Anna Pekala, Erik Nikolai Udbye and Eva Ravn Nielsen

January 4, 2024

The green hydrogen hierarchy

Green hydrogen is often thought to be a silver bullet capable of decarbonising various applications within the energy and transport sectors. Yet knowing exactly where and how to deploy this technology can help deliver scale and cost efficiencies, as well as substantiate a business case for investment.

Container ship
In this article, we investigate the most practical and achievable hydrogen applications, specifically focusing on green or low-carbon hydrogen and the use of hydrogen derivatives, the so-called e-fuels. We recommend placing a higher priority where there is an existing demand, and in applications such as heavy-duty transport, fertilizer production, and in hard-to-electrify industrial sectors with established demand where alternatives to using hydrogen and hydrogen-based e-fuels are scarce or difficult to find.
Widespread implementation of green hydrogen calls for expansion of renewable energy generation, ensuring affordable green energy for hydrogen and e-fuel production without hindering electrification. While the landscape may change with widespread green electricity availability or curtailment needs, the current focus should remain on selecting hydrogen applications based on feasibility and strategic importance within decarbonisation. It is about choosing the right solution for specific applications, whether that means enhancing efficient use of energy, using electricity directly, incorporating biofuels or using green hydrogen and e-fuels.
Where does hydrogen fit in the decarbonisation hierarchy?
Hydrogen has emerged as a crucial component in realising a low-carbon future. Serving various purposes from energy storage to fuel, its potential is recognised widely. However, not all applications are created equal; some hold more potential for becoming widely implemented applications.
Among industry experts, there is an ongoing debate about the extent to which hydrogen will play a role in our energy systems and which of its use cases are technologically feasible and economically sound. While hydrogen’s future appears promising, the discourse remains nuanced, as some applications seem to lack a holistic rationale for widespread adoption. Given limited resources (renewable energy, biogenic CO2, etc.), infrastructure, distribution, and storage, it is imperative to adopt a realistic approach to identify which hydrogen applications can truly help meet decarbonisation targets, while offering an economically viable business case.
When evaluating an energy system, Ramboll employs a hierarchical approach to decarbonisation: a methodical ranking of the most effective and feasible solutions for achieving successful decarbonisation. The prioritisation sequence is as follows:
  1. Reducing overall energy demand through a heightened emphasis on eliminating energy-intensive activities that can be avoided or limited
  2. Optimisation (enhancing energy efficiency and refining existing systems)
  3. Electrification
  4. Green fuels (incl. hydrogen, e-fuels, and biofuels)
  5. Further measures, such as carbon capture and storage (CCS) or other removal technologies.
While optimisation and electrification are viable strategies for diverse sectors and industries, such as residential heating, urban mobility, and power system balancing, the discussion becomes more nuanced when it comes to determining where electrification should and can be utilised versus where green fuels offer a superior choice. Moreover, it raises questions about the types of green fuels — both biofuels and e-fuels — that should be considered. We need to ascertain the most optimal use cases for hydrogen within this context.
Optimal use-cases
To optimise using available resources and harness technological advancements, Ramboll underscores the importance of directing immediate Power-to-X initiatives towards sectors with existing hydrogen demand, especially those which are difficult or even impossible to fully decarbonise through electrification alone. These applications contain the following themes:
  1. Hydrogen is directly used for its chemical properties (e.g. as a reducing agent and as feedstock in steel manufacture, fertilizer, refining, chemicals)
  2. Hydrogen, or its derivatives, are used for their energy density or portability characteristics: transport applications and energy storage
With these categories in mind, the sectors and use cases expected to gain momentum in the short term are outlined below:
The Green Hydrogen Hierarchy
Figure 1: Relative attractiveness of emerging hydrogen use-cases
As shown above, the fertilizer, chemical, shipping, and steel industries represent the vanguard of low-carbon hydrogen and e-fuel applications. These sectors currently either rely on hydrogen or necessitate an energy-dense, liquid energy carrier such as methanol, ammonia, or kerosene, as is the case in shipping and aviation. From a demand perspective, the refining and industrial sectors drove 99% of the existing 95-million-tonne global hydrogen demand in 2022.1 Unfortunately, this demand also made a substantial contribution to greenhouse gas emissions (approximately 2.5% of global emissions) due to the predominant use of environmentally polluting production methods.
Alternatives to green hydrogen and e-fuels for these use cases can be biofuels – also in the form of methanol and kerosene – made from biomass and waste, based on different feedstock and chemical processes than the e-fuels made from water electrolysis.
Less favourable cases
Less favourable use cases include residential space heating and urban mobility. These applications are much better addressed by direct electrification. For the heating of buildings, heat pumps would require approximately five to six times less renewable electricity compared to a hydrogen fired boiler.2 Electrification might become the most widespread but not the only alternative for space heating. Low-temperature waste heat from industrial processes or e.g. data centres may be utilised in district heating systems.
For cars, electric vehicles (EVs) have already won this debate by offering a cheaper and less complex solution compared to hydrogen cars or fuel cell electric vehicles (FCEV’s). EVs are generally cheaper to manufacture and operate, given the increasing affordability and availability of batteries. They are also less complex from an engineering standpoint, requiring fewer specialised components than FCEVs. Additionally, the infrastructure for charging EVs is becoming more widespread and accessible, further tipping the scales in favour of electrification. The efficiency of converting electrical power to motion is also higher in EVs compared to the multiple-step process of converting hydrogen to electricity in FCEVs. All these factors have effectively made EVs the go-to solution for passenger mobility, making the case for hydrogen in this sector increasingly untenable. A similar approach can be extended to evaluate other technologies adaptable to both hydrogen and electrification. Key considerations include assessing efficiency, complexity, and the existing infrastructure.
The in-between use case
For the use cases in the middle, things become less certain. Herein lie applications in high-temperature heat for industrial processes, long-haul trucking, and energy storage. Production costs, geographic considerations, energy density, and infrastructure are important to consider here.
A recent study conducted by the Energy Transitions Commission, comprised of companies and financial institutions, underscores the need for a $1.1 trillion annual investment in grid infrastructure until 2050 to attain the global net-zero emissions objective.3
This significant financial commitment would likely increase significantly if we were to opt for complete electrification whenever it is technically feasible. Therefore, while theoretically possible, it may not always be the most optimal choice for every application. Strategic assessment of applications should therefore be taken to ensure hydrogen offers the best available solution when compared to the trajectory of other technologies. Moreover, it is expected that these later applications will benefit from the learning rates and production scale-up expected in the hydrogen and electrolyser manufacturing industry that will run parallel to current deployments.4 While they may not be viable today, they could be in 2030 or 2035 depending on the hydrogen industry’s momentum.
Industry perspectives
There is a debate in the industry on practical applications of hydrogen and e-fuels as well as wide ranging estimates for the predicted size of the future hydrogen market. While hydrogen has gained recognition as a versatile decarbonisation tool, the extent of its practical application remains a point of contention among industry experts.
Michael Liebreich, known for popularising the “clean hydrogen ladder” concept and likening hydrogen to a versatile “Swiss Army knife” of energy solutions, leans towards electrification where possible and highly questions some speculative hydrogen applications. He emphasizes that versatility does not’ always equate to efficiency or cost-effectiveness, using the example of using a Swiss Army knife for various tasks when more specialised tools are often more practical, safer, or cheaper. Liebreich’s hydrogen ladder diagram assesses hydrogen’s viability in proposed applications, highlighting competition not only from electrification but also from biofuels.
Conversely, companies heavily investing in hydrogen technologies might tend to overemphasise its potential applications and benefits to expedite market adoption. These differing perspectives can contribute to a proliferation of opinions, making it difficult to reach a neutral, evidence-based assessment of hydrogen’s role. Furthermore, established energy entities may seek to shape the discourse to align with their particular interests, such as infrastructure assets or business models, potentially prioritising their own agenda over broader societal and climate objectives, further complicating the evaluation process.
It does not have to be a competition
Taking both views into account, Ramboll underscores the need to evaluate hydrogen’s role within a broader, decarbonised energy context and does not frame the discourse as a competition between hydrogen and electrification. Instead, we view hydrogen and Power-to-X technologies as complementary to electrification efforts – and the logical next step in the hierarchy where the integration of both hydrogen and electrification is deemed essential for achieving decarbonisation goals. Both hydrogen and electrification have roles to play, in the current and anticipated energy demands, and a cautiously optimistic approach is a good way to move forward.

”Hydrogen is not a silver bullet solving all future challenges with global warming and realising sufficient CO2 emission reductions. Direct electrification will be a main solution for decarbonisation, but green hydrogen and e-fuels will be the main solution for the sectors hard to electrify from 2030 and onwards”

Eva Ravn Nielsen
Senior Chief Advisor, Hydrogen & Power-to-X

“Our ambition is to help you make Power-to-X a sustainable solution – not only environmentally but also financially and socially.”

Anders Nimgaard Schultz
Director, Power-to-X

Want to know more?

  • Anna Pekala

    Business Manager

    +45 51 61 26 75

  • Erik Nikolai Udbye

    Consultant - SSC

    +45 60 36 12 27

  • Eva Ravn Nielsen

    Senior chief advisor

    +45 51 61 04 83