In the run-up to net zero emissions, countries across the globe are developing strategies to decarbonize their energy systems.
While electrification using renewable energy is a rather mature solution to decarbonize a wide range of sectors including light-duty transport, residential and service sectors, achieving carbon neutrality in hard-to-abate sectors such as carbon intensive industries and heavy-duty transport remains a key challenge.
Green hydrogen is expected to play a key role in decarbonizing the hard-to-abate sectors and is currently the focus of numerous decarbonization plans and accelerating initiatives across the economy.
Hydrogen produced via electrolysis involves splitting water into hydrogen and oxygen by using electricity.
The development of industrial water electrolysis dates to 1888, and several studies focusing on the techno-economic and environmental assessments (such as life cycle assessment) involving green hydrogen production (i.e., with renewable electricity) via electrolysis have been carried out in the recent years.
However, limited knowledge exists so far on the socio-economic and environmental impacts for countries moving towards green hydrogen.
To fill this research gap, I carried out an assessment of the macroeconomic impacts (direct and indirect), in terms of GDP growth, employment generation and GHG emissions, due to deployment of a green hydrogen industry at a country level.
In this study, I compared the gross macroeconomic impacts generated by the construction and operational phase of a green hydrogen industry and the net impacts assuming the replacement of diesel by green hydrogen as a transportation fuel for Switzerland.
In order to carry out this analysis, I developed an Input-Output model by adding a new green hydrogen industry to the existing Input-Output table of Switzerland.
The Input-Output model provides a simplified representation of a country’s economy and facilitate the understanding of complex direct and indirect supply chain impacts allowing to establish multiplier effects.
In this study, I used country-specific data from Switzerland, however, the methodology developed in this study can be applied to any other country using its specific data, such as, energy infrastructure, renewable energy potential, policy landscape, and socioeconomic factors.
Some of the key findings of the study are as follows:
According to the results, the total gross impacts on GDP, employment, and GHG emissions in the operational phase are 6.0, 5.9, and 9.5 times compared to the construction phase of a green hydrogen industry.
Shifting the spending on green hydrogen in place of diesel for households has a net positive impact on GDP and employment and a net negative impact (reduction) in GHG emissions across three different cases. For instance, in all the three cases, namely, ‘Equal Cost’, ‘Equal Energy’ and ‘Equal Service’, it was found that a green hydrogen industry generates around 106%, 28% and 45% higher GDP, respectively; 163%, 43% and 65% more full-time equivalent jobs, respectively; and finally, 45%, 18% and 29% lower GHG emissions, respectively, compared to diesel and other industries.
Domestic manufacturing of machinery and equipment during the construction phase of a green hydrogen industry would contribute to 83% and 80% of the gross GDP and employment, respectively.
This calls for policymakers to focus on creating a framework encouraging investments in domestic manufacturing of machinery, specifically electrolyzers.
Overall, the study shows that the establishment of a green hydrogen industry has a net positive impact on the economy.
It provides an important policy message for the decision-makers who are designing hydrogen strategies :
Investing in green hydrogen does not only reduce carbon dioxide emissions, but it also has net positive impacts on GDP and employment, under the assumptions made in the study.
This conclusion calls for similar studies in other countries, as well as uptake of national green hydrogen industries across the globe.
Ruchi Gupta
Senior R&D at VITO NV