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Global Research
- Disruptive technology
- Energy transition
- Future transport

Hydrogen in transport

By Sean McLoughlin, EMEA Head of Industrials Research, HSBC

2 May 2023

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Hy hopes? Why one size does not fit all

Hydrogen has long been seen as having a key role to play in the future of transport
Although electric batteries now appear to have a “seemingly unassailable” lead in passenger cars…
…hydrogen has long-term potential in heavy-duty transport including trucks, excavators, ships, trains and planes

Hydrogen in passenger cars looks an increasingly distant prospect

There’s been a key change in the debate about hydrogen in transport over recent years. The abundant element still has great potential as a zero-emission fuel: ‘green’ hydrogen, produced with renewable energy, can be converted into electricity without any carbon dioxide emissions.

This could still help the transport sector, which currently accounts for around 20% of global carbon emissions, to lower its environmental impact. And policymakers and companies alike are still keen to explore the potential benefits.

c20%

global carbon emissions from transport

But the big change is in the area of focus. In the past the spotlight was often on passenger cars, with major manufacturers releasing hydrogen-powered pilots. Now, however, most passenger car manufacturers have swung firmly in favour of battery electric vehicles. According to a January 2023 UK parliamentary committee report, electric batteries now have a “seemingly unassailable” lead over hydrogen when it comes to passenger cars.

Different strokes

Yet hydrogen has traction and compelling long-term potential in several other modes of transport, particularly heavy-duty ones. These include trains, buses, trucks, construction machinery, industrial machinery, shipping, and even aviation. Indeed, while the level of investment and deployment varies significantly, hydrogen vehicles are already a reality in some of these areas:

Trains: Hydrogen trains have been in commercial service in Germany since 2018 and regular service since 2022. France, California and Italy have hydrogen trains on order
Buses: China and Korea both have over 3,000 hydrogen buses and coaches in operation. The deployment of hydrogen buses can be helped by subsidies and zero-emission zones
Trucks: Battery electric is currently the dominant technology for decarbonising trucks. Hydrogen offers potential in long-haul heavy-duty trucks in particular, but it is still early days, and better refuelling infrastructure would be vital to support a broad roll-out
Industrial machinery: Hydrogen internal combustion engines, rather than hydrogen electric engines using fuel cells, may be particularly suited to vehicles in off-highway settings dealing with heavy loads, such as construction machinery or snow grooming machines in ski resorts
Shipping: Hydrogen is among a number of alternative fuels which have the potential to play a role in decarbonising shipping, alongside green ammonia and methanol. We see promising applications for hydrogen in smaller vessels and landside operations
Aviation: In the near term, Sustainable Aviation Fuels are likely to be the chief means of reducing emission from the sector. While companies are already investing in hydrogen-powered aircraft, we don’t see any entering commercial operations before 2035

Across these segments, we believe hydrogen provides a credible complement to battery electrification of transport, provided that robust policy support from governments and regulators continues, and that infrastructure challenges can be overcome.

Opportunities, challenges and debates

The single biggest change necessary for green hydrogen to be a commercially viable and widespread solution in transport is a huge increase in production of the gas itself. Large-scale clean hydrogen generation projects are now underway. Investments in low-carbon hydrogen topped USD1bn for the first time in 2022.

Investments in low-carbon hydrogen topped USD1bn for the first time in 2022.

Electrolyser manufacturing is also ramping globally to provide visibility on how ambitious production cost targets can be met. An intensifying focus from policymakers on decarbonisation is another supportive factor for hydrogen technologies.

However, we also see challenges that may yet be a roadblock to the widespread deployment of hydrogen in transport. These include the cost of transporting hydrogen, high vehicle upfront costs, heavy reliance on subsides, a lack of heavy-duty hydrogen infrastructure, and durability issues with fuel cell stacks.

Then there is also continued competition from electric batteries, particularly in trucks. Many manufacturers are pursuing multi-fuel strategies. They are, in effect, hedging their bets. With the rapid rollout of electric infrastructure and advancements in battery chemistry, there is a possibility that, once again, electric batteries could overtake hydrogen – at least in terms of attracting focus and investment from vehicle manufacturers. We will be watching the race very closely.

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Disclosure appendix

The following analyst(s), who is(are) primarily responsible for this document, certifies(y) that the opinion(s), views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Sean McLoughlin, Jonathan Day, James Rydge, Sriharsha Pappu, Charles Swabey, Pushkar Tendolkar, Achal Kumar, Parash Jain, Kim Fustier and Michael Tyndall, CFA

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Global Research
- Disruptive technology
- Energy transition
- Future transport