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A Hydrogen Future


As interest for power generation fueled by hydrogen increases, ERCE examines the role the gas could play in a low carbon future.

At a glance, hydrogen sounds too good to be true: the universe’s most abundant element contains three times the energy storage capacity of natural gas and emits only water1. Hydrogen has the highest energy per mass of any fuel2, making it a great candidate as an energy storage medium. With the transition to sustainable energy in an effort to reduce our carbon emissions, the potentials of hydrogen as a fuel in power generation, transport and domestic use are increasingly explored and developed3.


How Hydrogen is Extracted

Unlike natural gas, hydrogen does not occur naturally within subsurface reservoirs in its elemental form and is locked within compounds, such as hydrocarbons or water. The process for extracting hydrogen are well established and typically come from four processes:  reformation, gasification, electrolysis or fermentation4.

Figure 1: Illustration of Different Processes to Produce Hydrogen

Reformation: Natural gas extracted from the subsurface is combined with high temperature steam to produce hydrogen, carbon monoxide and carbon dioxide. Carbon monoxide is reacted with water to produce additional hydrogen. This is known as steam methane reforming (SMR). Biofuels such as ethanol can also be used in this process.

Gasification: Coal or biomass are combined with steam and oxygen at high pressure to produce hydrogen and carbon monoxide. Steam is then used to split out the hydrogen gas.

Electrolysis: An electric current is run through water to split hydrogen and oxygen components.

Fermentation: Sugars from biomass are fermented and the hydrogen produced can be captured.


Grey, Blue & Green Classes of Extraction

It is clear the processes and components used to generate hydrogen can create CO2 emissions themselves. The emissions produced from hydrogen production are therefore used to define the “colour” of the resource.

Figure 2: Illustration of the Classifications of Hydrogen Based On Emissions5

Source: POSCO Newsroom, 2020

Grey hydrogen is produced from hydrocarbons, where its productions will result in net CO2 emissions. This currently makes up 95% of the hydrogen production in the world today 6.

Blue hydrogen is produced in a way that meets a low carbon threshold but uses non-renewable energy sources. Generally, this would be via hydrocarbons and CCS, subsurface hydrogen creation, or other non-renewable sources such as nuclear.

Green hydrogen is produced entirely from renewable energy sources, such as wind or solar.


Slow Transition to Green

Most of the hydrogen produced today is from grey sources. While green hydrogen is the ideal, the currently available renewable energy is limited. Additionally, directly utilising the renewable energy for power generation is currently 50% more effective at lowering CO2 emissions than using that energy for hydrogen production instead7. Thus, power generation takes priority as the output in renewable energy projects and there is less drive to produce hydrogen instead. All in all, there are worries of there being a production shortfall in green hydrogen, despite the forecasted demand of 8.7 million tons of green hydrogen per year by 20308.

In addition to the shortfall in green hydrogen, the transition to using hydrogen as a fuel requires substantial changes to the existing infrastructure of cities and industries. Blue and even grey hydrogen projects would be necessary for a smooth transition to hydrogen economies, by providing the supply while infrastructure is being updated for hydrogen fuel.

As such, the Asia Pacific region currently has a great demand for blue and grey hydrogen, as liquefied green hydrogen has been deemed unlikely to be cost-competitive before 2030. South Korea plans to use blue hydrogen for the bulk of hydrogen supply while China seems likely to continue utilizing grey hydrogen primarily, whilst intending to have hydrogen account for 10% of the total energy footprint by 2050 (about 60 million tons per year). Japan aims to procure 0.3 million tons of hydrogen per year by 2030 from all three sources9.

Ultimately, movement away from large-scale grey hydrogen production will only occur once the price is right. Production costs are approximately US $1-2/kg without CCS and 50 cents more when paired with CCS10. Green hydrogen costs are currently a lot higher, and a carbon tax of US $40/tonne would be required to bring costs in line with blue hydrogen10. Furthermore, to vie with conventional fuels, it is estimated that green hydrogen would need to fall by over 50% to US $2-2.5/kg by 203011.

Challenges of Hydrogen


The chemical properties of hydrogen (low boiling point) and very low density make it difficult to store hydrogen in small amounts. Hydrogen requires very low temperatures (liquid storage) or very high pressures (pressurized storage). This has caused the adoption of hydrogen-fueled cars to be slow, as larger, specialized storage tanks are required, driving up the costs of these cars. However, storing large volumes has been less of an issue. Hydrogen can be stored in underground reservoirs such as salt caverns, with a number of projects already in existence in the US and the UK12. These projects require a sound understanding of subsurface geology and processes, to optimise any storage project.



The chemical properties of hydrogen similarly present challenges for the transportation of hydrogen: the gas is low density, is flammable and embrittles certain materials13. Currently, gas cylinders/cryogenic tanks or pipelines are the most common means of transportation14. Although existing gas pipelines are possible, they require higher specifications to prevent leaks. Hydrogen can also be blended with natural gas for transportation, but still requires additional fortification and inspection, as well requiring energy to separate it after transit15.


Lack of Evaluation Guidelines

As hydrogen is a fairly new market, and it’s influence on CO2 emissions is even newer, a global certification scheme of blue hydrogen is yet to be fully established. Several countries are in the midst of developing such a scheme; the Australian Renewable Energy Agency (ARENA) is providing AU $70M16 and a European scheme (CertifHy) is also at a pilot phase17. CertifHy currently defines Blue Hydrogen as being created using non-renewable energy and having emissions 60% below a benchmark carbon intensity. As of July 2019, emissions from hydrogen production must be under 36 gCO-2equivalent/MJ, less than 40% of natural gas emissions (91 gCO-2equivalent/MJ)18.  Both systems seek to establish a benchmark on CO2 emissions for hydrogen project to be considered blue, as opposed to grey.


ERCE are an independent energy consultancy, with global expertise in carbon auditing, resource classification and subsurface storage feasibility studies. Contact for more information.


[1] Wise, Jeff. “The Truth About Hydrogen.” November 14, 2017.

[2] “Hydrogen Storage.”

[3] IEA. “The Future of Hydrogen – Analysis.” June 2019.

[4] “Hydrogen Production and Distribution.”

[5] “POSCO to Establish Hydrogen Production Capacity of 5 Million Tons.” December 18, 2020.

[6] Certifhy Canada Inc. “Green and Blue Hydrogen.” and Blue H2.html.

[7] Dickel, Ralf. “Blue Hydrogen as an Enabler of Green Hydrogen: The Case of Germany.” Oxford Institute for Energy Studies, 2020. doi: 10.26889/9781784671594.

[8] IEA. “Falling Costs of Green Hydrogen Production Make H2 Economy Possible.” September 04, 2020.

[9] Edwardes-Evans, Henry. “Renewable Hydrogen Projects ‘at Risk of Government Inaction, Capital Shortfall’.” August 24, 2020.

[10] Wood Mackenzie. “Green Hydrogen: A Pillar Of Decarbonization?” January 31, 2020.

[11] Edwardes-Evans, Henry. “Green Hydrogen Costs Need to Fall over 50% to Be Viable: S&P Global Ratings.” November 20, 2020.

[12] Hevin, Storengy, Grégoire, Dr. “Underground Storage of Hydrogen in Salt Caverns.” Lecture, European Workshop on Underground Energy Storage, Paris, November 7, 2019. Storage H2 in Salt.pdf.

[13] Gerboni, R. “Introduction to Hydrogen Transportation.” Compendium of Hydrogen Energy 2 (2016): 283-99. doi:10.1016/b978-1-78242-362-1.00011-0.

[14] ENTSOG, Gas Infrastructure Europe, and Hydrogen Europe. “How to Transport and Store Hydrogen – Facts and Figures.” 2021.

[15] Pacific Gas and Electric Company. Pipeline Hydrogen. Whitepaper. PG&E GAS R&D AND INNOVATION, 2018. doi:

[16] ARENA. “Renewable Hydrogen Deployment Funding Round.” July 09, 2021.

[17] Certifhy Canada Inc. “Project Description.”

[18] Barth, Frederic, Thomas Winkel, Wouter Vanhoudt, Antti Kuronen, Marko Lehtovaara, Matthias Altmann, Patrick Schmidt, Karina Veum, Marcel Weeda, Javier Castro, and Klaus Nürnberger. “Towards a Dual Hydrogen Certification System for Guarantees of Origin and for the Certification of Renewable Hydrogen in Transport and for Heating & Cooling.” Fuel Cell and Hydrogen 2 Joint Undertaking 2 (2019). doi:10.2843/46282.