NOVEMBER 2022
0Copyright © 2022 by Boston Consulting Group. All rights reserved.

Low-Carbon Hydrogen Is aHigh-Stakes Investment
Opportunity

Introduction

Infrastructure investors are well aware of the high returns earned by those that invested earlyin new technologies such as solar and wind power. Consequently, they are keen to put money
into new low-carbon hydrogen projects. But few large-scale low-carbon hydrogen projects arecurrently underway.
We have identified the actions that stakeholders across the hydrogen ecosystem—public sector
leaders, companies, customers, and lenders and investors—can take to unlock the market andhelp realize the potential of the hydrogen economy.
1Copyright © 2022 by Boston Consulting Group. All rights reserved.

The low-carbon hydrogen market today is still nascent and is expected to come in at around
10 million tons per year (mtpa) in 2025. By 2050, however, when low-carbon hydrogen is likely
to provide a critical decarbonization option in industries such as aviation and steel, global
demand is likely to top 350 mtpa. That would represent a value pool of $600 billion to$1.1 trillion.

Demand for low-carbon hydrogen willsoar if climate action accelerates
Low-carbon H2 demand by scenario

Low-carbon H2 demand by region

2025–2050 total global demand (Mtpa)

2025–2050 total global demand (Mtpa)

353

2⁰C pathway

600

1.5⁰C pathway

540

232

2⁰C pathway

400

353

134
Stated policies

200

74

140

33

100
2025E

2030E

2035E

2040E

2045E

2050E

Sources: BCG Global H2 Demand Model, January 2022; BCG analysis.
Note: Mtpa = millions of tons per year.

2025E

2030E

2035E

2040E

2045E

North America and South America

Asia-PacificMiddle East and Africa

Europe

2050E

2353

2025–2050 total global
demand (Mtpa)

Derivatives arelikely to accountfor more thanhalf of long-term
low-carbonhydrogen demand

232

54%

H2Hydrogen

21%

12%

Ammonia
MethanolKerosene

11%

Synthetic crude

74
33
10

H2 derivatives

3%

2025E

2030E

2035E

2040E

2045E

2050E

Sources: IEA World Energy Balances; IEA WEO 2021; GlobalData; Nexant; BCG Global H2 Demand Model, August 2022.
Note: Hydrogen-derivative fuels are normalized to hydrogen equivalent, and projections are based on the 2⁰Cpathway. Mtpa = millions of tons per year.

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134Low-carbon hydrogen market revenue could top $1 trillion by 2050
Logistics

Value pool in2050 ($billions)

280–500

160–300

100–180

50–90

25–45

Total:~$600 billion to$1,100 billion

Feedstock

Production

Conversion

Transport
and storage

Reconversion

Renewables and waterElectrolysis

H2
processing

Land-basedtransport

Green H2
ShippingBlue/turquoise
H2

Fossil fuelFossil-based production

Derivative synthesis= $100 billion
Source: BCG Hydrogen Market Model.

H2 reconversion

Geological storage

Value pool lower boundValue pool upper bound4

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Production

US

Middle East and Asia

Europe(excluding Australia)

14–20

2010

9–15

12–18

12–20

~18–281~17–271

7–11

11–17

12–18

10–16

6–10

12–18

13–19

~13–211

12–16~16–241~15–231

6–10

5–7

8–11

9–13

7–10

6–8

9–11

10–13

10–16
Solar

12–18

14–20

9–15

20152020

17–23

15–21

8–14

~15–251

Latin Americaand Africa

Onshore wind

8–12

12–18

13–20

Offshore wind

Sources: Analyst reports; BCG analysis.
Note: Estimated range of unleveraged returns over project life for subregions with good renewable resources and suitable market access. Ranges reflect different degrees of policy
support, local cost differences, and assumptions about future market pricing.
1 Conceptual, as there is currently no project volume for the technology or region.

5

Copyright © 2022 by Boston Consulting Group. All rights reserved.

The lesson from renewables: Early infrastructure investors
earn the best returns
Unleveraged returns (%)

Total currently announced green
H2 production capacity1 (Ktpa)

39,265
Green production capacity

Too few projects areinvestable today
4,055

32,000

3,480
1,061
79

72
Feasibility

Approval/
pre-FEED

FEEDConstruction Commissioning

Sources: GlobalData, May 2022; BCG Global H2 Demand Model, May 2022; BCG analysis.
Note: FEED = front-end engineering design; Ktpa = kilotons per year.
1 As of May 2022.
2 Expected low-carbon H demand in a 2⁰C scenario.
2

Completed

Project progress
6

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2030 demand2

4

stakeholders
can taketo unlock
the market

Source: BCG analysis.

Companies: Develop and deploy new technology
to reduce production costs and increaseelectrolyzer efficiency and capacity; form joint
ventures and consortia to ensure risk-sharing
Customers: Make purchase commitments,
including agreements to pay the necessary
premium for low-carbon hydrogen
Lenders and investors: Develop new instruments
to support development of large-scale low-carbonhydrogen projects
7

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Keyactions
thatPublic sector: Craft a framework, including
subsidies and certification of low-carbon
production, to support market developmentEsben Hegnsholt
Managing Director and Partner
Hegnsholt.Esben@bcg.com
Copenhagen

Wilhelm Schmundt
Managing Director and Senior Partner
Schmundt.Wilhelm@bcg.com
MunichMogens Holm
Associate Director, Climate
Holm.Mogens@bcg.com
Copenhagen

James Loughridge
Sector Manager
Loughridge.James@bcg.com
LondonErik Rakhou
Associate Director, Climate
Rakhou.Erik@bcg.com
Amsterdam

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