by wind, solar and nuclear power,
as well as (power-based) hydrogen and e-fuels. The only option
to use coal, oil or natural gas would be underground carbon
capture and storage (CCS), a technology that is not yet provenfor the long term, but could be an intermediate solution. Mostof the feedstock in the chemical, metal and cement industries
relies on carbon energy sources. Feedstocks, as well as thehigh-temperature burners needed by these industries, could not
be replaced by electric power – only by hydrogen and e-fuels.
The sheer volume of feedstock would push hydrogen demand
to enormous dimensions. Replacing Europe’s selected chemical
H2 feedstock with green hydrogen and e-fuels would require 1.5
times Europe’s renewable energy potential5, which would leave
no hydrogen for any other sector!
Given the scale sensitivity of current electrolyzer technologies,
larger-scale projects secured by industrial off-takers are expected
to be among the driving forces in the hydrogen economy.

DECHEMA (2017)
The future of hydrogen and e-fuels3ViewpointHydrogen production and infrastructure

Contacts

To fulfill the huge demand for hydrogen, production andtransmission infrastructure are the key success factors. For
example, studies expect that by 2050, Germany’s primaryenergy consumption will be 10 percent (156 TWh) hydrogen and28 percent (442 TWh) e-fuels6. Due to high transportation costs,
hydrogen is produced as locally as possible.

Austria

The Netherlands

virag.bela@adlittle.com

eikelenboom.martijn@adlittle.com

Belgium

Norwaybaes.kurt@adlittle.com

thurmann-moe.lars@adlittle.com

China

Polandsong.ninghua@adlittle.com

baranowski.piotr@adlittle.com

Czech Republic

Russian Federation

But there are also conceivable scenarios (including concreteprojects) in which green hydrogen is shipped from low-energycost countries – similarly to LNG.

vylupek.lukas@adlittle.com

grigoryev.mikhail@adlittle.com

FranceSingapore

bamberger.vincent@adlittle.com

ito.yuma@adlittle.com

GermanySpainschmitz.klaus@adlittle.com

gonzalez.juan@adlittle.com

India

Swedenmaitra.barnik@adlittle.com

brundin.niklas@adlittle.com

Italy

Switzerland

caldani.saverio@adlittle.com

kruse.michael@adlittle.com

JapanTurkeysuzuki.hiroto@adlittle.com

baban.coskun@adlittle.com

Korea

UKlee.kevin@adlittle.com

white.nick@adlittle.com

Latin America

USAE-fuels will play an important role in industries in which neither
electrification nor hydrogen can be easily applied, e.g., aviation,
and will be mainly imported from non-EU countries due tolimited green energy sources. Therefore, Europe must invest
in green hydrogen and e-fuel sources from other continents inthe long term. The foundation for a global hydrogen supply chain
must be created now. Hydrogen production in regions rich insolar and wind, such as North Africa, the Middle East, and North
America, would provide not only the required capacity, but also
more favorable renewable cost conditions. Chemical, steel andother energy-intensive industries need be reliable foundations
for investments in their existing and future plants today, given
their 40-plus-year investment horizon.
Politics is now called upon to create the appropriate setting:
optimal regulatory conditions, a clear and solid perspective of
the carbon price, and a global carbon pricing mechanism which
prevents “carbon leakage” into other countries.

guzman.rodolfo@adlittle.com

martinovich.alan@adlittle.com

Middle Eastkuruvilla.thomas@adlittle.com

Authors
Christian Adolph, Dr. Matthias von Bechtolsheim, Martijn
Eikelenboom, Roman Mathyssek, Dr. Klaus Schmitz, Dietrich
von Trotha

Arthur D. Little
Key take-aways
1. Within mobility, hydrogen and e-fuels will play thebiggest role for heavy trucks.
2. Replacing natural gas with feedstock and industrial heat
will create a demand for hydrogen, which will exceed
Europe’s green energy potential by 50 percent.
3. Importing hydrogen and e-fuels will play a key role in thefuture for nations with limited permanent green energy
sources and unclear nuclear strategies.
4. When hydrogen and e-fuels are imported, FCEVs ande-fuel-run combustion engine vehicles tend to become
more favorable.
5. Thus, a holistic perspective on energy applications isneeded.

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