Hydrogen is increasingly taking centre stage as nations and industries launch action plans to reduce carbon emissions and meet urgent climate targets. This naturally occurring gas, abundant yet commonly found within other compounds, holds the potential to serve as a clean and adaptable energy source, with its cleaner version developed through renewables-driven processes.

From large-scale industrial operations to transport, hydrogen, whether liquid or gaseous, can power numerous applications. Most notably, it provides a compelling alternative to fossil fuels in decarbonising the global economy, especially in energy-intensive sectors such as steel manufacturing, oil refining, chemical production, and metallurgy. As renewable energy capacity expands, hydrogen’s role as a complementary fuel grows even more significant.

Hydrogen: Availability

Hydrogen is the most common element in the universe: approximately 90% of all atoms are hydrogen. However, on Earth, it rarely exists as a single element; instead, it is typically bound to other atoms (for instance, in water or organic compounds). Producing hydrogen thus requires releasing it from these compounds, an energy-intensive process.

At present, according to data from the International Renewable Energy Agency, about 75 million tonnes of hydrogen is produced in pure gaseous form, with another 45 million tonnes appearing as part of other gas compounds, equivalent to 3% of global demand.

Currently, most hydrogen is produced as “grey hydrogen,” derived from fossil fuels such as coal or natural gas.

Grey, Blue, and Green Hydrogen

Different types of hydrogen — grey, blue, and green — are classified based on their production methods and related carbon emissions:

• Grey Hydrogen: Created from fossil fuels (mostly coal or natural gas) through steam methane reforming (SMR) or coal gasification. This process emits substantial carbon dioxide, making it carbon-intensive.
• Blue Hydrogen: Also generated from fossil fuels, but with the critical distinction that carbon dioxide emissions are captured and stored, thereby cutting overall emissions. Blue hydrogen is often considered a transitional solution, as it utilises the existing grey hydrogen infrastructure alongside carbon capture, utilisation, and storage (CCUS) technologies.
• Green Hydrogen: Produced by splitting water into hydrogen and oxygen via electrolysis powered by renewable sources such as solar or wind. This method yields no direct carbon emissions, with water as the only by-product, making green hydrogen genuinely clean. Once economies of scale are reached, and as production, storage, and transport costs decline, green hydrogen could replace more expensive, polluting fossil fuels in many industrial sectors.

Blue hydrogen can be viewed as a stepping stone on the path to fully clean green hydrogen production, since many industries already use grey hydrogen methods. Simply adding carbon capture and storage infrastructure supports a rapid move towards blue hydrogen, cutting emissions while the global market for green hydrogen continues to develop.

According to McKinsey’s Global Energy Perspective 2023, nearly all currently used hydrogen is grey. Forecasts, however, indicate a turning point after 2025, when new hydrogen production is predicted to be predominantly clean.

By 2030, industries now relying on grey hydrogen are projected to increase their use of clean hydrogen by 30%. Throughout the following decade (2030–2040), new sectors and applications are expected to appear, pushing demand even higher. Post-2040, this demand should rise significantly as public and private commitments to carbon neutrality intensify, resulting in a projected total demand of 125–585 million tonnes per annum of clean hydrogen by 2050.

By 2050, the global hydrogen supply mix is anticipated to undergo a dramatic shift, with green hydrogen comprising 50–65% of supply and blue hydrogen accounting for 20–35%.

Meanwhile, green hydrogen production costs are set to drop by 30% by 2030, thanks to technological advancements, improved infrastructure, and economies of scale, while grey hydrogen is likely to become more expensive as carbon costs escalate. An additional round of sizeable cost reductions between 2030 and 2050 could drive production expenses as low as USD 1.5 per kg.

Growing Global Demand and Investment

Soaring demand for clean energy is prompting substantial investment in hydrogen technologies. As of December 2023, more than 1,400 green hydrogen projects are under development worldwide, drawing around USD 570 billion in direct investment, according to McKinsey. Of this, approximately USD 193 billion has been committed in Europe alone. The European Union aims to invest a further USD 430 billion in green hydrogen by 2030, underlining its dedication to a low-carbon future.

Since the pre-industrial era, global temperatures have already risen by 1.1°C, and thorough decarbonisation with net-zero emissions is the only way to restrict further temperature increases within 1.5°C. The International Renewable Energy Agency identifies clean hydrogen as a key component for mitigating the effects of climate change, alongside energy efficiency, electrification, and renewables. While these three measures could together deliver 70% of the emission reductions required, clean hydrogen could account for an additional 10%, taking a 12% share of final energy demand.

India’s Hydrogen Mission

The nation has pledged to achieve net-zero emissions by 2070, ensuring that any remaining greenhouse gases are offset by carbon capture or other mitigation measures. In addition, India plans to reduce its GDP’s emissions intensity by 45% by 2030 and cut one billion tonnes from its cumulative emissions by the same year.

To boost these environmental ambitions, India intends to produce 500 gigawatts of energy, about half its total capacity, from renewable sources. By 2047, the country aims to be energy independent, cutting down its current average annual energy import bill of USD 160 billion, which could double to USD 320 billion within 15 years without suitable clean alternatives.

Under the guidance of the Government of India and NITI Aayog, the country has set its sights on becoming the world’s most economical source of green hydrogen by 2030, targeting production costs of USD 1 per kilogram, to further focus down on energy independence ambition.

Estimates suggest that India’s green hydrogen market could be valued at USD 8 billion by 2030, soaring to USD 340 billion by 2050. By mid-century, India may meet 10% of global green hydrogen demand, establishing itself as both a clean energy frontrunner and an exporter of zero-carbon products.

Challenges to Widespread Adoption

Despite hydrogen’s cosmic abundance, turning it into a widely available, cost-effective energy source remains challenging. Major strides are needed in electrolysis technology, carbon capture, hydrogen storage and transport infrastructure, and scaling up renewable power generation.

Nonetheless, international cooperation, including substantial investments from Europe, India, and elsewhere, points to a swiftly expanding role for hydrogen in the energy transition.

Notably, India has introduced a ‘National Green Hydrogen Mission’, with a budget allocation of INR 19,744 crore up to 2029–2030, aimed at supporting the research, development, and deployment of green hydrogen. Policymakers foresee a future in which India minimises its environmental impact while also becoming a major exporter of green hydrogen and related technologies.

Hydrogen Towards a Greener Future

Hydrogen, whether in gaseous or liquid form, presents a promising route to cut emissions in electricity generation, transport, and other high-emission industries.

Progressing from grey hydrogen to blue, and ultimately to green, will help curb global greenhouse gas emissions, boost energy self-sufficiency, and foster fresh economic opportunities across numerous sectors. From Europe’s large-scale investments to India’s ambition of becoming the world’s most cost-competitive green hydrogen producer, momentum behind this versatile energy resource is quickly gathering pace.

Yet, realising widespread adoption demands collective efforts from governments, industries, and research bodies. Building the necessary infrastructure, driving down production costs, and resolving technical hurdles are essential next steps. If these challenges are addressed, hydrogen energy, particularly in its clean, green form, could well become a defining pillar of a sustainable, zero-carbon future.