Hydrogen is essential for industrial applications (chemicals and refining) and is set to become a key driver of industrial decarbonization. According to our internal estimates, demand is expected to reach 200 Mtpa by 2050. However, its economic viability is largely restricted to its role as an industrial feedstock, rather than as a fuel. While some scenarios, such as the Net Zero Emissions (NZE) outlook, predict a hydrogen market of 500 MtPa, real-world economics suggest that hydrogen’s primary value lies in refining, chemicals, and emerging industrial applications like steelmaking and sustainable fuels.

Michael Liebreich’s famous "Hydrogen Ladder" highlights the most viable hydrogen applications, emphasizing that its use in heating, power generation, and transport is largely impractical and cost-prohibitive. Hydrogen is mainly used in high-value industrial processes where direct electrification is not feasible.

Current hydrogen production methods contribute significantly to CO2 emissions, with conventional Steam Methane Reforming (SMR) emitting approximately 10 tons of CO2 per ton of hydrogen produced. This means that hydrogen production contributes nearly 2% of global CO2 emissions, so cleaner alternatives are needed to meet industrial demand and reduce environmental harm.

Hydrogen Demand: Present and Future

Global hydrogen demand currently stands at approximately 100 Mtpa, primarily for refining and chemical production—most notably ammonia, which could grow to 230–250 Mtpa by 2050, requiring 40–45 Mtpa of hydrogen.(1)  Ammonia made from hydrogen and nitrogen is essential for fertilizers that support food production for nearly 50% of the global population. With population growth and increasing food demand, ammonia consumption—and consequently hydrogen demand—is expected to rise.

Beyond its existing industrial applications, new use cases could drive an additional 100 Mtpa of demand by 2050:

> Steel Industry: The hydrogen-based Direct Reduced Iron (DRI) process could require 15–35 Mtpa. Today’s DRI production stands at 130 Mtpa and is expected to reach 200–500 Mtpa by 2050. The International Energy Agency (IEA) estimates hydrogen demand for iron and steel at 48 Mtpa in its NZE scenario, while more conservative estimates suggest 25 Mtpa. 

> Sustainable Fuels: Hydrogen-based fuels, including synthetic kerosene for aviation and ammonia for maritime transport, could drive demand of 90–100 Mtpa. The NZE scenario estimates a higher figure of 116 Mtpa, although a lower adoption rate of clean alternatives is more likely. Aviation fuel demand is expected to grow from about 9 exajoules (EJ) in 2022 to around 13 EJ by 2050, requiring 3.4 million barrels per day (Mbbl/d) of H2-derived fuel. In contrast, shipping demand is expected to decrease from around 11 EJ to about 10 EJ, with ammonia, methanol, and hydrogen making up 60% of the sector’s energy mix. This shift will drive an additional demand of 45–50 Mtpa of hydrogen.

Industrial hydrogen consumption typically exceeds 1–10 tons per hour, and more than 70% of ammonia plants in the U.S. require over 10 tons of hydrogen per hour.

Meeting this level of hydrogen demand poses major limitations, as industrial land is scarce and valuable, while electrolyzers take up a lot of space. According to International Renewable Energy Agency IRENA , a 1 GW electrolyzer needs more than 10 hectares of land. Efficiency is key to reducing costs and making projects viable. Since electricity access is often limited, upgrading power infrastructure can be expensive or even impractical, making efficient energy use even more critical.

The Challenges of Green and Blue Hydrogen

Industries that use hydrogen as a feedstock need on-site production, large-scale capacity, and efficient delivery. Hydrogen is no exception. The logistics of transporting hydrogen efficiently and cost-effectively remain a major challenge, making on-site production crucial.

> Green Hydrogen: Green hydrogen production through electrolysis is an energy-intensive process, requiring over 55 kWh of green electricity for every kilogram of hydrogen produced. This makes electricity availability and cost the most critical factors influencing scalability. Scaling electrolysis to an industrial level demands large amounts of renewable energy and major investments in power infrastructure, including high-capacity grid connections and transmission systems that can support gigawatt-scale loads.

The economics of green hydrogen remain challenging, with production costs currently ranging from $5 to $8 per kilogram. This is primarily driven by high electricity prices, often exceeding $50/MWh, as well as substantial capital expenditures for electrolyzers, which range from $200 to $300/kW, plus Balance of Plant (BoP) costs. These factors make green hydrogen significantly more expensive than conventional hydrogen derived from fossil fuels, limiting its competitiveness without strong policy incentives or subsidies.

A 2.5 Mtpa Direct Reduced Iron (DRI) plant, a potential industrial application for hydrogen, would require a vast amount of hydrogen, translating into massive energy consumption. With each ton of DRI production consuming approximately 60 kg of hydrogen, total demand would reach 150,000 Mtpa. Meeting this demand would require around 8.3 TWh of electricity annually. Since the plant must operate continuously, it would need a dedicated power capacity of around 1 GW only for hydrogen production.

Land use is another critical consideration. Electrolyzers have a large physical footprint, and supplying a DRI plant of this scale would require around 10–15 hectares. In many industrial regions, land availability is limited and expensive, further complicating project feasibility.

> Blue Hydrogen: Blue hydrogen, produced via steam methane reforming (SMR) with carbon capture, could play a role in the energy transition, but its application will be limited to regions that can effectively manage CO₂ liability. Unlike electrolysis, SMR requires only a fraction of the energy input, consuming 8–12 kWh of thermal energy per kilogram of hydrogen, and it benefits from an abundant and widely available feedstock—natural gas.

Although blue hydrogen is relatively energy efficient, managing CO₂ remains a major challenge. Carbon dioxide is a liability that is difficult and costly to handle. Storing CO₂ underground is an option, but it only works where there is enough capacity near hydrogen consumers, or off-takers. Although global CO₂ storage potential is theoretically vast, it is unevenly distributed. This means that the viability of blue hydrogen depends on whether a hydrogen-consuming industrial plant happens to be located above suitable storage sites—essentially a matter of luck.

The cost implications of CO₂ management make blue hydrogen less competitive. Capturing and sequestering CO₂ adds at least $1 per kilogram of hydrogen, assuming a capture cost of $50 per ton and an additional $50 per ton for sequestration. As a result, blue hydrogen will always be more expensive than gray hydrogen, making it less viable as a long-term, low-cost solution.

Turquoise Hydrogen: A Competitive Solution

Turquoise hydrogen has the potential to be more cost-effective than gray hydrogen while playing a major role in decarbonizing both existing hydrogen demand and emerging clean hydrogen applications. It is produced through methane pyrolysis, a process that breaks down methane (CH₄) into its basic components—hydrogen (H₂) and solid carbon (C)—by applying energy in the absence of oxygen. Unlike steam methane reforming (SMR), this process does not generate direct CO₂ emissions. The chemical reaction can be summarized as:

Methane pyrolysis is much more energy-efficient than electrolysis, requiring just 5.2 kWh per kilogram of hydrogen in theory, compared to 39.4 kWh/kg for electrolysis. This results in lower energy costs and less infrastructure demand for integration. Additionally, it uses natural gas, a widely available resource, without requiring major infrastructure changes.

A key advantage of methane pyrolysis is that both of its outputs, hydrogen and solid carbon, have intrinsic value. Since no CO₂ is produced, there are no gaseous liabilities to manage, eliminating the need for carbon capture and storage.

Overcoming the Challenges of Methane Pyrolysis

Despite its potential, methane pyrolysis has faced challenges due to technological and economic barriers. While it offers a low-emission way to produce hydrogen, existing technologies have traditionally focused more on carbon production than hydrogen. As a result, business models have prioritized solid carbon markets over hydrogen supply.

Most established players in this space operate as carbon black manufacturers, using pyrolysis mostly to produce cost-effective carbon black rather than hydrogen. Their intellectual property stems from earlier innovations aimed at optimizing pyrolysis for the carbon black industry, which traditionally relies on oil as a feedstock. By taking advantage of the price differential between natural gas and oil, these companies have developed processes that prioritize carbon black yield over hydrogen efficiency.

Publicly available data suggests that leading players in this segment face high capital expenditures, with estimated CAPEX levels of around $5,000 per kW and energy efficiency of only 30–35 kWh per kilogram of hydrogen. This results in a capital cost of approximately $2–2.5 per kilogram of hydrogen, making it difficult for methane pyrolysis to compete with more established hydrogen production methods. These economic and efficiency constraints have slowed adoption, despite its potential as a cleaner and lower-energy alternative to traditional hydrogen production.

The Carbon Challenge: Why Methane Pyrolysis Struggles to Achieve Economic Viability

In such cases, for methane pyrolysis to be economically viable, the solid carbon byproduct must be sold at prices for over $2,000 per ton. However, this is challenging, as both carbon black and graphite—the main carbon products—are subject to strict quality requirements and operate within complex market dynamics.

> Carbon Black is mainly used in tire manufacturing, where safety standards demand rigorous qualification processes and consistent production. Compounding the challenge, there are more than 20 different types of carbon black, making production complex. In 2024, the global carbon black market reached approximately 19 million tons, valued at around $27 billion, based on an average price of $1,500 per ton. By 2030, demand is projected to grow to 25 million tons, with an estimated market value of $38 billion (2)

> Graphite is essential for high-tech applications, especially in electrodes and battery anodes that require highly specific material characteristics and a complex production process. The global graphite market reached approximately 1.6 million tons in 2024, valued at $7 billion, with an average price of $4,000-$5,000 per ton. By 2030, demand is expected to grow to 2.5 million tons, bringing total market value to around $12 billion. Natural graphite accounts for 90% of this supply, while 10% is synthetic.(3)

For these technologies to be financially viable, a large share of revenue must come from selling the solid carbon byproduct. This creates a major hurdle, as long-term offtake agreements for carbon—a specialized product with stringent qualification requirements—are crucial to obtaining project financing and reducing capital costs. However, the complexity of product certification makes it difficult to secure these agreements before building a plant, making it difficult for banks to approve financing.

New companies in the methane pyrolysis space are focusing on high energy efficiency, but their technologies are inherently small-scale and modular. This forces them to target distributed markets, such as hydrogen for transportation, which remains underdeveloped and uncertain. The lack of established infrastructure and demand in this sector raises doubts about whether it will ever scale sufficiently to support widespread adoption of methane pyrolysis.

The Economics of Methane Pyrolysis: Why Scalability and Efficiency Are Key to a Viable Hydrogen Business

A successful hydrogen-driven business must combine scalability and efficiency, both essential for making methane pyrolysis economically competitive.

Scalability is vital for meeting industrial hydrogen demand, but its benefits go beyond production capacity. Large-scale operations improve productivity, and increase asset utilization rates, which helps amortize capital costs and lower the cost per unit of hydrogen. In centralized industrial plants, scalability is more valuable than modularity, as it enables more efficient and cost-effective use of the Balance of Plant (BoP), leading to lower capital and operational costs.

Efficiency is just as important, as it determines energy consumption—one of the largest operating costs after feedstock. A more efficient process minimizes energy input per kilogram of hydrogen, directly improving economic viability.

When scalability and efficiency are not aligned, methane pyrolysis becomes too costly, making it unfeasible to rely solely on hydrogen sales for profitability. In such cases, financial viability depends on generating substantial revenue from solid carbon byproducts. However, as previously discussed, securing stable carbon offtake agreements is highly challenging due to the complexities of these markets. This inherent uncertainty further complicates the commercialization of methane pyrolysis-based hydrogen production.

The Carbon Dilemma: Can the Market Absorb the Byproduct of Large-Scale Methane Pyrolysis?

If methane pyrolysis becomes a mainstream hydrogen production method, managing the vast quantities of solid carbon generated will be a critical challenge. For every kilogram of hydrogen produced, three kilograms of solid carbon are formed. To put this into perspective, if turquoise hydrogen were to supply 30% of the projected 2050 global hydrogen demand—around 60 Mtpa of H₂ —it would produce at least 180 Mtpa of solid carbon. However, the current carbon black market is only about 20 Mtpa, highlighting the need for large-scale alternative uses for this byproduct.

The key question is: Can we find scalable applications for solid carbon that also contribute to decarbonization?

Dual-Decarbonization Uses: Reducing CO₂ in Hydrogen and Its Secondary Applications

Some existing markets could integrate pyrolytic carbon while simultaneously reducing their own carbon footprints:

> Carbon Black: Carbon black from methane pyrolysis has a much lower carbon footprint than traditional production methods. The most common process today, Furnace Black, partially combusts heavy hydrocarbons, releasing 2–3 tons of CO₂ per ton of carbon black produced. Replacing it with pyrolytic carbon could dramatically cut these emissions.

> Graphite: Graphite manufacturing has widely varying CO₂ emissions depending on the method used. Natural graphite mining has environmental impacts, while synthetic graphite production is highly energy-intensive, emitting over 15 tons of CO₂ per ton of synthetic graphite. Replacing fossil-based graphite with pyrolytic carbon could offer a cleaner alternative.

Beyond existing markets, several emerging applications could provide additional demand for pyrolytic carbon while supporting decarbonization efforts:

> Asphalt Binder Replacement: Traditional asphalt binder is derived from bitumen, a petroleum-based product. Startups like Modern Hydrogen have demonstrated that pyrolytic carbon can serve as a partial substitute for bitumen in asphalt applications, reducing reliance on fossil-derived binders (link to white paper).

> Construction Materials: Research has shown that pyrolytic carbon and carbon nanomaterials can be used as cement additives in concrete production. The enhanced properties of carbon-enriched concrete (link to paper ) reduce the need for cement. This is significant since cement production is responsible for about 8% of global CO₂ emissions. By partially replacing cement with pyrolytic carbon, the industry could cut emissions while improving material performance.

Unavoidable Carbon Uses: Essential Industrial Applications

Some industrial processes rely on carbon and cannot fully eliminate its use. In these cases, replacing fossil-based carbon with carbon from methane pyrolysis could provide a cleaner alternative:

> Green Steel Production: Even in hydrogen-based Direct Reduced Iron steelmaking, carbon is required for steel production. In Electric Arc Furnaces (EAF), it is used for carburization and as a slag foaming material, with no viable steel producing method that eliminates its use. By 2050, the hydrogen-based steel industry could require between 15–25 Mtpa of solid carbon, up from today’s 5–10 Mtpa of anthracite. Replacing mined anthracite with pyrolytic carbon could eliminate emissions from mining, transportation, and fossil fuel extraction.

Life Cycle Assessment (LCA) and Environmental Impact

The environmental impact of turquoise hydrogen depends on factors such as the energy source for methane pyrolysis and methane leakage rates in natural gas supply chains. A life cycle assessment (LCA) evaluates emissions across the entire process--from feedstock extraction to end-use—offering a complete view of its carbon footprint (ref).

> Scope 1 - Direct Emissions: Methane pyrolysis does not produce direct CO₂ emissions, making its Scope 1 emissions negligible. Unlike Steam Methane Reforming (SMR), which releases CO₂ as a byproduct, pyrolysis separates methane into hydrogen and solid carbon without combustion, eliminating process-related emissions.

> Scope 2 - Indirect Energy Emissions: The environmental impact of methane pyrolysis largely depends on the energy source powering the process. If electricity is sourced from renewable sources like solar, wind, or hydro, Scope 2 emissions remain negligible.

> Scope 3 - Upstream Natural Gas Supply Chain: The biggest source of CO₂-equivalent emissions in methane pyrolysis comes from natural gas supply and transportation, particularly methane leaks along the value chain. The U.S. Treasury Department’s 45V guidance sets a benchmark methane leakage rate of 0.9% for upstream emissions. While actual leakage rates vary by region and infrastructure, reducing methane leaks is one of the most effective and immediate decarbonization strategies available. Governments are increasingly penalizing methane emissions to drive reductions. The Waste Emission Charge imposes a fee of $900 per metric ton of methane in 2024, increasing to $1,200 in 2025 and $1,500 in 2026 and beyond. This regulatory pressure adds a financial incentive for better methane management, further improving the emissions profile of turquoise hydrogen.

At TechEnergy Ventures, we are particularly interested in innovative technologies that enhance the value of solid carbon and drive industrial adoption of pyrolytic carbon. As methane pyrolysis scales, developing high-value applications for its solid carbon byproduct will be crucial to ensuring both economic viability and environmental sustainability.

Upgrading Solid Carbon into High-Value Materials: Several emerging technologies focus on transforming low-quality solid carbon into higher-value products, opening new market opportunities. For example, BeDimensional is developing a process to convert graphite into single-layer graphene, an advanced material used in electronics, coatings, composites, and energy storage. Universal Matter claims to upgrade amorphous carbon, including carbon from recycled tires, into 3D graphene, which could enable high-performance materials for various industries. Other advanced carbon technologies are exploring ways to refine pyrolytic carbon for use in specialty applications, including structural materials, energy storage, and advanced coatings.

Collaborating with the Steel Industry to Validate Pyrolytic Carbon: We are actively working with leading global steel manufacturers to explore and validate the use of pyrolytic carbon in steel production.

Conclusion

Turquoise hydrogen represents a scalable, efficient, and cost-effective alternative for industrial hydrogen demand. Overcoming the challenges in carbon offtake, energy efficiency, and infrastructure integration, is key to making methane pyrolysis a major player in the low-carbon transition. At TechEnergy Ventures, we are committed to supporting innovations that unlock the full potential of turquoise hydrogen, ensuring a sustainable and economically viable hydrogen economy.

(1) Source: IEA. 2050 Projections: Stated Policies “SP” 253 Mton NH3/y; Sustainable Development Scenario “SDS” and Net Zero Emissions “NZE” Scenario 229 Mton NH3/y. Stoichiometrically the Hydrogen/Ammonia ratio is ~3/17.

(2) Hard Carbon Material Market To Reach USD 12.8 Billion By 2032, DataHorizon Research, May 2024

(3) Graphite Market Size, Share & Industry Analysis by product and regional forecast, 2025-2032, Fortune Business Insights, December 2024