. Part 1: Hydrogen era no longer a distant mirage Part 2: Europe vies for pole position in global race to a hydrogen economy Part 3: Facing uncertain future, gas operators look to hydrogen lifeline   Part 4: Hydrogen finance maturing from day trading to M&A Part 5: 'This is lift-off' for green hydrogen, says veteran British engineer .

This is the first of a five-part series exploring the burgeoning hydrogen economy and its rise — after decades of false dawns — to the top of the energy agenda in 2020.

The potential future of carbon-free energy is taking shape in an unlikely place: the Texas oil patch.

For decades oil producers have stored fossil fuels in manmade caverns carved into naturally occurring salt domes, deep below the surface of the U.S. Gulf Coast. Three of these subterranean storage facilities, all in southeast Texas, also house huge volumes of hydrogen derived from natural gas. This so-called "gray hydrogen" flows through a dedicated pipeline network to major oil refineries and ammonia plants across the region, forming an essential feedstock for the global fossil fuel-based economy.

Now, this hydrogen infrastructure will form the center of several marquee initiatives launched in 2020 to unlock the much broader potential of the most abundant element in the universe. In three separate but interrelated efforts, oil major Royal Dutch Shell PLC, gas suppliers Texas Gas Service Co. Inc. and Southern California Gas Co., electric utility Entergy Corp., hydrogen provider L'Air Liquide SA, automaker Toyota Motor Corp., equipment vendor Mitsubishi Heavy Industries Ltd. and others plan to study, demonstrate and commercialize "green hydrogen," produced using renewable energy resources instead of fossil fuels.

If all goes as planned, that carbon-free green hydrogen will be stored as a gas in salt caverns and then distributed via new and existing pipelines.

Energy visionaries have long seen an energy economy based on hydrogen as the cure for the world's hydrocarbon addiction. Hydrogen, they say, will be burned as a zero-carbon fuel in hydrogen-compatible turbines to produce electricity. It will power fuel cells to drive passenger vehicles, heavy-duty trucks, ships and even airplanes, and to heat and light buildings. It will substitute for fossil fuels in industrial manufacturing processes. It will enable levels of decarbonization unimaginable using only renewable resources and battery storage.

As the world looks for strategies to vastly reduce or eliminate carbon emissions, hydrogen technology appears to be a promising pathway to enabling longer-term storage of renewable power and decarbonizing industry and transportation.

Dozens of ambitious green hydrogen projects have kicked off this year in Asia, Australia, Europe, the Middle East and North America, forming the initial outlines of what a growing number of participants and observers see as a multitrillion-dollar opportunity. They align with a series of recently adopted public policies and private-sector initiatives that seek to achieve carbon neutrality by midcentury. That includes the European Union's passage this summer of the most ambitious green hydrogen initiative to date, which could pour half a trillion dollars or more into key enabling technologies, according to the European Commission, much of it during a fast-paced commercialization phase in the 2020s.

As a result, the world's largest energy and technology companies are jockeying for position across the green hydrogen value chain. Forces are "about to align" for the broader use of hydrogen, including falling costs for renewable energy and electrolyzers, advances in fuel cell technology and "a global focus on decarbonization and sustainability," investment analysts at Bank of America Securities Inc. said in a recent research report.

That will not be possible without significant government support. In November, the U.S. Department of Energy released its Hydrogen Program Plan, which offers no new funding, but details the steps needed to enable the broader use of hydrogen, including cost reduction, safety protocols and infrastructure investments. It will be up to President-elect Joe Biden and his eventual choice for secretary of energy to decide how to build on the more than $4 billion the Energy Department has poured into hydrogen research and development over the last two decades.

"We're sort of where we were five to eight years ago on solar, maybe where we were a decade ago on wind, or five years ago on lithium-ion batteries, where the industry is starting to scale and you can see a very clear [downward] cost trajectory," Paul Browning, CEO of Mitsubishi Power Americas, a subsidiary of Mitsubishi Heavy Industries, said in an interview. "But it hasn't happened yet, and so until we really see it take off and scale … well, seeing is believing."

Everywhere and nowhere

Despite this year's flurry of new project launches, the hydrogen era faces significant hurdles.

Hydrogen is nearly ubiquitous, it is found mostly in water and hydrocarbons, but separating it requires energy. Today that energy comes mostly from fossil fuels.

Green hydrogen makes up less than 0.1% of the world's 70 million-metric-ton annual hydrogen supply, according to the Green Hydrogen Coalition, a California-based nonprofit advocacy group. "Gray" hydrogen, produced from natural gas using high-temperature steam methane reforming, and "brown" hydrogen, made by gasifying coal, account for almost all hydrogen in use today. The chief customers are oil refineries, chemical plants and industrial manufacturers such as steel and cement makers. "Blue hydrogen," a lower-carbon variant, also uses fossil fuels as a source but offsets emissions with carbon capture and storage. Like green hydrogen, it is not yet widely in use.

With limited demand and no real scale to date, green hydrogen sourced from renewable energy can cost four times as much as other options, according to the International Energy Agency.

Suppliers of green hydrogen technologies, including electolyzers, fuel cells, hydrogen-burning turbines and infrastructure, must crack a "chicken and egg issue," says Browning, where demand is too low to fuel significant new production. That is why early activity is centered in locations that can take advantage of existing infrastructure, including Texas, where Mitsubishi is working with Entergy on a series of projects, starting with the recently proposed 1,200-MW Orange County Power Station.

Scheduled to come online in 2026, the Orange County plant will use Mitsubishi turbines that will initially burn a blend of 30% hydrogen from zero-carbon resources and 70% natural gas, supplied by underground storage caverns. Mitsubishi Power says it will gradually boost hydrogen's share of the fuel to 100% by midcentury, when Entergy aims to achieve net-zero-carbon emissions across its four-state service territory. The companies are exploring hydrogen sourced from both renewables and nuclear power.

A similar 840-MW project in Delta, Utah, under contract to supply the Los Angeles Department of Water and Power and other municipal utilities, sits above a large salt dome where Mitsubishi plans to store hydrogen for the plant and for other applications across the U.S. West. The Delta plant will generate hydrogen onsite with electrolyzers powered by low-cost wind and solar farms throughout the region, connected by existing transmission lines.

Such plants could help California avoid the kind of widespread rolling blackouts the state experienced during an extreme August heatwave by saving surplus renewable energy in the spring for later use.

In areas without such salt domes or existing hydrogen pipelines, Mitsubishi offers integrated packages of hydrogen-burning turbines along with onsite electrolysers and above-ground storage tanks. The company has secured contracts in 2020 to supply equipment for power and storage projects in Utah, New York, Ohio and Virginia with a combined investment of roughly $5 billion.

Europe leads scale-up

In the near term, though, the advance of green hydrogen technologies will be tied largely to progress in Europe, which is one reason why Mitsubishi Heavy Industries recently made a strategic investment in Norwegian electrolyzer company HydrogenPro AS.

The EU's hydrogen strategy calls for a surge in electrolyzer installations to produce green hydrogen, from an estimated roughly 100 MW of global installed capacity today to at least 6,000 MW in Europe by 2024 and roughly 40,000 MW across the continent by 2030. At the same time, electrolyzer developers are working to expand individual system sizes into the hundreds of megawatts. The largest single plant today, completed in Japan in early 2020, is just 10 MW.

"We are right at the beginning," Jürgen Wollschläger, the CEO of Raffinerie Heide GmbH in northern Germany, said in an interview. Oil refiners and fertilizer makers that already use gray hydrogen are the first steps in Europe's roadmap for introducing green hydrogen, with steel and heavy transport — sectors considered challenging or impossible to decarbonize with electrification alone — set to follow.

Wollschläger is overseeing one of the world's largest green hydrogen pilot projects, the cross-industry Westküste 100 project in Heide, on Germany's northwest coast.

The German government greenlighted the first phase of the project in August with €30 million in funding, kicking off construction of an initial 30-MW electrolyzer at the Heide refinery to produce green hydrogen from offshore wind through a joint venture with Denmark's Ørsted A/S and France's EDF Group. Future plans include expanding the electrolysis plant to 700 MW and transporting hydrogen via a dedicated pipeline integrated with the local natural gas grid.

"I am deeply convinced that if you really want to scale up hydrogen you need to look into industrial applications," Wollschläger said. "The challenge will be to get the speed right. You will need more of the 30-to-50 MW installations in order to improve the technology."

Such commercialization efforts are bringing clarity to hydrogen's role in a carbon-free energy future, although that future could take another 10 years or more to materialize. "A truly hydrogen-based economy ... appears out of reach, at least before 2030," S&P Global Ratings said in a report released in November. "Energy transitions typically take decades."