Today, around 120 megatonnes (Mt) (14 EJ) of hydrogen is produced per year (IRENA, 2019g). But almost all of this comes from fossil fuels or from electricity generated by fossil fuels, with a high carbon footprint; less than 1% is “green” hydrogen.

Yet progress is being made and in early 2020 the world’s largest green hydrogen production plant with 10 MW electrolyser capacity began operation in Japan (Recharge, 2020). Green hydrogen is produced by renewable electricity through electrolysis, and costs are falling fast.

Green hydrogen will become cost competitive with “blue” hydrogen in the next few years in locations with favourable low-cost renewable electricity. As costs fall further, green hydrogen will be cheaper than blue hydrogen in many locations within the next 5 to 15 years. Certain energy-intensive industries may in the future relocate to areas with good renewable energy resources to tap this potential to produce cheap green hydrogen; examples include iron making and ammonia. The first plant producing ammonia from green hydrogen is expected to open in 2020 (Yara, 2019).

The natural gas industry is also looking at hydrogen as a promising solution for greening the gas system and extending the life of existing infrastructure.

However, this approach must be viewed with caution in light of unclear prospects of actually being able to significantly reduce emissions of the gas system and the potential to lock in carbon-intensive infrastructure.

Hydrogen could become the clean energy vector that makes it possible to tap into ample remote, low-cost renewable energy resources – a development that could have important geopolitical implications as well as further accelerating the demand for renewable power generation. By 2050, there would be 160 Mt (19 EJ) of green hydrogen produced annually in the Transforming Energy Scenario (see Figure S.6). That amount, however, would only cover 5% of global energy demand today, with an additional 2.5% being met with blue hydrogen. Significant scale-up of electrolysers is necessary to produce that amount, requiring additions of between 50 GW and 60 GW per year of new capacity from now until 2050.