Hydrogen is core to net-zero strategies globally

Low-carbon hydrogen is central to national net-zero targets globally, and the number of companies announcing hydrogen strategies has been growing. To put the potential into an APAC perspective, we think hydrogen could play a much larger role in the energy mix than the 12% occupied by natural gas today (up to 400mn tons APAC hydrogen demand in our most aggressive scenario). The utility of low-carbon (green and blue) hydrogen is broadly known to the market. However, we believe markets are still moving up the learning curve regarding:

  1. bottom-up factors that will differentiate hydrogen’s development on a country-by-country and industry-by-industry basis;
  2. specific factors that could underpin the fall we expect in low-carbon hydrogen production cost from 2020 to 2050;
  3. hydrogen transport cost and what it means for the cost of hydrogen for the end-user; and
  4. the economics of carbon intensity and how it may impact the adoption of hydrogen across key end-user segments.
    This Q-Series report builds on the foundations laid by UBS Q-Series reports on Blue Hydrogen (Shneur Gershuni) and Energy Transition, adding in UBS proprietary analysis and with a tilt toward case studies in APAC. This report includes input from 20+ UBS analysts globally.

Falling cost of supply and application of carbon tax to support demand

Our UBS proprietary cost of hydrogen supply model uses China as an example, though the analysis is relevant to other markets. We estimate the cost of producing green hydrogen is set to drop 75% by the end of this decade and another 50% by 2050. In our China case study, we expect the cost of compressed hydrogen transport to decline 25- 30% by 2030. Depending on transport distance, we believe green hydrogen could begin to look attractive for use in heavy land transport. A carbon tax of c.US$40/t could, in our view, accelerate adoption in chemicals and steel, both large industries for low- carbon hydrogen in China.

No one-size-fits-all solution for hydrogen adoption

Our in-depth country-by-country analysis reveals two structural factors in particular that we think may shape development strategies:

  1. whether local conditions are suitable for deep penetration of renewable energy; and
  2. whether carbon sinks required for carbon capture are accessible.
    In the case of APAC, we expect China to develop green hydrogen supply before other countries in the region and to eventually build a 100% self-sufficient hydrogen economy. Japan and Korea are likely to rely on imports and we think may seek to lead global supply chain initiatives. Australia and New Zealand could build surplus production and emerge as regional exporters. Markets in the EU and North America will likely follow their own unique paths.

Authorized clients of UBS Investment Bank can log in to UBS Neo to read the full report.


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