The Hydrogen Economy
The world consumes 95 million tonnes of hydrogen a year — almost entirely 'grey' hydrogen from natural gas steam reforming, used in refineries and ammonia plants. Green hydrogen from renewable-powered electrolysis represents under 1% of supply today. Scale-up is happening but slowly: $200 billion of announced projects, most still pre-FID.
Key insights
The colour codes are about production, not chemistry
Hydrogen is one element; the colours describe how it was produced. Grey = steam methane reforming with venting (the current default). Blue = SMR with CCS. Green = electrolysis powered by renewables. Pink = electrolysis powered by nuclear. Turquoise = methane pyrolysis. White = naturally occurring (rare). The same H₂ molecule sells for very different prices depending on its colour.
Existing use is industrial, not transport
Today's 95 Mt H₂ market is dominated by petroleum refining (40%), ammonia production for fertilizer (30%), methanol (15%), and various chemicals. Almost no hydrogen is used as fuel for transport or heating today. The most actionable near-term decarbonization opportunity is replacing grey hydrogen with green in existing industrial users — same volume, same customers, just cleaner production.
Green hydrogen scale-up is happening, slowly
Announced green hydrogen projects globally reach ~$680B in nominal capex and 45 Mt/year by 2030 — but only ~7% has reached final investment decision. The cost gap to grey ($1–2/kg) and to blue ($2–3/kg) remains substantial. EU mandates (RED III, ReFuelEU), US production tax credits (IRA 45V), and Japanese/Korean offtake commitments are the main pull mechanisms. India and Australia are building export-oriented production capacity.
Current hydrogen demand by sector (2024)
Mt H₂ per year
Show data table
| Mt H₂ | |
|---|---|
| Refining | 42 |
| Ammonia | 33 |
| Methanol | 16 |
| DRI steel | 1.6 |
| Other industrial | 1.6 |
| Transport/heating | 0.5 |
Key Finding: Refineries and ammonia plants are the entire current hydrogen market. Anything beyond that is potential demand.
Cumulative electrolyser capacity 2018–2030 (announced)
GW of installed electrolyser capacity
Show data table
| Operational (GW) | All announced (GW) | |
|---|---|---|
| 2018 | 0.2 | 1 |
| 2020 | 0.3 | 5 |
| 2022 | 0.7 | 40 |
| 2024 | 2.5 | 180 |
| 2026 | 12 | 300 |
| 2028 | 30 | 450 |
| 2030 | 55 | 600 |
Key Finding: Capacity is rising fast in percentage terms but from a very small base. Most projects are still on paper.
Methodology & caveats
Energy round-trip economics
Green hydrogen production from electricity is ~70% efficient (electrolysis). Storage, transport, conversion back to electricity through a fuel cell loses another 50%. Round-trip electricity → H₂ → electricity is ~35% — far worse than batteries (>90%). Hydrogen makes economic sense where the alternative isn't 'use the electricity directly' but 'use a hydrocarbon' (industrial heat, fertilizer, long-haul shipping).
The 'no regrets' applications
Roughly 100 Mt of hydrogen demand exists today in applications where alternatives are weak: refineries, ammonia, methanol, DRI steel (Sweden's HYBRIT, the Boston Metal route). Replacing grey with green at this volume requires ~600 GW of electrolysers and ~3,500 TWh of renewable electricity — roughly 13% of global electricity production today.
Why hydrogen-for-cars failed
Hydrogen fuel cell vehicles competed for a decade with battery-electric vehicles. BEVs won. Batteries got cheaper faster, charging infrastructure scaled faster, and the round-trip-efficiency disadvantage of hydrogen never closed for light-duty transport. Long-haul trucking and shipping retain a hydrogen (or ammonia) case because batteries don't scale to the energy density required.