Green hydrogen to outcompete fossil fuels by 2040

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  Quantumrun Foresight
• January 29, 2022

Insight summary

Green hydrogen production through electrolysis, fueled by renewables, eliminates carbon dioxide emissions. This environmentally friendly energy source could change transportation, significantly reduce carbon emissions, enhance grid stability, and foster the wider adoption of renewables. It also holds promise for job creation, energy security and technological advancements in renewable energy.

Hydrogen context

According to research conducted by Wood Mackenzie Ltd, the cost of green hydrogen is expected to drop by 64 percent by the year 2040. As of 2023, the majority of hydrogen is used in the process of oil refining and is derived from natural gas as a by-product. Unfortunately, this method of production results in the release of approximately 830 million tonnes of carbon dioxide annually, which is equivalent to the combined emissions of the UK and Indonesia.

However, with the utilization of renewable energy sources, it becomes economically feasible to produce hydrogen through a process called electrolysis, which involves separating water into its constituent elements. By adopting this approach, hydrogen can be generated without the accompanying release of carbon dioxide, hence earning the label 'green hydrogen.' The resulting green hydrogen can be efficiently stored, transported across international borders, and eventually employed to power vehicles or supply electricity to entire grids.

The transportation industry could witness a noteworthy transformation as the utilization of green hydrogen as a fuel source for vehicles becomes more affordable. This shift could lead to a considerable reduction in carbon emissions, offering a potential solution to the environmental challenges associated with traditional fossil fuel-based transportation. Furthermore, ss the cost of green hydrogen decreases, it becomes increasingly viable to store excess renewable energy generated from sources like wind and solar power. This stored hydrogen can then be converted back into electricity during periods of high demand, thus enhancing the reliability and stability of electrical grids.

Disruptive impact

In addition to the environmental benefits, the decreasing cost of green hydrogen presents promising opportunities for the renewable energy industry. Renewable energy sources, such as solar and wind, are intermittent in nature, meaning that energy production is contingent on weather conditions. The ability to convert excess renewable energy into green hydrogen through electrolysis offers a means of storing and utilizing this energy during times of low production. Consequently, this feature could lead to a more efficient utilization of renewable energy sources, fostering their wider adoption and integration into existing energy systems.

This development could be a game-changer since energy sectors worldwide are already facing many challenges as they pivot from non-renewable to renewable and clean energy sources to meet emerging international emissions standards. For example, much of the existing energy infrastructure (from energy grids to gas pipelines) will have to be retrofitted and extended to account for the different properties and behaviors of energy sources growing in popularity, particularly, hydrogen. 

These efforts will require a considerable upfront investment in environmental studies, technologies, and staff upskilling efforts. Energy sector workers who’ve worked with non-renewable energy sources like gas and coal will require additional training to transition to working safely and effectively with cleaner energy sources, like green hydrogen. This shift may occur throughout the 2020s, as countries like Germany, Australia, and Japan invest billions of dollars into local green hydrogen production and importing infrastructure.

Implications of hydrogen production

Wider implications of hydrogen production may include:

• Fuel vehicles designed to run on hydrogen, especially heavy-duty vehicles like transport trucks.


• Entire factories and heavy refineries being powered by green hydrogen, which would significantly decarbonize the heavy industries.


• Countries with lots of sun but limited oil and gas reserves (like Australia and Chile) becoming energy exporters to G7 countries.


• New job opportunities in electrolysis technology, and hydrogen storage and transportation.


• Energy security by diversifying the energy mix and reducing dependence on fossil fuel imports, potentially strengthening national sovereignty and geopolitical stability.


• Energy democratization enabling individuals and communities to generate and store their own energy, reducing reliance on centralized power systems.


• Advancements and innovation in electrolysis efficiency, storage solutions, and hydrogen-powered applications, creating a ripple effect of technological progress in related fields.


• Workers heavily reliant on traditional fossil fuels requiring retraining programs and job transitions to ensure a just and equitable transition to a greener economy.

Questions to consider

• If you work in the renewable energy sector, how is your company developing green hydrogen?


• What are the other potential challenges of adopting green hydrogen?