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Digital - the missing piece of the hydrogen puzzle

04 Digital - the missing piece of the hydrogen puzzle

Introduction

Earlier waves of interest in electrolytic hydrogen have been underpinned by a lack of understanding of the complexity of the challenge, coupled with the use of processes which have been optimized over decades for large-scale fossil fuel projects.
Digital levels, smart assets and AI, both LLMs and Agentic AI, represent a suite of tools which could bring significantly reduce the levelized cost of hydrogen costs, increase project safety and bankability, but would see a rewriting of the project design process.

Kerry-Ann Adamson-Morland

VP: Global Hydrogen Lead, Capgemini

Kerry-Ann leads Capgemini’s global business for hydrogen.

Salomon Salinas

EVP: Energy Transition, Capgemini

Sal leads Capgemini’s America Sustainability practice.

04 Digital - the missing piece of the hydrogen puzzle

Industry Context and Strategic Challenges

In recent years, the hydrogen sector has experienced significant recalibration. The complexity of hydrogen projects has led to a retrenchment of initiatives from both ends of the spectrum, influenced by globally divergent political and subsidy regimes. Countries such as China, India, Germany, Spain, Oman, and Morocco have intensified support for green and low-carbon hydrogen as a decarbonization strategy. Conversely, recent policy reversals in the United States have increased investor uncertainty. Despite these fluctuations, the sector maintains a robust pipeline of projects with Final Investment Decisions (FID) requiring approximately USD 8 billion in investment for 2025, nearly doubling the 2024 levels (1). It should be noted that these developments occur within a broader geopolitical landscape marked by fragmentation and heightened concerns over energy security and resilience, which are reshaping policies, regulations, and investment patterns.

Investment in hydrogen rose by 60% in 2024, despite some project cancellations and delays; developing all projects that have received FID will require investment to almost double in 2025

FIGURE 1
Average annual investment in low-emissions hydrogen supply by type (left) and by intended use (right), 2015-2025

Source: World Energy Investment 2025

04 Digital - the missing piece of the hydrogen puzzle

Digital Transformation & Cost Reduction in Hydrogen Projects

Within this context, hydrogen’s market role remains multifaceted: with the potential to serve as an energy carrier for storage, a fuel for transportation, a precursor for derivatives such as green ammonia, green methanol, and sustainable aviation fuel (e-SAF), and a decarbonization agent for heavy industry. The sector’s challenges though remain, which include a need to establish a clear value proposition while addressing the imperative to reduce costs amid rising prices in the component supply chain, evolving policies on critical metals and minerals, and constraints on green electricity access.

Capital Expenditure (CAPEX) and Development Expenditure (DEVEX)

As a sector the electrolytic hydrogen production remains predominantly analogue, with digital initiatives often relegated to supplementary roles during the Front End Engineering Design (FEED) phase or limited early on profit optimization modeling. There are notable exceptions to this observation with Stegra, the green steel company in Sweden, for example, having over 10% of staff in a digital role and a Chief Digital Officer. A Digital First strategy, implemented from the project inception, is essential to realize significant cost reductions. This approach enables rapid project design iteration, including on forecasting site impact due to climate change events, and optimization, improving bankability and reducing financial risk.

In it’s current form the traditional project development process, characterized by Front End Loading (FEL) stages, is not well-suited to the accelerated timelines required for hydrogen projects with commercial operation dates within six years to meet with subsidy regimes. Current FEL1 conceptual designs, with broad cost estimate ranges (+50% to -30%), progress to FEL3 and FEED phases, where specifications and budgets are refined. A Digital First approach would reorganize decision-making to enable early selection of electrolyzer types and supply chain risk analysis, supported by digital design twins integrated within geographical digital twins such as those being developed by Blackshark.ai. These tools facilitate virtual site modeling, optimizing site layout, power supply, and regulatory compliance considerations, and enhanced stakeholder engagement without needing to secure land rights or expose a project to supply chain contracts at such an early stage.

04 Digital - the missing piece of the hydrogen puzzle

Adopting this methodology does require increased upfront investment and likely a revised relationship with Engineering, Procurement, and Construction (EPC) firms. Smaller developers may face challenges due to higher initial funding requirements and misalignment with existing public sector funding mechanisms, which often support FEED after key FEL milestones. However, this transformation mirrors the evolution observed in onshore renewables, where system standardization and software development have driven rapid, repeatable project creation and substantial CAPEX and DEVEX reductions.

FIGURE 2
Hydrogen is still digitally immature

Hydrogen is still digitally immature - According to Capgemini's framework on maturity of intelligent products and services

Source: Wapgemistricted © Siemens & Capgemini 2025 | Hannover Fair 2025

A recent report by Capgemini and Siemens estimate that digital technologies can reduce CAPEX by approximately 5% for a 100MW alkaline electrolyser.

Source: “Accelerating low-carbon hydrogen and cutting costs with digital technology”

04 Digital - the missing piece of the hydrogen puzzle

Industry-level standardization is critical to scale these benefits without compromising proprietary intellectual property. Standardized design twins based on electrolyzer type and size will facilitate packaged solutions and favor companies with integrated technology stacks. Current studies, such as those by Capgemini and Siemens (2), estimate that digital technologies can reduce CAPEX by approximately 5% for a 100MW alkaline electrolyzer, with significant potential for further reductions as AI integration advances.

Operational Expenditure (OPEX) and Smart Asset Integration)

Over the planned 25 to 30 year lifetime of a hydrogen production asset operational expenditure represents a substantial component of the overall hydrogen project costs. The integration of smart assets—digital, connected systems that enable real-time monitoring, control, and optimization—is pivotal to reducing OPEX and enhancing operational efficiency. Hydrogen facilities generate vast data volumes, which, when harnessed effectively, improve uptime, safety, and economic performance.

Smart assets employ advanced sensors, intelligent alarms, and cloud-based remote monitoring to provide continuous visibility into key performance indicators (KPIs) such as energy consumption, production rates, purity levels, and storage status. This data-driven approach enables rapid anomaly detection, predictive maintenance, and optimized operational scheduling, reducing energy consumption and labor costs by an estimated 10-20%.

AI-enhanced weather forecasting supports operational resilience by anticipating extreme weather events, allowing proactive system adjustments to maintain safety and uptime. Furthermore, smart asset systems facilitate dynamic economic optimization, managing the sale of hydrogen, oxygen, carbon certificates, and electricity under power purchase agreements (PPAs) to maximize revenue streams.

Up to 10% of plant construction errors can be attributed to inconsistencies between documents"

Source: Aveva corporate presentation

04 Digital - the missing piece of the hydrogen puzzle

Data transparency and traceability foster regulatory compliance and build stakeholder trust. Demonstrating sustainable water usage, carbon intensity, and emissions control through continuous data collection and certification supports community acceptance and long-term project viability.

Within the Capgemini smart asset framework for hydrogen, cybersecurity is an integral consideration, safeguarding digital infrastructure and ensuring operational safety against evolving threats. Robust cybersecurity frameworks are essential to protect sensitive data and maintain uninterrupted operations.

The adoption of smart assets aligns with the broader digital twin ecosystem, creating a feedback loop between design, operation, and continuous improvement. This approach facilitates the replication of successful operational models across multiple sites, leveraging economies of scale to reduce levelized costs of hydrogen by up to 4%, with further reductions anticipated as AI and smart asset utilization expands.

04 Digital - the missing piece of the hydrogen puzzle

Role of Hydrogen and Smart Assets in Decarbonization

Hydrogen’s versatility as an energy carrier and feedstock positions it as a cornerstone of decarbonization strategies across multiple sectors. Smart asset technologies enhance the feasibility and scalability of hydrogen solutions by enabling precise control over production processes and integration with renewable energy sources.

Digital twin technology, combined with AI and the Internet of Things (IoT), supports scenario modeling and optimization across the hydrogen value chain. This includes evaluating the impact of variable renewable energy inputs, storage requirements, and demand fluctuations, thereby improving investment decisions and operational flexibility.

The integration of smart assets in hydrogen infrastructure also facilitates the development of hydrogen derivatives such as green ammonia, green methanol, and sustainable aviation fuels, which are critical for decarbonizing sectors where direct electrification is challenging.

Conclusion

The hydrogen sector stands at a pivotal juncture, where digital transformation and smart asset integration are essential to overcoming cost and complexity barriers. A Digital First strategy, encompassing early-stage digital twin deployment and comprehensive smart asset management, is critical for optimizing CAPEX and OPEX, enhancing project bankability, and ensuring operational excellence.

Smart assets enable real-time data utilization to improve safety, efficiency, and economic returns while supporting regulatory compliance and stakeholder trust. The integration of AI, IoT, and digital twins accelerates innovation cycles and reduces time to market, positioning hydrogen as a key enabler of global decarbonization efforts.

To realize these benefits, the industry must embrace standardization, invest in digital capabilities early in project development, and foster collaboration across diverse stakeholders. This approach will unlock the full potential of hydrogen technologies, driving sustainable growth and energy transition objectives.

04 Digital - the missing piece of the hydrogen puzzle

Our Convictions

1

We are at the genesis of utilizing digital tools and levers in the hydrogen industry. While it is exciting and holds significant potential, it is not an overall panacea and will require industry-wide collaboration in areas such as standardization, which we are only just starting to observe.

2

Digital levers, data and AI are powerful enablers for hydrogen and will in of themselves generate new value creation, new innovation and new businesses.

3

Over time the concepts proposed here we foresee being developed into off-the-shelf software solutions, following the trajectory of the renewable energy industry.

4

Hydrogen remains damned with potential and it is only by marrying digital with hydrogen that we can move forward and ensure that it is part of the solution.