Hydrogen – an essential element of the energy transition

Your expert for questions

Prof. Dr. Jürgen Peterseim
Director PwC Deutschland
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Supply security and energy transition through green hydrogen

In order to achieve climate neutrality (net zero), companies and governments worldwide have set ambitious goals. To achieve them, energy and heat generation must be decarbonised as well. In Germany, the energy transition has gained significant momentum under the impact of geopolitical tensions and the expansion targets for renewables have been raised. Green hydrogen, which has long been overshadowed by photovoltaics and wind power, has a special role to play in the energy architecture of the future.

Renewable electricity is essential, but for various end-uses there is much to suggest that the hydrogen molecule is the crucial particle in the implementation of a net-zero strategy. Why can the hydrogen molecule be a perhaps crucial part in the implementation of a net-zero strategy? It is because hydrogen has many applications: as fuel, as chemical feedstock and as energy storage. Many processes require fuels or chemical precursors. Hydrogen and its derivatives - such as synthetic fuels or chemicals - can be utilized to replace fossil hydrocarbons and thus reduce emissions. Hydrogen can either be used directly, processed into other energy carriers or chemicals via power-to-gas, power-to-liquid or power-to-x.

Its use as intermediate storage can help buffer the volatile availability of green electricity. At the same time, hydrogen can be transported over long distances via pipelines or liquefied, which facilitates global trade.

By developing a German and European hydrogen economy, we can make a significant contribution to achieving the climate goals and at the same time ensuring the security of supply as well as the economic and political resilience of Germany as a major business location.

Your situation

Gathering your first experiences of hydrogen as an energy source

H2 technology and the related applications are currently developing very quickly. However, only very few projects are commercially viable. At the same time, it will be almost impossible for some industries – such as the steel, chemicals or transport industries – to achieve the targets for emissions reduction and climate protection without H2 technologies. Companies must now adopt a clear position and gather their first experiences of using hydrogen as a source of energy.

At present, the biggest challenge is to identify the H2 applications with the lowest cost gap and to transfer these into projects. Companies must now gather experience of finding ways to reduce these costs. This will be the only way to achieve future market success.

Success in this regard requires companies to gain comprehensive understanding of hydrogen in the specific context of their sector and their applications, as well as deep knowledge ranging from the technology itself through to legal considerations. Successful and economically viable projects will only be possible if companies think and act holistically. This approach will also help to optimise the business cases of existing projects. For example, it is not sufficient to concentrate on generating revenue by selling H2. Instead, companies also need to consider the by-products that result from the process, such as oxygen and heat.

In the next ten years, global demand for hydrogen will increase, driven by niche applications and the emergence of a small number of pioneering companies. Local projects will reveal insights into how to cut costs. Strong market growth is then expected from 2030 onwards, as the realized cost reductions and infrastructure measures make hydrogen a competitive and available alternative.

Hydrogen has the potential to make an important contribution to climate protection by decarbonising entire industries – either directly or through Power-to-Gas, Power-to-Liquid or Power-to-X technologies. However, this success will also require green power. Electricity from renewable sources and hydrogen complement each other and will both be required in order to achieve net zero.

What opportunities does hydrogen offer for my company and how can we put ourselves in a strong position to take advantage?

Decarbonisation is on the rise around the globe – not just in Germany. Achieving net zero will require more than just green electricity.

When it comes to hydrogen, many companies are asking themselves the following questions:

• How can we achieve the optimal balance between efficiency, green energy and hydrogen?
• How big will the market for hydrogen be in the future, which approaches are suitable for my company and how well are we currently positioned?
• How can we gather our first experiences of this technology, and where are the best locations for pilot projects?
• How can we close the current cost gaps?
• How can we use niche products to pass on additional costs?
• How can we purchase hydrogen and participate in this value chain?

Our services

Support from strategy through to implementation

Hydrogen applications are currently growing within niche markets where the additional costs can be passed on to selected customers via green products. Companies must now position themselves in order to participate in this growth market in the future.

Against this complex background, PwC provides support from developing a strategy through to implementing projects. The experts from PwC offer comprehensive technical knowledge, are able to further develop business cases and can also support you with legal considerations. In this way, we can enable your company to use hydrogen as a sustainable and economically viable energy source.

Our services include:

• Developing company-specific hydrogen strategies, including those related to emerging markets, technological requirements, M&A activities and partnerships.
• Identifying pilot projects, conducting analysis of technical and economic feasibility, and evaluating financing possibilities.
• Optimising the business case, for example through identifying suitable funding initiatives and the use of by-products.
• Legal consultancy.
• Purchasing and trading hydrogen.
• Certification models for green hydrogen.
• Integrating hydrogen-related projects into reporting.

Our promise

At PwC, experts from across industries and disciplines work hand-in-hand. Our interdisciplinary team helps companies to find the best possible way of integrating hydrogen into their business development goals. We consider relevant strategic and technological factors, as well as the business model, application, legal requirements and reporting. With our global network of PwC experts, we have access to hydrogen experts worldwide.