Hydrogen has great potential as a carbon-free energy carrier. Here’s a look at the momentum behind this widely applicable technology.
Hydrogen could play a central role in helping the world reach net-zero emissions by 2050. As a complement to other technologies, including renewable power and biofuels, hydrogen has the potential to decarbonize industries including steel, petrochemicals, fertilizers, heavy-duty mobility (on and off-road), maritime shipping, and aviation, as well as to support flexible power generation (among other applications). In 2050, hydrogen could contribute more than 20 percent of annual global emissions reductions.

Hydrogen’s potential role in the broader energy transition is explored in a series of industry reports coauthored by McKinsey and the Hydrogen Council—a global, CEO-led initiative with members from more than 140 companies. The reports explore, for example, how demand for hydrogen could reshape current power, gas, chemicals, and fuel markets; the need for scaling hydrogen production, particularly clean hydrogen (which is made with renewables or with measures to lower emissions); and what must happen in the coming decade to reach net-zero targets.

The momentum behind hydrogen has accelerated in the past year, as described in Hydrogen Insights 2022, 1 a recently published perspective on the state of the hydrogen industry. Both investment and project development have ramped up. However, a funding gap remains.

The following five charts show how hydrogen could play a key role in a low-carbon future. ( check out the link above)
In 2050, hydrogen could contribute more than 20 percent of annual global emissions reductions.


Part of the net-zero equation

By 2050, clean hydrogen could help abate seven gigatons of CO2 emissions annually, which is about 20 percent of human-driven emissions if the world remains on its current global-warming trajectory. 1 Complementing other technologies, such as renewables and biofuels, hydrogen has the potential to decarbonize a variety of sectors, for example: industry (steelmaking, ammonia synthesis for fertilizer production); long-range ground mobility (as a fuel for heavy-duty trucks); maritime shipping and aviation (to produce synthetic fuels for vessels); and building heating. Hydrogen can also be used for flexible, long-term storage for power grids. Industry and transportation account for most of hydrogen’s abatement potential, which has a cumulative emissions reductions upside of 80 gigatons of CO2 through 2050.

Funding gap

Despite hydrogen’s momentum, a significant investment gap remains for it to fully contribute to decarbonization. Achieving a pathway to net zero will require additional direct investments of $460 billion by 2030 1 —closing the gap between the $240 billion of announced projects and $700 billion in required investments. The investment gap breaks down into three categories:

Production. Clean-hydrogen production has the highest amount of announced investments; however, it’s also the segment with the biggest investment requirements. The current investment gap is roughly $150 billion through 2030.
Transmission, distribution, and storage. Investments in this part of the value chain are critical to enabling access to cost-competitive hydrogen supplies, for example, connecting the regions with the lowest production costs to demand hubs, developing refueling infrastructure for vehicles, or building pipelines to supply industrial plants. An investment gap of more than $165 billion remains.
End-use applications. Meeting projected demand in hydrogen’s various end-use applications, including steel production and transportation, will require additional investments of $145 billion, with the largest absolute gap in mobility. New industry applications such as steel will require significant investments—about $35 billion—for outlays like new plants. However, steel is also one of the most advanced segments among announced investments, with about half of required investments announced.