Hydrogen? Make it green

The latest study released by McKinsey and Company last week, entitled ‘Global Energy Perspective 2024’, indicates an expected reduction in the anticipated demand for hydrogen by 2050. McKinsey cuts projected hydrogen demand for 2050 by up to 25%, citing cost increases and regulatory uncertainty as barriers to growth. According to the report, the sector faces rising capital costs, slower adaptation rates and higher expenses for renewable energy storage and electrolysis technology, in particular.However, in terms of Namibia’s own ambition to produce ‘green’ hydrogen from renewable energy sources, the research holds a silver lining. McKinsey expects the majority of future hydrogen demand to be for green hydrogen, ranging between 50% to 70%. The vast majority of demand is expected to come from traditional chemicals and refining sectors, with demand projected to be lower than expected in road transport and buildings in particular. The report estimates that global green hydrogen consumption will increase to 179 million tonnes per annum (mtpa) by 2050, up from less than 1mtpa currently and 5mtpa expected in 2030. This could lead to growth in power consumption of 20% per year for the sector, McKinsey expects. Regarding hydrogen production costs in general, the report expects increases of between 20% and 40%. Electrification is acceleratingMcKinsey’s analysis suggests that, between 2023 and 2050, electricity consumption could more than double in slower energy transition scenarios, and nearly triple in faster scenarios. Total energy consumption is expected to grow up to 21% over the same period. Electricity is set to become the largest source of energy by 2050 across scenarios, with consumption coming from traditional sectors like the electrification of buildings, as well as newer sectors, such as data centres, electric vehicles and green hydrogen, according to the report.Of these new demand centres, the most striking is the rise of artificial intelligence (AI) and the associated boom in data centres, says McKinsey. “The effect that AI could have on future energy demand could vary substantially depending on the growth trajectories of its many applications, as well as those of other technologies. Our research estimates that the rise of cloud solutions, crypto-currency and AI could see data centres accounting for 2 500 to 4 500 terawatt hours (TWh) of global electricity demand by 2050 (5% to 9% of total electricity demand). Data centres are mostly powered by electricity (with backup generators) and have constant demand, creating greater need for gas or other firming sources of energy to balance out the intermittent supply of renewable energy sources,” the researchers say. Electricity consumption in transport could grow by around 10% annually, driven by increased penetration of electric vehicles. Battery electric vehicles are projected to account for most global passenger car sales by 2050, up from 13% today, McKinsey suggests.Mostly renewablesRenewable energy sources are set to make up the bulk of the power mix into the future. Low-carbon energy sources should grow, accounting for 65% to 80% of global power generation by 2050, depending on the scenario, up from 32% today. “This growth is primarily driven by the lower cost of renewable energy sources, though policy and incentives also play a role,” the report states.Growth rates are projected to differ by technology. Those technologies for which the cost of energy is already low at the point of production, such as solar, wind and energy storage systems, are expected to continue to grow, while those with higher costs, including hydrogen and other sustainable fuels, as well as for carbon capture, utilisation and storage, lack sufficient demand and policy support for strong growth. “Solar stands out with particularly strong growth projections, while hydrogen growth to 2050 has been revised downward by 10% to 25% compared to previous estimates due to higher cost projections,” reads the report.To supply projected energy demand and increase the viability of renewable-based power systems, fully running and reliable systems are necessary. “Emerging economies have an opportunity to build a renewable-based system from the ground up to meet their burgeoning energy needs, potentially leapfrogging some of the constraints imposed by adapting a pre-existing energy system to run on renewable energy. Doing so would require conscious planning; purposeful, pragmatic action, and a supportive policy environment to ensure that a renewable energy system could meet rapidly growing demand,” the researchers say.Renewed challenges While renewable energy systems are now cheaper and make up a larger part of the energy mix than ever before, more work is needed around the economic feasibility of some business cases, McKinsey found. “An emerging challenge affecting energy systems with a high penetration of renewable energy is power pricing. The comparatively lower marginal costs of renewable energy systems mean that the price of electricity tends toward zero, or even negative pricing, at certain times of day. For new installations, this could potentially impact the business case, requiring electricity providers to de-risk their positions. In some scenarios, including those with the most cost-effective decarbonisation pathways, our analysis shows that new renewable energy build-out would not have a positive business case without regulatory intervention,” according to the report.“The business case for firming capacity, such as from gas or battery electric storage systems (BESS), needs to make sense and be supported by government and correct market design,” the researchers point out. “Even though a renewable-based system may be cheaper than a fossil-based one, the need for firmness is not trivial, and this, in combination with the required grid investment, could make the final cost of power for the consumer higher than previously anticipated.”Policy and regulation can play a role in ensuring the build-out of low-carbon firm energy sources is feasible, with robust business cases that result in affordable power for end users. Additionally, BESS and other long-duration energy storage technologies could play an important role in meeting demand located far from the grid and in balancing a renewable-based system, McKinsey found.

Hydrogen? Make it green

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Namibian Sun 2025-05-01

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Hydrogen? Make it green

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Namibian Sun 2025-05-01

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