• Hydrogen Economy
  • Hydrogen
  • Energy Technologies
  • Renewable Energy

Hydrogen Demand Grows with Emerging Applications in Cities

Jason Schwartz
Aug 21, 2019

Hydrogen

Cities are responsible for two-thirds of the world’s energy and 70% of CO2 emissions. In addition to efforts to reduce greenhouse gases, cities struggle with localized pollution, which can have detrimental health effects. As a result, clean energy solutions are crucial; however, many operate independently, increasing upfront capital costs, time for deployment, and efficiency. Hydrogen is being proposed as the fuel of the future, with hydrogen cities emerging as a sustainable alternative and potential integration in nearly every sector, especially industry and heavy transportation, where few green alternatives exist. How these cities navigate this transition is critical to the long-term success of hydrogen.

Which Came First?

Many cities recognize hydrogen’s future yet also acknowledge that hydrogen prices are not presently competitive to implement it full scale. While declining renewable energy costs are expected to augment this, further R&D is necessary for green electrolysis. To maximize the first-mover advantage and economies of scale, emerging hydrogen cities are looking toward applications that net the highest use value to grow their hydrogen market share. The most prominent industries for this application were recently identified in a Navigant Research report and include energy storage, industrial use, and transportation. Initial investments in the highest value segments allow cities to keep a foot in the market while waiting for it to reach maturity. 

Hydrogen cities suffer from the chicken and egg dilemma, where infrastructure requires demand for hydrogen, and hydrogen demand requires significant upfront infrastructure investment. Cities and private companies should look to sources of hydrogen that promise constant demand to minimize risk as an entry point. Although the initial capital investment for transportation is high, cities can integrate transportation in smaller doses. Specifically, hydrogen buses, long-haul trucks, trains, and ride-sharing programs solve two main issues with hydrogen. First, they promise steady demand in small increments, allowing the supply-chain to adjust accordingly. Second, they convince customers of the feasibility of hydrogen for everyday use. Substituting green hydrogen for industrial use and integrating hydrogen into ports (which make up 65% of prominent hydrogen cities identified) are two other valuable applications that can help build end-use demand. By carving out niche, high profile markets, hydrogen can slowly increase in presence without tackling the major hurdles of deployment until the price of hydrogen becomes competitive. 

Top 20 Cities and the Future

Analyzing the top 20 hydrogen cities in the world, public investment is the pivotal spark for innovation. Private investors are beginning to recognize the potential for hydrogen in a decarbonized economy but will not act unless given a proper incentive. Just as Germany initiated solar development with government funding (which tapered off as prices dropped), hydrogen will need initial public capital. Also, nearly every city detailed provided some form of grant, loan, or other incentive to help with initial upfront costs. The top six cities in the tracker are located throughout Europe and Asia and have a cumulative investment of $5.5 billion to spur hydrogen growth.

Cities that wish to attract top companies in the hydrogen market require similar funding in the early stages. While public spending is required for the first stage of a hydrogen transition, the most important factor is steady growth of consumer demand. As demand and infrastructure grow and prices decline, maritime and aviation applications of fuel cell technology is expected to grow more realistic, offering a critical antidote for emission in these two pollution intensive industries. A hydrogen transition, if done successfully, should be invisible, meaning consumers won’t notice a change in their daily lives. Still, initiating the switch requires buy in, and this is best achieved through accessibility, education, and economic incentives.