When building a campfire, it helps to have kindling. Emerging markets, by comparison, are no different. Kindling provides the fuel to grow; employed correctly, it can accelerate the fire’s progression from a single spark to self-sustaining flames. 

Few emerging markets hold the same societal and economic significance as those tied to the Energy Transition. Because of this, the federal government is committed to accelerating clean energy, most recently through the Inflation Reduction Act — a tinderbox of tax credits, grants, and loans, potentially exceeding $400 billion by 2030. So what does this mean for the energy industry today? How can traditional energy companies redefine their portfolios, while leading the way for immature clean energy markets?

My name is Warren Smith, and I’m a member of the Energy and Natural Resources Practice at Oliver Wyman. As a child, I’d always been fascinated by the natural world — I remember helping my parents in the garden, hunting for fossils with older siblings, and yes, building campfires in the backyard. I maintained that passion for the outdoors which led me to study Geology and Geophysics at Brown University. 

Fascinated by the intersection of science and industry, I began my professional career as an exploration geologist at a major international oil company, where I assessed the commercial opportunity of acreage offshore Brazil. Since joining Oliver Wyman, I’ve gravitated toward working on the energy transition, and have had the privilege to help build out our Inflation Reduction Act platform. With the US on the cusp of a broad transition to cleaner energy, I’m excited to be helping clients translate the complex federal incentives and rapidly evolving competitive landscape into actionable strategies. 

Let’s focus on clean hydrogen. The market is forecast to grow from its current “proof-of-concept” phase into a global-scale commercial phase in the near- to mid- term. The incentives have drawn interest from clients searching for opportunity in the clean hydrogen economy of tomorrow, but thoughtful commercial strategies are critical to keeping the flames alive beyond the Inflation Reduction Act. 

Despite being in its infancy, clean hydrogen is widely recognized as a key aspect of the energy transition for hard-to-abate sectors like transportation, power, and heavy industry. The federal government has accordingly piled kindling on this nascent market, and as a result, the number of clean hydrogen projects in development in the US has skyrocketed. 

Clean hydrogen includes green hydrogen, from renewables; and blue hydrogen, which uses natural gas but captures and sequesters the associated carbon emissions. The distinction between the two begins to illustrate some of the complexity in designing strategies: For instance, how can oil and gas companies find new opportunities in blue hydrogen, while leveraging their assets, relationships, and highly skilled technical workforce? Or, how can renewable generators reduce their burden on the grid by using excess watts to produce green hydrogen?

While this shiny new tech — the electrolysers, the renewables, the fuel cells — will continue to innovate and steal headlines, hydrogen’s widespread adoption and commercial success will equally depend on the infrastructure to connect supply to demand. Will project developers effectively collaborate across the value chain, perhaps with public and private sector partnerships, in building efficient market infrastructure? And what’s at risk if these developments stall? 

In our view, companies can outperform this rapid-growth market by focusing on three high-level strategies:

First, Network Synergies. The Department of Energy recently announced $7 billion toward funding regional clean hydrogen networks, or hubs, across the US. The H2Hub program encourages stakeholders throughout the value chain to coordinate during the planning phase. While the recipients of this funding won’t be announced until later this year, players building strategies to leverage these infrastructure developments and partnerships will lead the way to commercial success.

Second, Risk Mitigation. Any new market is susceptible to unforeseen bottlenecks and overlooked risks. Detailed planning for all phases of a project, from financing to operations, reveals blind spots and ensures that each area of risk or uncertainty has the appropriate level of mitigation. 

Lastly, Commercial Relationships. Long-term, bankable offtake agreements are critical to securing project financing, and limit exposure to near-term price volatility. They should be considered in the beginning stages of any new project. 

Clean hydrogen could be a game-changer for many industries in the global efforts to decarbonize. We’re excited to be working alongside clients to help shape their roles in building out the hydrogen economy of tomorrow.

I’m Warren Smith and this is my take on the end-to-end hydrogen market.

When building a campfire, it helps to have kindling. Emerging markets, by comparison, are no different. Kindling provides the fuel to grow; employed correctly, it can accelerate the fire’s progression from a single spark to self-sustaining flames. 

Few emerging markets hold the same societal and economic significance as those tied to the Energy Transition. Because of this, the federal government is committed to accelerating clean energy, most recently through the Inflation Reduction Act — a tinderbox of tax credits, grants, and loans, potentially exceeding $400 billion by 2030. So what does this mean for the energy industry today? How can traditional energy companies redefine their portfolios, while leading the way for immature clean energy markets?

My name is Warren Smith, and I’m a member of the Energy and Natural Resources Practice at Oliver Wyman. As a child, I’d always been fascinated by the natural world — I remember helping my parents in the garden, hunting for fossils with older siblings, and yes, building campfires in the backyard. I maintained that passion for the outdoors which led me to study Geology and Geophysics at Brown University. 

Fascinated by the intersection of science and industry, I began my professional career as an exploration geologist at a major international oil company, where I assessed the commercial opportunity of acreage offshore Brazil. Since joining Oliver Wyman, I’ve gravitated toward working on the energy transition, and have had the privilege to help build out our Inflation Reduction Act platform. With the US on the cusp of a broad transition to cleaner energy, I’m excited to be helping clients translate the complex federal incentives and rapidly evolving competitive landscape into actionable strategies. 

Let’s focus on clean hydrogen. The market is forecast to grow from its current “proof-of-concept” phase into a global-scale commercial phase in the near- to mid- term. The incentives have drawn interest from clients searching for opportunity in the clean hydrogen economy of tomorrow, but thoughtful commercial strategies are critical to keeping the flames alive beyond the Inflation Reduction Act. 

Despite being in its infancy, clean hydrogen is widely recognized as a key aspect of the energy transition for hard-to-abate sectors like transportation, power, and heavy industry. The federal government has accordingly piled kindling on this nascent market, and as a result, the number of clean hydrogen projects in development in the US has skyrocketed. 

Clean hydrogen includes green hydrogen, from renewables; and blue hydrogen, which uses natural gas but captures and sequesters the associated carbon emissions. The distinction between the two begins to illustrate some of the complexity in designing strategies: For instance, how can oil and gas companies find new opportunities in blue hydrogen, while leveraging their assets, relationships, and highly skilled technical workforce? Or, how can renewable generators reduce their burden on the grid by using excess watts to produce green hydrogen?

While this shiny new tech — the electrolysers, the renewables, the fuel cells — will continue to innovate and steal headlines, hydrogen’s widespread adoption and commercial success will equally depend on the infrastructure to connect supply to demand. Will project developers effectively collaborate across the value chain, perhaps with public and private sector partnerships, in building efficient market infrastructure? And what’s at risk if these developments stall? 

In our view, companies can outperform this rapid-growth market by focusing on three high-level strategies:

First, Network Synergies. The Department of Energy recently announced $7 billion toward funding regional clean hydrogen networks, or hubs, across the US. The H2Hub program encourages stakeholders throughout the value chain to coordinate during the planning phase. While the recipients of this funding won’t be announced until later this year, players building strategies to leverage these infrastructure developments and partnerships will lead the way to commercial success.

Second, Risk Mitigation. Any new market is susceptible to unforeseen bottlenecks and overlooked risks. Detailed planning for all phases of a project, from financing to operations, reveals blind spots and ensures that each area of risk or uncertainty has the appropriate level of mitigation. 

Lastly, Commercial Relationships. Long-term, bankable offtake agreements are critical to securing project financing, and limit exposure to near-term price volatility. They should be considered in the beginning stages of any new project. 

Clean hydrogen could be a game-changer for many industries in the global efforts to decarbonize. We’re excited to be working alongside clients to help shape their roles in building out the hydrogen economy of tomorrow.

I’m Warren Smith and this is my take on the end-to-end hydrogen market.