Hydrogen Stocks: News, Market Analysis and Sector Coverage

Hydrogen is commonly categorised using a colour system that describes how it is produced and the carbon intensity of the production process. Grey hydrogen is made by reforming natural gas (methane) with steam, a process that releases carbon dioxide as a by-product. Grey hydrogen is the cheapest to produce and currently accounts for the vast majority of global hydrogen supply. Blue hydrogen uses the same natural gas reforming process but captures and stores the CO2 emissions underground through carbon capture and storage (CCS), reducing the carbon footprint significantly though not to zero. Green hydrogen is produced through electrolysis, where an electric current is passed through water to split it into hydrogen and oxygen. When the electricity used in this process comes from renewable sources such as solar or wind, the resulting hydrogen has near-zero lifecycle carbon emissions. Green hydrogen is currently more expensive than grey hydrogen but is the focus of most climate-aligned energy transition investment.

Hydrogen is already used at large industrial scale in two primary sectors. Ammonia synthesis, via the Haber-Bosch process, accounts for the largest share of global hydrogen consumption. Ammonia is the feedstock for nitrogen fertilizers, which underpin global food production. Petroleum refining is the second largest use, where hydrogen is used to remove sulphur from fuels in a process called hydrodesulphurisation, and to convert heavier crude oil fractions into lighter products. Combined, these two applications account for the majority of the roughly 90 million tonnes of hydrogen consumed globally each year. Future growth applications being targeted by the hydrogen economy include green steel production, long-haul transport via fuel cells, sustainable aviation fuels, and long-duration energy storage. These emerging uses are at various stages of commercial development.

Green hydrogen is produced through a process called electrolysis, in which an electrical current is passed through water (H2O) to break it into its constituent elements: hydrogen gas (H2) and oxygen gas (O2). The device used for this process is called an electrolyser. The most commercially mature electrolyser technology is the alkaline electrolyser, which has been used industrially for over a century. Proton exchange membrane (PEM) electrolysers are more compact and can respond rapidly to variable power inputs, making them well suited to coupling with intermittent renewable energy sources. Solid oxide electrolysers operate at high temperatures and can achieve higher efficiencies. The key input for green hydrogen is renewable electricity: the lower the cost of the electricity, the lower the cost of the resulting hydrogen. This is why regions with abundant low-cost renewable energy, such as Australia's sun-belt regions, are considered prime locations for green hydrogen production.

Australia's potential as a major green hydrogen exporter rests on several structural advantages. First, Australia has exceptional renewable energy resources, with some of the highest solar irradiation levels in the world and strong wind resources across vast land areas, providing the low-cost electricity input needed to make green hydrogen competitive. Second, Australia has substantial existing industrial infrastructure, export experience, and relationships with Asian energy markets developed through its LNG trade, which could be adapted to hydrogen export. Third, Japan and South Korea, two of Australia's closest trading partners and major LNG customers, have made green hydrogen a cornerstone of their decarbonisation strategies and are actively seeking long-term import supply. The Australian government has published a national hydrogen strategy and committed significant funding to support the development of green hydrogen projects through the Hydrogen Headstart programme and other initiatives.

The hydrogen economy faces several significant technical, economic, and infrastructure challenges. Cost is currently the most significant barrier: green hydrogen is considerably more expensive to produce than fossil fuels on an energy-equivalent basis, and the economics are not yet competitive without subsidies or carbon pricing in most applications. Hydrogen is also challenging to store and transport. As the lightest element, it has a very low volumetric energy density in its gaseous form, requiring either compression to high pressures, liquefaction to cryogenic temperatures, or conversion into a carrier molecule such as ammonia for practical transport. Infrastructure investment requirements are substantial, as existing energy infrastructure is not designed for hydrogen. Safety considerations, arising from hydrogen's wide flammability range and potential for embrittlement of metal infrastructure, also require engineering attention. Progress is being made on all these fronts, but significant scale-up challenges remain.