Hydrogen and the Chemical Industry

Alex Böser

Industry Insights

Author: Alex Böser, Senior Innovation Lead Chemistry @ 5-HT Chemistry & Health

Introduction

Hydrogen isn’t exactly a new topic: For many years it’s been part of concepts and initiatives revolving around a greener and more sustainable future for the industry - and humanity in general. According to a report by the International Energy Agency (IEA), China, the United States, and Japan are among the top three countries investing in hydrogen infrastructure [1]. In Europe, Germany, France, and the UK are also actively promoting the use of hydrogen as a clean energy source.

But energy technology is evolving fast and is accelerated by a global transition towards a sustainable and decarbonized economy and culture. Additionally, recent elections and political debates brought the discussions around the feasibility of using hydrogen back into the spotlight:

  • Immediately after his inauguration, US President Donald Trump puts US clean hydrogen support schemes on hold as part of a plan to terminate the 'Green New Deal' of the Biden Presidency [2],

  • German chancellor candidate Friedrich Merz mentioned during a conference in January 2025, that he doesn’t believe it possible to change to hydrogen-based steel production soon [3]. He also added the question, where this hydrogen should even be coming from, as Germany “doesn’t have it”. And even if „we used hydrogen [for steel production], then a ton of steel would still be 300 Euros more expensive in comparison to the conventional production methods” (translated from German). Interestingly, he later redacted his statements after receiving a lot of criticism.

Leaving political agendas and election debates aside, hydrogen has emerged as a cornerstone of clean energy strategies worldwide. Its versatility as an energy carrier, fuel, and feedstock gives rise to a lot of theoretical and practical application scenarios. Many of these application scenarios are particularly valuable for the chemical industry, which faces unique challenges in achieving decarbonization.

In 2025, the spotlight is on the chemical industry’s role in embracing hydrogen as both a key resource and a driver of technological innovation [4-6].

So, everyone wants hydrogen – but where does the hydrogen come from?

Pick a colour: the Hydrogen Spectrum

Atomic hydrogen is the first element on the periodic table and the most abundant element in the universe. But the “hydrogen” the industry, the media and this article is talking about is more specifically molecular hydrogen (H2), which is rarely found in Earth’s natural resources due to its high reactivity. Therefore, hydrogen must be produced from more readily available compounds like water or hydrocarbons using various amounts of energy.

These methods of production categorize hydrogen into various "colours", each reflecting its environmental impact [7-11]:

  • Grey Hydrogen: Produced from natural gas or methane, using steam methane reforming (involving reacting methane with high-temperature steam to produce hydrogen and carbon dioxide), this method is currently the most common but generates significant CO2 emissions. Subsequently, grey hydrogen is currently by far the most used type of hydrogen.

  • Green Hydrogen: Created through the electrolysis of water into hydrogen and oxygen using renewable electricity, making it entirely carbon-free. Thermo-chemical Water Splitting is also a promising technology to produce green hydrogen, which uses heat to split water into hydrogen and oxygen.

  • Black and Brown hydrogen: Using black coal or lignite (brown coal) in the hydrogen-making process, black and brown hydrogen is the direct opposite of green hydrogen in the hydrogen spectrum and the most environmentally damaging.

  • Blue Hydrogen: Derived similarly to grey hydrogen but combined with carbon capture and storage (CCS) technology to mitigate emissions.

  • Turquoise Hydrogen: Produced via methane pyrolysis, this method results in solid carbon as a byproduct rather than CO2 – which has its own pros and cons.

  • Pink and Yellow Hydrogen: Variants of green hydrogen that depend on nuclear energy (pink) or solar energy (yellow) for the electrolysis of water.

  • White Hydrogen: Naturally occurring hydrogen, extracted without human intervention - though it is not yet commercially viable.

It seems trivial to point this out, but the origin (and more precisely: the production method) of hydrogen correlates directly with the available amount of hydrogen, its price and its sustainability. Furthermore, these production methods are themselves heavily dependent on various factors such as scalability, weather conditions, electricity prices, technology readiness and critical resources -such as precious metal catalysts for water electrolysis. Lastly, some production methods can produce hydrogen on-site and on-demand, while others leave the hydrogen to be transported in some form, requiring a transportation and storage infrastructure.

Of course, these pain points and potential bottlenecks aren’t new as well. The role of hydrogen is expanding in decarbonization strategies globally, with hydrogen colours like blue and green receiving the most attention for their potential to reduce carbon footprints while scaling to meet industrial and energy needs. Countries such as Germany, Japan, and Australia are leading efforts in developing hydrogen economies [12] addressing many of these pain points.

Only time will tell whether these strategies are truly realistic and can be achieved in certain timeframes and which colour of hydrogen will take the pole position in the future.

The Role of Hydrogen in the Chemical Industry: A Key Enabler of Sustainability

As previously stated in our article on the chances of the chemical industry in 2024 [LINK] and emphasizing it here once more: There is no alternative to the chemical industry in our modern world. It’s the basis or an integrated part of value chains of almost every other industrial sector.

The good news: there will always be a chemical industry.

The bad news: therefore, the chemical industry must always adapt to the current business climate as well as to the demands and needs of its customers. Its status quo must constantly be redefined.

And although the start of 2025 is marked by many global companies turning away from their previously highly praised sustainability initiatives (for various reasons), transitioning to greener energy carriers and feedstocks remains highly relevant for many companies to circumnavigate supply chain dependencies and counteract market fluctuations.

Interestingly, the chemical industry accounts for a substantial portion of hydrogen consumption - primarily as feedstock in ammonia, methanol production, and refining processes. The industry consumes approximately 45 million metric tons (Mt) of hydrogen annually, which represents roughly 40% of the total global hydrogen demand [4].

In 2025, the industry is therefore positioned to lead in adopting low-carbon hydrogen due to its unique reliance on the molecule for both energy and materials [4]. Additionally, as regulatory frameworks tighten, consumer expectations shift towards sustainability, and through advancing technologies, hydrogen is playing an increasingly vital role in reducing greenhouse gas (GHG) emissions and improving the environmental footprint of chemical production.

However, there are still several transition challenges remaining:

  • Cost Competitiveness: As shown in Figure 1 further down below, the price of hydrogen per kg fluctuates significantly between different regions and even forecasts for future price developments are difficult. Additionally, green hydrogen is still more expensive than fossil-fuel-derived options, creating financial barriers for an industry currently operating on thin margins and in a weak economy - especially in Europe [13-14].

  • Process Adaptation: Adopting hydrogen requires either modifications to existing facilities, such as integrating electrolysers or hydrogen pipelines, or completely new installations of hydrogen plants. While digital twins and advanced modelling techniques are being used to optimize these transitions, adopting hydrogen into processes takes significant time and investments [8].

  • Regulatory Landscape: Compliance with stringent carbon reduction targets requires navigating complex regulations. Unfortunately, regional disparities in hydrogen regulations add complexity to the global hydrogen supply chains [8, 15].

The combination of price fluctuation, high investment cost, a difficult compliance landscape and dependency on political agendas slows the hydrogen transition dramatically with its uncertainty. While this baggage seems to discourage smaller players in the market, big players are still interested in developing the necessary technologies and infrastructure further to shape this transition of the industry:

In the chemical industry, companies such as Linde, Air Liquide, and Shell are at the forefront of hydrogen production and application. These companies have invested heavily in hydrogen infrastructure, including pipelines, storage facilities, and electrolysers [16]. Similarly, the world biggest chemical company, BASF, has recently been granted public funding for the inception of a huge hydrogen production plant in cooperation with Siemens Energy:

Example: Hy4Chem-El, a cooperation between BASF and Siemens Energy

As mentioned, this project is a cooperation between BASF and Siemens Energy and aims to install a 54-MW proton exchange membrane (PEM) electrolyser with a capacity to produce up to 8,000 metric tons of hydrogen annually using electricity from renewable energy.

BASF plans to use the output of the plant primarily as a raw material to decarbonise its chemical production processes. A smaller portion will also be used for transport applications near its headquarters in Ludwigshafen. Once switched on, the Ludwigshafen electrolyser is expected to be one of the largest of its kind in Germany and its commissioning is planned for 2025 [17-18]

For what exactly is hydrogen needed in the chemical industry?

Key applications of hydrogen in the chemical industry

There are four key applications:

  • Ammonia Production: Ammonia is a cornerstone of the chemical industry, mainly used for fertilizers and as an industrial chemical. Traditionally produced through the Haber-Bosch process using fossil-derived hydrogen, green ammonia is gaining traction as a more sustainable alternative [19]. Several pilot projects are underway to integrate renewable hydrogen in ammonia synthesis, reducing emissions significantly [20].

  • Methanol Production: Methanol serves as a crucial feedstock for producing formaldehyde, acetic acid, and plastics. Green methanol, produced using hydrogen from renewable sources and captured CO₂, is being developed to replace fossil-based methanol [21].

  • Refining and Petrochemicals: Hydrogen is extensively used in refining to remove Sulphur from fuels (hydrotreating) and in hydrocracking. The transition towards green hydrogen in refineries can significantly cut emissions while maintaining fuel quality [9].

  • Hydrogen as a Reducing Agent in Steel and Chemicals: Beyond conventional chemical applications, hydrogen is increasingly being considered as a reducing agent in processes like direct iron reduction (DRI) for steelmaking, replacing coal-based methods and integrating with chemical industry value chains [8].

In summary, hydrogen has the theoretical potential to revolutionize the chemical industry by enabling deep decarbonization as well as greener products and processes. By leveraging innovations such as hydrogen-powered crackers and renewable ammonia, the industry could achieve significant emission reductions while maintaining production efficiency.

As investment in hydrogen infrastructure accelerates and technological advancements drive down costs, the chemical industry is well-positioned to transition from fossil-based feedstocks to a sustainable hydrogen economy. However, overcoming infrastructure, policy, and cost barriers will be essential to unlocking hydrogen's full potential in the chemical industry. Collaborative ventures between energy and chemical companies – such as the Hy4Chem-El project - are expected to grow, aligning hydrogen production with downstream applications [6, 9]. With coordinated efforts across governments, industries, and innovators, hydrogen can become a frontrunner of a cleaner, more resilient chemical industry.

Let’s now have a closer look on whether there actually is enough hydrogen for everyone.

Enough Hydrogen for all! Enough Hydrogen for all?

The numbers are clear: The global demand for hydrogen in 2025 is projected to reach unprecedented levels, with estimates suggesting a rise to over 115 million metric tons annually, compared to around 90 million metric tons in 2020. This growth is driven by stringent government policies such as the European Union's “Fit for 55” package, the U.S. Inflation Reduction Act, and Japan's Green Transformation policy - all of which prioritize clean energy transitions and hydrogen adoption [4]. It’s noteworthy however, that these government policies can be subject to changes over time - as the case of the USA demonstrates [1].

Additionally, (projected) hydrogen applications are expanding beyond traditional industrial uses to include power generation, transport, and heating.

Currently, the producers' ability to meet the projected hydrogen demand of over 115 million metric tons by 2025 remains uncertain due to several challenges:

  1. Production Capacity: While investments in electrolyser manufacturing are expected to surpass 60 GW by 2030, current global production capacity is still limited. Large-scale projects are in development, but scaling up takes time [4, 12].

  2. Infrastructure and Storage: A robust hydrogen transport and storage infrastructure is still underdeveloped in many regions, limiting access. Projects such as the European Hydrogen Backbone aim to address this by creating a network of pipelines across Europe, but they require significant investments and time to implement [10, 14].

  3. Energy Constraints: Producing green hydrogen requires substantial renewable energy capacity, creating competition with other sectors for renewable electricity. Offshore wind and solar energy are being integrated into hydrogen production systems to address this challenge [8, 22].

  4. Geopolitical Constraints: Hydrogen production hubs and resource availability vary significantly over countries and continents, leading to the need for an international hydrogen trade network. The “Hydrogen Trade Outlook” by McKinsey identifies strategic corridors for hydrogen exports, such as those from Australia to Asia and the Middle East to Europe [9, 15].

  5. Economic Viability: Despite subsidies and policy support, hydrogen remains more expensive than fossil fuels in many applications. Market adoption will depend on continued cost reductions through technology advancements [23].

Just like anywhere else, innovative solutions and technological breakthroughs are the key drivers to scale hydrogen production – solutions, such as novel proton exchange membranes (PEM) and solid oxide electrolysers. Concurrently, carbon capture and storage (CCS) for blue hydrogen projects is gaining traction, with large-scale initiatives such as the Northern Lights project in Norway and the Houston CCS hub aiming to capture millions of tons of CO2 annually [4, 12].

While hydrogen production is growing rapidly, it remains to be seen if it can scale fast enough to meet the high demand in 2025. These are the main demand drivers for hydrogen:

  • Industrial Use: Demand is highest in industries like ammonia production, refining, and steelmaking, which rely on hydrogen as a critical input [8, 12].

  • Transportation: Hydrogen fuel cells are gaining traction in heavy transport, aviation, and shipping. Initiatives like the European Clean Hydrogen Alliance are driving the adoption of hydrogen in mobility [4, 8].

  • Energy Storage: Hydrogen serves as a critical medium for balancing intermittent renewable energy sources, acting as a long-term energy storage solution. Research into hydrogen storage technologies, such as salt caverns and advanced materials, is also accelerating [13, 24].

Despite its promise, the economic viability of hydrogen remains contingent on policy support, scaling, and technological innovation. Governments and industries are collaborating to establish price parity with fossil fuels through subsidies and technological breakthroughs [23].

Leaving these more generalistic and high-level discussions aside, let’s have a look at the real numbers:

Pricing and sizing hydrogen

As previously stated, the chemical industry consumes approximately 45 million metric tons (Mt) of hydrogen annually, which represents roughly 40% of the total global hydrogen demand [4]. Depending on factors such as region of origin current hydrogen production costs vary between 10-14 USD per kilogram of hydrogen [25] (1 USD = 0,96 EUR). As both hydrogen supply and demand are growing, these production prices are expected to fall:

The International Council on Clean Transportation (ICCT) estimated green hydrogen production costs across US regions and European Union Member States in 2030 under different technology-improvement scenarios, which are shown in Figure 1 [26]: Depending on the region and development scenarios, prices range from 2-9 USD per kg of green hydrogen – with prices in the EU being significantly higher in general compared to US prices.

Figure 1 - ICCT green hydrogen production cost estimates for 2030 in the European Union and United States under different technology-improvement scenarios. Circles represent the regional average, and bars show the range of estimated production costs in all U.S. regions and EU countries (Source ICCT [26]).

These estimates assume producers will choose the renewable energy source (wind or solar), connection type (direct or grid), and electrolyser type (alkaline, proton-exchange membrane, or solid oxide) that’s most cost effective for that region. Note, though, that these factors only determine green hydrogen production costs – “at the pump” prices paid by consumers, which include the cost of compression, transportation, and distribution, will be much higher.

Figure 2 shows ICCT’s central technology case alongside other recent cost estimates from other organisations and institutes [26, 27-31]. ICCT’s central estimates of 2030 green hydrogen production costs fall within the range estimated from these other sources (3,7 USD per kg in the United States and 5,6 USD per kg in the European Union).

Figure 2 - The ICCT’s 2030 central scenario cost estimates compared with other published values [27-31]. Circles represent average values, when available. All costs are adjusted to 2023 US dollars (Source: ICCT) [26].

As mentioned several times above, these wildly different price scenarios for hydrogen make betting the future of the chemical industry on hydrogen almost impossible.

The future price of hydrogen is not the only problem though. Additionally, the infrastructure to create truly sustainable hydrogen still must be built, requiring significant capitol and operational expenditures:

Using the previously mentioned example of the Hy4Chem-EL project by BASF in cooperation with Siemens Energy: According to Siemens Energy’s own documentation, the total electrolysis plant space of their 50 MW reference plant (capable of producing approximately 1 ton of hydrogen per hour - equalling 24 tons/day or 8760 tons/year) has a footprint of 3900 m² [18]. Their 100 MW reference plant (2 tons/h, 48 tons/day, 17520 tons/year) requires an area of 19500 m² - the size of almost 3 soccer fields. To meet the chemical industry’s current annual hydrogen demand of 45 million tons, over 2500 of these 100 MW hydrogen plants would be needed – using a theoretical space of over 50 million m² or 50 km² of pure electrolysis plant infrastructure. This is roughly the size of Lake Starnberg in Germany or around 7700 soccer fields.

Although intimidating – at first glance, installing a total of 2500 of these 100 MW electrolysis plants all over the globe sounds achievable. But this is only the amount of place needed right now to covers today’s hydrogen demands – and only the demand of the chemical industry. To realistically meet the hydrogen demands in 5, 10 or 20 years, we would need hundreds (if not thousands) of these plants already running today.

Additionally: Assuming electrolyser CAPEX costs of around 1000 USD per kW, a 100 MW electrolyser plant adds up to around 100 million USD. Assuming 50 USD per kW as OPEX cost, our 100 MW reference plant generates a total of 5 million USD annual OPEX costs [32-34]. Installing our theoretically needed 2500 electrolyser plants would amount to 250 billion USD in CAPEX costs and 12,5 billion USD of annual OPEX costs.

Of course, not all these investments have to be made by the chemical industry alone. But somebody has to pay the theoretical bill, and the chemical industry will have to pay a big share: Either investing in own infrastructure and keeping it running or paying whoever is running the electrolyser plants in the future for their hydrogen and being dependent on them. Both scenarios have their pros and cons but add to the complexity of the overall topic.

To add even more complexity to the overall hydrogen topic, let’s discuss hydrogen safety – a topic rarely seen in mainstream media.

Hydrogen Safety: Literally a booming business

Despite its promise, hydrogen’s unique properties present notable safety challenges that require rigorous attention [35]:

Hydrogen’s flammability range in air is exceptionally broad, from 4.0% to 75.6% by volume, significantly increasing the risk of explosive mixtures. Its minimum ignition energy is remarkably low in normal air and especially low in oxygen-rich environments. Just 4% of methane’s ignition energy are needed to ignite hydrogen, underscoring its heightened sensitivity to ignition sources. Additionally, flame propagation studies reveal that hydrogen flames spread irregularly.

Hydrogen production processes, particularly steam methane reforming and water electrolysis, operate under high temperatures and pressures, elevating explosion risks. Hydrogen's role in embrittlement—where it degrades the mechanical integrity of storage materials—poses another hazard, especially in high-pressure vessels.

Several storage technologies exist, such as high-pressure gas tanks or liquid hydrogen. However, maintaining liquid hydrogen requires extreme conditions—cooling to -235°C, which is both energy-intensive and technically challenging.

In addition, hydrogen's low density facilitates rapid diffusion, making leaks harder to detect yet more prone to forming explosive clouds. For example, hydrogen leaks in confined spaces, like garages, present higher explosion risks compared to gasoline due to faster diffusion and wider flammability.

In fuel cell vehicles, hydrogen is typically stored at pressures up to 70 MPa (700 bar) to achieve driving ranges of around 400 km. The tanks, often made from composite materials, must withstand extreme conditions to prevent catastrophic failures.

From an energetical point of view, the energy released by exploding 1g of hydrogen is equivalent to the energy released by exploding around 29 g of TNT [36]. Combined with a much larger affected area of explosion in comparison to petrol or natural gas [37], the usage of hydrogen always must be paired with stringent safety measures.

Hydrogen’s potential as a clean energy source is undeniable, but its safe integration into the chemical industry hinges on understanding and mitigating its inherent risks. How this secure hydrogen economy can be achieved over thousands of kilometres of hydrogen pipelines, thousands of hydrogen tanks and trucks and dozens of different national security standards remains to be seen.

One of the many possibilities to make hydrogen safer is by continuously innovating the technology around it. Let’s therefore have a broader view on the innovation landscape surrounding hydrogen.

The new H2: Innovation in the hydrogen space

Hydrogen’s role is not confined to the chemical industry or transportation alone; its integration across sectors is pivotal for realizing a low-carbon future in general. The chemical industry is forecasted to benefit from these integrations as well, being a part of many other industrial supply chains: The construction sector is exploring hydrogen-fuelled machinery and cement production processes that significantly reduce carbon emissions [4]. The agricultural industry is testing hydrogen-based fertilizers, with pilot projects in the Netherlands demonstrating reductions in nitrogen runoff and increased energy efficiency [19]. In energy, utilities are developing hybrid systems that combine hydrogen with battery storage, addressing seasonal energy storage needs. This hybrid approach is particularly useful in regions with high renewable penetration but limited energy storage capacity [24].

5-HT is and has been an innovation partner for companies in the chemical industry for 7 years. Our main expertise is finding and evaluating external innovation providers (such as startups) for specific technology and innovation demands. Based on our own experience as well, the emergence of startups focused on hydrogen technologies has accelerated innovation across production, storage, and application domains.

Here are a few examples of startups developing innovative solutions around hydrogen:

  1. H2Pro: Develops efficient, low-cost electrolyzers using advanced electrode technologies. [LINK]

  2. Hydrogenious LOHC Technologies: Pioneers liquid organic hydrogen carriers (LOHC) for safer and more efficient transport. [LINK]

  3. Proton H2: Focuses on extracting hydrogen from underground hydrocarbons without emitting CO2. Its "clean hydrogen" production method addresses both cost and sustainability [LINK].

  4. Enapter: Provides modular electrolyzer systems designed for small-scale hydrogen production and distribution. Their cost-effective approach is driving decentralized hydrogen production [LINK]

  5. Lhyfe: Innovates in offshore green hydrogen production, using floating platforms powered by wind turbines. Their approach minimizes the land footprint and integrates directly with renewable sources [LINK].

As these examples show: innovation in hydrogen is more than just developing novel catalysts for grey or green hydrogen. It’s also innovation in processes and infrastructure alongside classical R&D.

5-HT has scouted and evaluated hundreds of hydrogen-related startups over the last few years. If you are interested in our findings, feel free to contact us.

Summary and author's point of view

Hydrogen’s potentially pivotal role in the chemical industry and broader energy landscape underscores the importance of continued investment and innovation. While significant progress has been made, challenges related to cost, infrastructure, and regulation must be addressed to truly unlock hydrogen’s full potential.

In my personal opinion, transitioning to hydrogen mainly boils down to this: Investing time, resources and money in reliable and scalable technology – and then truly focusing efforts on them. Researching and developing novel hydrogen solutions is tremendously important, too. But being a green company and producing sustainable products has been fashionable in recent years, also attracting - and therefore diverting and decentralizing - a lot of interest and investment. The start of 2025 shows, that a turn towards a less green future can happen withing just a few days. We therefore need technologies and pilot plants that produce more than just a few kilograms of hydrogen per year but are scalable in practical manner to produce mega-ton scale amounts of hydrogen per year or more. Fostering meaningful partnerships between governments, industry leaders, and startups will therefore be critical to achieving a sustainable hydrogen economy. Another important issue is that all these efforts must be parallelized to fully work together. Otherwise, we might end up with large-scale production plants but not transportation infrastructure or vice versa.

For me, every aspect revolving the use of hydrogen as energy carrier or raw materials has tremendous potential for the chemical industry and humanity in general, but at the same time also many bottlenecks, requirements and dependencies.

Just like ammonia needed the invention of the Haber-Bosch process to revolutionize our modern world, hydrogen lacks its own “Haber-Bosch moment” to truly transform our future in my opinion – at least for now.

__________________________________

Comments, questions, and discussions regarding this article are therefore highly appreciated! Feel free to contact the author of this article, Alex Böser (Senior Innovation Lead Chemistry @ 5-HT), via e-mail [alexander.boeser@5-ht.com] to share your opinion.

AI and Quality Assurance Disclaimer

This article has been structured, written, formatted and edited with the help of 5-HT’s own AI system, called “Hatty”. Every piece of text generated by Hatty has been revised, updated, enriched and cross-referenced by the author.

References

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