Green Hydrogen can be a game changer in energy supply, creating US$1.4 trillion market by 2050—Deloitte

Key highlights:

• Decisive climate action can help make green hydrogen competitive in less than 10 years and has the potential of supporting around 2 million jobs globally per year between 2030 and 2050.
• Over US$9 trillion of cumulative investments in the global clean hydrogen supply chain will be needed to help meet the world’s net-zero targets by 2050.
• Deloitte announces two new initiatives: Global Hydrogen Center of Excellence and the Hydrogen Investment Corridor.

Johannesburg, South Africa, 22 June 2023—Green Hydrogen is set to be a game changer as a dependable, sustainable, and clean energy source., with its market expected to surpass the value of the liquid natural gas trade by 2030 and grow further to US$1.4 trillion per year by 2050. Global leaders can seize the opportunity presented by green hydrogen to rapidly decarbonise while investing in sustainable growth. 

Green hydrogen—produced by splitting hydrogen atoms from water molecules using electrical currents is poised to help drive the bulk of the growth according to Deloitte’s new report “Green hydrogen: Energizing the path to net zero. Deloitte’s 2023 global green hydrogen outlook,” released today by the Deloitte Center for Sustainable Progress (DCSP). 

The report is being released as the South African government announced the launch of the $1bn SA H2 fund, which was announced this week in conjunction with the governments and financing institutions from South Africa, Denmark, and the Netherlands. 

The report also comes as South Africa hosted the Energy Observer, the world’s first hydrogen powered vessel which docked for just over a week in Cape Town, for the first time in Africa, earlier in June. 

While market growth will be important for industrialised economies, clean hydrogen represents a major sustainable growth opportunity for developing countries, which, with targeted and significant investment, could account for nearly 70% of the US$1.4 trillion market in 2050 while supporting up to 2 million jobs globally per year between 2030 and 2050. 

The projections comes from Deloitte’s Hydrogen Pathway Explorer (HyPE) model, which delivers one of the most comprehensive analyses of the supply of hydrogen globally. This research shows that clean hydrogen can deliver up to 85 gigatons in reductions to cumulative CO2 emissions by 2050, more than twice global CO2 emissions in 2021. Deloitte’s outlook provides extensive detail into the cost, production, and market of hydrogen, even analysing the business challenges facing the successful implementation of clean hydrogen, and providing insights into various market dynamics, such as optimal infrastructure sizing, investment needs, and technology choices.

“The report reveals a compelling opportunity for private and public leaders to accelerate the transition to green energy. This was a core topic at the 2023 Sustainability Summit Africa hosted by Deloitte Africa earlier in June, wherein the conversation focused on practical solutions for the continent given the impact of the climate crisis on those most vulnerable.” said Simon van Wyk, Sustainability & Climate spokesperson for Deloitte Africa. 

Inter-regional trade is key to helping unlock the full potential of the clean hydrogen market, supported by diversified transport infrastructure. Regions, including those in Africa, which are currently able to produce cost-competitive hydrogen in quantities that exceed domestic needs are already positioning themselves as future hydrogen exporters—supplying other less-competitive regions and helping to smoothly facilitate the energy transition. Notably, global hydrogen trade is projected to generate more than US$280 billion in annual export revenues by 2050, with North Africa expected to benefit the most (US$110 billion per year) due to its high export potential. Other areas across Africa are exploring export opportunities such as Namibia and South Africa which have an abundance of solar and wind availability.

To help scale up a robust and clean hydrogen economy to meet projected demand, the report recommends policymakers to focus attention on three key components:

• Lay out the market foundation. Lay out national and regional strategies to lend credibility to the market, develop a robust and shared certification process for clean hydrogen to help ensure transparency, and coordinate internationally to help mitigate political friction and promote a level playing field
• Spur action. Establish clear targets and markets for clean hydrogen-based products and offer pointed instruments, such as fiscal incentives and subsidies, to help reduce the cost difference between clean and fossil-based technologies and help businesses integrate clean hydrogen into their value chains
• Ensure long-term resilience. Diversify value chains—from trade partners to raw material suppliers—to help prevent costly bottlenecks during the transition to clean hydrogen, focusing specifically on improving infrastructure design to more effectively transport (pipelines and marine roads) and store (strategic reserves) clean hydrogen commodities 

According to the report, major supply chain investment will be needed to help optimise the global value of clean hydrogen. For Africa to meet the Net zero requirements in terms of infrastructure alone, this will entail more than $200 million per annum (or >$3 trillion by 2050), according to the African Development Bank. 

Clean hydrogen can be a significant contributor to a low carbon economy across Africa for local supply as well as export potential. These green infrastructure projects can play a substantial role supporting job creation given Africa’s working-age population is projected to increase to almost 1 billion by 2030. 

“Deloitte is making a number of investments globally, recently unveiling its Global Hydrogen Center of Excellence. The centre is dedicated to supporting clients in scaling up clean hydrogen and driving large scale decarbonisation. Clients from cross the globe, including Africa, will benefit from the insights, knowledge and strides made within this center,” said van Wyk. 

He went on to say that Deloitte is helping establish multilateral collaboration across key hydrogen trade and investment pathways, with an initial focus on Africa, Australia, Germany, and Japan. This will be driven by the Deloitte Hydrogen Investment Corridor. Through the corridor initiative, Deloitte will support the development of public policy, including hydrogen strategies for public authorities; bring economic and technical modeling skills to help inform decision-making; and convene different entities along the value chain to help support consortia formation and scaled investment.

Africa has a global role to play in the energy transition. The continent has both the capacity and willingness to participate and clean hydrogen is a key part of that equation. While Africa may only emit around 4% of global carbon emissions, it does not mean that the continent cannot lead the way in terms of clean hydrogen.

Deloitte’s research coupled with our Global Hydrogen Center of Excellence and the Deloitte Hydrogen Investment Corridor initiative is an enabler to help bring clean hydrogen to life. Initially the focus will be in North and Southern Africa owing to the natural solar and wind resources, but the potential to scale both import and export to service Industry (Ammonia, Methanol and Refining) and Mobility (Road Freight and Aviation) is attainable as early as 2030 which is a gamechanger for the continent.