The hydrogen market is growing fast, and many are seeing hydrogenization of the economy as the most practical path to clean energy. This article will explore the economic factors at play in determining the potential return on investment (ROI). Based on some estimates from hydrogen analysts, here are some possible ROIs in the hydrogen market in the three areas of expected growth:
Production of hydrogen
The ROI for producing hydrogen, especially green hydrogen, is expected to increase as the cost of renewable electricity and electrolyzers declines, and as the demand for clean hydrogen grows. According to Bloomberg New Energy Finance, green hydrogen could be produced for $0.70 – $1.60 per kg in most parts of the world by 2050, a price competitive with natural gas. According to McKinsey, the global hydrogen production capacity could reach 1,200 GW by 2050, generating revenues of $400 billion per year. Assuming an average capital expenditure of $1,000 per kW and an average operating expenditure of $0.50 per kg, the ROI for producing green hydrogen could range from 10% to 40% by 2050.
Distribution and storage of hydrogen
The ROI for distributing and storing hydrogen is expected to improve as the infrastructure and technology for transporting and storing hydrogen develops, and as the scale and efficiency of the hydrogen market increases. According to BCG, the annual capital spending for distribution and storage equipment could reach $50 billion by 2050, creating a market worth $150 billion per year. Assuming an average capital expenditure of $500 per ton and an average operating expenditure of $0.20 per kg, the ROI for distributing and storing hydrogen could range from 15% to 35% by 2050.
Usage and consumption of hydrogen
The ROI for using and consuming hydrogen is expected to vary depending on the application and sector, as well as the carbon price and the availability of alternatives. According to IRENA, the global hydrogen demand could reach 614 million tons per year by 2050, creating a market worth $650 billion per year. Assuming an average selling price of $1.06 per kg and an average cost of goods sold of $0.80 per kg, the ROI for using and consuming hydrogen could range from 5% to 25% by 2050.
This analysis indicates that the potential return on investment for hydrogen could go far beyond sustainability and making the plant better for future generations.The actual ROI for the hydrogen market will depend on the specific project, location, and time horizon, as well as the evolution of the market conditions and the policy support. The hydrogen market is still in its early stages, but it has the potential to offer attractive returns for investors who are willing to take the long-term view and contribute to the energy transition.
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