From very little demand today, hydrogen and derivatives such as ammonia will account for 5% of world energy demand by mid-century, according to DNV’s new ‘Hydrogen Forecast to 2050’.1
To meet the targets of the Paris Agreement, the most likely forecast for the uptake of hydrogen and derivatives would need to triple, with governments backing urgent, significant policy interventions to scale hydrogen to meet around 15% of world energy demand by mid-century. However, from DNV’s research and the 5% demand that has been forecast, there are already many lessons to learn about the value chains that will connect and scale hydrogen as an energy carrier.
This article explores key trends in hydrogen production, transport and end use, focusing on the lessons learnt for building successful value chains on the path to enabling societies to embrace the urgent decarbonisation opportunities presented by hydrogen.
Competitiveness and ability to scale are crucial
Competitiveness is crucial to determining successful value chains. This includes competition within and across hydrogen production, transport and end use, but more crucially taking an energy systems perspective to evaluate how hydrogen value chains compete with other technologies, such as electrification.
This is not just about linking production to consumption; it also involves considering energy efficiencies and losses, economics, greenhouse gas emissions, and geography — in terms of both location for transport, and resources such as natural gas and renewable energy for production.
The ability to scale is also essential. Hydrogen supply needs to grow together with demand, which generally requires a gradual pathway that avoids economic, technical and system risks. This will require the management of safety risk and public acceptance, innovation to bring down costs, and the employment of policies to make hydrogen projects competitive and bankable.
One of the key questions is: when will the world move from hydrogen projects to a hydrogen economy? Most large hydrogen projects within the next decade will likely require offtake agreements and a full value chain perspective to get off the ground. A hydrogen economy, however, requires flexible value chains that mix and match options in production, transport and end use. This will be underpinned by enabling infrastructure, certification and standards to ease trade and interoperability, and by flexibility mechanisms – such as hydrogen blending – to balance supply and demand.
Hydrogen value chains for energy use are in their infancy
Hydrogen is already a large and thriving industry, however it is not low-carbon hydrogen production and energy use that is thriving today. Global demand for non-energy hydrogen is around 90 million tpy (2020). To put this into perspective, DNV forecasts that demand for hydrogen as an energy carrier will not reach this level until the early 2040s.
The hydrogen currently produced comes from coal or natural gas without carbon capture, producing emissions greater than the carbon dioxide (CO2) emissions of France and Germany combined. It is produced at or close to where it is consumed, predominately used in fertilizer or for chemical feedstock, and is used by relatively few large industrial users.
This is wildly different from the low-carbon energy use value chains of the future. For hydrogen to play a meaningful role as a strategic decarbonised energy carrier, new value chains and the development of hydrogen markets will be required. Many different hydrogen value chains will develop. This is partly due to the versatility of hydrogen: it can be produced from coal, natural gas, grid electricity, or dedicated renewables; it can be stored, transported and used in its pure form, blended with natural gas, or converted to derivatives such as ammonia; and it can be consumed across a range of industries and applications, including maritime shipping, heat production, road transport and aviation.
This, of course, has significant costs. DNV forecasts that global spend on producing hydrogen for energy purposes from now until 2050 will be US$6.8 trillion, with an additional US$180 billion spent on hydrogen pipelines, and US$530 billion on building and operating ammonia terminals...
1. ‘Hydrogen Forecast to 2050’, DNV, https://www.dnv.com/focus-areas/hydrogen/forecast-to-2050.html?utm_source=emp_activation&utm_medium=organic&utm_campaign=eto_hydrogen
Written by Jørg Aarnes, Energy Systems at DNV, Norway.
Read the article online at: https://www.globalhydrogenreview.com/special-reports/14092022/the-key-to-building-successful-value-chains/