Can Hydrogen Help Supply Chains Be More Sustainable?

As governments and major corporations intensify their efforts to meet net zero targets, hydrogen is emerging as a key component in the future energy mix.

When combusted, hydrogen produces water instead of carbon dioxide, making it a compelling alternative to fossil fuels.

Its versatility means it can be used directly in engines or to generate electricity in fuel cells, which could be crucial for decarbonising industries where electrification is challenging.

With major economic blocs like the EU establishing dedicated hydrogen strategies, the groundwork is being laid for a significant industrial transformation.

Navigating the hydrogen colour spectrum

Understanding the production methods for hydrogen is essential as each carries different environmental and cost implications.

The industry uses a colour-coded system to distinguish these processes. The most common form today is grey hydrogen produced through steam reforming of natural gas or autothermal reforming, both of which release considerable amounts of carbon dioxide.

Blue hydrogen follows the same production paths but incorporates carbon capture and storage (CCS) technologies to mitigate CO₂ emissions.

The ultimate goal for many is green hydrogen, which is created using electricity from renewable sources like wind or solar to power the electrolysis of water, separating it into hydrogen and oxygen without producing carbon emissions.

Hydrogen demand and net zero pledges

The transition towards a hydrogen-based economy is already under way. According to the International Energy Agency (IEA) Global Hydrogen Review 2024, demand for hydrogen has more than tripled since 1975, with demand for low-emissions hydrogen seeing nearly 10% growth in 2023 alone.

This trend is a result of ambitious climate goals. The United Nations notes that, as of June 2024, 107 countries have made net zero pledges.

These commitments are fuelling the search for viable fossil fuel alternatives, particularly in hard-to-abate sectors like long-haul transport, chemicals and steel manufacturing.

The International Renewable Energy Agency (IRENA) projects that hydrogen could fulfil 12% of final energy demand by 2050.

Further research from a 2020 PwC report suggests global demand for green hydrogen could reach 530 million tonnes by 2050, creating an estimated annual export market of US$300bn.

Hydrogen supply chain and industrial decarbonisation

Major industrial players are now forming strategic partnerships to build out the necessary infrastructure for a hydrogen economy.

TotalEnergies and Air Liquide are collaborating on a project with a combined investment of over €1bn to build two large-scale electrolysers.

These will produce low-carbon hydrogen to help decarbonise their refinery operations in Northern Europe.

Emilie Mouren-Renouard, Air Liquide’s Group Vice President for Europe, Africa, Middle East and India, says: “We are proud to lead the way on European renewable and low-carbon hydrogen production and to accompany TotalEnergies in their journey to decarbonising their industrial assets.”

Similarly, in Germany, BASF and Siemens are developing a green hydrogen project capable of producing up to a tonne of green hydrogen per hour.

The potential impact extends to legacy industries like steel. Alex Richards, Vice President & Regional Segment Leader at Schneider Electric, believes green hydrogen offers a lifeline for the UK's steel sector.

He says: "Producing DRI [Direct Reduced Iron] using green hydrogen can result in over a 95% reduction in CO₂ emissions compared to steel produced with coal. “This presents an opportunity to sustain a steel industry with much less environmental impact.”

Despite the momentum, significant challenges remain. According to the US Department of Energy, liquid hydrogen has a volumetric energy density of 8MJ/L, which is just a quarter of that of gasoline.

This disparity means larger volumes of hydrogen are needed to produce the same energy output, requiring more advanced and costly storage solutions like cryogenic tanks.

Furthermore, IRENA data indicate that only 1% of current global hydrogen production is from renewable sources.

Scaling up green hydrogen is a capital-intensive process that requires substantial investment in renewable energy generation, electrolyser technology and distribution infrastructure.

Making hydrogen an accessible and economically viable fuel will depend heavily on optimising these emerging supply chains.