2050年氢气预测（英）-DNVVIP专享VIP免费

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2023-04-18
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HYDROGEN

FORECAST

TO 2050

Energy Transition Outlook 2022

DNV — Hydrogen forecast to 2050

CONTENTS

Foreword 3

Highlights 4

1 Introduction 8

1.1 Properties of hydrogen 9

1.2 Today’s industrial use and ambitions 12

1.3 Hydrogen value chains 15

1.4 Safety, risks and hazards 20

1.5 Hydrogen investments risks 26

2 Hydrogen policies and strategies 30

2.1 Policy and the hydrogen transition 30

2.2 Details on the policy and regulatory

landscape 34

2.3 Regional hydrogen policy developments 37

2.4 Policy factors in our hydrogen forecast 46

3 Producing hydrogen 48

3.1 Ways of producing hydrogen 48

3.2 Hydrogen from fossil fuels: methane

reforming and coal gasiﬁcation 50

3.3 Hydrogen from electricity: electrolysis 52

4 Storage and transport 56

4.1 Ways of transporting and storing hydrogen 56

4.2 Storage 58

4.3 Transmission transport system 61

4.4 Distribution pipelines 65

4.5 Shipping hydrogen 66

5 Hydrogen: forecast demand and supply 70

5.1 Hydrogen production 73

5.2 Hydrogen as feedstock 78

5.3 Hydrogen as energy 81

6 Trade infrastructure 92

6.1 Seaborne interregional transport 93

6.2 Pipeline transport 94

7 Deep dive: evolution of value chains 96

7.1 Four competing hydrogen value chains 96

7.2 Solar PV in Southern Spain 98

7.3 Geothermal energy in Iceland 101

7.4 Offshore wind on the North Sea 104

7.5 Nuclear power 106

7.5 Comparison and conclusion 108

References 110

Project team 113

Foreword

FOREWORD

Remi Eriksen

Group president and CEO

DNV

Welcome to DNV’s ﬁrst standalone forecast of hydrogen

in the energy transition through to 2050.

While there are ambitious statements about the prominent

role that hydrogen could play in the energy transition,

the amount of low-carbon and renewable hydrogen

currently being produced is negligible.

That, of course, will change. But the key questions are,

when and by how much? We ﬁnd that hydrogen is likely to

satisfy just 5% of global energy demand by 2050 — two

thirds less than it should be in a net zero pathway. Clearly,

much stronger policies are needed globally to push

hydrogen to levels required to meet the Paris Agreement.

Here it is instructive to look at the enabling policies in Europe

where hydrogen will likely be 11% of the energy mix by 2050.

Five percent globally translates into more than 200 million

tonnes of hydrogen as an energy carrier, which is still a

signiﬁcant number. One ﬁfth of this amount is ammonia,

a further ﬁfth comprises e-fuels like e-methanol and clean

aviation fuel, with the remainder pure hydrogen.

Hydrogen is the most abundant element in the universe,

but only available to us locked up in compounds like fossil

fuels, gasses and water. It takes a great deal of energy to

liberate those hydrogen molecules — either in ‘blue’ form

via steam methane reforming of natural gas with CCS, or

as ‘green’ hydrogen from water and renewable electricity

via electrolysis.

By 2050, more than 70% of hydrogen will be green. Owing

to the energy losses involved in making green hydrogen,

renewables should ideally ﬁrst be used to chase coal and,

to some extent, natural gas, out of the electricity mix. In

practice, there will be some overlap, because hydrogen is

an important form of storage for variable renewables. But it

is inescapable that wind and solar PV are prerequisites for

green hydrogen; the higher our ambitions, the greater the

build-out of those sources must be.

Hydrogen is expensive and inefﬁcient compared with

direct electriﬁcation. In many ways, it should be thought

of as the low-carbon energy source of last resort. However,

it is desperately needed. Hydrogen is especially needed

in those sectors which are difﬁcult or impossible to

electrify, like aviation, shipping, and high-heat industrial

processes. In certain countries, like the UK, hydrogen can

to some extent be delivered to end users by existing gas

distribution networks at lower costs than a wholesale

switch to electricity.

Because hydrogen is crucial for decarbonization, safety

must not become its Achilles heel. DNV is leading critical

work in this regard: hydrogen facilities can be engineered

to be as safe or better than widely-accepted natural gas

facilities. That means safety measures must be designed

into hydrogen production and distribution systems,

which must be properly operated and maintained

throughout their life cycles. The same approach must

extend to the hydrogen carrier, ammonia, which will be

heavily used to decarbonize shipping. There, toxicity is a

key concern, and must be managed accordingly.

It is no easy task to analyse the technologies and policies

that will kick-start and scale hydrogen and then model

how hydrogen will compete with other energy carriers.

As we explain in this report, there will be many hydrogen

value chains, competing not just on cost, but on timing,

geography, emission intensity, risk acceptance criteria,

purity, and adaptability to end-use. I commend the work

my colleagues have done in bringing this important

forecast to you, and, as always, look forward to your

feedback.

/114

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HYDROGENFORECASTTO2050EnergyTransitionOutlook20222DNV—Hydrogenforecastto2050CONTENTSForeword3Highlights41Introduction81.1Propertiesofhydrogen91.2Today’sindustrialuseandambitions121.3Hydrogenvaluechains151.4Safety,risksandhazards201.5Hydrogeninvestmentsrisks262Hydrogenpoliciesandstrategies302.1Policyandthehydrogentransition302.2Detailsonthepolicyandregulatorylandscape342.3Regionalhydrogenpolicydevelopments372.4Policyfactorsinourhydrogenforecast463Producinghydrogen483.1Waysofproducinghydrogen483.2Hydrogenfromfossilfuels:methanereformingandcoalgasification503.3Hydrogenfromelectricity:electrolysis524Storageandtransport564.1Waysoftransportingandstoringhydrogen564.2Storage584.3Transmissiontransportsystem614.4Distributionpipelines654.5Shippinghydrogen665Hydrogen:forecastdemandandsupply705.1Hydrogenproduction735.2Hydrogenasfeedstock785.3Hydrogenasenergy816Tradeinfrastructure926.1Seaborneinterregionaltransport936.2Pipelinetransport947Deepdive:evolutionofvaluechains967.1Fourcompetinghydrogenvaluechains967.2SolarPVinSouthernSpain987.3GeothermalenergyinIceland1017.4OffshorewindontheNorthSea1047.5Nuclearpower1067.5Comparisonandconclusion108References110Projectteam1133ForewordFOREWORDRemiEriksenGrouppresidentandCEODNVWelcometoDNV’sfirststandaloneforecastofhydrogenintheenergytransitionthroughto2050.Whilethereareambitiousstatementsabouttheprominentrolethathydrogencouldplayintheenergytransition,theamountoflow-carbonandrenewablehydrogencurrentlybeingproducedisnegligible.That,ofcourse,willchange.Butthekeyquestionsare,whenandbyhowmuch?Wefindthathydrogenislikelytosatisfyjust5%ofglobalenergydemandby2050—twothirdslessthanitshouldbeinanetzeropathway.Clearly,muchstrongerpoliciesareneededgloballytopushhydrogentolevelsrequiredtomeettheParisAgreement.HereitisinstructivetolookattheenablingpoliciesinEuropewherehydrogenwilllikelybe11%oftheenergymixby2050.Fivepercentgloballytranslatesintomorethan200milliontonnesofhydrogenasanenergycarrier,whichisstillasignificantnumber.Onefifthofthisamountisammonia,afurtherfifthcomprisese-fuelslikee-methanolandcleanaviationfuel,withtheremainderpurehydrogen.Hydrogenisthemostabundantelementintheuniverse,butonlyavailabletouslockedupincompoundslikefossilfuels,gassesandwater.Ittakesagreatdealofenergytoliberatethosehydrogenmolecules—eitherin‘blue’formviasteammethanereformingofnaturalgaswithCCS,oras‘green’hydrogenfromwaterandrenewableelectricityviaelectrolysis.By2050,morethan70%ofhydrogenwillbegreen.Owingtotheenergylossesinvolvedinmakinggreenhydrogen,renewablesshouldideallyfirstbeusedtochasecoaland,tosomeextent,naturalgas,outoftheelectricitymix.Inpractice,therewillbesomeoverlap,becausehydrogenisanimportantformofstorageforvariablerenewables.ButitisinescapablethatwindandsolarPVareprerequisitesforgreenhydrogen;thehigherourambitions,thegreaterthebuild-outofthosesourcesmustbe.Hydrogenisexpensiveandinefficientcomparedwithdirectelectrification.Inmanyways,itshouldbethoughtofasthelow-carbonenergysourceoflastresort.However,itisdesperatelyneeded.Hydrogenisespeciallyneededinthosesectorswhicharedifficultorimpossibletoelectrify,likeaviation,shipping,andhigh-heatindustrialprocesses.Incertaincountries,liketheUK,hydrogencantosomeextentbedeliveredtoendusersbyexistinggasdistributionnetworksatlowercoststhanawholesaleswitchtoelectricity.Becausehydrogeniscrucialfordecarbonization,safetymustnotbecomeitsAchillesheel.DNVisleadingcriticalworkinthisregard:hydrogenfacilitiescanbeengineeredtobeassafeorbetterthanwidely-acceptednaturalgasfacilities.Thatmeanssafetymeasuresmustbedesignedintohydrogenproductionanddistributionsystems,whichmustbeproperlyoperatedandmaintainedthroughouttheirlifecycles.Thesameapproachmustextendtothehydrogencarrier,ammonia,whichwillbeheavilyusedtodecarbonizeshipping.There,toxicityisakeyconcern,andmustbemanagedaccordingly.Itisnoeasytasktoanalysethetechnologiesandpoliciesthatwillkick-startandscalehydrogenandthenmodelhowhydrogenwillcompetewithotherenergycarriers.Asweexplaininthisreport,therewillbemanyhydrogenvaluechains,competingnotjustoncost,butontiming,geography,emissionintensity,riskacceptancecriteria,purity,andadaptabilitytoend-use.Icommendtheworkmycolleagueshavedoneinbringingthisimportantforecasttoyou,and,asalways,lookforwardtoyourfeedback.4HIGHLIGHTSForecast•Renewableandlow-carbonhydrogeniscrucialformeetingtheParisAgreementgoalstodecarbonizehard-to-abatesectors.Tomeetthetargets,hydrogenwouldneedtomeetaround15%ofworldenergydemandbymid-century.•WeforecastthatglobalhydrogenuptakeisverylowandlaterelativetoParisAgreementrequirements—reaching0.5%ofglobalfinalenergymixin2030and5%in2050,althoughtheshareofhydrogenintheenergymixofsomeworldregionswillbedoublethesepercentages.•Globalspendonproducinghydrogenforenergypurposesfromnowuntil2050willbeUSD6.8trn,withanadditionalUSD180bnspentonhydrogenpipelinesandUSD530bnonbuildingandoperatingammoniaterminals.DNV—Hydrogenforecastto2050Highlights5•Grid-basedelectrolysiscostswilldecreasesignificantlytowards2050averagingaround1.5USD/kgbythen,alevelthatincertainregionsalsowillbematchedbygreenhydrogenfromdedicatedrenewableelectrolysis,andbybluehydrogen.TheglobalaverageforbluehydrogenwillfallfromUSD2.5in2030toUSD2.2/kgin2050.InregionsliketheUSwithaccesstocheapgas,costsarealreadyUSD2/kg.Globally,greenhydrogenwillreachcostparitywithbluewithinthenextdecade.•Greenhydrogenwillincreasinglybethecheapestformofproductioninmostregions.By2050,72%ofhydrogenandderivativesusedasenergycarrierswillbeelectricitybased,and28%bluehydrogenfromfossilfuelswithCCS,downfrom34%in2030.Someregionswithcheapnaturalgaswillhaveahigherbluehydrogenshare.•Costconsiderationswillleadtomorethan50%ofhydrogenpipelinesgloballybeingrepurposedfromnaturalgaspipelines,risingtoashighas80%insomeregions,asthecosttorepurposepipelinesisexpectedtobejust10-35%ofnewconstructioncosts.6HIGHLIGHTSHIGHLIGHTS•Hydrogenwillbetransportedbypipelinesuptomediumdistanceswithinandbetweencountries,butalmostneverbetweencontinents.Ammoniaissaferandmoreconvenienttotransport,e.g.byship,and59%ofenergy-relatedammoniawillbetradedbetweenregionsby2050.•Directuseofhydrogenwillbedominatedbythemanufacturingsector,whereitreplacescoalandgasinhigh-temperatureprocesses.Theseindustries,suchasironandsteel,arealsowheretheuptakestartsfirst,inthelate2020s.•Hydrogenderivativeslikeammonia,methanolande-kerosenewillplayakeyroleindecarbonizingtheheavytransportsector(aviation,maritime,andpartsoftrucking),butuptakeonlyscalesinthelate2030s.•Wedonotforeseehydrogenuptakeinpassengervehicles,andonlylimiteduptakeinpowergeneration.Hydrogenforheatingofbuildings,typicallyblendedwithnaturalgas,hasanearlyuptakeinsomeregions,butwillnotscaleglobally.DNV—Hydrogenforecastto20507HighlightsInsights•Hydrogenrequireslargeamountsofeitherpreciousrenewableenergyorextensivecarboncaptureandstorageandshouldbeprioritizedforhard-to-abatesectors.Elsewhere,itisinefficientandexpensivecomparedwiththedirectuseofelectricity.•Unabatedfossil-basedhydrogenusedasanindustrialfeedstock(non-energy)infertilizerandrefineriescanbereplacedbygreenandbluehydrogenimmediately—animportantexistingsourceofdemandbeforefuelswitchingscalesacrossenergysectors.•Safety(hydrogen)andtoxicity(ammonia)arekeyrisks.Publicperceptionriskandfinancialriskarealsoimportanttomanagetoensureincreasedhydrogenuptake.•Thelowandlateuptakeofhydrogenweforeseesuggeststhatforhydrogentoplayitsoptimalroleintheracefornetzero,muchstrongerpoliciesareneededtoscalebeyondthepresentforecast,intheformofstrongermandates,demand-sidemeasuresgivingconfidenceinofftaketoproducers,andhighercarbonprices.8DNV—Hydrogenforecastto2050Hydrogenhasbeenusedinlargequantitiesforwellover100yearsasachemicalfeedstock,infertilizerproduction,andinrefineries.However,thepresentuseofhydrogenasanenergycarrierisnegligible.Thatisbecausetheproductionofhydrogenitselfmustbedecarbonized—currentlyathighcost—beforeitcanplayaprominentroleinthedrivetodecarbonizetheenergysystem.Thatformidablecostbarrierisnotdeterringtheenergyindustry’sinterestinhydrogen,althoughthenumberofprojectswithinvestmentdecisionsandinaconstructionphaseisstillatamodestlevel.Furtheruptheinnovationpipeline,therearemanyfeasibilitystudiesfrombothexistingtechnologysuppliers,andstart-upsaredevel-opingmoreefficientandlarger-scaleconcepts.Hydrogennormallyhassignificantcost,complexity,efficiency,andoftensafetydisadvantagescomparedwiththedirectuseofelectricity.However,formanyenergysectors,thedirectuseofelectricityisnotviable,andhydrogenanditsderivativessuchasammonia,methanolande-kerosenearetheprimelow-carboncontenders—sometimescompetingwithbiofuel.Thereisanemergingconsensusthatlow-carbonandrenewablehydrogenwillplayanimportantroleinafuturedecarbonizedenergysystem.Howprominentaroleremainsuncertain,butvariousestimatespointtohydrogenbeinganythingfrom10to20%ofglobalenergyuseinafuturelow-carbonenergysystem.DNV’sownPathwaytoNetZerohashydrogenat13%ofanetzeroenergymixby2050andgainingsharerapidlybythen.Ourpresenttask,withthisforecast,isnottostatewhatsharehydrogenshouldtakeinthe2050energymix,butwhatshareitislikelytotake.Wefindthathydrogenisnotontracktofulfilitsfullnetzerorolebymid-century—infactfarfromit.Ourforecastshowsthathydrogenislikelytosatisfyjust5%ofenergydemandby2050.Scalingglobalhydrogenuseisbesetbyarangeofchallenges:availability,costs,acceptability,safety,efficiency,andpurity.WhileitiswidelyunderstoodthaturgentupscalingofglobalhydrogenuseisneededtoreachtheParisAgreement,thepresentpaceofdevelop-mentisfartooslowandnowhereneartheaccelerationweseeinrenewables,powergrid,andbatterystorageinstallations.Nevertheless,thereisagreatdealofinterestamongarangeofstakeholdersandthemediainthepromiseofhydrogen.Yetveryfewcommentatorsaretakingacareful,dispassionatelookatthedetailsbehindhydrogen’slikelyglobalgrowthpathway.ThisreportisapartofDNV’sannualEnergyTransitionOutlook(ETO)suiteofreports.Theresultspresentedherewillbepartofthe2022versionofthemainETOreporttobereleasedinOctober2022.OurinsightsandconclusionsinthishydrogenforecastarebasedonmoredetailedhydrogenmodellinginDNV’sETOmodel,includingnewmodulesforhydrogentradeandtransportandamuchcloserstudyofnewproductionmethodsandhydrogenderivatives.Ouraimwiththisforecastisnottostatewhatsharehydrogenshouldtakeinthe2050energymix,butwhatshareitislikelytotake.Thereportstartsbyexplainingthepropertiesandpresentuseofhydrogen,aswellassafetyandinvest-mentrisks,andcontinuesbydescribingpresentandlikelyfuturehydrogenpoliciesandstrategies.Chapters3and4gointothedetailsofhydrogentechnologiesforproduction,storageandtransport.TheresultsfromDNV’smodellingofhydrogenuptakearepresentedinChapter5,lookingathydrogenproductionanduseinthedifferentenergysectors.Chapter6coversthetradeofhydrogen.Thefinalchapterdivesintoexamplesandacomparisonofdifferenthydrogensupplychains.1INTRODUCTION9Introduction11.1PropertiesofhydrogenHydrogenisbothfamiliaranddifferentfromanythingelseintheenergysystem.Aswithelectricity,hydrogenisanenergycarrierthatcanbeproducedviarenewableenergy,andlikeelectricpower,itcanbeusedto‘charge’batteries(comprisedoffuelcells).Likeafossilfuel,hydrogenisexplosiveandproducesheatwhencombusted;itcanbeextractedfromhydrocarbons,heldintanks,movedthroughpipelines,andstoredlongterm;itcanbetransformedbetweengaseousandliquidstatesandconvertedintoderivatives.Thesepropertiesmakehydrogenafascinatingprospectintheenergytransition,butalsocreatebarrierstoitsadoptionintermsofsafety,infrastructure,production,usecases,andcommercialviability.Abundant,butcostlytoproduceasalow-carbonandrenewableenergycarrierHydrogenisthemostabundantelementintheuniverse,butonEarthitisfoundonlyaspartofacompound,mostcommonlytogetherwithoxygenintheformofwaterbutalsoinhydrocarbons.1Abundant,butcostlytoproduceasalow-carbonenergycarrier2Combustible,butbehavesdifferentlytonaturalgas3Lightweight,butlowenergydensityisanissue4Liquidhydrogenandderivativesovercomelimitations,butconversionisinefficient5Greatpotential,butalsosignificantchallengesFIGURE1.1Hydrogenproperties$10DNV—Hydrogenforecastto2050Foruseasanenergycarrierorzero-emissionfuel,hydrogenmusttemporarilybereleasedfromitsbondwithoxygenorextractedfromhydrocarbons.Hydrogenisthesimplestofallelements,butprocessestoproduceitinitspureformarenotsosimple:theyareenergyintensiveandinvolvelargeenergylosses,havesignificantcosts,andcanproducetheirowncarbonemissions.Themaindriverofwidescalehydrogenuseistodecarbonizetheenergysystem,andmorespecificallythosepartsofitthatarehard-to-abate(i.e.,cannotbedirectlyelectrified).Thismakesitessentialtoproduceandtransportloworzeroemissionhydrogen,withefficientuseofwaterandbyproductssuchaswasteheatandoxygen.Hydrogenisthesimplestofallelements,butprocessestoproduceitinitspureformarenotsosimple:theyareenergyintensiveandinvolvelargeenergylosses,havesignificantcosts,andcanproducetheirowncarbonemissions.Combustible,butbehavesdifferentlytonaturalgasHydrogeniscombustibleandgaseousatnormalatmosphericpressureandtemperature,butitbehavesdifferentlytonaturalgas,requiringadaptionordevelopmentofinfrastructure,appliances,andsafetystandards.Relativetofamiliaralternativessuchasnaturalgasorpetrolvapours,hydrogenigniteswithverylowenergyandhasawideflammabilityrange.Thedispersionbehaviourisdifferenttoothergasesduetothesmallsizeofhydrogenatoms.Hydrogeniscolourless,taste-less,andodourless,meaningthatspecificsensorsorodorizationarerequiredtodetectit,andadditivesareneededtoproducethefamiliarityofavisiblecolourflamewhenburninghydrogen.Lightweight,butlowenergydensityisanissueHydrogenisthelightestelementandhashighenergydensitycomparedtoweight,offeringsomeadvantagesforapplicationswhereweightcanbeanissue,suchasinheavyroadtransport.Overall,itismorerelevanttoconsiderhydrogen’senergydensitycomparedwithvolume,whichisverylowcomparedtootherfuels.Thismakeshydrogenmoredifficulttostoreandtransport.Lowenergydensityalsoreducesthefeasibilityofhydrogen—atleastinitsgaseousform—forusecasesnotconnecteddirectlyorregularlytothegrid,suchasshippingandaviation.Thesolutionistocondensehydrogentoaliquid—whichonlypartlysolvesthechallenge—orconvertittoderivativessuchasammonia,methanol,orsyntheticfuels.Liquidhydrogenandderivativescanovercomelimitations,butconversionisinefficientandcanbecostlyCompressedhydrogenisingeneralthemostcost-effectivewayoftransportinglargevolumesoverlongdistances,butthisrequirespipelinesandpresentstechni-calchallenges.Hydrogenmayneedtobeoperatedatdifferentpressures(orvelocity)thannaturalgas/biome-thaneandcouldhaveanadverseeffectonmaterials(e.g.,inpipesandvalves).Tomatchsomeofthedensityandflexibilitybenefitsofliquidfuels,suchasgasolineanddiesel,hydrogencanbecondensedintoaliquid,butthetemperaturepointforhydrogenliquefactionisextremelylowat-253ºC,requiringsignificantenergy.Eveninitsliquidstatehydrogenisnotasenergydenseascomparablefossilfuels.Liquidhydrogenalsohasdifferentsafetycharacteristicsthancompressedgaseoushydrogen—forexample,becomingaheavygaswhenreleasedthatmayaccumulate,ratherthanrisinganddissipatingaswithcompressedhydrogengas.Hydrogencanbeconvertedtoderivativessuchasammonia,whichhasahigherenergydensitypervolumethanliquidhydrogenandcanbestoredandtransportedasaliquidatlowpressuresorincryogenictanksataround-33°Cat1bar.Ammoniacanbetransportedatlowcostbypipelines,ships,trucks,andotherbulkmodes.Thecaveatisthattheammoniasynthesis,anditssubsequentdehydrogenationtoreleasehydrogen,requiressignificantenergy.11Introduction1Greatpotential,butalsosignificantchallengesThepropertiesofhydrogengiveitgreatpotentialintheenergytransition,andtherearesolutionstothechallengespresentedbyhydrogenproperties.Thetrade-offisoftentheenergyrequiredtoimplementthesesolutions.Theseparationorextractionprocessforhydrogenproductionrequiresenergy,andtheenergycontentoftheoutputhydrogenisalwayslessthantheenergycontentoftheinputfuel,plustheenergyrequiredforthehydrogenprocess.Inotherwords,producingandconvertinghydrogenisinefficientandinvolveslargelosses.Hydrogenisalsogenerallymoreenergyintensivetostoreandtransportthanotherconventionalfuels.Thevalueofhydrogeninpureformtousersortosocietyatlargemustbesufficienttojustifytheenergylossesinitsproduction,distribution,anduse.Thepropertiesofhydrogenrequireconsiderationacrossthehydrogenvaluechainbasedonapplicationandcontext,todeterminethebestsource,state,andderivative,andassociatedinfrastructureandappliance,tomaximizethebenefitsofhydrogenpropertiesandminimizenegativeimpacts.Asuccessfulhydrogenvaluechainwillbalancetheprosandcons,physicalandsafety/risks,costsandbenefits,anddecarbonizationpotentialofhydrogenagainstotherenergycarriersandfuels.Onemajorconsiderationistherelationshipbetweengreaterelectrificationandwidescalehydrogenuse.Wheredecarbonizationthroughdirectelectrificationofasectorisfeasible,thisisthefirstpriorityduetotheinefficienciesofconvertingelectricitytohydrogen.Whereelectrificationisnotanoption—oraverypoorone—thenhydrogenisthebestalternative,asisthecaseinmanyso-calledhard-to-abatesectors.Theenergyindustryisclearonwherehydrogenandelectri-ficationcanplayarole:some80%ofenergyprofessionalswesurveyedbelievethathydrogenandelectrificationwillworkinsynergy,helpingbothtoscaleup;just16%believehydrogenandelectrificationwillbeincompetitionforthesameshareoftheenergymix1.12DNV—Hydrogenforecastto20501.2Today’sindustrialuseandambitionsHydrogenanditsderivativesareproducedinlargequantitiestoday,butasanenergycarrier,itsuseisnegligible.TomeetthetargetsoftheParisAgreement,however,theexistingindustrialproductionofhydrogenmustbedecarbonized.Morecrucially,anadditionalverylargequantityoflow-carbonhydrogenanditsderivativesisneededasanenergycarrier—includingheatinginindustry,shippingandaviation,andenergystorage.HydrogenproductionisalreadyathrivingindustryHydrogenproductionisalreadyalargeandthrivingindustry.Exceptitisnotlow-carbonhydrogenproductionthatisthrivingtoday.Thehydrogenproducedtodayispredominatelyusedinfertilizerorforchemicalfeedstockandisproducedfromcoalornaturalgaswithoutcarboncapture.Theassociatedemissionsaresignificant:around900milliontonnesofCO2in2020,orgreaterthantheCO2emissionsofFranceandGermanycombined.Globaldemandforhydrogenanditsderivativesasanindustrialfeedstock(i.e.,non-energyhydrogen)isaround90milliontonnesperyear(2020)2.Inenergyterms,thisisequivalenttoaround12EJorroughly2%ofworldenergydemand.Toputthisinperspective,DNVforecaststhatdemandforhydrogenasanenergycarrierwillnotreachthisleveluntiltheearly2040s.Non-energyhydrogenhasaroletoplayintheenergytransition,however.Tacklingitsemissionswillhelptoscaleandacceleratecarboncaptureandabatementtechnologies.Hydrogentodayisusedinoilrefining,fertilizer,andindustrialprocessesToday’shydrogendemandissplitbetweenpure13Introduction1hydrogenuseinoilrefininganddemandforhydrogenfromchemicalproductiontoproducederivativessuchasammoniaandmethanol.Ofhydrogenusedinchemicalproduction,roughlythree-quartersisusedforammoniaproductionandone-quarterformethanol.Arelativelysmallproportionofhydrogendemandisalsoconsumeddirectlyinsteelproduction.—Petroleumrefining—Oilrefineriesarethelargestconsumerofhydrogen(around37Mtin2020)usingittoreducethesulfurcontentofdieseloilandupgradeheavyresidualoilsintohigher-valueoilproducts.Thisdemandissettocontinueinthecomingyearsasglobaloildemandremainsarounditscurrentlevel,beforedecliningfromaround2030withafallinoildemand.—Ammonia—Around33Mt/yrofhydrogenisusedannuallytoproduceammonia(NH3),with70%ofthisusedasanessentialprecursorinproducingfertilizers3.Accordingly,ammoniademandiscorrelatedwithglobalagriculturalproduction,whichcontinuestogrow.Ammoniaistradedaroundtheworld,withglobalexportsequatingtoabout10%oftotalproduc-tion—showingthefeasibilityofammoniashippingandglobalammoniatrade,whichwillbeanimportantenablerofthefuturehydrogenecosystem.—Methanol—Around13Mt/yrofhydrogenisusedeachyearformethanolproduction,whichisusedinindustrialprocessestoproducethechemicalformal-dehydeandinplasticsandcoatings.—Steel—Closeto5Mt/yrofhydrogenannuallyisuseddirectlyinsteelproductionfordirectreductionofiron(DRI).Fossilfuelsarecurrentlyusedthroughoutthesteelmakingprocess,intheformofcoke,asareducingagent,andasforvariousheat-intensivestagesoftheiron-andsteelmakingprocess—allofwhichcouldbereplacedbylow-carbonhydrogen.Thehydrogenproducedtodayisalmostexclusivelyproducedfromfossilfuels(grey,blackandbrownhydro-gen,fromnaturalgasandcoalrespectively).However,carbonpricesarerising,particularlyinEurope,andallindustriesareundermountingpressuretodecarbonize—particularlytheoilandgasindustry.Fromoneperspec-tive,thetransitionfromgrey/black/brownhydrogentoblueandgreen(producedfromfossilfuelswithcarboncapture,orbyrenewableenergy)inoilrefining,ammoniaproduction,andotherindustrialusescouldensureearlydemandforlow-carbonhydrogen,helpingthehydrogen'ecosystem'—i.e.,valuechainssupportinghydrogenasanenergycarrier—toscale.Fromanotherperspective,thesearelargeindustriesthatwilllatercompetewithenergyusersforlow-carbonhydrogen.GrowingambitionsforhydrogenasanenergycarrierHydrogenhasanewstatusasanimportant,viable,andrapidly-developingpillaroftheenergytransition.MorethansixintenseniorenergyprofessionalssurveyedbyDNVin2022saythathydrogenwillbeasignificantpartoftheenergymixby20304,andclosetohalfsaytheirorganizationisactivelyenteringthehydrogenmarket.Morethanthis,thehydrogenpledges,plans,andpilotsofrecentyearsarenowbeginningtoevolveintoconcretecommitments,investmentsandfull-scaleprojects.Topursuetheirambitionstoincreasetheirproductionofgreenandbluehydrogeninthecomingyears,producerswillneedgreatercertaintytohavetheconfidenceforlarge-scaleinvestmentsandprojects.Thiswillrequireambitiouspoliciesandgovernmentstrategies,severalindustriessimultaneouslybuildingthedemand-sideofthehydrogenvaluechain,andrealizationoftheexpectedhugegrowthinrenewablegeneration.Thatgrowthhastoacceleratebeyondthedemandforrenewably-generatedelectricitytocreateclean,low-costenergyforgreenhydrogenproduction,andgreaterdemandforhydrogenforenergystorage.Inlinewithclimateandnetzerogoals,manyindustrieshaveapressingneedtoreplacecarbon-intensiveprocessesbyreconfiguringtheirplants,machines,models,andpracticestoswitchtohydrogen—whichcanbeasubstituteforeitherfossil-fuel-basedenergyorfeedstockneedsintheseindustries.Forexample,long-haultruckingfleetscanreplacedieselwithhydrogenfuelcells;heatprocessesincement,aluminiumandsteelmakingcanbefuelledbyhydrogen;andchemicalcompaniesthatproduceammoniacanswapgrey/brownhydrogenfeedstockforblue/greenequivalents.WepresenttheforecastdemandandsupplyinChapter5.14Low-carbonderivativeskeytoawidespreaduseofhydrogenasanenergycarrierJustashydrogentodayisconvertedtoammoniaandmethanolforsomeindustrialapplications,widespreaduseofhydrogenasanenergycarrierwillalsorelyonhydrogenderivativesandhydrogen-basedsyntheticfuels,wherethepropertiesoftheseenergycarriersmakemoresensefortheapplicationthanpurehydrogen.Thesederivativeswillneedtobeproducedinalow-carbonway.Aviationandshippingstandoutasthetwosectorsthatwillmakethemostsignificantuseoflow-carbonhydrogenderivatives.Whattheyhaveincommonisthattheyaredisconnectedfromthegridandrequirelargeamountsofenergy,meaningelectrificationorpurehydrogenarenotfeasiblealternativestothefossil-basedfuelstheycurrentlyrelyon.Theenergydensityofbothpurehydrogenandbatteriesaretoolowtobeusedwidelyintheseindustries.Wherethesesectorsdifferfromoneanotheristheweightandspaceavailableforfuelstorage,withweightparticularlycriticalinaviation.—Aviation—Hydrogen-basedsyntheticfuels—synthetickeroseneorsimilar—arelikelytobeusedinaviation,andweexpectpurehydrogentoseesomeuseformedium-haulflights,butwedon’tforecastsignificantuptakebeforethe2040s.—Shipping—Thereisnorelevantbatteryelectricoptionfordecarbonizingthedeep-seashippingsector,withsyntheticfuels,ammonia,hydrogenandbiofuelsbeingthemostrealisticlow-carbonalternatives.Thesehigh-costfuels,whichcanbeimplementedinhybridconfigurationswithdiesel-andgas-fuelledpropulsion,willseesignificantuptake,providingslightlyover42%ofthemaritimefuelmixby2050,accordingtoDNV'slatestforecast.Hydrogenderivativeswillalsobeusedinthetransportandstorageofhydrogen,asweexplorefurtherinChapter5.FIGURE1.3EnergyindustryambitionsforhydrogenSource:DNVEnergyIndustryInsights2022,basedonasurveyconcludinginJanuary2022.Strongambitionsforahydrogeneconomyby2030OverallOilandgasPowerEnergy-consumingindustriesRenewablesMyorganizationisactivelyenteringthehydrogenmarket62%56%68%66%59%47%35%61%40%46%Hydrogenwillbeasignificantpartoftheenergymixby2030MyorganizationisactivelyenteringthehydrogenmarketDNV—Hydrogenforecastto2050151.3HydrogenvaluechainsThemarketandvaluechainsforhydrogenasanenergycarrierareintheirinfancy—evenasthepotentialhasbeendebatedfordecades.Hydrogenmarketstodayaremainlycaptive,withproductiontakingplaceatorclosetokeyindustrialconsumers.Therearelittletonoopencommoditymarketsforhydrogen,withtheexceptionofmarketsforhydrogenderivativessuchasammoniaandmethanol.HydrogeniscurrentlyalmostexclusivelyproducedfromnaturalgasandcoalwithoutCCS.Inmanyifnotmostcases,anintermediatesteptoafullydecarbonizedhydrogenvaluechainisthroughtheproductionofbluehydrogen(i.e.CCS-basedhydrogenproductionfromfossilfuels)beforesurplusordedicatedrenewableenergyisavailableinsufficientquantitiesforthelarge-scaleproductionofgreenhydrogen.Forhydrogentoplayameaningfulroleasastrategicdecarbonizedenergycarrier,newvaluechainsandthedevelopmentofhydrogenmarketsarerequired.Manydifferenthydrogenvaluechainswilldeveloptowards2050.Thisispartlyduetotheversatilityofhydrogen:itcanbeproducedfromcoal,naturalgas,gridelectricity,ordedicatedrenewables;itcanbestored,transported,andusedinitspureform,blendedwithnaturalgas,orconvertedtoderivatives;anditwillbeconsumedacrossarangeofindustriesandapplica-tions,includingmaritimeshipping,heatproduction,roadtransport,andaviation.Introduction1DNV—Hydrogenforecastto205016SourcingSolarDedicatedREproductionElectricitygenerationCoalandbiomassNaturalgasWindHydroNuclearConversiontoammoniaConversiontomethanol/e-fuelsDirectuseofhydrogenElectrolysisw/CCS=sizeofCO2footprint,includinglifecycleemissions.w/CCSWaterGasiﬁcationMethanereforming40%ConversionFossilHYDROGENPRODUCTIONANDUSEIN2050DNV—Hydrogenforecastto205017Introduction1AmmoniashippingNH3NH3HydrogenshippingHydrogenpipelinesTruckwithgastanksPipelinesAviationIndustryMaritimeReﬁneryTrucksBuildingsHeatingIndustrialheatingFertilizerPowerGasgridInter-regionalregional20%40%TransportUseThisfigurepresentshydrogenproductionanduseflowsin2050.Thethicknessoftheflowlinesapproximatesthevolumeofeachflowindicatingmajorproductionroutesandendusesin2050.However,incontrasttotheSankeydiagramshownonpage68,nolossesaredisplayedhere.By2050,thevastmajorityofhydrogenproducedislow-carbonhydrogeneitherfromrenewablesourcesorCCSbasedfossilproduction.DNVHydrogenReport2022Introduction1FIGURE1.4ComparisonofselectedhydrogenvaluechainsandtheircompetitorsPrimaryenergysourceEnergycarrierEnergyserviceFinalenergycontentSpaceheatingPassengerroadvehiclesShipsUsefulheatRenewableelectricityElectrolysisBoilerHydrogen57%33%losses4%Transportationlosses6%LossesUsefulheatNaturalgasBoiler85%9%Losses6%TransportationlossesDedicatedrenewableelectricityUsefulheatPowergeneration(2020worldavgmix)Heatpump(2020avgefficiency)Gridelectricity135%51%losses3%TransportationlossesRenewableelectricityFossil,nuclear,biomassAmbientheatUsefulheatPowergeneration(2050worldavgmix)Heatpump(2050avgefficiency)Gridelectricity307%22%losses4%TransportationlossesRenewableelectricityFossil,nuclear,biomassAmbientheat12%Refining&transportationlosses72%LossesOilInternalcombustionengineUsableenergy16%MethanereformingwithCCSHydrogen24%losses4%Transportationlosses6%Processing&transportationlosses38%LossesNaturalgasFuelcellengineUsableenergy27%DedicatedrenewableelectricityPowergeneration(2020worldavgmix)Gridelectricity51%losses3%Transportationlosses11%LossesRenewableelectricityFossil,nuclear,biomassElectricengineUsableenergy35%12%Refining&transportationlosses49%LossesOilInternalcombustionengineUsableenergy39%RenewableelectricityElectrolysis&ammoniasynthesisAmmonia48%losses3%Transportationlosses27%LossesInternalcombustionengineUsableenergy22%RenewableelectricityElectrolysis&methanolsynthesisE-fuels51%losses3%Transportationlosses26%LossesInternalcombustionengineUsableenergy20%Powergeneration(2050worldavgmix)Gridelectricity22%losses4%Transportationlosses11%LossesRenewableelectricityFossil,nuclear,biomassElectricengineUsableenergy63%DNV—Hydrogenforecastto20501819Introduction1Efficiencies,economics,emissions,andgeographykeytodeterminingviablevaluechainsDeterminingviablehydrogenvaluechainsisnotjustaboutlinkingproductiontoconsumption.Itisconsideringenergyefficienciesandlosses,economics,greenhousegasemissions,andgeography—intermsofbothlocationfortransport,andresourcessuchasnaturalgasandrenewableenergyforproduction.Issuesofpublicacceptanceandsafety—addressedinSection1.4—arealsopivotal.Figure1.4showsalternativehydrogenvaluechainsandtheirassociatedenergylosses.Energylossisimportantwhenitcomestodecidingavaluechain,asitalsodeterminestheeconomicsituation.However,theoveralleconomicsituationisusuallythemaindeterminantforthesetupanddesignofahydrogenvaluechain.Theproductionofhydrogenisassociatedwithsignificantlossesineachvaluechain,butwhenthesourceofhydro-genproduction,likerenewableelectricityinthecomingdecades,isabundantlyavailable,energylosseswillbelessimportantinthelongterm.Valuechaingreenhousegasemissionswillbeadecisivefactorinestablishingspecifichydrogenvaluechains.Takersofhydrogen,suchascountriesorend-usesectors,willhavepreferencesonthevaluechaingreenhousegasemissionsandthusincentivizetheirimplementation.Transportofhydrogenisanotherdecisivefactorinfluencingahydrogenvaluechain.Someworldregionsmightnotbeabletosupplytheirregionalneedsofhydrogenandthushavetoimporthydrogenviapipelinesormaritimeshipping.Relatedtothisisthefactorofgeographies.Whereassomeregionsintheworldcanuseabundantresourcesfromwindandsolartoproducegreenhydrogen,otherregionsmightneedtorelyonhydrogenfromnaturalgas.Alloftheaboveisofcoursesurroundedbyeconomicassessmentsashydrogenisexpensivetoproduceandneedstobeusedsensibly.AsillustratedinFigure1.4,thereareplentyhydrogenvalue-chainpermutations,impactedby,amongstothers,theaforementionedfactors.Thespecificdetailscombiningineachofthesechains,suchassources,conversion,transport,enduse,etc.arepresentedinmoredetailinthecomingchapters.SkillsandstandardskeytosuccessfulimplementationofnewvaluechainsTheimplementationofhydrogenintheenergysystemwillre-useexistingenergyindustryskillsandservicesacrossthewholesupplychain.Thesewillbetransferredfromtheoilandgassectortosupportbothblueandgreenhydrogen.Connectedtobluehydrogen,oilandgasskillswillhavetoberetainedtoproducenaturalgasforrefineriestoreformintobluehydrogen.Standardsandproceduresforexistingoffshoreopera-tionswillhelpensurethesafetyandsuccessofthenewhydrogenindustry.Forexample,connectedtogreenhydrogen,offshorewindwillinvolvetheinstallationofeverlargerwindturbinesrequiringknowledgeoffloatingandfixedstructuresindeepwaterandoperationinchallengingweatherconditions.Thehydrogensupplychainwillalsoincludeportsandlogistics,pipelinedesignandmanufacture,transmissionanddistributioninfrastructure,safetyassessments,abovegroundstoragetanksandbelowgroundgeologicalhydrogenstorage.Eachofthesewillrequireskilledlabour.Chapter7divesmoredeeplyintovalue-chainevolution,withexamplesanddetailsoftheireconomicsandpossiblegrowthpaths.Valuechaingreenhousegasemissionswillbeadecisivefactorinestablishingspecifichydrogenvaluechains.20DNV—Hydrogenforecastto20501.4Safety,risksandhazardsHydrogenisnotnewtosociety;ithasbeenproducedandusedinlargequantitiesforoveracentury.However,thishasmostlybeeninindustrialenvironmentswherethereisagooddegreeofcontrol,andwherefacilitiesaremanagedbypeoplewhohaveaclearunderstandingofthepotentialhazards.Theforecastsignificantgrowthinthemarketforhydrogenasanenergycarrierwillintroducemanynewhydrogenfacilitiesthatareverydifferentfromthosewehavehadinthepast.Moreover,someofthefacilitieswillbeinmuchcloserproximitytothepublicandwillbebuiltandoperatedbynewentrantswhomaynothaverelevantexperienceinhydrogensafety.Ourpreviousexperienceofhydrogensafetyisthusanimperfectguide,atbest,astowhatmighthappeninthefuture.Detonationofhydrogenisentirelycredibleatscalesrepresentativeofmanyscenarioswhereitisnotfortraditionalhydrocarbons.Thisimageshowsastillimagefroma15m3hydrogendetonationconductedasademonstrationatDNV’sSpadeadamResearchCentreintheUK21Introduction1Riskperceptionwillbeanimportantfactorinacceptanceofhydrogenuse.Accidentsinvolvinghydrogenarelikelytoreceivemoremediaattentionthancomparableeventswithconventionalfuels(atleastinitially)andthiscouldexcitepublicresistanceandpromptamorerestrictiveregulatoryenvironment.Thesensitivitiestoriskandriskperceptionwilllikelyvaryamongsectorsbutwillbehighestwherethepublicisneartheactualuseofhydrogen,suchasinaviationanddomesticheating,andlesssoinmoreindustrial-typeapplicationssuchashydrogenstorage.Safetyrepresentsasignificantbusinessrisktoinvestorsanddevelopers.Therehavealreadybeenexampleswhereincidentsathydrogenrefuellingstationshavehaltedhydrogenuseinvehiclesforsignificantperiods.Theindustryhastried-and-testedmethodsformanagingthesafetyofflammablegasesthathavebeenusedfordecadesandthesecomewithsomeveryimportant,hardwon,lessons.Firstly,safetymustbebasedonanunderstandingofhowtheparticularpropertiesofhydrogenandhydrogenderivativesaffectthepotentialhazards.Secondly,itisbyfarmosteffective(intermsofbothsafetyandcost)ifappropriaterisk-reductionmeasuresareaddedearlyinthedesignstage.Inmanyinstances,ifaddressedearly,thesemeasurescanbeincorporatedatlittle(andattimesno)extracostandcanresultindesignsthatareinherentlysafer.Finally,thedesignintentneedstobemaintainedthroughthefulllifecycle:safetymeasuresshouldnotdegrade.Achievingallthisrequiresanunderstandingofthekeypropertiesofhydrogen(anditsderivatives)thataffectthehazards.Ashydrogenisverydifferenttoitsderiva-tives,weneedtoconsiderthoseseparately.HydrogenhazardsHydrogenisaflammablenon-toxicgasinambientconditions.Theeffectofitspropertiesonhazardsandhazardmanagementareprobablybestunderstoodbyreferencetoanotherflammablenon-toxicgasthatiswidelyacceptedbysociety:naturalgas(oritsprimarycomponent,methane).Sohowdothepropertiesofhydrogenchangethepotentialhazards?Forhydrogen,aswithnaturalgas,ignitionofaccidentalreleasescanresultinfiresandexplosions.ResearchisveryactiveintheseareasandDNVisengagedinlarge-scaleexperimentalresearchatourResearch&TestingsiteatSpadeadam,Cumbria,UK5.Althoughourunderstandingisstilldeveloping,weknowenoughtounderstandwheretoconcentrateeffortswithhydrogen.Table1.1summarizesthediffer-encesbetweenhydrogenandnaturalgas/methane,inbothgaseousandliquidform.Ignitionofaflammablegasclouddoesnotalwaysresultinanexplosion.Pressureisgeneratedwheneitherthegascloudisconfinedwithinanenclosure,ortheflameacceleratestohighspeed(orboth).Thiscouldoccurinawiderangeofpossiblescenarios,fromlow-pressureleaksindomesticproperties,medium-pressureleaksinhydrogenproductionfacilitiesormarineapplications,tohigh-pressureleaksfromstoragefacilities.Theseverityofanexplosionwilldependonmanyfactors,butingeneral,themore‘reactive’thefueltheworsetheexplosion.Reactivityinthissenserelatestohowfastaflamemovesthroughaflammablecloud.Atitsworst,hydrogenflamescanburnaboutanorderofmagnitudefasterthannaturalgasandmuchfasterthanmostcommonly-usedhydrocarbons.Toaddtothis,whenaflametravelsveryfast,goingsupersonic,theexplosioncantransitiontoadetonation.Adetonationisaself-sustainingexplosionprocesswithaleadingshockof20barthatcompressesthegastoapointofautoignition.Thesubsequentcombustionprovidestheenergytomaintaintheshockwave.Ourpreviousexperienceofhydrogensafetyisanimperfectguide,atbest,astowhatmighthappeninthefuture.22DNV—Hydrogenforecastto2050DNV’sHyStreetFacilitysitsattheendofthemostcompleteonshore‘beachtoburner’demonstrationofhydrogenuseanywhereintheworld.DNV’sHyStreetprovidesthedomesticend-usewith100%hydrogenboilersprovidingheating,NorthernGasNetwork’sH21projectdemonstratesdistributioninthebelow7bargregimeandNationalGrid’scurrently-under-constructionFutureGridfacilitywilldemonstratetransmissioninlargediameter,highpressuresystems(upto70barg).23MethanemoleculeHydrogenmoleculeTABLE1.1Comparisonofhydrogenandnaturalgas/methanepropertiesandhazardousoutcomeHydrogenpropertyGaseous(compressed)hydrogenDensityReleaserateBeingoneeighthofthedensityofmethane,inequivalentconditionsthevolumetricflowrateofhydrogenis2.8timesthatofmethane;conversely,themassflowofmethaneis2.8timesthatofhydrogen.Isolatedhydrogenpressuresystemswilldepressurisefasterthanformethane,butlargerflammablecloudsmayresult.Thehigherenergydensityperunitmassofhydrogenmeanstheenergyflow(likeforlike)issimilar.Dispersionandgasbuild-upHydrogenismorebuoyantthanmethaneandwillhaveastrongtendencytomoveupwards,anaspectthatcanbeusedtominimisethepotentialforhazardousconcentra-tionstodevelop.IgnitabilityIgnitionenergyTheminimumsparkenergyrequiredtoigniteahydrogen-airmixtureislessthanatenthofthatrequiredformethaneornaturalgas.However,thisdoesnotnecessarilysignificantlyincreasethechanceofignition.TestingbyDNVhasshownthatmanypotentialignitionsourceseitherignitebothhydrogenandnaturalgasmixturesorneither.Onlyasmallproportionwillignitehydrogenbutnotnaturalgas.Additionally,equipmentapprovedforuseinhydrogensystemsisreadilyavailable.FlammabilityConcentrationsofhydrogeninairbetween4%and75%areflammable,whichisamuchwiderrangethanfornaturalgas(5-15%).Thiswillincreasethelikelihoodofignition.CombustionFireReleasedcompressedhydrogengaswillburnasajetfire.Flamelengthscorrelatewelltheenergyflowrateandasthisissimilarforhydrogenandmethane,inlikeforlikeconditions,thejetfirehazardsaresimilar.ExplosionTheexplosionpotentialforhydrogenismuchgreatercomparedtomethaneasathigherconcentrationsinair(>20%)thespeedoftheflameismuchmorethanformethane.Inaddition,hydrogen-airmixturescanundergotransitiontodetonationinrealisticconditions,whichwouldnotoccurwithmethane.Liquidhydrogen(additionaltocompressedgashazards)TemperatureLiquefactionInmanyways,liquidhydrogenisacryogenicliquidlikeliquefiednaturalgas(LNG).Butduetothelowertemperature,spillagescanliquefyandsolidifyairfromtheatmosphere.Theresultingmixofliquidhydrogenandliquid/solidairhasexplodedinsmallscalefieldexperiments.ThisdoesnotoccurwithLNG.DensityBuoyancyanddispersionAsliquidhydrogenvapourizesandmixeswithair,itcoolstheair,increasingitsdensity.Consequently,ahydrogenaircloudproducedfromaliquidhydrogenreleasewillnotbeasstronglybuoyantasinagaseoushydrogencase.ThisalsooccurswithLNGbutinthiscasetheLNG-airmixturewillbedenserthanair.Introduction124DNV—Hydrogenforecastto2050Detonabilityvariesfromfueltofuelanddetonationswouldnotoccurinanyrealisticsituationwithnaturalgasbutareentirelycredibleforhydrogen.Itisalsonotablethatcurrentexplosionsimulationmethodsusedbyindustryarenotabletomodelthetransitiontodetonation,butonlyindicatewhenitmightoccur,thoughthereisstillconsiderableuncertaintyinthisarea.Thissoundslikebadnewsforhydrogenfacilitiesyetweknowthatthesepropertiesdependontheconcentrationofthefuelinair.Ifconcentrationsarekeptbelowabout15%hydrogeninair,itisnoworsethanmethaneatsimilarconcentrations.Theimplicationisthatakeyelementofmanaginghydrogensafetyisthecontrolofgasdispersionandbuild-uptopreventtheconcentrationofhydrogeninairexceeding15%asfarasispracticable.Thisisaparticularchallengewheredispersalspaceisconstrained—forexampleonboardships.Gasdetectionandrapidisolationofhydrogeninventorieswillbekeymeasures.Considerationofventilationratesandventilationpatternsisalsocritical.Importantly,currentsimulationmethodscanmodelgasdispersionandbuild-upwithreasonableconfidence.Insummary,althoughhydrogen’shighexplosionreactivityisjustifiablyconcerning,bybeingawareofthisissueanddesigningtoavoidhighhydrogenconcen-trationsintheatmosphere,itisreasonabletoexpectwecanengineerfacilitiesthatareassafeorbetterthanwidely-acceptednaturalgasfacilities.Ifbasedonasoundtechnicalunderstandingandaddressedinearlydesign,thecostimplicationsofsuchengineeringsolutionsmaynotbesignificant.HydrogenderivativesArguably,themostimportanthydrogenderivativeinrelationtohazardmanagementisammonia.Ammoniaisflammablebutitisrelativelydifficulttoigniteandasitsburningvelocityiswellbelowthatofmethane,theexplosionriskissmall.Thekeyhazardwithammoniaisitstoxicity;itisharmfultopersonnelatconcentrationswellbelowitslowerflammabilitylimitof15%inair.Forexample,UKHSEindicatesaconcentrationof0.36%couldcause1%fatalitiesgiven30minutesofexposure.Concentrationsof5.5%couldcause50%fatalitiesfollowing5minutesofexposure.Whileammoniahasbeenwidelymanufacturedforover100yearsandisusedinconsiderableamountsinthemanufactureoffertilizers,itspotentialhazardsneednowtobeunderstoodinthecontextofnewenergytransitionapplications,asisthecasewithhydrogen.Averyrelevantexampleisthelikelyuseofammoniaasafuelinthemaritimesector.Anammoniareleasewithinthehullofashiphasthepotentialtodeveloppotentiallyfatalconcentrationsinconfinedspaces.Unlikehydrogen,thishazardcannotbereducedbymeasuresthatreducethechanceofignition;ammoniahasadirecteffectifreleasedandcomesintocontactwithpersonnel.Thereisthereforenoguaranteethattherisksarelowerthanforhydrogen,eventhoughithasnorealexplosionpotential.Riskassessmentwouldinvolveapplicationofstandardhazardmanagementmethodsandwouldneedtoconsideraspectssuchasthetypesofreleasethatcouldoccur,thepotentialconcentrationsthatcouldbegenerated,andthelikelihoodofpersonnelbeingexposedtoharmfullevels.Mitigationmethodswouldincludeammoniareleasedetectionandemergencyshutdownofammoniasystemsandventilation,butcouldalsorequiretheavailabilityofemergencybreatherunitsandverywelldefinedescaperoutes.FeasibilityofammoniaforshippinghasbeendescribedintheDNVwhitepaperfrom2020:Ammoniaasamarinefuel.TheadditionalDNVclassnotation“Gasfueledammonia”wasreleasedinJuly2021.25Introduction1Liquidorganichydrogencarriers(LOHCs)havethelowestsafetyrisksastheirpropertiesareclosetothoseofliquidhydrocarbonsalreadyhandledinlargequantities.Safetymanagementshouldbestraightforward,thoughitshouldbenotedthathydrogenwillberequiredduringproductionandwillbeproducedatthepointofutilization(asmayalsobethecaseforammonia).Akeyelementofmanaginghydrogensafetyisthecontrolofgasdispersionandbuild-uptopreventtheconcentrationofhydrogeninairexceeding15%asfarasispracticable.26DNV—Hydrogenforecastto20501.5HydrogeninvestmentsrisksThereiscurrentlyunprecedentedinterestinrenewableandlow-carbonhydrogenasanenergycarrier,fuel,andcleanmolecule.However,thereisstillalongwaytogo:firstforinvestmenttoflowbeyondresearchandpilotprojects,andsecondtorealizemanylarge-scalehydrogenprojectsanddeveloporretrofitinfrastructure.Hugeinvestmentsrequiredforlarge-scalevaluechainsforenergypurposesIn2021,USD12bnwasinvestedgloballyinhydrogenasenergycarrier.Annualinvestmentinhydrogenanditsderivativesby2030willstandatUSD129bnandby2050atUSD440bn—withhydrogenasanenergycarriergrowingrapidlybythenandwellintothesecondhalfofthiscentury.Asimpressiveasthesefiguresare,muchmoreinvestmentwillbeneededinhydrogen,andsooner,toensureaParis-compliantenergytransition.OurPathwaytoNetZeroEmissionsseeshydrogenaccountingforaround13%ofglobalenergydemand,morethandoublethemostlikelyfutureweforecastforhydrogen.Thequestionariseswhetherafaster,biggerfutureforhydrogenisaffordable.WithinthecontextofworldNAMNorthAmericaLAMLatinAmericaEUREuropeSSASub-SaharanAfricaMEAMiddleEastandNorthAfricaNEENorthEastEurasiaCHNGreaterChinaINDIndianSubcontinentSEASouthEastAsiaOPAOECDPacific27Introduction1expenditureonenergy,theanswerisyes.Weforecastthatthepercentageofworldgrossdomesticproduct(GDP)thatwillbespentonenergyissettofallfrom3.2%in2019to1.6%in2050owingtorisingefficienciesassociatedmainlywithelectrification.IfthecurrentfractionofGDPdevotedtoenergyexpendituresweretoremainconstant,thesurplusfundstospendoncleanenergywouldgrowbyaroundUSD2trneachyear,reachingclosetoUSD63trnby2050—enoughtofinanceatransitioncompliantwiththeParisAgreement,includingtherequiredscalingofdecarbonizedhydrogen.HydrogeninvestmentintrinsicallylinkedtowiderenergyinvestmenttrendsAstheenergytransitionaccelerates,energycompaniesaremakingcritical,long-termstrategicdecisionsontheirfutures,withmuchoftheindustrymakingtransfor-mationalgreeninvestments.Financiers,meanwhile,arereassessingandbringingforwardthefutureriskinfossilfuels—fearingstrandedassets,anddrivenbydevelop-mentsinareassuchasESG,taxonomies,carbonpricing,andpressurefromshareholdersandthepublic.Significantcapitalislookingforanewhomeintheenergytransition,butitisnotnecessarilythecasethatthiscapitalwillflowintohydrogen.Oilandgasprojectshavebeenstrugglingtosecurefinancing,with38%ofsenioroilandgasprofessionalssayingthattheirorgani-zationisfindingitdifficulttoaccessreasonablypricedfinanceforoilandgasprojects6.ThisresponseisbasedonDNV’sJanuary2022surveyundertakenbeforeRussia’sinvasionofUkraine.Nevertheless,ourresearchshowsthatthedriversawayfromfossilfuels—decarbonizationandtheenergytransition—areresilient,long-termtrendsthathavebeenlargelyunaffectedbythecyclicalnatureoftheindustry.Incontrast,renewableenergyprojects,atleastindevelopedmarkets,arereceivingsignificantinterestandthereisabundantcapitalavailabletotheseprojects—thebottleneckforrenewablesisinsteadpermittingandavailableprojects7.However,financingisnotasreadilyavailableforprojectsemployingtechnologieswithless-maturevaluechains.Forhydrogen,whileinterestandinvestmentexpectationsareincreasing,thecapitalisnotflowingasreadilyintoprojectsasitisintorenewables.ReducingriskandincreasingtheappealofhydrogeninvestmentsCapitalwillonlyflowintoprojectsthatarebankable.Energycompaniesandinvestorsneedtoensurehydrogenprojectsofferabalancebetweenriskandreturn.Thisrequireslong-termstability,certainty,andline-of-sight,whichcanbestrengthenedbybusinessmodelsandlong-termagreements,theregulatoryenvironment,governmentsupport,partnerships,andtechnologicalinnovation.Themarket’smaturityisalsoessential,withinvestmentriskreducedbygreatercertaintyofdemand,nowandinthefuture.Anever-presentworryforcompaniesinvestinginhydrogenproductioniswherethedemandwillcomefrom,atwhatlevel,andcrucially,when.Thecoreissueisthatfromafinancingperspective,hydrogenopportunitiesarecurrentlylong-term,low-return,andseeminglyhigh-risk.Financiersareunlikelytoacceptsuchriskwithoutsignificantgovernmentsupportintermsofcreatingcertaintyandprovidingmoredirectsupportthroughsubsidies—andthisiswhatweseeinthemarkets.Intheearlystagesofrollingouttechnologies,thecostsareoftenhigh,andenterpriseshavetofollowlong-termstrategiesandimplementplansthatmaylackprofitsintheshortterm.Buttheydosotogainmarketshareintheindustry,intheexpectationthatoncehydrogensupplyanddemandincrease,costswillfall,andprofitswillimprove.Early-stageinvestmentcanbeachallenge.Initialsupportandindustryinvolvementisneededtofast-trackprojectstothestagewheretheyhavelowerriskandfittheprofileforwidely-usedfinancialmechanisms.Itisaquestionofachievingsafe,large-scaleproductionoflow-carbonhydrogenatalowerprice.Theambitionistodevelopthematurityofmarketsandinvestorswithinthem,sothatdifferentfinanciershavethebusinessmodelsandriskappetitestocomeinateachstageofaproject,fromconcepttocompletion.Forhydrogen,mostprojects—beyondpilotsandR&D—areinthepre-developmentphase.Riskishighatthisstage,anditisdevelopersandIOCs(internationaloilcompanies)thatareactive.28DNV—Hydrogenforecastto2050CertaintyofdemandandsupplyGreatercertaintyonthedemandfortechnologiesandinnovationscanreduceriskandincreaseinvestment.Butasdebatescontinueonbluevsgreenhydrogen,hydrogenvselectrification,andgreenhydrogenvsbatteriesforenergystorage,demandforhydrogenisfarfromcertain.Thisreport,providingDNV’sindependentforecastofhydrogensupplyanddemandto2050,mayhelpbyprovidingabestestimateforalikelyenergyfuturethatcompaniesandgovernmentsmayconsiderwhenformingtheirhydrogenstrategies.Beyondthat,thereareotherwaystoensurecertaintyofdemand,suchasagreementsbetweenproducersandconsumers,whetherintheformofagreenhydrogenpowerpurchaseagreements(PPAs)orjointinvestmentinindustrialclustersforhydrogen.Announcementsfrommajorcompanies,suchasaswitchtohydrogenbyamajorindustrialuserinsteelproduction,orforammoniauseinshipping,canhelptocreatecertainty.Govern-mentscanalsoleadthewayasmajorinvestorsandconsumersofhydrogen,forexamplebybuildingearlydemandforhydrogenuseinpublictransport.Anotheroptionforgovernmentsistointroducequantity-basedpoliciestostimulatethedemand-side(seediscussioninChapter2).Nationalhydrogenstrategiesandpolicieswillplayacrucialrole.Policymakerswillneedtoplanatthelevelofenergysystems,simultaneouslypursuingpoliciestoenablesignificantscalingofrenewablepowergenerationandthebuildoutofCCSvaluechains.Currently,fromthesupplyside,hydrogenproducersfaceuncertaintyinPre-developmentDevelopmentConstructionCommencementofoperationCommencementofoperation+1–3yearsOperationalphaseDecommissioningorextensionoflifeStagesofInvestmentInvestmentriskDevelopersIOCsVentureCapitalRenewableFundsInfrastructureFundsPensionFundsSovereignWealthFundsDevelopmentbanksCommercialBanksDebtFundsDebtCapitalMarketFIGURE1.6InvestorappetiteSource:FinancingtheEnergyTransition,DNV202129Introduction1thesupplyofresourcestoproducelow-carbonhydrogen,whetherit’savailableandaffordablenaturalgaswithsufficientlylowsupply-chainemissionsforlow-carbonbluehydrogenproduction,orgridsurplusordedicatedrenewableenergy(orpotential)forgreenhydrogenproduction.Furtheralongthevaluechain,consumersinhard-to-abateindustries—reliantonfossilfuelsforfuelandfeedstock—arelookingforsolutionssuchashydrogenandderivativestodecarbonizebutneedcertaintythattheywillbeabletoaccessasecureandaffordablesupplyofthelowcarbonalternativetowhichtheytransition.Standards,taxonomyandcarbonpriceStandardsandtaxonomiesclassifyactivitiesthataresustainableandalignedwithclimatetargets,andthosewhicharenot,providingcleardirectionforenergyinvestmentandthebasisforincentives,standards,andregulations.Taxonomies,suchastheEUtaxonomy,canhelptoensurecapitalflowsintocleanenergyprojectsandtechnologies,andawayfromunabatedoremissions-intensefossilfuels.Suchtaxonomiesandstandards,andcertificationthathydrogenprojectsandproductscomplywiththem,cansignificantlyde-riskinvestment.Theflipsideisthatbeforetaxonomiesareagreedandfinalized,thereisuncertaintyandrisk.Companiesareunlikelytoinvestinbluehydrogenforexample,untilthereisclarityonwhetherthiswillbeeligiblefor“low-carbon”investment.DNV’sresearchBlueHydrogeninaLow-CarbonEnergyFuture(2021)addressestheissueofwhetherbluehydrogencanbeconsideredlowcarbon8.Wefindthatbluehydrogencanbedeliveredwithalowergreenhousegas(GHG)footprintthanthethresholdsinthetaxonomyasdefinedbytheEUandWorldBusinessCouncilforSustainableDevelopment.However,thisrequiresacombinationofhydrogenproductiontechnologyandcarboncapturethatfocusesonhighconversionratesandhighCO2capturerates,resultinginlowprocess-relatedCO2andmethaneemissions.Inaddition,thenaturalgassupply-chainemissionsofCO2andmethanemustbekeptlow.Ourdatashowthatthiscanbedeliveredwithcurrentnaturalgassupplyinsomeregions,butfarfromall.Certificationofhydrogencouldplayamajorroleinthisregard,directingcapitaltolow-carbonprojects,andgivingbothproducersandconsumerstheconfidence—anddata—thataswitchtohydrogenwillsupporttheirdecarbonizationefforts.Aneffectivecarbonprice—orclarityonwhensuchapricewillbeimplemented—wouldalsoincentivizecleanenergyanddisincentivizeunabatedfossilfuels.Byeffective,wemeanproperlypricingthedamagecausedbyemissions,butalsopricingatalevelthatmakeslow-carbontechnologiescommerciallyviable.Suchacarbonpricewouldsignificantlyde-riskhydrogeninvestment.FinancialinstrumentsTode-riskandimprovetheprofitabilityofclean-energyopportunitiesgovernmentsandmarketsworldwidehavedevelopedbusinessmodelsandfinancialinstru-ments.Thesemainlyreduceriskandcreatecertainty(suchashydrogenpowerpurchaseagreementsorcontractsfordifference)orsubsidiseandincentivize(suchasviafeed-in-tariffsortaxequityfinancing)inordertodevelopprojectsandtechnologiestoastagewheremoretraditionalformsoffinancingareavailable—suchasdebtandequityfinancing.Asmentioned,hydrogenhasauniquemixofattributesthatgiveitsimilaritiestoelectricityandtoafossilfuel.Thequestionthenfromafinanceperspectiveis:howwillhydrogenbepricedoncethemarketmatures?Theviewfromtheindustryissplitroughly50/50onthisquestion9.Howhydrogenispricedhasimplicationsforwhattypesoffinancialmechanismswouldbebesttoemploy.Electricitypricesareoftengovernedbyregulatorybodies,whichservetoprotectconsumersandguaranteeastablerateofreturnforproviders.Fossil-fuelpricesaremoredrivenbyfree-marketforces,whichmakesthemmorevolatile,yetpotentiallymoreprofitable.Morespecificpoliciesandmechanismswillneedtobeadaptedforregions,countries,andsectorstobeeffective.Itisvisibilityoftheimplementation,ofwhatregulationsandsupportforthesetechnologieswilllooklike,thatwillgivethecertaintyrequired.WeexplorehydrogenpoliciesandstrategiesinmoredetailinChapter2.30DNV—Hydrogenforecastto20502HYDROGENPOLICIESANDSTRATEGIES2.1PolicyandthehydrogentransitionHydrogen’sroleintheenergytransitionhasbecomeclearerinrecentyears,andmoreurgentjustinrecentmonths.Thedecarbonizationpathwaysofaselectfewsectorslargelyrelyonhydrogen’senvironmentalcredentials,whileensuringaffordability,availability,andsafety.Renewableandlow-carbonhydrogenwillincreasinglyplayapartasstrategicenergycarriersforanenergy-securefuture.However,realizinganyinnovationjourneydependsonregulatoryframeworkspromptingstakeholdercoope-rationandaligningdecisionsandcollectivecompetencies.Thereisaneedtoco-evolvethehydrogenvaluechainsand‘ecosystems’fromproduction,distribution,anduse.Atthesametime,policymustunleashadditionalrenewablepowercapacitiesandCCSdeployment,asbothareprerequisitesforrenewable(green)andlow-carbon(blue)hydrogen,e-fuelsandhydrogencarriers.Herewedelveintopolicyandregulationsthatarealreadyinplaytoacceleratetheevolution.InSection2.4,wedescribethepolicyconsiderationsdirectlyfactoredintoourforecast.Wealsosummarizekeyconsiderationsforpolicymakers(seeopposite).RevampingregulatoryframeworkstoadvancehydrogenenergyThehydrogeninnovationtrajectory,andovercomingitsbarriers,areshapedbytheemergingandharmonizingregulatoryframeworks,displayingabroadspectrumfromgovernmentpolicytoindustryregulationthatincentivizecoordinationthroughcodesofpracticeandstandards.Foranynascentenergycarrierandmarket,acomprehensiveregulatoryframeworkneedsdevelopment,andhydrogenisnodifferent.Policymakersandregulatorsfaceaddedcomplexityfromthefragmentedsetofplayersanddifferentenergysubsectors,traditionallyoperatingandregulatedwithintheirownsilos.Withmoresectorcoupling,theseplayersandsectorsareincreasinglyintertwined,requiringharmonizedregulatoryframeworksthatviewelectricityandgassectorscohesively.Regulatoryframeworkswillhavetoaddressseveralhydrogenproductionanduseareassimultaneously,suchas:—Decarbonizingexistinghydrogenproductionanduse—Fuelswitching(e.g.fromnaturalgastohydrogen),whichmeansretrofittingormodifyinginfrastructuremostlyinestablishedindustry—Newuses,whichmeansestablishingnewinfrastructureforconversionofenergycarriers(e.g.fromdieseltruckstohydrogenelectricfuelcellversions)thatarelargely‘outsidethefence’ofindustry-regulatedareas.31Keyconsiderationsforpolicymakers1.Policiesmusttargetmultiplesectorsasrenewable/low-carbonhydrogencanbeasustainableenergycarrier,fuel,andchemicalfeedstock.Hydrogencanassistdecarbonizationwhereelectrificationisdifficultandwillbeusedinmakingsustainableendproducts(e.g.,ammonia/fertilizers),greenmaterials(e.g.,steelandaluminium),andlow-carbonchemicals(e.g.,methanolandplastics).2.Decarbonizationpolicies/regulationmustaddresssafetygaps.Therearegapsinguidelinesandoperationalproceduresforhydrogen,especiallylarge-scaleproduction,storage,transport,andnewend-uses.Forasafetransition,new/retrofittedinfrastructurewillneedupdatedguidelinesandstandardsalongsidepoliciesandregulation.3.Regulationiscomplexbutcanbetailoredtorequiredtransitions.Regulationisneededfordecarbonizingcurrenthydrogenproduction/use;retrofittingormodifyinginfrastructureforfuelswitching;newuses;andproductionwithnewinfrastructure.Existing,updated,andnewpoliciescanbeoverarchingorsector-specific.4.Policies/regulationmustspurramp-upoftechnologiestosupporthydrogenuse.Policiesmustunleashrenewable/low-carbonhydrogenproductionbyvastlyboostingrenewablepowercapacity,CCS,new/retrofittedgasandpowergrids,andscaleproductionofelectrolysers.CCSisalsoneededathugescalefordirectaircaptureofCO2tomeetclimatetargets.5.Hydrogenneedspoliciesthataccelerateproductionandofftake.Directfundingisthemaintoolsupportingscalingoflow-carbonhydrogenproductionbyloweringCAPEXcosts.Demand-sidepolicymuststimulateofftake.Fiscalpolicies(e.g.carbonpricing,taxesreflectingcarbonefficiency/pollutants)areneededforlow-carbonhydrogentocompetewithunabatedfossil-basedhydrogen.Market-basedinstrumentssuchascontractsfordifference(CfDs)cancutOPEXcostsandofferpredictabletermsforproducersandendusers.6.Decarbonizedhydrogencanbenefithumanitybutneedsinfrastructureplansandinvestment.Hydrogencanbepartofexistinggassystems,oradecarbonizedenergycarrierformedium-tolong-termstorage,providingenergysecurity.Asafeedstockforammonia/fertilizers,itsupportsfoodsecurity.Maximizingthesebenefitshingesonplanningandnewpublicinfrastructureinvestments(e.g.saltcavernstostorehydrogen,andnew/retrofittedgaspipelinestotransportit),andoncontinueduseofexistingpracticesandinfrastructureforammoniawhiledecarbonizingitsproduction.7.Easywinsincludedecarbonizingexistinghydrogenproductionanduse.Userenewablehydrogenfromelectrolysersco-locatedwithindustriesandcapturecarbonfromfossil-basedhydrogenproduction.Thisrequiressupporttoreduceinvestmentcostsandincentivizeearlyretirementoffossil-basedcapacityinapolicypackagetoincreasecompetitivenessoflowcarbon-intensityhydrogen.8.Acomprehensiveregulatorytoolboxisneededtoencouragefuelswitching,retrofitted/newbuildinfrastructure,andmultipledecarbonizationoptions.Hard-to-abateindustriesneedmoresupportforretrofitting/replacingequipmentand/ormodifyinginfrastructure.Newinfrastructuremustoftenbebuiltalongsideexistingassetsbeforeoldinfrastructureisretrofitted.HigherOPEXandlowermarginsareseldomoptionsforcommodityproducers,unlessmarketsoffergreenpremiums.Sectorswilloftenchoosehybriddecarbonizationpathways(electrification,hydrogen,CCS)requiringapolicymix.Regulationofintegratedenergysystemsiskeyifharmonizationbetweensectorsandacrossbordersisneeded.9.Newproductionandofftakerequirenewregulatoryframeworks,standards,andguidelines.Thisisrelevant,forexample,foroffshorehydrogenproduction,newdirecthydrogenofftake,orhydrogencarrieruseinshippingoraviation.Innovationandfull-scaletestinganddevelopmentsareneeded.Movingbeyondpilotstolarge-scaletestingandimplementationoftenrequiresnewregulations,standards,andguidelines.10.Readinessforscalingishigh,butkeyfactorsblockinvestment.Policyshouldaimtoremovebarrierstolarge-scaleinvestments.Keybarriersinclude:havingnoframeworkforguaranteeingtheorigin/traceabilityofhydrogen;renewablepowerandCCScapacitymustscalewhilereducingCAPEX/OPEXcosts;supportmechanisms(e.g.CfDsorhighercarbonpricingonfossilhydrogen)arecrucialforlow-carbonhydrogen.Hydrogenpoliciesandstrategies232DNV—Hydrogenforecastto2050Governmentsaresteeringthetrajectorybyincorporatinghydrogenintoplanningandrequirements.Theirtargetsanddedicatedhydrogenbudgetsaimtocatalyseprojectsandadvancescalingtimeouslyandsafelytowards2030and2050climateobjectives.Synchronously,governmentstrategiesandpoliciesaregearedtowardsindustrialpositioning,competitiveadvantagesand,increasingly,towardsenergysecurity.However,ouranalysisofregions(highlightspresentedinSection2.3)showsthatnotallregionsandgovernmentsarestimulatinghydrogendevelopmentcomprehensivelyacrossthefullchainfromproductiontouse.Policymeasuresamongstpioneercountrieskick-starttechnologycost-learningdynamics.Wesawthiswithsolarandwindpowercostreductionsintheirearly-stagedevelopment.Thesamewillbethecaseforspecifichydrogentechnologies.Front-runnercountriesplayabigroleinkick-startinglearningandcostreductions.Forexample,Germanyisspeedingupitshydrogentransition,withEUR7bnmadeavailabletodrivethemarketrollouttowards2030,whiletheUSisdedicatingUSD8bntohydrogenhubsandaimsforcleanhydrogenproducedatUSD1perkilogramofhydrogen(/kgH2)withinthedecade.Businessesarethekeyagentsinalldevelopmentphasesfromdemonstrationanddeploymenttohydrogeninfrastructureandtransportation.Somehydrogentechnologiesarewell-established(e.g.greyhydrogenuseddirectlyinrefineriesandammoniaproduction),whileothersarenot(e.g.infrastructurefornewenduse,large-scaleelectrolysersandoffshoreproduction).Anindustrializedorcommercializedscale-upwithsafeandcost-effectiveproduction,transportation,anduseofhydrogenneedscarefullycraftedpolicyframeworkstosucceed.Towardsthisend,policymakersareshapingthebusinessinnovationagendaasseenrecentlyinthegovernment-ledGlasgowBreakthroughs,theglobalMissionInnovationinitiative,andthepublic-privatepartnershipFirstMoversCoalition.Internationalcollaborationispullinggovernmentandindustryplayerstogethertoprogresshydrogen.ThisisexemplifiedbythePartnershipAgreementbetweentheInternationalRenewableEnergyAgency(IRENA)andtheHydrogenCouncil;theIRENAandWorldEconomicForum(WEF)HydrogenToolbox;andtheWorldBusinessCouncilforSustainableDevelopment(WBCSD)SMIhydrogenindustrypledgesinitiative(H2Zero),alsowithproposedpolicies1.Thesecollaborativeinitiativesareinstrumentalinfacilitatingharmonizationandexchangeofbestpractices.4.SafetyandhazardsAcceptancecriteriaanddocumentationvaryingfromcountrytocountryHydrogenbarriersthatpoliciesmustovercome1.CostsandfinancialsupportNocarboncostinternalizationandlimitedsupporttofirstphasescalingandcommercialization2.DemandandcompetitionCompetitionbetween1)low-carbonblueandrenewablegreenhydrogen2)electrification,and3)fossilalternatives5.InfrastructureandindirectenablersRenewablepowerproductionwithrobustgridsonshoreandoffshore,andCCSvaluechains6.StandardsandcertificationNoGoOcertificationwithtraceabilityandLCAframeworks,standardsforlarge-scalesafedesignneedsupdating3.TechnologyandmanufacturingLimitedmanufacturingforgreenandblueH2technologies,andoffshorePtXneedsmaturingFIGURE2.1Breakdownofbarriersforpoliciestoovercome33Hydrogenpoliciesandstrategies22.1.1WhatpoliciesandregulatoryframeworksmusttargettoovercomebarriersRegulatoryframeworksandpoliciesneedtailoringtoovercomeadministrative,technical,andeconomicbarrierstohydrogenscale-up,andwithsafetyasacross-cuttingpriority.Figure2.1isinspiredbytheworkofIRENA&WEF20222andrecapsthecurrentstateofplay.Thesepotentialshowstoppersneedtobeovercometofacilitateasafeandacceleratedscalingofhydrogenproduction,enablinginfrastructure,andsupportingnewofftake.Thefigureshowsthemainbarriercategoriesthepoliciesmustaddress.Thisisnotanexhaustivechecklist.Whilesomebarriersareoverarching,globalandregional,mostmustbedealtwithonacountry-by-countrybasis.1.Costsandfinancialsupport•Nocarboncostinternalization•Lackofupstreamsupport•Lackofdownstreamsupport•Unfitmarketdesign•UnclearframeworksforContractsforDifferencesuntilfossilhydrogen,andalternativesbecomemorecostly•Ahighercostlevelforthefuture(>1.5–2EUR/kg),notpossibleforanykindofhydrogen(exceptturquoise/pyrolysisandpurple/nuclear?)4.Safetyandhazards•Acceptancecriteriaanddocumentation,varyingfromcountrytocountry,somedonothaveestablishedcriteria•Noexperiencewithlarge-scalegreenhydrogenproduction(>200MW),andunclearsafetyphilosophiesandinherentlysafedesign•Littleexperiencewithhydrogenuseforcertainsectors(fuelswitchingandnewuse)•Unclearnationalandlocalproceduresforapprovingnewinstallations,especiallyoutsideindustryareas2.Demandandcompetition•GlobalcompetitivenessbetweenH2productionandtrade•Globalcompetitionbetweenalternativestohydrogenuse(batteries,electrificationandexistingfossilalternatives)•Availabilityandsecurityofsupply(wherestorageisminimizedduetohighcosts)6.Standardsandcertification•NoGuaranteeofOrigin(GoO)certificationofhydrogen•NoGoOcertificationofhydrogenderivatives•Incompatibilityacrossborders•Unclearmethodologyforestimatesinlifecycleassessment(LCA)ofgreenhousegas(GHG)emissions•LackofclarityonenvironmentalimpactbeyondGHGs•Standardizationfordesignandsafety5.Infrastructureandindirectenablers•Slowrenewablecapacitydeploymentandunclearadditionality•Carboncaptureandstorage(CCS)valuechains•Powergridcapacity—powergridfordistributedgreenhydrogenproduction•Gasgridretrofitornewbuild—forbuffering/storageofearlyproduction,connectinglarge-scaleproduction(innewareas)andofftake(inexistingclusters)•LackofinfrastructuresupportanddevelopmentInfrastructureuncertainty3.Technologyandmanufacturing•Materialsuseinequipment•De-riskingnewindustrialapplications•Electrolyserandfuelcellsperformance•Assessingcompatibilityoftheexistinggasgrid•De-riskingintegratedPower-to-X(PtX)pathways•Slowelectrolysermanufacturingexpansion•Fuelcellmanufacturingcapacity•Industrialassetslifetimedelayingrenewal34DNV—Hydrogenforecastto20502.2DetailsonthepolicyandregulatorylandscapeSeveralhydrogen-relatedguidesforpolicymakershavebeenpublishedrecently(e.g.,IEA2021,IRENA20213).Toprogressthehydrogentransition,thereisapolicytoolboxofknownandprovenmeasuresavailable(e.g.DNVEnergyTransitionOutlook2021,Section6.54),whichleansheavilyonapproachesandexperiencefromadvancingrenewableelectricityoverdecades.However,newpolicymeasurestailoredtospecificneedsalongthevaluechainareneededandareevolving.Inthissection,weelaboratefivepolicycategoriesthataffectthemostlikelyhydrogenfutureto2050.Fourofthemarenationalstrategies,technology-push,demand-pull,andfiscalpolicies.Afifth,standardsandcertification,getsitsmainimpetusfrompublicandprivatepartnerships.Nationalstrategieswithtimelinesandtargetsarethefirststeptocreatingastableplanninghorizonandcertaintyforstakeholders.Thesecondstepistoestablishmorecostlyfossil-energycarriers(seeelaborationunderfiscalpoliciespage34)untilthehydrogenvalue-chainbecomeseconomicallyviable.NationalhydrogenstrategiesandroadmapshavebeenmultiplyinginDNV’sEnergyTransitionOutlook(ETO)regions.Notsurprisingly,thisispredominantlyinregionswithnet-zeromid-centuryambitions,suchasEurope,NorthAmerica,andOECDPacific.However,weseegreatvariationintermsofcomprehensivenessandrealpolicieson‘howtodeliver’underthesestrategies.Aspartofgreenhydrogenstrategies,renewableelectric-itydevelopmentneedssignificantattentionandupscaling,whereadditionality—meaningrenewable-basedelectricityconsumedbyelectrolysersisadditionaltorenewablesmeetingrenewableelectricityconsumptiontargets—isalsoexpectedtobearequirement.Thebuildoutalsoneedsaspeedierprocess.AdatainsightfromEnergymonitor.ai(2022basedonGlobalData5)showedthatTop20EUcountrieshavefour-timesmorewindcapacityinpermittingthanunderconstruction,andthatthe‘standstill’isnotauniquelyEuropeanchallenge:while81%oftheEU'swindpipelineisstuckinpermitting,theUS(79%),China(74%),andIndia(64%)arealsofacinglogjams.Renewablepowerbuildoutisaprerequisiteforgreenhydrogenproduction,andthescalerequiredisenormous:DNV’sPathwaytoNetZerostudy(20216)projectselectricitydemandgrowthofmorethan180%by2050,withthelargest(400-fold)increaseinpowerdemandcomingfromhydrogenproductionviaelectrolysis.35Hydrogenpoliciesandstrategies2Realpolicyandsupportmeasuresareneededtocatalyseimplementationofnationalhydrogenstrategies.Technology-pushpoliciesareatplaytoadvancetechnologiesalongtheentrepreneurialandtechnologydevelopmentcyclefromR&Dandpilotingtoscale-up.Wefindthatgovernmentfundingprogrammeswithinvestmentgrants/loanstocapitalexpenditures(CAPEX)arethedominantearly-stageformofsupport.Programmesarefocusingonpromotingrenewableandlow-carbonhydrogenproduction.Fundingisavailabletodecarbonizeexistinghydrogenproduction,newmerchantproduction,andfortransformationprojectsforswitchingtohydrogen-basedfuels(i.e.,e-fuels,ammonia).InFigure2.2,theaverageannualgovernmentfunding(targetedforhydrogen,andnon-targetedbutforwhichhydrogenprojectsqualify)availablefordifferentregionsismappedagainstnationalproductiontargetsin2030.Someregions–e.g.Europe,MiddleEastandNorthAfrica,andOECDPacific–showaclearconnectionbetweenambitionsonscalinghydrogenproductionandavailablefunding.Inadditiontolocalproduction,Europehastargetsof10Mt/yrrenewablehydrogenimports.Otherregionshaveambitioustargetsbutarelackinginfunding,whichislikelytomakeitmoredifficulttoreachtheirtargets.However,withseveraloftheseregions(e.g.LatinAmericaandSub-SaharanAfrica)mainlytargetingproductionforexports,fundingmightbeavailablefrominternationalpartnershipswithimportingregions.Asanexample,theGermanFederalMinistryofEconomicCooperationandDevelopment(BMZ)ispromotinggreenhydrogenproductioninSouthAfrica(seeSection2.3.4).Todate,onlyafewcountrieshaveproductionsupportmechanismssupportingoperationalexpenditures(OPEX)overafixedtimeframe.OneexampleistheUS,wherea10-yeartaxcreditperkilogramofhydrogen(seeSection2.3.1),isproposedwithtax-creditratestailoredtoemissions,thehighesttorenewablehydrogen.AnotherexampleisDenmark’splannedfeed-intariffschemewithafixed-pricesubsidy,alsofor10years.WeexpecttoseemoreschemessupportingOPEXcostsandaguaranteedpricetoproducersinthefuturetoenhancethebusinesscaseforbothproducersandusers.Inthisregard,ContractsforDifference(CfDs)areaplausiblemechanism.AsCAPEXsupportislikelytodwindleovertimeafterinitialgovernment-supportedplantshavebeenbuilt—andgreyhydrogenremainslessexpensivebecauseof,forexample,insufficientcarbonpricing—along-termarrangementisneededtoclosetheeconomicgapandincentivizecontinuedinvestments.CfDssupportoperationalcostswithastrikepriceguaran-teedtoproducersoverafixedperiod.Suchcontractscanprovidestableandpredictabletermsforproducers,andforendusersbecause,throughcontinuedinvestmentsandreductioninhydrogencosts,theyhavespillovereffectsforhydrogenpriceanddemandinenduses.Demand-pullpoliciesareinplaytocreatedemandforrenewableandlow-carbonhydrogeninnewapplicationsaswellasamongestablishedindustrytoswitchfromunabatedfossil-basedhydrogen.WefindthatgovernmentfundingprogrammesareequallyavailabletohydrogenconsumerstocoverCAPEXsuchasthatlinkedtoconversionofprocesstechnologyandequipmentupgrades(e.g.tousehydrogenforheatinginmanufacturing,buildings,andheavytransport).Itisuncommontofindquota-basedorquantity-basedpoliciestostimulateconsumptionandcreatedemandamongend-usesectors.Futurepolicypackagesarelikelytoinvolvemechanismssuchasbindingtargetsandobligationsondemandsectors(e.g.industrialconsumersrequiringafixedamount/shareofenergy/fuelstocomefromhydrogen).TheEUisproposingtomandategreenhydrogenintheEUenergymixby2030(e.g.withatransportsectorsub-targetof2.6%fromgreenhydrogenande-fuels)withuseofRFNBOs(renewablefuelsofnon-biologicalorigin)tomeettargets.Inroadtransport,CaliforniaaspartoftheNorthAmericaregion,SouthKorea,JapanandChinahavetargetsandsupportforfuel-cellpoweredvehicles(FCEVs)andinfrastructuredevelopment.Weexpecttoseehydrogenblendmandatesappliedinmaritimeandaviationtotriggeruptakeinthefuture.Gridblendingofacertainpercentageintothegasgridis36DNV—Hydrogenforecastto2050anotheroptionthatcouldprovidelong-termvolumeofftakecertaintyandconfidencetonewinvestments.Overall,wefindthatpolicymeasurestosparkofftakeanddemandcreationacrossend-usesegmentsareratherlimited.Fiscalpoliciesincludeeconomy-wideeconomicsignals,suchascarbonpricingtopassoncarboncoststoemitters,henceencouragingtheuseoflow-carbonorrenewablehydrogen.Althoughthenumberofschemesisincreasing,carbonpricingisnotatsufficientlevelsacrossETOregions.Incombinationwithfossil-fuelsubsidies,thislimitsdecar-bonization,CCSuptake,andhydrogencompetitivenessoverall.Robustcarbonpricesstimulateinnovationandareneededtoclosethecostgapbetweenconventionalunabatedfossil-fuel-basedtechnologiesandnewhydrogen-basedtechnologies.Operatingalongsidecarbonpricingareenergytaxation,andoftenhighgrid-connectioncostsandtaxesongrid-connectedpowerconsumption.Reformeffortsareexpected,asexemplifiedbytherevisionoftheEUEnergyTaxationDirective,forincreasingalignmentoftaxationwithenvironmentalperformanceandclimateobjectives.Reformswillunfoldatanunevenpacewithhigh-incomeregions(withnet-zerotargetsby2050)beingfirstmoversintherefinementoftaxschemestopromoteelectrificationandhydrogenuse.Implementingsafetystandardsandcertificationschemesarekeyinscalinghydrogenasanenergycarrierandfosteringinternationaltrade.Topavethewayforglobaltradeofhydrogenandotherhydrogen-derivatives(seeChapter6),standardsandcertificationsneedtobeinplaceastheyensureclarityonthequalityandoriginofaproduct.Akeyaspecthereisestablishingthecarbonintensityofthehydrogenproduced,toguaranteethatitreallyiscontributingtomeetingdecarbonizationtargets.Althoughthesestandardsandguidelinesneedfurtherdevelopment,weseeseveralpromisinginitiativesfrombothindustryandpublic-privatepartnerships.SomeexamplesaretheHydrogenProductionAnalysisTaskForce(IPHE)onGHGestimationmethodology,andtheWBCSDinitiativeonlow-carbonhydrogenpledgesfromindustryandsupportingmethodologyforcalculatingemissionlevels.OtherinitiativesincludenewnationalandEUlegislationoncertificationofhydrogen,suchasenabledbythevoluntaryCertifHyTMcertificationschemeprovidingguaranteesoforiginandtransparentinformationaboutenvironmentalattributesofhydrogen.Thesewillbeessentialtosupportharmonizationand,insodoing,establishingtheglobalhydrogenvaluechain.Inadditiontoproductcertificationschemes,clarity,standardizationandharmonizationonthetechnicalandsafetyaspectsofhydrogenareneededtoensuresecureandreliablesupply.Itcanbeachallengetoscalehydro-genasanenergycarrieratthepacerequiredtomeetdecarbonizationtargetswhilealsoachievingsatisfactoryhydrogensafety.Nevertheless,safetyrequirementsneedtobethefoundationofallprojects,asunwantedinci-dentscanslowdownorhaltdevelopments.Althoughsafetyguidelinesandregulationforhydrogenandothercarrierssuchasammoniaarewellknowninestablishedindustries,thisisnotthecaseforseveralnewuse-cases,suchasforlarge-scalestorageorhydrogenblendinginpipelines.Industryisnowpavingthewayinestablishingnew,globalstandardsonhydrogen-relatedactivities.Althoughseveralcountriesmighthavetoadopttheirownstandards,havingglobalandharmonizedstandardsacrossregionsandsectorscanhelpde-riskhydrogenprojectsandprovideclarityforallpartiesinvolved.Aspartofgreenhydrogenstrategies,renewableelectricitydevelopmentneedssignificantattentionandupscaling.37Hydrogenpoliciesandstrategies22.3RegionalhydrogenpolicydevelopmentsThefieldofregionalpolicyanalysisisamovingtargetwithfrequentnewpolicyannouncements.Nevertheless,wehaveassessedthecurrent‘stateofplay’,focusingontheextenttowhichplansandtargetsarebackedbycomprehensivepolicypackagestoensuretheirexecution.Inotherwords,policypackagesthataddressthehydrogenvaluechainfromproductiontousage,andsoinstilalevelofbelievabilityinimplementation.Ouranalysisofthepolicylandscapeofnationalstrategies,targets,fundinglevelsandpolicymeasuressuggeststhatnotallregionshavecomprehensivepolicyframeworksinplacetoimplementhydrogenambitions.Someregionsareclearlyattheforefrontofadvancinghydrogen.Otherslooklessmaturedespiteencompassingindividualcountriesthathavetakenstepstopositionthemselvesasfront-runnersontheglobalhydrogenstage.Figure2.3providesanoverviewofthe10worldregionsandtheirtargetednewrenewableorlow-carbonhydrogenproductionin2030.Notethatthisdoesnotincludetargetsonimportedhydrogen.Theplacementofregionbubblesisdeterminedbythecomprehensivenessofpresentpolicypackagesintermsoftheircombinationoftechnology-push,demand-pull,andfiscalpolicies.Wehavenotattemptedtoscorethecontentofindividualpolicies.Rathertheintentistopinpointhowregionsarepositionedwithregardstoputtinginplaceaholisticsetofpolicymeasurestoachievetheirannouncedambitionsandtoadvancetheirhydrogendevelopmenttrajectories.—Europeisinthelead.Thepolicypackageprovidessubstantialfundingtokick-startthescalingofhydrogenproductionandclusterdevelopment.Inparallel,offtakeandutilizationinend-usesectorsarestimulated;forexample,proposedlegallybindingtargetsandobligationsonfuelsuppliers.Costcompetitivenessagainstconventionalfossil-fuelledtechnologiesisadvancedthroughtighteningcarbonpricing(inclusionofmoresectorsandremovalofexemptions),andthecarbon-borderadjustmentmechanismaimstocreatealevelplayingfieldbetweenEUandnon-EUsuppliers.38DNV—Hydrogenforecastto2050—TheOECDPacificandNorthAmericaregionstrailEurope.Theyalsohavestrategies,targetsandfundingpushingthesupply-side,butwithlowercarbon-pricelevelsandfewerornocarbon-pricingschemesatall(someUSstates,Australia).CarbonpricingisnotcentraltotheUSclimatechangeprogramme,forexample.TheNorthAmericaregionalsohasless-concretetargets/policies,andhencelesspredictability,onthefutureend-useuptaketrajectory.—GreaterChinafollowson,recentlyprovidingmoreclarityonfundingandhydrogenprospectstowards2035coupledwithanexpandingnationalemissionstradingscheme.Butbeyondtheroadtransportsector,realpolicyframeworksarenotyetconcrete.—LatinAmericaandtheMiddleEastandNorthAfricaeachincludeaselectfewcountrieswherethehydrogenpolicyagendaisfirmlyestablishedwithstrategiesandfunding,particularlytargetinghydrogenproductionforexports.WhileLatinAmericahasakeyfocusonrenewable-basedgreenhydrogenproduction,theMiddleEastandNorthAfricafocusonhydrogenfromrenewables,nuclear,andnaturalgaswithCCS.—IndianSubcontinent,withIndiabeingthedominanteconomy,hasanannouncedhydrogenmissionandfundingprogrammealsoemphasizingdomesticindustrialconsumption,replacingpresentunabatedfossil-fuelbasedhydrogen.However,theregionhasyettoestablishcomprehensivepolicyandregulatoryframeworks,includingoncarbonpricing.—NorthEastEurasiaandSub-SaharanAfricahavesomecountrystrategiesandtargetsforbecomingblueandgreensuppliers,respectively,withthelatterdependingonforeigninvestments.SouthEastAsiahasnopolicyinplaceyet.Keypolicydevelopmentsinourforecastregionsarehighlightedoverleaf.39Hydrogenpoliciesandstrategies22.3.1NorthAmericaNationalstrategies:CanadaandtheUSaretargetingnetzeroGHGsby2050,withhydrogenusepivotaltosuccess.TheUS’sNationalCleanHydrogenStrategyandRoadmap,andtheHydrogenEnergyEarthshot(June2021),targetcostreductionforcleanhydrogenby80%toUSD1/kgH2by2030.Canada’sHydrogenStrategy(December2020)aimsforgloballeadershipincleansupplyandfora30%shareofhydrogeninend-useenergyby2050.Nospecificproductiontargetsarementioned,thoughtheCanadianstrategystatesapotentialfor4Mt/yrcleanhydrogenproductionby2030.Theregion’sfocusisonadvancingproductionhubsinlow-carbon(blue)hydrogenandelectrolysisbasedonrenewablesornuclear.End-useplansincludeswitchingofexistinggreyhydrogen,industrialprocesses,roadtransport,andgridbalancing.Carbon-freepowersectortargets(USby2035,Canada90%by2030)facilitatehydrogenefforts,asdostrongCCSpolicywithR&Dfunding,requirements,andeconomicinstruments(e.g.theUSSection45Qtaxcreditandgrants).Technology-push:SeveralUSandCanadianfederalgovernmentalfundingprogrammesareavailableforCAPEXsupportandscale-up.Forexample,theUShasaUSD8bnHydrogenHubPlan,USD1bnforR&D,andtheUSD500mnhydrogensupply-chaininitiative.CanadahasafederalLow-CarbonandZero-emissionsFuelsFundofCAD1.5bn(USD1.1bn)includingfundingforhydrogen,andtheCAD2.75bn(USD2.1bn)ZeroEmissionTransitFundforvehiclesandrefuellingstations.TheUStaxcreditproposaltoproducersalsoaimstoincentivizehydrogenuptakethroughamaximumtaxcreditrateofUSD3/kgH2for10yearsforhydrogenproducedwithacarbonintensitybelow0.45kgCO2e/kgH2(forprojectsbeginningconstructionbefore2029).Thetaxcreditratedecreaseswithincreasingcarbonintensity;forexample,productionwithacarbonintensitybetween1.5and2.5kgCO2e/kgH2receives25%ofthefulltaxcredit.Facilitieswith4–6kgCO2/kgH2mustbeplacedintoservicebefore2027.Demand-pull:Statesandprovinceshaveindividualroad-mapsandpolicies.Forexample,Californiaisalreadyleadinghydrogenmobility/infrastructuregloballybecauseofitsZeroEmissionVehiclepolicyandincentives.Canadianprovincesarealsodevelopingprogrammessupportinghydrogenstorageandgrid-integrationpilots,industryphase-inandhydrogen-readyequipment(e.g.inOntario).Aregulatoryframeworkforblendinghydrogeningasandpropanesystems,encouraginguseinheavytransport,existsinBritishColumbia.Carbonpricing:WeseethisrisinginCanadafromCAD15/tCO2toCAD170/tCO2in2030.ThereareUSstateschemes,butnofederalpolicy.Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD25/tCO2in2030and70/tCO2by2050.2.3.2LatinAmericaNationalstrategiesandtargets:Severalcountriesaredevelopinghydrogenstrategies(e.g.Uruguayin2021andParaguayin2022).Chile’sNationalGreenHydrogenStrategy(2020)andColombia’sHydrogenRoadmap(2021)arethemostconcretetodate.Bothtargetcleanhydrogenproductiontobecomeglobalhydrogenexporthubs.Amongothers,Chileaimstohave5GWof40DNV—Hydrogenforecastto2050electrolysercapacityunderdevelopmentby2025,and25GWwithcommittedfundingby2030.Colombiaaimsfor1–3GWelectrolysiscapacityinstalledand50kt/yrofbluehydrogenproducedby2030.ThereisnoconcreteCCSpolicy,buttheregionhasdiversifieditselectricitymixwithhighrenewableshares/targetswithgovernmentcapacitytenders/competitivebidding.Localindustry(e.g.mining,Chile’slargestindustry)andheavy-dutytransportarekeyfocusareasforhydrogenuse;forexample,Colombiaplansfor40%ofindustryhydrogenconsumptiontobelow-carbonhydrogenby2030.However,theprincipalfocusisonexportinghydrogen.Technology-push:Thereislimitedpublicfundingforscalinghydrogen.TheChileangovernment’sProductionDevelopmentCorporation(CORFO)hasfundingofUSD50mn,withacapofUSD30mnpercompany,tofinanceelectrolyserinvestments.Demand-pull:Therearelimitedpolicyframeworksinroadtransport;forexample,vehicletaxexemptionsforlightEVs(likelytransferrabletoFCEVs)andCAPEXsupportincludingforrefuellinginfrastructure,suchasforpublicbuses.Carbonpricing:Thereareschemes,butpricingislow.Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD25/tCO2in2030,and50/tCO2by2050.2.3.3EuropeNationalstrategiesandtargets:Europeisafront-runnerintheenergytransitionwithitsGreenDealtodeliveratransformationtoasustainable,low-carboneconomyandaclimate-neutralEUby2050.TheEuropeanUnion(EU)hydrogenstrategy(2020)aimsforatleast40GWelectrolysercapacityinstalledin2030(6GWby2024).REPowerEU(2022)boostsambitions,aimingfor10Mtofdomesticrenewablehydrogenand10Mtofrenewableimports,by2030.Somecountriesintheregion(e.g.Germany)areexpectedtodevelopintolarge-scaleimportersofhydrogen,withothersbecomingexportersortransithubs.Severalcountriesintheregionhavetheirownstrategiesandtargetsforinstalledhydrogenproductioncapacityby2030tosupporttheEUgoals:forexample,Denmark(4–6GW),France(6.5GW),Italy(5GW),Germany(5GW),andSpain(4GW).InREPowerEU,theEU’srevisionoftheRenewableEnergyDirectiveproposesa45%renewableshareofEuropeanenergyuseby2030,bringingrenewablegenerationcapacitiesto1,236GWcomparedwith1,067GWenvisagedunderFitfor55.HencethereisstrongfocusonscalingrenewablehydrogenproductionintheEU,thoughlow-carbonhydrogenisrecognizedinatransi-tionalphase.Thekeyfocusestowards2030arescalingelectrolysercapacity,decarbonizingexistinghydrogenuseinindustry,promotinghydrogenfornewuse-cases,andbuildoutofdistributioninfrastructureincludingstoragefacilitates.Technology-push:HydrogenprojectscanapplytoseveralEUfundingprogrammessupportingtheGreenDeal.TheEUalsorecentlyestablishedthepublic-privateCleanHydrogenPartnershiptoacceleratedevelopmentandimprovementofcleanhydrogenapplications.ThetotalfundingavailableisEUR1bningrantsfrompublicfunding,andEUR1bnfromindustry.ThefirstcallforproposalsthisyearsawatotalofEUR600mnavailablefor41topicsacrossthehydrogenvaluechain.Severalcountriesalsohavetheirownfundingprogrammestargetedforhydrogen,mostnotablytheGerman‘PacketfortheFuture’withEUR7bnforhydrogenmarketrolloutplusEUR2bnforfosteringinternationalpartnerships.CCSpolicyisanenablerofhydrogen.TheEUInnovationFundfinancesupto60%oftheadditionalinvestmentandoperationalcostsoflarge-scaleprojects.ThefocusisonProjectsofCommonInterest(PCIs)andsupportingchainstobenefitseveralindustrialinstallations—forexample,theNorthernLightsandPorthosprojectsin41Hydrogenpoliciesandstrategies2NorwayandtheNetherlands,respectively.SeveralEUandnon-EUcountries(e.g.Denmark,Germany,theNetherlands,theUK)haveCCSpoliciestohelpachievenet-zeroambitions.Demand-pull:AlthoughgovernmentalfundingismainlybasedongrantsasapercentageofCAPEXsupport(upto50%)forhydrogenproduction,thefundingisalsoavailableforotherpartsofthehydrogenvaluechain,stimulatingdemandofftake.Moreover,theEuropeanCommissionistoproposeCarbonContractsforDifference(CCfDs)forgreenhydrogenaspartofitsREPowerEUscheme.CfDsforhydrogenproposedbytheUKaresettobefinalizedbytheendof2022.Carbonpricing:Thereareestablishedschemeswithclearupwardpricingtrends.Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD95/tCO2in2030and135/tCO2by2050.2.3.4Sub-SaharanAfricaNationalstrategiesandtargets:SomecountrieswithinETOregionsaretakingstepstobecominghydrogenexporterstoEurope.SouthAfrica’sHydrogenSocietyRoadmap(February2021)aimsforrenewablehydrogenexports,targetinga4%globalmarketshareby2050withthefollowingtimetabledproductioncapacitytargets:1MWelectrolyserproductionpilotedto2024;expansionto10GW(2025–2030);and15GWcapacityinstalled(2030–2040).Technology-push:Therearelowfundinglevelsandnodedicatedsupportprogrammesforhydrogen.SouthAfricahasaZAR800mn(~USD49mn)greenfundtosupportgreeninitiativesincludingrenewableenergyandhydrogen.Renewablepoweristargetedwithsharesaround40%oftheenergymixby2030(e.g.inSouthAfrica,Kenya,Nigeria).NocountryintheregionhasconcreteCCSpolicy.Hydrogendevelopmentislikelytoadvanceonlyifsupportedthroughinternationalfundingandbilateralgovernmentofftakeagreements.IndicationofmovementinthisdirectionisseeninGermany’senergylinkswiththeregion.ItisprovidingEUR12.5mntopromotegreenhydrogenproductioninSouthAfrica;intendstoformagreenhydrogenpartnershipwithNamibia,anddevelopedtheH2Atlas-AfricaprojectwithSub-Saharanpartnernations.Developmentfinanceinstitutionswillalsobeprimaryfinanciersifgreenhydrogenprojectsaretoadvance.Demand-pull:Norelevantpolicyframeworksareavailableintheregion.Carbonpricing:Low/absentcarbonpricingandslowadoptionareexpected.Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD5/tCO2in2030and25/tCO2by2050.Note:Africafacesenergypovertyandlacksstableenergysupplyinfrastructure,hamperingeconomicdevelopment.MakingaffordablepoweravailableforSub-SaharanAfrica’sunderservedpopulation,andforeconomicdevelopment,shouldbeprimeobjectives.Decarbonizingtheregion’spowersectorsshouldbeanotherobjectivebeforepivotingintorenewa-ble-basedhydrogenforexports.Hydrogendevelopmentislikelytoadvanceonlyifsupportedthroughinternationalfundingandbilateralgovernmentofftakeagreements.42DNV—Hydrogenforecastto20502.3.5MiddleEastandNorthAfricaNationalstrategiesandtargets:Theregionisahydrogenexportcontenderwithcountriesseekingtobecometopglobalsuppliersofhydrogenanditsderivatives.Hydrogenproductioncapacityisbuildingonexistingfossil-fuelcapacities;largenaturalgasresourcesavailableforconversion;excellentconditionsforlow-costrenewables;andnuclear-poweredelectrolysisasinSaudiArabiaandtheUnitedArabEmirates(UAE).Morocco,OmanandtheUAEhavepublishedtheirhydrogenstrategies,andSaudiArabia,Algeria,EgyptandTurkeyaredevelopingtheirs.—Morocco’sGreenHydrogenRoadmap(2021)targetsa4%shareofglobaldemandby2030,prioritizingexporttoEurope.Domesticuseplansincludeasrawmaterial(feedstock)infertilizerproduction,fuelfortransport(freight,publictransit,aviation),andgreenhydrogenforenergystorage.Thehydrogenambitionsarecomple-mentedbya52%renewablepowertarget(2030).—Oman’sNationalHydrogenStrategy(2021)pursuesblueandgreenhydrogenwithcapacitytargetsof10GWby2030and30GWby2040.Thecountryfocusesonhydrogenfordomesticuseforheatinginindustrialprocesses(iron,aluminium,chemicalsproduction),asarawmaterial(feedstock),andforroadtransport.—TheUAE’sHydrogenLeadershipRoadmap(2021)targetsa25%shareofthegloballow-carbonhydrogen/derivativesmarketby2030.Itishometotheregion’sfirstsolarPV/greenhydrogenfacility.Targetsincludedomesticuseinmanufacturing(e.g.steelmaking,kerosene)andpublictransit.ExamplesofexportfocusincludebilateralagreementswithJapan,SouthKorea,andmemorandaofunderstanding(MoUs)withseveralEuropeancountries(Austria,Germany,Netherlands).—SaudiArabiaispreparingitsroadmap.Itisdemon-stratingablueammoniavaluechainwithshipmenttoJapan,andisplanningalarge-scaleprojectforrenewablehydrogen-basedammonia(NEOM).Itaimsforlargemarketsharesinbluehydrogenandblueammoniainalignmentwithitsstrategyonacircularcarboneconomy(carboncapture,storageandutilization,CCUS).Thecountrytargetsdomestichydrogenuseintransportapplications(FCEVs,publictransit,aviation,andsustainablejetfuelproduction).Technology-push:Statefundingandstate-ownedcompanies(e.g.inoilandpetrochemicals)areinvolvedinhydrogenprojects.TheUAEandSaudiArabiangovernmentspursuejointfundinginhydrogenindustrialpartnerships.MoroccoexpectscumulativehydrogeninvestmentsofUSD8bnby2030andUSD75bnby2050.OmantargetsUSD34bninrenewable-hydrogeninvestmentsby2040.FundingandsupporttoEgyptisexpectedfromtheEuropeanBankforReconstructionandDevelopment.Demand-pull:Norelevantpolicy/regulatoryframeworksareavailable.Carbonpricing:Presentlylow/negative.Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD10/tCO2in2030and30/tCO2by2050.2.3.6NorthEastEurasiaNationalstrategiesandtargets:Russia’sRoadmapforHydrogenDevelopment(2020)fortheperiod2021–2024aimstopreservethecountry’sleadingroleasaglobalenergyexporterwithtargetsof0.2Mt/yrby2024and2Mt/yrlow-carbonhydrogenby2030.43Hydrogenpoliciesandstrategies2UkrainefeaturedprominentlyintheEU'shydrogenimportplansbeforetheRussianinvasion.Ukraine’sdraftHydrogenStrategy(December2021)aimsatrenewablehydrogenexports,buildingonitsextensiveexistingnatural-gasinfrastructure.Thedraftdocumentincludestargetsofupto10GWofrenewablehydrogenproductioncapacityby2030,with7.5GWofthisdedicatedtoexportstotheEU.Technology-push:Thereisnorelevantpolicy/regulatoryframework,andnofirmCCSpolicy/support.Demand-pull:Norelevantpolicy/regulatoryframeworksexist.Carbonpricing:Presentlylow/negative.Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD6/tCO2in2030and20/tCO2by2050.2.3.7GreaterChinaNationalstrategiesandtargets:China’s14thFive-YearPlan(2021–2025)seeshydrogenasa‘frontier’industryareaofthefutureandassupporttowardsthegoalofpeakcarbonemissionsbefore2030andcarbonneutralityby2060.Hydrogenisexpectedtohavea10%shareoffinalenergyconsumptionby2050(5%by2030).China'sHydrogenDevelopmentRoadmaptargets10GWinstalledelectrolysercapacityby2025,atleast35GWby2030,andmorethan500GWby2050.InthenewlyreleasedMediumandLong-termPlanfortheDevelopmentofHydrogenEnergyIndustryfrom2021–2035(NDRC&NEA20227),China’sgovernmenttargetsalong-termtransittorenewablehydrogensupplywithariseinrenewableelectricity,aimingfor100–200kt/yrofrenewablehydrogenproductionin2025.Thekeydevelopmentfocustowards2025iswithinhydrogentechnologymanufacturing,industrialsystems,andthepolicyenvironment.By2035,thegoalisahydrogenenergyindustryformationwithdiversifiedapplicationsintransportation,energystorage,industryandotherfields.Industryisexpectedtobethedominanthydrogendemandsegment.Technology-push:ChinesegovernmentfundingofUSD20bn,halfofittargetingtransportapplications,isavailabletohydrogenprojects.Demand-pull:Policy/regulatoryframeworksareunderdevelopment.Purchasesubsidiesarereplacedbycityclusterdemonstrationsupport(2020)forFCEVs,includinginfrastructure.Carbonpricing:China’snationalemissionstradingscheme(ETS)isexpandingcoverage.Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD22/tCO2in2030andUSD90/tCO2by2050.2.3.8IndianSubcontinentNationalstrategiesandtargets:India’sNationalHydrogenMission(August2021)aimstomakethecountryaglobalhubforhydrogentechnologymanufacturing.ItisprogressingpolicyaftertheCOP262070netzeroannouncement.India’sfirstphasegreenhydrogenpolicy(February2022)aimstoproduce5Mt/yrofrenewablehydrogenby2030,andfor75%ofhydrogentocomefromrenewablesourcesby2050.Thecountryistargeting500GWofrenewablesby2030(70–100GWfromhydroand450GWfromwindandsolarcombined).44DNV—Hydrogenforecastto2050Theprevioustargetsof100GWofsolarand60GWofwindby2022wereunmet.IndiahasnofirmCCSpolicy.Hydrogendeploymentisplannedinmajorconsumptioncentres,includingthefertilizerindustry(ammoniaproduction)anddesulphurizationoffuelinrefineries,useswhichtogetheraccountforaround80%ofhydrogenconsumption.Technology-push:India’sNationalHydrogenMissionhasidentifiedseveralhydrogenactivitiesforinvestmentwithaproposedfinancialoutlayofRs800crores(EUR95mn)towards2025forR&D,pilotprojects,infrastructure,andsupplychain.India’slargestcompany,Reliance,isinvestingUSD75bninrenewableenergyinfrastructure,includingsolarandelectrolysercapacitytargetinggreenhydrogenproductioncostsbelowUSD1/kg.Demand-pull:Indiaisdevelopingapolicy/regulatoryframework.Carbonpricing:Thereiscurrentlynoexplicitcarbonpricing.Indiahasannouncedaplannedcarbon-tradingscheme(April2022).Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD10/tCO2in2030and25/tCO2by2050.2.3.9SouthEastAsiaNationalstrategies:Hydrogenhasyettoformallyenterpolicyagendasintheregion.Noclearstrategiesaredeveloped.TheASEANCentreforEnergyhasconductedhydrogenstudiessuchas‘HydrogeninASEAN–EconomicProspects,DevelopmentandApplications’(2021).Singapore’slong-termlow-emissionstrategy(2020)seeshydrogenasalow-carbonalternative,andthegovernmentislookingatthecountrybecomingahydrogenhubfortheAsiaregion.ASEANmemberstatesaretargeting35%renewablesininstalledpowercapacityby2025.Technology-push:Nopolicy/regulatoryframeworksareavailable.Demand-pull:Norelevantpolicy/regulatoryframeworksareavailable.Carbonpricing:Thereiscurrentlynoexplicitcarbonpricing.Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD25/tCO2in2030and50/tCO2by2050.2.3.10OECDPacificNationalstrategiesandtargets:Therearenetzero2050targetsinJapan,SouthKorea,andNewZealand.ForJapanandSouthKorea,pivotingtohydrogeniskeytodecarbonization,diversificationofenergysupply,andgreengrowth.SouthKorea’sHydrogenEconomyRoadmap(2019)andHydrogenLaw(effective2021)targetamixofgrey,blue,andgreenhydrogentowards2030withatotalof3.9Mt/yr(ofwhicharound2Mt/yrwillberenewablehydrogenimportedfromoverseas).For2050,theaimistoproduce5Mt/yr(3Mt/yrrenewablehydrogen,2Mt/yrlow-carbonhydrogen)whileimporting23Mt/yrrenewablehydrogen.45Hydrogenpoliciesandstrategies2Japan’sStrategicRoadmapforHydrogenandFuelCells(2019)seeshydrogenandammoniasupplying1%ofitsenergydemandby2030,withhydrogenalreadygener-atingelectricitybythen.Japanaimstoimportrenewableorlow-carbonhydrogenfromoverseas(e.g.withammoniashipmentsfromtheUAE).Akeypartofitsstrategyistobuildacomprehensiveinternationalsupplychaininthemanufacture,storage,transportanduseofhydrogen.Australia’sNationalHydrogenStrategy(2019)targetscleanhydrogen(blueandgreen)productionandbecominganexporthubinrenewableandlow-carbonhydrogenandammonia.Australia’sdifferentregionsalsohaveregionaltargetsforhydrogenuse(e.g.10%hydrogenblendinginthegasnetworkby2030)andproduction.NewZealandispreparingitsroadmap.Technology-push:JapanhasfundingsupportingitsGreenGrowthStrategy—forexample,USD2.8bntodevelopinternationalsupplychainsandUSD3.1bnforapplicationsinaviation,shipping,steelmakingandammoniaproduction.SouthKoreahastargetedannualfundstohydrogenprojects.RecoverypackagewithUSD2.4bn(KRW2.6trn).ItsHydrogenLawstipulatessupporttohydrogen-focusedcompanies(R&D,loans,taxexemptions).CCSisoneofKorea'snineNationalStrategicProjects,butpolicysupportisneeded(e.g.applicationstocoal-firedpowerplants).Australia’sgovernmentisinvestingaroundUSD320mninCleanHydrogenIndustrialHubs.ItsRenewableEnergyAgencyischannellingaboutUSD40mninsupportforR&Dingreenhydrogenandammoniaprojects,andAustralia’sregionsalsohavefundingprogrammesforhydrogen.Demand-pull:JapanandSouthKoreasupportdomesticuptakeofhydrogen.Japanhasindustrializationandcapacitytargetsforhydrogen-basedpowerplants.Italsohasroadvehicletargets(800,000FCEVsand900refuellingstationsby2030)drivenbyagoalofreducingautomotiveemissionsby80%.SouthKoreahaspilotcitiestestingapplicationofhydrogenintransportation,industry,andbuildingsspaceheating,andaimstobecomealeadinghydrogeneconomyby2040.Bothcountriesareenablingthetransitionwithinvestmentsupport.Carbonpricing:Schemesareestablished,exceptinAustralia.Ourprojectionfortheregionalaveragecarbon-pricelevelisUSD35/tCO2in2030andUSD90/tCO2by2050.46Carbon-pricingschemes—Regioncarbon-pricetrajectoriesto2050considerhybridpricing(cap-and-tradeschemesandcarbontaxation).Theyarereflectedascostsforfossilfuelsinmanufacturingandbuildings,andinpower,hydrogen,ammoniaandmethanolproduction,andasparticipatingprogressivelyinthesameregionaland/orsectoralcarbon-pricingschemes.Europe,NorthAmerica,OECDPacific,GreaterChinaregionsareprojectedtoreachcarbon-pricelevelsintherangeofUSD22–95/tCO2by2030andUSD70–135/tCO2by2050.Carbonpricingacrossall10regionsinmid-centuryisprojectedtorangebetweenUSD20/tCO2inNorthEastEurasiaandUSD135/tCO2inEurope.—Costofcapitalreducestheattractivenessoffossil-basedequipment,atrenddrivenbygovernmentsincorporatingGHGthresholdsintaxonomies(seediscussioninSection1.5)stipulatingwhatcanbedescribedas‘green’,‘low-carbon’,‘zero-carbon’,andsoon.Costofcapitalratesaredifferentiatedtoreflectregion-specificrisk,andfurtherreflecttechno-logicalmaturitywithdecliningratesaslow-carbontechnologiesgraduallyreachmaturity.Taxationoffuel,energy,carbonandgridconnections—Fossilfuelsusedinroadtransportaretaxedattheconsumerlevel,labelledasfuelorcarbontaxes.—Effectivefossil-carbonratesareincorporatedintofuelpricesforroadtransport,withtaxationhighestinEurope.—Weassumethatthesetaxeswillincreaseinlinewitharegion’scarbon-priceregime,growingataquarterofthecarbon-pricegrowthrate.—Energytaxratesincorporatedforotherdemandsectors(buildings,manufacturing)encourageswitchingfromfossilfuelstoelectricityandhydrogenuse.Electricitytaxationdeclinesinhigh-taxregionstoenableelectrificationofend-usesectors.Hydrogenisexpectedtobeexemptfromenergytaxationthroughto2035tofavouritsuptake.Inregionsprioritizingdomesticuseofhydrogen,thetaxexemptionhasaphase-outprofile,andhydrogenincreasinglyfacestaxlevelsequaltothoseappliedtotheregion’sfutureindustrialelectricity,toassureaharmonizedenergytaxationsystem.—Taxesandgridtariffsforgrid-connectedelectrolysersareassumedtobea25%surchargeoverthewholesaleelectricityprice.Thepresentforecastfactorsinpolicymeasuresthatexertinfluenceinthreemainareas:a)Supportingtechnologydevelopmentandactivatingmarketsthatclosetheprofitabilitygapforlow-carbontechnologiescompetingwithexistingtechnologies;b)Applyingtechnologyrequirementsorstandardstorestrictuseofinefficientorpollutingproducts/technologies;orc)Providingeconomicsignals(e.g.apriceincentive)toreducecarbon-intensivebehaviour.Wetranslatecountry-leveldataintoexpectedpolicyimpacts,thenweighandaggregatetoproduceregionalfiguresforinclusioninouranalysis.Here,wepresentasnapshotofpolicymeasuresthatweconsider.2.4PolicyfactorsinourhydrogenforecastDNV—Hydrogenforecastto205047Hydrogenpoliciesandstrategies2Hydrogensupport—Supportforthebuild-upofhydrogeninfrastructure,andforthesupply-sideintermsofhydrogenproduction,isestimatedbasedontotalannualgovernmentfundingavailableforhydrogenR&Danddeployment(pilotprojects,supportforlarge-scaleinfrastructure,andindustryprojects)andreflectedasapercentagesubsidyforthecapitalcostoflow-carbonhydrogenproductionroutes.Thisalsohasspillovereffectsforhydrogendemandinend-usesthroughreductioninhydrogenprice.—Forthedemand-side,ahydrogen-policyfactorreflectsCAPEXsupporttomanufac-turingandbuildingsbutvariesbyregionintermsofpolicyfocusandpercentagelevelofCAPEX,asspecifiedingovernmentfundingprogrammes.Thefullsubsidyiskeptuntil2030andgraduallyhalvedto2050.—Forroadtransport/vehicles,thespeedofhydrogenuptakeisdeterminedbyahydrogen-policyfactorreflecting,amongotherparameters,FCEVCAPEXsupportincludingrefuellinginfrastructure,suchasincentivesdrivenbymunicipality-basedCAPEXreductionpoliciesforhydrogen-fuelledpublicbuses.—Forshippingandaviation,fuel-mixshiftsaredrivenbyfuelblendingmandatesandcarbonpricing—CCSforbluehydrogenismainlydrivenbyregionalcarbonprices.CarbonpriceshigherthanthecostofCCSwillbecomethemaintriggerforCCSuptake.Beyondthecarbonprice,regionalpoliciesprovidingspecificsupportforCCSarereflectedtoenabletheinitialuptakeandreducecosts.Thisadditionalpolicysupportwillbereducedwhencarbonpricesbecomehighenoughtosustainthegrowth.Renewablepowersupport—Renewableelectricitybuildoutisadvancedbygovernmentsinallregions,basedontheprofitabilityofrenewableelectricity,andthroughmarket-ledapproachessuchascapacityquotas,competitivebidding/auctions,investmentsupporttostoragecapacitycoupledwithrenewablegeneration,andevolvingmarketdesign.Carbonpricingandcostofcapitalincreasesreducetheattractivenessoffossil-basedgeneration.48DNV—Hydrogenforecastto20503PRODUCINGHYDROGEN3.1WaysofproducinghydrogenHydrogencanbeproducedusinganumberofdifferentmethodswithvaryingefficienciesandenvironmentalimpacts,andistypicallyclassifiedintocoloursdependingonthemethodandfeedstockused.Asummaryofthedifferentcoloursofhydrogen,includingfeedstock,productiontechnologyandemissionlevels,isgiveninTable3.1,withafullerdiscussionofthetechnologiesfollowingfurtheroninthischapter.Asseeninthetable,thegreenhousegas(GHG)emissionscanvarygreatlyevenwithinaspecificcolourduetodifferencesinefficiencies,capturerates,supplychainemissionsandgridmix.Assuch,usingcolourstodefineanddiscussemissionlevelsofhydrogencanbemisleading.DNVnowseesashifttowardsdefininghydrogenintermsofcarbonintensity(expressedinunitofCO2equivalentsperunitofhydrogenproduced)ratherthancolours,makingitpossibletocomparetechnologies,productionroutesandresultingemissionlevelsonalevelplayingfield.Afinalkeyaspectwhenlookingatdifferentproductionmethodsofhydrogenistheresultingpuritylevel,withhydrogenproducedbyelectrolysishavingthehighestlevelofpurity.Differentend-usersegmentshavedifferentrequirementsforhydrogenpurity.Forexample,hydrogenforuseinfuelcellshasahighpurityrequirement.Consequentlywhenproducinghydrogenfromfossilfuels,apurifierisoftenneeded.49Producinghydrogen3aDirectemissionsaccountforthehydrogenproductionprocessemissions.bIndirectemissionsaccountforthefeedstocksupply-chainemissionsaswellastheenergygenerationsupply-chainemissions.Otherindirectemissions,suchascapex-relatedemissions,arealsoimportantbutarenotincludedhere.cComparabletorenewablepowerproductioninfrastructure(1-20gCO2/kWh).TheemissionsrelatedtothehydrogeninfrastructureandhydrogenleakagewillalsocontributetoindirectGHGemissions,wheretheexactquantitieshavetobeidentified.Thetableisinspiredby:GlobalEnergyInfrastructure(GEI),2021.TABLE3.1ThecoloursofhydrogenandresultingGHGemissionsColourofhydrogenFeedstockProductiontechnologyDirectGHGemissionsakgCO2e/kgH2IndirectGHGemissionsbkgCO2e/kgH2ProducedusingelectricityGreenRenewableelectricity,waterand/orsteambythermolysisElectrolysis–>0cYellowGridelectricity,water–<1–30DependsonthecarbonintensityofthegridmixPinkNuclearelectricity,water–>0cProducedusingfossilfuelsGreyNaturalgasMethanereforming9–110.5–4BrownLigniteGasification18–201–7BlackBlackcoalGasification18–201–7BlueNaturalgasorcoalMethanereformingwithCCSGasificationwithCCS0.5–40.5–7TurquoiseNaturalgasPyrolysisSolidcarbon(by-product)0.5–5GreenBiogasorbiomassReformingwithorwithoutCCSGasificationwithorwithoutCCSPossibilityofnegativeemissionswithCCS1–3OtherRedNuclearheat,waterThermolysis–>0cPurpleNuclearelectricityandheat,waterThermolysisandelectrolysis–>0cOrangeSolarirradiance,waterPhotolysis–>0cGreenWastewood,plastic,municipalsolidwasteThermochemicalPossibilityofnegativeemissionswithCCSNotassessedasvariabilitiesinthevaluechainsaretoogreattoaccuratelyrepresenttheGHGequivalentemissions50DNV—Hydrogenforecastto20503.2Hydrogenfromfossilfuels:methanereformingandcoalgasificationBlack/brownhydrogenBlack/brownhydrogen,producedfromcoal,isgenerallyproducedthroughgasification.Coalgasificationisbasedonpartialoxidation(POX),whereaportionofcoal(orothercarbonaceousmaterials)isburntwithaselectedamountofoxygenunderpressureinagasifier.Theoutputofthisgasificationstepisasyngascontainingamixtureofhydrogen,carbonmonoxide,carbondioxideandothergases.Inasecondstep,theadditionofsteamenablesthewatergasshiftreactionwithcarbonmonoxide,producingadditionalhydrogen.Mostoftoday’scoalgasificationplantsareinChina,whichhasamarketshareofabout85%1.GreyhydrogenGreyhydrogenproducedfromnaturalgascanbeproducedbymethanereforming,whichincludessteammethanereforming(SMR)andautothermalreforming(ATR).Simplyexplained,theSMRprocessworksbyintroducingnaturalgas,mainlymethane,andsteamintoareactorsuppliedbyheatfromasurroundingfurnace.Thefurnacecombustsnaturalgasandexcessair.Naturalgasisconvertedtohydrogenandcarbonmonoxide,whichisthensentthroughawatergasshiftreactorandapressureswingadsorbertoconvertcarbonmonoxidetocarbondioxideandthenseparatethehydrogenoutfromthesyngas.ATRislesscommerciallyadvancedthanSMR,however,theprocessisbasedonacombinationofSMRandPOXtechnology2.InanATR,pureoxygenisusedinsteadofair.TheprimaryreformerinATRdiffersfromtheSMRinthattheheatissuppliedintheprocessitself,eliminatingtheneedforafurnace.Otherwise,theprocessissimilar.Agasheatedreformercanalsobeincludedforpre-heatingpurposesandreformingsomeoftheinitialhydrocarbons.BluehydrogenAddingCCStoanyofthebefore-mentionedtechnologieswillcreatebluehydrogen,and1%ofhydrogentodayisproducedasbluehydrogen3.ForSMR,therearedifferentoptionsfortheplacementofacarboncaptureplantthataffecttheoverallcapturerateandtheefficiencyoftheplant.FortheATR,thecaptureplantwilltypicallyfollowthewatergasshiftreactor.Incoalgasification,thecarbonandhydrogencanbeseparatedwithpressureswingadsorption.AnotherinterestingoptionistousepalladiummembraneswithahighH2-selectivity4,5.Itshouldbestressedthatcaptureplantsdonotcapture100%oftheCO2andtherearealsoconcernsregardingupstreamemissions,whichincludebothcarbondioxideandmethane.AstudybyDNV6hasshownthattheseemissionscanbesignificant,aslistedinTable3.2,albeitwithregionalvariations7.Cost-wise,SMRiscurrentlythemosteconomicproductionmethod,althoughthereislessresearchonthecostsofATRcomparedwithSMR.However,theoverallcostofSMRwithCCSisexpectedtoincreasetowards2050,despiteadecreaseintheCAPEX,becausefuelandcarboncostsarelikelytoincrease8.ThesameappliestoATR,howeverthecostofATRislessdependentoncarboncostsandmoredependentonthecostofelectricity.Regardingemissionsfrombluehydrogentechnologies,ATRisthetechnologywiththepossibilityforthelowestemissions;itisalsohasfairlyhighefficiencyandishenceapromisingoptionforbluehydrogen.Captureplantsdonotcapture100%oftheCO2andtherearealsoconcernsregardingupstreamemissions,whichincludebothcarbondioxideandmethane.51TABLE3.2Comparisonofefficiency,emissionsandlevelizedcostofhydrogen(LCOH)acrossproductionmethodsSMRSMRwithCCSATRATRwithCCSCoalgasificationCoalgasificationwithCCSEfficiency%66–7669–7967–8574-8060-6658EmissionskgCO2/kgH28.9–9.40.5–27.4–9.80.3-1.316.5-20.21.8-2.1LCOHUSD/kgH20.8–2.71.8–4.10.8–2.71.3-3.02.2-4.13.7-5.2Producinghydrogen352DNV—Hydrogenforecastto20503.3Hydrogenfromelectricity:electrolysisAtabasiclevel,electrolysissplitswater(H2O)intohydrogen(H2)andoxygen(O2)byapplyinganelectriccurrent.Assimpleasitsounds,researchersanddevel-opershaveoptimizedthisprocessandcurrentlytherearefourmaintechnologies;Alkaline,ProtonExchangeMembrane(PEM),SolidOxideElectrolysis(SOE)andAnionExchangeMembrane(AEM).Alkalineismostdevelopedbutgrowinginterestingreenhydrogenboostingfurtherdevelopment.Manufactur-ersarefocusedonperformanceimprovement,costreductionandupscaling.Wheretheestablishedalkalinetechnologywasmainlyatmospheric,pressurizedsystemshavealsoenteredthemarket.Pressurizedsystemsrequirelesscompressionwhichisgenerallyneededformostapplications.Pressurizedsystemsarealsobetterequippedtorespondtochangesinpowerinput(e.g.,fromrenewableenergy).ThisgivespressurizedalkalinetheadvantagetostillcompetewithothertechnologiessuchasPEMwhencombinedwithrenewableenergy.PEMhasseenmuchdevelopmentoverthelastdecadeandhasanestablishedpositionintheelectrolysermarket.PEMisknownforitsabilitytorampupanddownveryquickly,makingitasuitabletechnologytofollowchangesinpowerinputfromrenewableenergy.Thefocusareasfordevelopmentareverysimilartoalkalinebutareexpectedtofollowasteeperlearningcurvetocatchuptocostsofalkaline.AdditionaldevelopmentwithPEMgoestothereductionandrecyclingofiridiumandplatinum,rarematerialswhichcouldlimitverylarge-scaleexpansionofPEM.SOEhasreachedcommercializationandrecentinvest-mentshaveledtocompetitivenessinthemarketandupscalingofproductioncapacity.Thetechnologyismainlyrecognizedforhighoperatingtemperatures(500-900ºC),highefficiencies,andtheuseofsteaminsteadofliquidwater.ThetechnologyiscommerciallyavailablebutisstillfarbehindalkalineandPEMintermsofscaleandmaturity.Thecurrentfocusfordevelopment,iscommercialization,upscaling,lifetimeimprovementandcostreduction.ThelattertwostillneedmuchdevelopmenttocompetewithAlkalineandPEM.AuniqueadvantageofSOEisitscapabilitytodirectlyformsyngasusingco-electrolysisofsteamandCO2,ContainerizedPEMelectrolyser.ImagecourtesyHystar.53andtoproduceamixtureofhydrogenandnitrogenwithco-electrolysisofsteamandair.Thelatterisadvantageouscombinedwithammoniaproduction,savingcostsonairseparationunitstoproducenitrogenandthepossibilitytousewasteheatforsteamproduction.SOEisalsocapableofoperatinginreverse,actingasafuelcell9.AEMisthelatestdevelopedtechnologyandhasnotyetcommercializedatrelevantscale.ItsharesmanysimilaritieswithPEMintermsofdesignbutusescheapermaterials.Themainfocusofdevelopmentislifetimeimprovementbeforeitwillentercommercialization,costreductionandfurtherimprovements.AsuitablematchDNVbelievestherewillbeafutureforeachtechnology,althoughfordifferentapplications.Atmosphericalkalinemightbethepreferredoptionforlargescaleandmorebase-loadhydrogenproductionasthisismostdevelopedandhaslowercosts.PressurizedalkalineandPEMwilllikelyalsobeappliedinthisareaoncethesetechnologieshaveachievedfurthercostsreductions.BothpressurizedalkalineandPEMaresuitableincombinationwithrenewableenergyandwilllikelyseetheirapplicationthere,bothonshoreandoffshore.WhenAEMisfurtherdeveloped,itwillfollowthesetechnologies.SOErequiresheatasaninputandwillthereforelikelybeappliedatlocationswherethisisavailable.AnexamplewouldbeacombinationofSOEandanammoniaplantornuclearplantwherewasteheatcanbeused.Heretheadvantageofproducingbothhydrogenandnitrogenwillalsoberelevant.ElectrolysiswillseemassiveupscalingandcostsreductionElectrolysisisdevelopingrapidlybutrequiresmassiveupscalingofmanufacturingtomeetindustryandgovernmenttargets.Thepressureisonelectrolysermanufacturerstofurtherdeveloptheirtechnologies,standardizetheirsystemsforlarge-scaleapplication,andincreasetheirmanufacturingcapacity.Themostestablishedmanufacturershavealreadystartedthisprocessandaregettingreadytosupplyelectrolysersatlargescaleinthecomingdecadeandbeyond.Althoughupscalingbringsopportunitiesformanufacturers,itisverychallenging.Theclearestriskistheuncertaintyofthemarketitself,makingforanunsteadyfoundationforthekindofrapid-firedecisionsandlarge-scaleinvestmentsthatmanufacturersneedtomake.TABLE3.3MainelectrolysercharacteristicsCurrent2030AAlkalinePressurizedAlkalinePEMSOEAEMEfficiencykWh/Nm³4.74.34.74.34.84.53.63.3B4.8(stackonly)Stacklifetimehours80,000100,00080,000100,00050,000>80,00020,000>20,0005,000FlexibilityTimetoreachnominalcapacityMinutes<10s<1s<1sC<1sPressurebarAtm.<40<70<40<70atm.<20<35CommercialstatusAvailableAvailableAvailableAvailable2022-2024UnderdevelopmentAPredictionsbasedonmanufacturerindications,literatureorFCHJUtargets.BEfficiencyofSOEassumesexternalheatisprovided.CHotsysteminlaboratory,unknownforcommercialsystems.Coldsystemsrequirestartuptimesofhoursifnotmore.Producinghydrogen354DNV—Hydrogenforecastto2050Otherchallengesarethegrowthofsupplychain,theuseofpreciousmaterials(especiallyforPEM)andfindingexperiencedandqualifiedpersonnel.Additionalchallengesarethereadinessoflarge-scaleelectrolysisdesignandtodevelopinherentlysafedesignforever-largerconcepts,forinstanceregardingcross-overofoxygeninternally,safeblow-downwithventing/flaring,andreducingleaksbyimprovingthe“weaklinks”suchasvalves,sealsetc.WhileDNVdoesnotseethesechallengesasshow-stoppers,theydorequireurgentresolutionormitigation.Thisrequiresearlyidentificationofchallengesandtheinvolvementofindustryandgovernmenttoassuretherightdirectionofdevelopment,certaintyforofftake,andtherightpolicymeasurestode-risktheoverallhydrogenvalue-chain.Inadditiontoupscalingofmanufacturingandsystemcapacity,electrolysiswillseesignificantcostreductions.Electricityconsumptionandsysteminvestmentsarethemaincostdrivers.Costsforrenewableelectricityarenotinfluencedbyelectrolysermanufacturers;theycanonlyimprovesystemefficiencieswhichhaveadirect,andlargebearing,onCAPEX.Optionsforcostreductioninclude:—Standardizationofsystemdesign—toactasbuildingblocksforscalingupthecapacity.Thisallowsforaswitchfromtailor-madesolutionstoastandardizedsolutionthatcanfacilitatemultipleclientsandscales.—Improvedandautomatedmanufacturing—Mostelectrolysersandstacksarecurrentlyassembledbyhandwhichcanbepartiallyautomatedwiththestandardizeddesign.—Economiesofscale—applyespeciallytothebalanceofplant(BoP)andcanreducesystemcostssignificantly.Figure3.1illustratestheeffectofcapacityonthesystemcosts.—Performanceimprovement—Improvingperformancesuchasefficiencyandstacklifetimewilldecreasecostsduringtheoveralloperationallifetime.—Costoptimization—Othermeanstocutcostsareimprovingagreementsandpricingfromsub-suppliersbyreducingorreplacingexpensivematerials,andoptimizationofdesign.Wealreadyseesomeeffectsofthesecostreductionmethodsinthenewgenerationelectrolyserswhichareofferedinupcominglarge-scaleprojects.Althoughthereiscurrentlyawiderangeofelectrolysercosts,weexpecta25%dropinaveragecostsby2030and50%by2050basedoncurrentmarketinsights.Figure3.2isanapproximationofthecostreductionpertechnologybasedonvariousliteraturesources(recalculatedto1MW).Alltechnologieswillseecostreductions.PEMandalkalinecostsarelikelytooverlapconsiderablyfromtheearly2030sonwards.TechnologieslikeSOEandAEMarestillveryearlystage,anditisdifficulttoestimatetheircostdevelopment.WhileSOEwilllikelybeElectrolysisisdevelopingrapidlybutrequiresmassiveupscalingofmanufacturingtomeetindustryandgovernmenttargets.55appliedinindustrialareaswithavailablewasteheat,andincombinationwithotherconversionprocessessuchasammoniaorsyngas,AEMcouldhaveadisruptiveeffectoncostsifthetechnologyisdevelopedsuccessfully.ApplicationwilllikelybesimilartoAlkalineandPEMwhilematerialcostscanbelower.ElectrolysersinChinaChinesemanufacturersholdsignificantadvantagesintermsoflowlabourandmaterialcostsandhavethepotentialtodisrupttheelectrolysermarket.However,currently,wedonotyetseeasignificantexportofChinesesystems.ThedomesticChineseelectrolysermarketisstilllargeenoughtoabsorbChineseproductionandmanufacturershavenotyetscaledupattherateWesternmanufacturershave.Inaddition,mostChinesemanufacturershavenotyetinternationalizedwiththecorrectcertificationandhavenotadaptedtheirbusi-nesstoaninternationallanguage.Furthermore,therearequalityconcernswiththeperformanceandreliabilityofChineseelectrolysers.Overthecourseofaprojectlifetime,loweryieldandhighermaintenancecostscontinuetorenderChinesesystemslesscompetitivethanWesternelectrolysers,despitethelowercosts10.Fromaprojectdevelopmentperspective,thereisalsoalowerriskwhenchoosingalocalsupplierwithregardtoagreementsandguarantees,serviceandmaintenance,andshippingofequipment.Especiallyregardingserviceandmaintenance,manyprojectdevelopersrelyonthemanufacturertoperformorassistwithmaintenanceandoperations.WhenChineseelectrolysermanufacturersscaleup,improveproductqualityandinternationalizewecanexpectanexportincrease.HowdisruptivethisprovestobetotheelectrolysermarketintheWestwilldependonglobalmarketgrowth—electrolyserdemandiscurrentlylargerthansupply—andpolicyonimportandtrade.WesterncountriesmightmovetoprotecttheirownmarketsfromChinesecompetition.SomeWesternmanufacturershavealreadytakenactionregardingtheChinesemarket.CumminsrecentlyannouncedtheywillopenaGWfactoryinSouthernChinainajointventurewithSinopec11andJohnCockerillhasalsostartedajointventurewithJingli12toproduceelectrolysersinbothChinaandEurope.Producinghydrogen356DNV—Hydrogenforecastto20504STORAGEANDTRANSPORT4.1WaysoftransportingandstoringhydrogenThefutureofthehydrogenvaluechainwillrelyondevelopinginfrastructureforlow-costdistributionanddelivery.Comparedwithothergasesandliquids,hydrogenasenergycarrierischallengedbylowenergydensity,embrittlement,andsafetyconcerns.Theseuniquepropertiespresentspecialcostandsafetyobstaclesateverydistributionstep,frommanufacturingtoend-use.Alsocriticalistheformofhydrogenbeingtransportedandstored.Hydrogencanbetransportedaspurehydrogen—eitherpressurizedorliquified—orbyusingaliquidhydrogencarriersuchasammoniaorliquidorganichydrogencarriers(LOHC).AnoverviewofoptionsfortransportandstorageofhydrogenisshowninFigure4.1.Eachselectedoptionrequiresdifferentstate-conversionssuchascompression,liquefactionorchemicalreactionsasindicatedinthefigure.Thesestateconversionsinducelosses(energyuse)andcosts.Thepreferredorlowest-costoptionfortransportandstoragewilldependonthestate,distanceoverwhichhydrogenistransported,andonscaleandenduse.CompressedhydrogenPipelinetransportofcompressedgaseoushydrogenisingeneralthemostcost-effectivewayoftransportinglargevolumesoverlongdistances.Thiscanbedoneinpureform,orblendedintonaturalgasingaspipelines,uptolimitsprescribedbytherelevantregulationsorimposedbycontractorotherrestrictionssuchaspurityrequire-mentsforend-use.Smallvolumes,suchasthoserequiredtodayathydrogenrefuellingstations,wouldusuallybemostcost-effectivelytransportedinbulkbytruck.57LiquidhydrogenWhileliquidhydrogenhasahigherenergydensitythancompressedhydrogen,moreenergyisrequiredtoliquefyhydrogenthanforcompressingittorelevantpressures.Furthermore,liquidhydrogenhasdifferentsafetycharacteristicsthancompressedgaseoushydrogen.Forexample,aleakintoopenairfromcompressedhydrogentankswillriseduetobuoyancyandwillgenerallydissipatequickly.Incontrast,aleakofliquidhydrogenintoopenairwillfreezethesurroundingair,becomeaheavygas,andmayaccumulateonthegroundforsometime.Thisisrelevantwhen,forinstance,transportinghydrogeneitherbyshiportruck,orwhenstoringitintanks.Ammoniaandliquidorganichydrogencarrier(LOHC)Ammoniahasahigherenergydensitypervolumethanliquidhydrogenandcanbetransportedandstoredasaliquidatlowpressuresorincryogenictanksataround-33°Cat1bar.Thisimpliesthatammoniacanbetrans-portedatlowcostbypipelines,ships,trucks,andotherbulkmodes.Thedrawbacksarethattheammoniasynthesisanditssubsequentdehydrogenationtoreleasehydrogenrequiresignificantenergyanditistoxicifanaccidentalreleaseoccurs.HydrogenationanddehydrogenationofLOHCs,suchastoluene,requireslessenergy,butthegravimetricdensityofthehydrogenthatcanbeextractedfromthehydrogenatedliquid(methylcyclohexanefortheLOHCtoluene)is50%–70%lowerthanthegravimetrichydrogendensityofammonia1.Theseconsiderationsshowthatthelowestcostorpreferredvaluechaindependsontheapplicationandcontext.FIGURE4.1OverviewofmainoptionsfortransportandstorageofhydrogenStorageandtransport4TransportationoptionsStateoftransportandstorageStorageoptionsPipelineTruckShipRail/BargeCompressedhydrogenCryogenicliquidhydrogenAmmoniaLiquidorganichydrogencarierSubsurfacegasstorageCompressedhydrogentanksPipelineinfrastructureLiquidhydrogentanksAmmoniatanksLiquidhydrocarbontanks58DNV—Hydrogenforecastto20504.2StorageAnyeffectiveenergysystemmustbeabletoprovidesecurityofsupplyandresilienceforcustomers.Theenergysystemmustbedesignedandoperatedtoensuresufficientsecurityofphysicalassets,diversityofenergysupply,marketcontrol,andresiliencetogeopoliticalevents.Oneoftheprimarychallengesfortheenergytransitionisincreasedrelianceonvariablerenewableenergyforhydrogenproductionandthismeansthatstoragewillbecomeincreasinglynecessarytomatchsupplyanddemand.Hydrogencanbestoredintwoways—eitheraspurehydrogenorintegratedintoacarrierwhichmakesiteasiertotransportandstore.Hydrogencanbestoredasagasathighpressuresorasaliquidatverylowtemperatures.Whenrequired,hydrogencanbewithdrawnfromthestorageandthepressureortemperaturecarefullyadjustedtosuitendusewithoutanyfurthersignificantchemicalprocessing.Liquidhydrogencarriersaremoleculesthathavesignificanthydrogencontent,andareliquidatconditionsclosetoambienttemperaturesandpressures—thismakesthemeasierforshippingorabove-groundstoragewithoutspecialistcontainment.Thereareseveralexamplesoforganicmoleculesthatarehydrogenrichsuchastolueneanddi-benzyltoluene—theseareknownasliquidorganichydrogencarriers(LOHC).ThedrawbackofLOHCsisthatthereisanenergypenaltyinsynthesisingtheminthefirstplaceandinsubsequentregenerationofhydrogenatthepointofuse.Iftheenergyusedinthehydrogencarrierprocessisnotrenewable,thentherewillbeacarbonpenaltytoo.Ammonia,whichhastheformulaNH3,isawell-establishedliquidhydrogencarrierandcontainsoneatomofnitrogenandthreeatomsofhydrogen.Ammoniamaybecombusteddirectlyinsomeapplicationsratherthancrackingtoreleasehydrogen.EnergydemandandsupplyMostindustrialeconomieshaveavaryingdemandforenergy,oftenincreasingatcertaintimesofdaywithmoreextremeseasonalvariations,especiallyincountrieswithcoldwinters.Thesevariationsarethereforebothshortterm(intraday)andlongterm.Whererenewablepowerisusedtogenerateenergy,thevariationsinelectricalsupplyneedtobeoverlaidonthevaryingdemandandthiscreatesaverycomplexoperatingregime.Toensuresecurityofsupply,energystorageisrequiredtofillthosegapswhendemandisgreaterthansupplyorwhensupplyisgreaterthandemand.Storingelectricalenergyinbatteriesispossiblebutchallengingatlargescaleandforlongperiodsoftime.Storingmolecularenergyintheformofhydrogenisastableandreliableformofenergystorageandthehydrogencaneitherbeuseddirectlyorconvertedtoelectricityasrequired.Hydrogenisastableandreliableformofenergystorage;itcaneitherbeuseddirectlyorconvertedtoelectricityasrequired.Ifhydrogenisrequiredonlyforroadtransport,shipping,manufacturing,andpowergeneration,thenthedemandprofileforhydrogenisrelativelyflatwithslightvariationscausedbythepowersector—theneedforhydrogenstorageinthiscaseisdrivenbythevariationingenerationfromrenewablepower.Ifhydrogenisadditionallyusedforspaceheating,thenthedemandprofileisdominatedbythecoldweathermonthswhich,coupledwithvariationsinrenewablepowerproduction,leadstoasignificantlyincreasedmismatchbetweensupplyanddemandacrosstheyear.Countriesandregionsaimingtoreplacenaturalgasforheatingwithhydrogenwillneedgreatervolumesofstoragethantheyhavenow.Additionally,wherenaturalgaslinepackmayhaveprovidedsomeresiliencepreviously,hydrogenlinepackdepletesmuchmorerapidlyandquickeraccesstostoragewithdrawalwillbenecessarytomaintainpipelinepressures.Duringtheenergytransition,theintroductionofhydrogenblendsintogasnetworksandfillingnewhydrogenstoragefacilitieswillbeanecessaryfirststep;thiswillstimulatethebuildoutofhydrogenproductionandthe59hydrogenecosystem.Fordomesticheatappliances,variationinhydrogenblendsupto20mol%canbetoleratedbutlargeindustrialconsumers,gasturbines,gasenginesandgas-firedpowergenerationwillnotbeastoleranttovaryinghydrogenconcentrations.Othermechanismsforbalancinghydrogensupplyanddemand,suchasdemand-sideflexibilityandsupplyflexibility,couldbeimportantbutthesefailtocapitalizeonperiodsofexcessrenewablepowerproductionwhichwouldleavecurtailmentasthelastoption.UnderstandingstorageneedsandoptionsItislikelythatamixofhydrogenstorageoptionswillbeneeded,andprojectscentredonindustrialclusterswillbeimportanttounderstandstorageneedsandtimings.Energysystemmodellerswillneedtocarryoutwhole-systembalancinganalysestodeterminestorageneedsindetail.Overall,hydrogenstoragemayneedtobemoredistributedthanthatofnaturalgasastherewillbelesslinepackingaspipelines.Wemustalsonotforgetthathydrogenhasamuchlowervolumetricenergydensitythannaturalgas(3to4timeslessdense)whichincreasesthecomplexityofthesolution.Wherehydrogenistobeusedfortransportapplicationsitisabout2,700timeslessdensethangasolinewhichmeansthatitneedstobecompressed,liquefiedorchemicallycombinedbeforestorage.Anoverallframeworkforcomparinghydrogenstorageoptionsislikelytobenecessaryandassessmentsforeachregionorcountryshouldinclude:—Capacity—Deliverability—Injectability—Dischargeduration—Responsetime—Energyintensity—Costperunitstored—Safety—Location—TimetomarketAmixofstorageoptionsislikelytoinclude:—Longdischargedurationstorageforgasnetworks—Saltcavernsthatcanmanagemultiplefill/dischargecycles,andthatcandeliverandinjectveryquickly—Seasonalstorageinporousrocks,althoughthisisnotgoodfordeliverabilityandinjectabilityAsummaryofoptionsisshowninTable4.1.Lookingbackathistoricalmechanismsandsolutionsfornaturalgasstoragewillnothelpsolvetheissuesaroundhydrogenstorage.Naturalgasproductioncanberampedupanddownasrequiredbutlow-carbonhydrogenneedstobemadebytheelectrolysisofwaterorbyreforminghydrocarbonsandCCS.Intermittent(renewableenergy)orflatproductionprocesses(reformingofmethaneorelectrolysisusingnuclearpower)eachcreateadifferentstoragechallengeandwillneedadifferentstoragesolution.Storageandtransport460DNV—Hydrogenforecastto2050TABLE4.1HydrogenstorageoptionsandassociatedconsiderationsEnergystoragetypeHydrogenstorageoptionStoragecapacity(TWh)Response/turnaroundtimeDurationTechnologyreadinesslevelDeploymenttimeframeDemandsideapplicationsCentralisedorde-centralisedsolutionHazard/toxicityGeologicalRepurposedsaltcavern–Fastresponse(1hour)MultipleannualcyclesMediumMediumMultipleusersacrosspower,industry,andheatCentralisedLowNewsaltcavern1.5aHighHighRepurposedhydrocarbonreservoir9bSlowresponse(12-24hours)SingleseasonalcycleLowHighLargescaleseasonalheatdemandMediumNewoffshorefields–LowHighSurfaceCompressed0.00004cFastresponse(minutes)MultipleannualcyclesHighLowLimitedduetosizeBothMediumLiquidhydrogen1dFastresponse(1hour)LowHighMultipleusersacrosspower,industry,andheatHighAmmoniaMediumresponse(>4hours)fMediumHighHighLOHCLowHighLowNetworkLinepack1.2eFastresponse(instant)WithindaycycleHigh–LowImportHydrogenpipeline–Fastresponse(instant)–HighMediumCentralisedMediumAmmonia–Slowresponse(daysdependentonshipping)–MediumHighLimitedduetoresponsetime,targetlargepredictableswingsindemandsuchasheatHighLOHC––LowHighLowMethanol––LowHighHighLiquidhydrogen––LowHighHighSupplyflexibilityFlexibleproduction(BlueHydrogen)–Mediumresponse(>4hours)-MediumMediumIndustryandheatBoth-Flexibleproduction(Grid-connectedelectrolysis)–Fastresponse(1hour)-MediumMediumMultipleusers-DemandflexibilityInterruptiblecontracts---HighLow--Smartheatingsystems---LowHigh--aSaltcavernstoragevolumebasedonH21projectestimationsbEnergybasedonestimatedstorageofare-purposedRoughreservoircBasedonlargeststandardsizemetalcylinder(50m3)dBasedonH21estimations,footprintrequirementsmajorimpacteBasedonconversionofexistingnaturalgasnetworklinepacktohydrogenfDependentoncomplexityandfuturetechnologydevelopments614.3TransmissiontransportsystemAhydrogentransmissionsystemtransportslargeamountsofhydrogenoverlongdistances,withthehydrogentypicallyincompressedgasorinliquidform.Transmissionofhydrogencanbedonebyships,trucks,rail,ortransmissionpipelines.Transmissiontransportofhydrogenbytruckisamatureoption,wherehydrogencanbetransportedingaseousorliquidformorviaacarrier,suchasammoniaorLOHC.Despitethematurityofthisoption,forlongerdistancesitisoftennotthecheapestroute.Forcompressedgas,atrucktypicallycarries20ftor40ftcontainersmadefromaglassfibrecompositeorcarbonfibrecomposite,andintheoryonetruckcanhold1,100kgofhydrogencompressedto500bar2.Anotherapproach,transportingliquefiedhydrogenbytruck,ismorecommonforlongerdistances.Thetruckcancarry4,000kgofhydrogenover4,000km;anyfurtherdistancemightcausethehydrogentooverheatresultinginariseinpressureduetotheJoule-Thompsoneffect3.Byconvertingthehydrogentoammoniapriortotransport,atruckcancarryaround5,000kgofhydrogen.Transportinghydrogenthroughpipelinesisaninexpensiveandrobustmethodfordistancesupto2,000kmdependentonseveralfactors,likethevolumeofhydrogentransported.IntheUSthereareover2,500kmofhydrogenpipelinesalreadyinplace.WithinEurope,thelongestpipelinesareinBelgiumandGermany,at600kmand400kmrespectively.Intotalthereareroughly5,000kmofhydrogenpipelinesworldwide,comparedwith3millionkmofnaturalgaspipelines4.Hence,itisnaturaltoinvestigatetheextenttowhichhydrogencanmakeuseofanexistingnaturalgasinfrastructure.AprojectcompletedbyDNVandCarbonLimits(2021),calledRe-Stream,concludedthatmostoffshorepipelinescanbereusedforpurehydrogenbasedonthecurrentstateofknowledgeandstandards.Foronshorepipelines,about70%ofthetotalpipelinelengthcouldbereused,basedonpipelinesinEurope.Theremaining30%couldconceivablybereused,althoughmoretestingand/orupdatedstandardsarerequired.FromtheRe-Streamproject,thefollowingmapwasmade(Figure4.2),illustratingthepipelinesthatcanbereusedinEurope5.ForoffshorepipelinesinEurope,themedianmaximumallowableoperatingpressure(MAOP)isaround160barforoffshoregaspipelines,and70barforonshorepipelines.Storageandtransport462FIGURE4.2AssessmentofreuseofthecurrentpipelinenetworkinEuropeforhydrogenCategoryA:pipelinesreusableconsideringthecurrentstateofknowledge/standards(assessedbyRe-Streamteam)CategoryB:Pipelinesthatwouldrequiremoretestingand/orupdateofstandardstobereusable(assessedbyRe-streamteamCategoryA:pipelinesreusable(assessedbyTSOs)Source:CarbonLimitsASandDNV(2021),Re-Stream–StudyonthereuseofoilandgasinfrastructureforhydrogenandCCSinEurope.DNV—Hydrogenforecastto205063Theflowcharacteristicsofhydrogendifferfromnaturalgas,andapipelinedesignwithalowerflowspeedavoidsrecompression7.Thisisnecessaryasthelowmolarmassandhigh-volumeflowofhydrogenmeanthatitscompressionrequiresmoreenergycomparedwiththecompressionofnaturalgas.Transportinghydrogenthroughanaturalgaspipelinemayrequirethatthehydrogenisoperatedatalowerpressureorthatalayerofinternalcoatingisadded8.Therearesomelimitationsforhydrogentransmissiontransportinpipelines,suchastheembrittlementofsteel.ThecurrentstandardASMEB31.12-2019isapplicableforhydrogentransportinpipelines.Thestandardlimitstheallowablepressurewhenusinghigher-gradesteeltotransporthydrogen.Thereisagreementamongstmaterialexpertsthatthecriteriaonhydrogeninhigh-gradesteelpipelinesintheASMEB31.12-2019standardaretooconservative.Thereisresearchinvestigatingtheuseofhigher-gradesteel,X65,X70,andabove,fortransportinghydrogen.DNVexpertsbelievethatinthefuturemosthydrogenwillbetransportedbyX70steel.Hydrogencanalsobetransportedasablendintonaturalgas,whichmightbeseenasasolutionduringthetransitionfromnaturalgastohydrogen.Blendinghydrogeninagasnetworkcanbeacost-effectivesolutionandprovidelearningstowardsapurehydrogengrid.Therearedifferentlimitstotheamountofhydrogenthatcanbeblendedintothegasnetworkindifferentregionsandcountries,wherethelimitstypicallyrangebetween2-8%.Thedifferencesinthelimitsamongcountriesposeachallengefortransportingtheblendsacrossborders,andstandardizationworkisongoing,withaparticularfocusonregulatoryharmonization.A20%blendistechnicallypossible,althoughthereareuncertaintiesaboutthelong-termeffectsonthepipelines9.BlendinghydrogenintothenaturalgasnetworkwillalsoincuranadditionalcostduetoinjectionstationsaswellasahigherOPEX10.Asexplainedintheprevioussection,itisalsopossibletotransporthydrogenviaaliquidhydrogencarrierinapipeline.Ammoniaiseasiertotransportcomparedwithhydrogenandcanbeagoodalternative,althoughthecostofconvertingtheammoniabacktohydrogenneedstobeconsidered.Fordistancesshorterthan1,500km,itischeapertotransporthydrogeninpipelinesaspuregas,whileforlongerdistances,transportingthehydrogenasammoniaorviaaLOHCbyshipseemstobemorecost-effective.ConvertingammoniaorLOHCbacktohydrogenfortheenduseraddscostsofabout1USD/kgH2or0.4USD/kgH2respectively11.Reconversionofammoniatohydrogenalsorequiresabout7-18%oftheenergycontentofthehydrogen,whileforLOHCitrequiresabout35-40%.Asthemomentumgrowsworldwidearoundhydrogenasanenergycarrier,thereareseveralongoingprojectsandsizeableinitiativestofurtherdevelophydrogeninfrastructure12.Theexistinginfrastructurefornaturalgasisagoodstartingpointbuttherearehurdlestobeovercomebeforeahydrogentransmissionnetworkcanberealized.Severalinitiativesinvolvecoastalindustrialhubs,connectingtooffshorewindandtodemandfromthesurroundingindustrialbase.AreasofinterestforsuchhubsareEurope,Japan,LatinAmerica,U.S.,andChina.TABLE4.2Typicalvaluesforonshoreandoffshoregaspipelines6OnshoregaspipelineOffshoregaspipelinesTypicalmainmaterial45%madeofAPI5LX60steelgrade,restrangefromX52–X80API5LsteelgradeX65MedianMAOP70bar(40–100barrange)160barTypicalexternaldiameter12-36inches>24inchesStorageandtransport464DNV—Hydrogenforecastto2050Anexample,asdemonstratedinboththeRe-StreamanalysisandtheEuropeanHydrogenBackbonereport13(2020)isthattheexpectedhydrogenhubsinEuropewilldevelopoutwards,mainlysouth-east,fromtheNether-lands,asseeninFigure4.314.Thelackofinvestmentininfrastructureisgenerallyseenasoneofthemoreimportantbarrierstothedevelopmentofthehydrogen'ecosystem'.Withseveralprojectscoveringhydrogenpipelines,workisongoingatDNVtocreateguidelinesfortransmissionsystemoperators(TSOs)tointroducehydrogenintoexistinginfrastructurereliablyandsafely.FIGURE4.3ThedevelopmentofhydrogenconsumptioninEuropein2030–2050withina50x50kmgridcell203020502040Source:CarbonLimitsASandDNV(2021),Re-Stream–StudyonthereuseofoilandgasinfrastructureforhydrogenandCCSinEurope.654.4DistributionpipelinesFordecades,localgasdistributionnetworkshavedeliveredgastomillionsofhomes,businessesandindustriescost-effectively,reliablyandsafely.Weforeseethat,insomeregions,thedecarbonizationofthebuiltenvironmentwillinvolveacompetitionbetweenelectrificationanddecar-bonizedgases.Aswithotherend-usersegmentswherehydrogenisusedforheating,hydrogencouldinitiallybeblendedupto20-30%withnaturalgastoformatransitionpathtowardsafullyrenewabledecarbonizedgassupply.Insomeregions,adensenaturalgasdistributioninfrastruc-tureisalreadyinplacetoconnectindividualhomesandsmallbusinesstothehigh-pressuretransmissionnetworks.Uptomillionsofindividualenduserscouldbeconnectedtothesedistributionsystemsdifferentiatingthemfromthetransmissionsystems.Typically,inthesenetworksthegaspressureisreducedinanumberofstepsfrom16barinthetransmissionnetworkdownto0.1to0.03baroverpressureatindividualend-userconnections.Thepipelinesaremainlymadeofplastic(polyethylene,PVC),yetsomecanbemadeofsteelorcastiron.Agasdistributionnetworkisacomplexsystemcomprisinganumberofinstallations,including:pressurereducingstations,meteringstations,valvestations,mainlines,servicelines,injectionstationsandblendingstationsfordecarbonizedgases.Theconversionofdistributionsystemstotransport(blendsof)hydrogenisbeingconsideredbyanumberofdistribu-tionsystemoperators(DSOs).InseveralcountriesacrossEuropeandNorthAmerica,DSOshaveissuedfeasibilitystudiesandsetuppilotanddemonstrationprojects.Oneofthemainboundaryconditionsistooperatethedistribu-tionsystemsafelywithnoadditionalriskcomparedwithexistingnaturalgassystems.Thissafetycasehastotakeintoaccountthepropertiesofhydrogenthatdifferfromnaturalgas,notablythelargercombustionspeedthatcouldinfluencetheimpactofexplosions.TheH21projectisafrontrunnerinthisrespect,wherealargepartofthedistributiongridinthenorthernpartoftheUKwillbeconvertedtopurehydrogendistribution.Theproject'ssafetyassessmentconcludesthatthisispossiblewithoutanincreasedriskprofileforthedistributiongridwhenaddi-tionalpartsofthepipelinenetworkarereplacedbyPEpipelines.Pilotanddemonstrationprojectsarecurrentlybeingsetuptofurtherincreasetheexperiencewithhydrogeninthebuiltenvironment.Storageandtransport4Costconsiderationswillleadtomorethan50%ofhydrogenpipelinesgloballybeingrepurposedfromnaturalgaspipelinesoverthenextdecades,withtheshareashighas80%insomeregions,asshowninFigure4.4.Thecosttorepurposepipe-linesisexpectedtobejust10-35%ofnewconstructioncosts15,sonewpipelinesstillmakeupthemajorityofexpenditure,particularlyinthe2020s,asshowinFigure4.5.66DNV—Hydrogenforecastto20504.5ShippinghydrogenHydrogencanbetransportedinshipsinseveralways.Forshorterdistances,compressedhydrogenmaybefeasible,butforlongerdistancesandlargervolumesliquifiedhydrogen,ammoniaandliquidorganichydrogencarriers(LOHC)appeartobethebestsolutions.AmmoniaisproducedtodayviatheHaber-Boschprocessthatturnsamixtureofhydrogenandnitrogenintoammonia.Upondeliveryammoniacanbecrackedintohydrogenandnitrogenwithlimitedlossofenergy.AsnotedinSection4.3,anLOHCisanorganiccompoundthatcanreversiblystorehydrogen15.Itsbenefitsincludeimprovedsafety(loadedandunloadedLOHCtypicallydonoteasilyignite),compatibilityfordistributionandstoragewithexistinginfrastructure,nostorageloss,likelylowercostofstorage,andavolumetricdensitybetweencompressedandliquidhydrogen.However,LOHCisreleasedbyheatandtheamountofheatrequireddependsonthechemistry.Typically,itwilltakemorethan30%oftheenergycontentofthetransportedhydrogentoreleasethehydrogenwithtemperaturesbetween300-350ºC.Inoneexample,a37%energylosswasestimated16—adistinctdrawback.ThereleaseofhydrogenfromLOHCmayalsoinvolveslowkinetics.Liquidhydrogenatalowtemperatureof20Kisapossibilityfortransportinghydrogen.Acarrierforliquidhydrogenwasrecentlyfinalizedthatcantransport2,500m3ofliquidhydrogenfromAustraliatoJapan17.ANorwegian67IntroductionCHAPTER1conceptstudyofa9,000m3bunkeringvesselforliquidhydrogenhasalsobeencarriedout18.Itshouldbenotedhowever,thatittakesbetween30-40%oftheenergytoliquifyhydrogenand,furthermore,somehydrogenmaybelostduringtransportowingtoboiloff.Duetotheselimitations,itiscurrentlyonlypossibletotransportarelativelysmallamountofliquidhydrogenbyships(2,500m3correspondstoabout175tonneshydrogen),althoughlargercarriershavebeenenvisaged.Bycontrast,ammoniaisalreadytradedonalargescale,withapproximately18.5milliontonnesperyeartrans-ported,mainlyfromkeynaturalgasproducingcountriestofertilizerproducers19.Ammoniaistransportedingascarriersdesignedforammoniatransportation.ThesearesimilartoLPGcarriers,thatmayhavesizesofupto80,000m3.AmmoniashipmentsaretypicallysmallerthanLPGparcelsandthereforeshipmentsofammoniaaredonebyaselectionofcarriersuptoLGC(LargeGasCarrier)sizeof60,000m3.Thiscorrespondstoabout40,000tonnesammoniaormorethan6000tonnesofhydrogen.Largershipsareusuallyrefrigeratedto-50ºCandclosetoambientpressure.SeeChapter6.1forforecastamountsofshippedhydrogenandammonia.Itiscurrentlyonlypossibletotransportrelativelysmallamountofliquidhydrogenbyships.DNV—Hydrogenforecastto2050TheseSankeydiagramsshowtheflowsofenergyfortheglobalhydrogensupplychainfromtheirsourcestotheirfinaluses.Thewidthofeachstreamisproportionaltotheenergycontentoftheenergysource/carrierflow.Significantlossesinconversionandtransportationareindicatedbyfadingflows.Thehydrogensystemin2020predominantlyusesfossil-fuelsforfeedstockandenergy.Onlyasmallamountofelectricityisusedtopowerpumps,motors,heat-exchangers,andotherelectricalequipment.Lessthan1%ofallhydrogenproducedislowcarbon,andthatismainlyinafewrefineriesusingCCS.Inadditiontobeingusedinrefineries,hydrogenisusedtoproduceammoniaandmethanol.Althoughthediagramshowshydrogenproductionandammonia/methanolsynthesesasseparateprocesses,inmostcases,theyareonlytwostepsofonecontinuousprocesshappeninginsideafacility.The2050hydrogensystemismuchmorediverseintermsofsourcesandend-uses.Non-fossilprimaryenergysources,particularlysolarandwindpower,becomesthemainsourceofhydrogen,eitherdirectlyindedicatedelectrolysers,orindirectlythroughprovidingpowertotheelectricitygrid,whichinturnisusedbygrid-basedelectrolysers.Renewableorlow-carbonhydrogenbecomesthemaintypeofhydrogentobeusedeitherdirectlyasanenergycarrier,orinammoniaandmethanolproduction.HYDROGENFLOWS:2020AND2050NuclearfuelsBioenergyHydropowerGridelectricityWindpowerLossesLossesLossesGrid-connectedthermalpowerstationsGrid-connectednon-thermalpowerstationsNon-decar-bonized-hydrogenLow-carbonorrenewablehydrogenMethanereformingMethanolsynthesisAmmoniasynthesisReﬁneriesDirectreductionofironChemicalfeedstockFertilizersIndustrialapplicationsGasolineblendorbiodieselfeedstockNaturalgasCoalOilInter-regionalseabornetradePartialoxida-tionCoalgasiﬁ-cationGrid-connectedelectro-lysisPRIMARYENERGYENDUSESHYDROGENCONVERSIONS68SolarpowerSolarpowerNuclearfuelsBioenergyGeothermalNaturalgasCoalOilHydropowerGridelec-tricityReﬁneriesDirectreductionofironWindpowerWindpowerInter-regionalseabornetradeInter-regionalpipelinetradeDedicatednuclearpowerstationsLow-carbonorrenewablehydrogenLossesLossesLossesLossesLossesLossesLossesNon-decar-bonized-hydrogenGrid-connectedthermalpowerstationsChemicalfeedstockAviationfuelFertilizersIndustrialapplicationsGasolineblendorbiodieselfeedstockMarinefuelMarinefuelBuildingsheatinpureformIndustrialheatinpureformAviationfuelBlendedwithnaturalgasOtherenergyusesElectricitygenerationFuelcellroadvehiclesDedicatedrenewablepowerstationsElectrolysiswithdedica-tedpowerstationGrid-connectednon-thermalpowerstationsGrid-connectedelectrolysisPartialoxida-tionCoalgasiﬁ-cationMethanolsynthesisAmmoniasynthesisMethanereformingHydropowerWindpowerSolarpowerBioenergyGeothermalNuclearfuelsLow-carbonorrenewablehydrogenGridelectricityNon-decar-bonizedhydrogenMethanolAmmoniaOilCoalNaturalgasPRIMARYENERGYENDUSESHYDROGENCONVERSIONSHydrogen:forecastdemandandsupplyCHAPTER56970DNV—Hydrogenforecastto20505HYDROGEN:FORECASTDEMANDANDSUPPLYULSTEINSX190conceptH2vesseldesignforzero-emissionoperationsinoffshoreconstructionmarket.Imagecourtesy:UlsteinDesign&SolutionsB.V.71Hydrogen:forecastdemandandsupplyCHAPTER5Almostalloftheworld’scurrent90Mt/yr1annualhydrogenproductionisproducedandusedfornon-energypurposes.Thesemainlyinvolvetheremovalofsulfurfromrefinedproductsandheavyoilupgradinginrefineries,theuseofammoniaasfeedstockinammoniaandmethanolproduction,andhydrogenforthedirectreductionofiron.IEA1estimatesanother30Mt/yrhydrogenuseinresidualformfromindustrialprocesses,whichisnotconsideredashydrogendemandinthisreport.Theworld’stotalfuturehydrogendemandisbroadlydividedintothethreecategories1.Decarbonizingexistinguseofhydrogen—replacingunabatedfossilfuelswithlower-emissionalternatives2.Fuelswitchingtohydrogenanditsderivatives—retrofittingandmodificationofinfrastructure3.Newuseofhydrogen—wherenewinfrastructurehastobeestablishedThenon-energyusesofhydrogenwillcontinuetogrowslowlyuntilthemid-2030s,decliningthereaftertocurrentlevelsbythemid-century,withfallingdemandmainlyassociatedwiththedeclineindemandforoilproductsandtheassociateduseofhydrogeninrefineries.Substantialgrowthinhydrogendemandwillcomefromitsuseforenergypurposeseitherdirectly,orintheformofammoniaande-fuelsderivedfromhydrogen.In2030,22outofthe131Mthydrogenproducedgloballywillbeusedforenergypurposes.By2040,hydrogendemandforenergywillcatchupwithnon-energyuseofhydrogen.In2050,only30%ofglobalhydrogensupplywillbeusedfornon-energypurposes.39%willbedirectuseofhydrogenasenergywhile31%willbeconvertedtoammoniaore-fuelforenergyendusers.ThenextthreedecadesofhydrogendemandInpresentdecade,hydrogenwillremaintooexpensivetobewidelyusedandthedemandwillinsteadbecreatedthroughpolicysupportandincentivesfromgovernmentsmainlyinEurope,OECDPacific,NorthAmericaandChina.Thisfirstdecadeisshapedbyadesiretokick-startproductionandrelatedinfrastructureandtoenablecostlearning.Blendinghydrogenintonaturalgastransmissionnetworksisoneofthewayswewillseehydrogenbeingpushedtoconsumers,especiallyinindustry.Subsidizingthepricedifferencebetween72DNV—Hydrogenforecastto2050naturalgasandhydrogenwillfacilitateacceptanceandofftake.Wewillseethestartoftheapplicationofpurehydrogenuseinindustriesusinghighheat,suchasironandsteelproduction,wherehydrogen’sroleasfeedstockindirectreductionofironisalsoincreasing.Inthe2030s,theaveragepriceofhydrogenwillreducebyhalfcomparedwiththeearly2020sandhydrogen’sroleinindustrialheatingwillbecomemorewidespread,withitsuseinglobalindustrialheatsupplyexceeding5%.Thisseconddecadewillalsoseewideruseofhydrogeninbuildingsforheating,asafuelblendingas-firedpowerstations,andintransport.Despitegrowthinthesemarketstheglobaluseofhydrogenasanenergycarrierwillremainsmallerthanitsnon-energyuse.The2040swillbethedecadeofdemanddiversificationasmorehard-to-abatesectorswillbeforcedtousehydrogenoritsderivativestodecarbonize.AlthoughthecostofhydrogenwillcontinuetofallandapproachtheUSD1-2/kgrange,uptakewillmostlystillbedrivenbytheincreasedcostofthealternativebecauseofcarbonpricing,orbydecarbonizationmandates.Inthisdecade,weprojectamorewidespreaduptakeoffuel-cellvehiclesinlong-distanceheavytruckinganduptakeofammoniaande-fuelsasmaritimefuels.LeadersandlaggardsAcrossourworldregions,thereisawiderangeofnationalplansandpoliciesontheroleofhydrogeninthedecarbonizationofenergysystems,asexplainedinChapter2.Thesedifferenceswillleadtodifferentpaths,asshowninFigure5.2.Europe,withitsstronghydrogensupportpolicieswillleadthepackwith11%hydrogenanditsderivativesinits2050finalenergymix.OECDPacific,NorthAmericaandGreaterChinafollowEuropewithsharesabovetheworldaverageof5.1%.Thesefourleadingregionswilltogetherconsumetwo-thirdsoftheglobalhydrogendemandforenergypurposes,afigurethatalsoreflectsregions’sharesininternationalmari-timeandaviationenergyconsumptioninlinewiththesizeoftheireconomies.Inpresentdecade,hydrogenwillremaintooexpensivetobewidelyusedandthedemandwillinsteadbecreatedthroughpolicysupportandincentivesfromgovernments.Forregiondefinitions,seemappage26.735.1HydrogenproductionAsof2022,almostallofworld’s90Mt/yrhydrogenproductionisfossil-fuel-basedandunabated,i.e.,withoutCCS1.Thisincludesaboutaquarterofammoniaplantsthatcapturetheirprocessemissions(onlyaroundhalftheircarbonemissions)andprovidetherecoveredCO2tobeusedinureaproduction(carboncaptureandutilization—CCU),accountingforsome8MtH2/yr.Onlyafewrefineries,methanolandfertilizerproductionfacilitiesuseCCS(carboncaptureandstorage)tocaptureemissionsfromthedilutefluegasstream(usuallyupto85-90%ofthetotalCO2emissions)andstorelong-term,withacombinedcapturecapacityoflessthan10MtCO2/yr2.MostofthesefacilitiesareintheUSandCanada.Figure5.3showsthebreakdownofglobalhydrogensupplybyproductionroute.Methanereforming,almostallofwhichissteammethanereforming(SMR),isthemostcommonwayofproducinghydrogenforammoniaandmethanolproduction.CoalgasificationistheprincipalrouteusedinChina,buthaslimiteduseelsewhere.Inoilrefineries,abouthalfofthehydrogenisproducedasaby-productofotherprocessesintherefineryorfromotherpetrochemicalprocessesintegratedintocertainrefineries¹.Theotherhalfisproducedprimarilyfrommethanereforming,orcoalgasificationinthecaseofChina.Thefuturehydrogensupplymixwillbeshapedbytworelatedtrends:firstly,theuseofhydrogenasanenergycarrierwillincrease,andsecondly,therewillbeagradualreplacementofexistingproductioncapacitywithlower-emissionalternatives.Asthemainmotivationforhydrogenuseinenergysystemsistodecarbonizesectorsthatcannotbeelectrified,onlylow-carbonproductionroutesarefuturecontenders.Withenergyuseofhydrogenanditsderivatiesdominatinghydrogendemandafter2040,thesupplymixwillbeincreasinglylow-carbon.In2030,weforecastthatathirdofglobalsupplywillbelow-carbonandrenewable,withfossilfuelswithCCStakinga14%shareoftheglobaltotalandhydrogenfromelectrolysis18%.In2050,85%ofworld’shydrogensupplywillbefromlow-carbonroutes,brokendownasfollows:27.5%fromfossilswithCCS,25.5%fromgrid-connectedelectrolysis,17.5%fromdedicatedsolar-basedelectrolysis,13%fromdedicatedwind-basedelectrolysisand1%fromdedicatednuclear-basedelectrolysis.Hydrogen:forecastdemandandsupplyCHAPTER574DNV—Hydrogenforecastto2050Costandthespeedofbuild-uparethemainfactorsdeterminingthesharesofproductionroutesinthesupplymix.Currently,ontheglobalaverage,thecheapestlow-carbonhydrogenproductionrouteismethanereformingwithCCS,commonlyreferredtoasbluehydrogen,withanaveragecostjustbelowUSD3/kgH2in2020(seeFigure5.4).ThisglobalweightedaverageismorerepresentativeofregionslikeNorthAmericaandNorthEastEurasiawithaccesstocheapnaturalgas,anddoesnotreflecttheincreaseinthegaspricessince2020.Reflectingrecentincreasedgasprices,ourestimateisthatthelevelizedcostofmethanereformingwithCCShasincreasedfrom2020to2022by20-30%ingasproducingregions,and60-400%ingasimportingregions.Althoughweforeseegaspricesfallingfromthecurrenthighlevelsby2030s,thereareadditionalchallengesforbluehydrogen.CCSisstilladevelopingtechnologyandconcernsaboutlong-termstoragesites,uncertaintiesonfuturecosts,andonlymarginalbenefitsfromeconomiesofscalearelimitingthespeedofdeployment.Moreover,CO2captureratesbeyond90%willremainuneconomical,andtheremainingdirectCO2emissionsthroughoutthesupplychainsassociatedwithbluehydrogenisadisad-vantage,whichwillbeechoedbypolicymakersandresultinaweakersupportforbluehydrogencomparedwithotherlow-carbon,renewablealternatives.Nonetheless,withthecontinuedreductioninCAPEXformethanereforming(particularlyATRtechnology)andcarboncapture,andwithreducingriskpremiumsforhydrogeninvestments,andincreasingcarbonprices,bluehydrogenwillgainsignificantmarketshare,especiallyinammoniaandmethanolproduction.Thecostofcarboncaptureforammoniaproductionislowerthanthecostofcarboncaptureformerchanthydrogen.Ofthe78MtH2/yrproducedgloballyfrommethanereformingwithCCSin2050(whichwillconstitute24%oftheglobalhydrogensupply),68MtH2/yrwillbecaptivehydrogen.Captivemeansthatitisproducedinthesamefacilityinwhichitisconsumedinammoniaandmethanolproductionorinrefineriesorinthedirectreductionofiron.Thecostofdedicatedrenewables-basedelectrolysisispresentlyprohibitivelyexpensive,withaglobalweightedaverageofUSD5/kgH2in2020.But,inthedecadeto2030,wewillseeasharpreductioninthecostofelectrol-ysiswithdedicatedsolarorwindcapacityreducingonaveragetowardsUSD2/kgH2.Themaindriverofthistrendwillbea40%reductioninsolarpanelcostsanda27%reductioninturbinecosts.Withcontinuedimprove-mentsinturbinesizesandsolarpaneltechnologies,theannualoperatinghourswillsimultaneouslyincreaseby7510-30%,varyingbetweentechnologiesandregions.Moreover,thecostofcapitalforelectrolysersofanykindwillsee25-30%reductionastheperceivedfinancialriskkeepscomingdown.Electrolyserscoupledwithadedicatednuclearpowerstationwillbenefitfromunconstrainedrunninghours,providingcontinuoussupplyofelectricitywithessentiallynovariablecostfortheproductionofhydrogen.However,electricitycostsarehigh.Despitea35%reductionintheaveragenuclearCAPEXby2050,influencedbytheexpecteduptakeofsmallmodularreactors,dedicatednuclearelectrolyserswillonlyaccountfor1%oftheworld’shydrogensupplyin2050,almostallofwhichisinChina,wherenuclearcostsarerelativelylower.Thispercentageshareofhydrogensupplyfromnuclearpowerdoesnotincludeanygrid-connectednuclearpowerplantsthatmayseetheirannualoperatinghours(capacityfactor)dropowingtoahighrenewablespenetrationinthepowersystem,andwhichthenchoosetousethatexcesscapacitytoproducehydrogen.Wewouldaccountforsuchnuclearcapacity(orindeedsparecapacityfromanyotherkindofpowerstation)underthecategoryof“grid-connectedelectrolysis”,astheoperationoftheseelectrolyserswillbedictatedbypowermarketdynamics.Technically,thesepowerstations,as‘autoproducers’,willnotbebuyingelectricityfromthegrid,andthusavoidpayinggridconnectionchargesandothertaxesandleviesatthesamerateaselectricityend-users.However,othergrid-connectedelectrolyserswhichare‘buyers’ofelectricitywillmainlybepurchasingelectricitywhenthereisasurplusofrenewablepower.Owingtotheirflexibilityandmarket-stabilizingrole—preventingelectricitypricesfromgoingtozeroorevenintonegativeterritory—thesegrid-connectedpowerpurchasesarelikelytobeincentivizedwithlowertaxandgridcharges.Weassumetheywilltypicallypayonly25%abovethewholesaleelectricityprice.Hencethetwocategoriesofgridconnectedelectrolysers—autoproducersandbuyers—operateunderfairlysimilarcostsofpower.Moreover,itisnoteasytoestimatethefractionofauto-producersversusbuyers.Fromamodellingperspective,itisthereforeexpedienttotreatthemasonecategoryofhydrogenproduction.Forgrid-connectedelectrolysers,thelargestcostcomponentisthecostofelectricity(seeFigure5.5),specifically,theavailabilityofcheapelectricity.Inthelongerterm,theshareofvariablerenewableenergysources(VRES)inthepowersystemswillbethemainfactorindeterminingthefutureelectricitypricedistribu-tion;moreVRESmeansmorehourswithverycheap(orevenfree)electricity.However,before2030,thepenetrationofVRESinthepowersystemswillnotbesufficienttoexertlargeimpactsontheelectricitypricedistribution.Hence,anyreductionweseeinthecostofgrid-connectedelectrolysersintheremainingyearsofthisdecadeisduetoadeclineinCAPEXalongwithanysupportgovernmentsprovide.Astherearenowell-establishedsupplychainsandmarketsforhydrogen,existingelectrolysersdonotcompetewitheachother.Thismeansthattheiroperatinghoursaremainlydeter-minedbytheirownlevelizedcost.Inmanyregions,theoptimumcapacityfactoriswellabove90%,whichhelpstospreadinitialCAPEXacrossmanyhours.Towards2050,wewillseetwomaintrendsthataffectannualoperatinghours:increasedcompetitionfromalternativehydrogenproductionroutesandmorehourswithcheapelectricity.Themaincompetitorforgrid-connectedelectrolysiswillbebluehydrogenfrommethanereformingwithCCS.Inafullycompetitivemarket,thevariablecostofhydrogenproducedfromgrid-connectedelectrolysis(i.e.,thecostofelectricity)cannotbehigherthanvariablecostofhydrogenfrommethanereformingwithCCS(i.e.,thecorrespondingcostofgas).Thismeans,inregionswithcheapgaslikeNorthAmerica,atcurrentelectricityprices,thecompetitiveannualoperatinghourswouldbelessthan2000outof8760hoursinayear.Thismaybeinsignificanttodayascompetitionislimited.Butoverthenext30years,mosthydrogenconsumerswillhaveaccesstohydrogenfromvariousproductionroutesandcompetitionwillbeamajorissue.Fortunately,withincreasedVRESinthesystem,thenumberofhourswherehydrogenfromelectricitywillbecheaperthanbluehydrogenincreasetowards2050.Consequently,althoughweseeatightrangeofannualoperatinghoursin2030sofbetween2000-4000hours,thisexpandsto4000-7000inmanyregionstowards2050.Hydrogen:forecastdemandandsupplyCHAPTER576DNV—Hydrogenforecastto2050Figure5.5showslevelizedcostanditscomponentsinfourselectedregions,whichillustratethetrendsexplainedintheprecedingparagraphs.Thewidespreadincostsbetweenregionsisduetofactorssuchasdifferencesinlocalconditions,fuelprices,availabilityofsupport,andcostofcapital.ThedifferencesinregionalcostsinfluenceregionalproductionmixesasshowninFigure5.6.Table5.1summarizesthecapacityofallelectrolysers,dedicatedorgrid-connected,merchantorcaptive,in10worldregions.GreaterChina,withitshighhydrogenInputstothelevelizedcostcalculationsareasfollows.Naturalgasprice(allinUSD/MMBTU):3.1(2020),4(2030),5(2050)inNAM;10.5(2020),12.4(2030),13.5(2050)inEUR;5(2020),6.6(2030),7.6(2050)inMEA;8.8(2020),9.4(2030),11.4(2050)inSEA.Electricitypriceisdeterminedusingthehoursatwhichelectrolysersoperate,assuming25%surchargeoverwholesalepricetocovergridchargesandotherTSOexpenses.Resultingelectricityprices(allinUSD/MWh):33.8(2020),29.8(2030),6.5(2050)inNAM;42.4(2020),54.5(2030),16.9(2050)inEUR;38(2020),51.5(2030),12(2050)inMEA;69.3(2020),75.7(2030),10(2050)inSEA.Grid-electrolysisoperatinghoursdeterminedasaweightedaverageofoperatinghoursminimizingtotallevelizedcost(dominantfactorin2020)andhourswhereelectricitypricemakeselectrolysischeaperthanmethanereformingwithCCS(dominantfactorin2050).Resultingannualoperatinghours:8753(2020),5718(2030),5856(2050)inNAM;8452(2020),4632(2030),7803(2050)inEUR;8505(2020),8682(2030),4034(2050)inMEA;5058(2020),6764(2030),5194(2050)inSEA.Methanereformingannualoperatinghours:8332.Annualoperatinghoursfordedicatedrenewablesincreasewithimprovedsolartechnology(tracking,bifacialpanels)andturbinesize.Ratioofpoweroutputtoelectrolysercapacityisassumed0.7forsolar,1.0foronshorewind.Annualoperatinghoursforsolar(2020-2050):2300-2600inNAM;1600-2000inEUR;1800-2600inMEA;1700-1900inSEA.Annualoperatinghoursforonshorewind(2020-2050):3500-4300inNAM;3050-3950inEUR;3400-4150inMEA;2550-3750inSEA.Lifetimeforhydrogenproductioncapacity25years.LifetimeforsolarPV:30years.Lifetimeforonshorewind:30-35years.Electrolyserstacklifetime:72000hoursin2020,80500hoursin2050.CAPEXformethanereformingwithCCS1440USD/(kgH2/day)in2020.CAPEXforelectrolysisincludingstack:880USD/kWin2020.CAPEXforsolarPV(inUSD/kW)in2020;994inNAM,833inEUR,823inMEA,760inSEA.CAPEXforonshorewind(inUSD/kW)in2020:1500inNAM,1610inEUR,1380inMEA,1220inSEA.Additionalengineering&procurementcostisassumedas35%foralltechnologies.Learningrateformethanereforming:11%,forCCSCAPEX:13%,forelectrolysers:15%in2020reducingto12%in2050,forsolarpanels:26%in2020reducingto16%in2050;forwindturbines:16%.Discountrate:11%/yr(2020),7.5%/yr(2030),5.5%/yr(2050)inNAM;10%/yr(2020),7%/yr(2030),5%/yr(2050)inEUR;13%/yr(2020),10%/yr(2030),8%/yr(2050)inMEAandSEA.Highdiscountratesin2020reflecttheriskpremiumofhydrogenproduction.AnnualH2productionOPEX:3.3%/yrofH2productionCAPEXformethanereformingwithCCS;3%forelectrolysers.ShorttermH2storageandtransportcost:0.15-0.11USD/kgH2formethanereforming,0.1-0.3USD/kgH2forgrid-connectedelectrolysis,0.4-0.3USD/kgH2forsolarelectrolysis,0.5-0.4USD/kgH2foronshorewindelectrolysis.Specificfeedstockintensityformethanereforming:145.3MJ/kgH2.Specificfuelintensityformethanereforming:11.5MJ/kgH2.Specificelectricityintensityformethanereforming:5.18MJ/kgH2,forelectrolysers:reducingfrom185.5MJ/kgH2in2020to173MJ/kgH2in2050.Emissionintensityofmethanereforming:57.3kgCO2/GJofnaturalgas.Costofcarboncaptureandstorage(allinUSD/tCO2):58(2020),51(2030),49(2050)inNAM;109(2020),85(2030),81(2050)inEUR;60(2020),56(2030),52(2050)inMEA;76(2020),65(2030),65(2050)inSEA.Carbonprice(allinUSD/tCO2):10(2020),25(2030),70(2050)forNAM;30(2020),95(2030),135(2050)forEUR;0(2020),10(2030),30(2050)forMEA;1(2020),25(2030),50(2050)forSEA.CAPEXsubsidy:25%(2020),50%(2030),25%(2050)inNAM,EUR;13%(2020),10%(2030),8%(2050)inMEA;0inSEA.Allnumbersareformerchanthydrogen,reflectingtheaverageconditionsintheregion.77demandandrelativelyhighgasprices,leadsthewayinelectrolysiscapacity.AsexplainedinChapter3,thecurrentcostofelectrolysersinChinaissignificantlycheaperthanelsewhereintheworld.BNEF’srecentestimates3foralkalineelectrolysersareaslowasUSD300/kW.However,theyarealsoknowntobelessefficientandhaveshorterlifetimes4.Weexpectsomeimprove-mentsinthesedisadvantages,whichwillhelpChinatobuildthelargestelectrolysercapacityintheworld.However,technologydiffusionfromChinatootherregionswillbelimitedasshowninChapter3.Europe,withitsambitioustargetsfromtheEUandtheUK,willbealsoaheadoftheotherregions,especiallyuntil2030.InEurope,weforecast111GWofelectrolysercapacityin2030,producing6.6Mthydrogenattheregionaloperatinghoursaverageof3,000hours/yr,fallingshortofthe10Mtambitionby2030initsREPowerEUplan.TABLE5.1ElectrolysercapacitybyregionUnits:GW203020402050NAMNorthAmerica10120305LAMLatinAmerica42783EUREurope111351574SSASub-SaharanAfrica41666MEAMiddleEast&NorthAfrica835147NEENorthEastEurasia31322CHNGreaterChina2588991248INDIndianSubcontinent1880263SEASouthEastAsia327123OPAOECDPacific45180244World46517483075Hydrogen:forecastdemandandsupplyCHAPTER578DNV—Hydrogenforecastto20505.2HydrogenasfeedstockAsshowninFigure5.7,inthenextfewyears,de-carbonizationofnon-energyhydrogenovershadowshydrogenforenergyandprovidesvaluablelearningandcatalysationforuptakeofgreenandbluehydrogenforenergyusefromthelate2020s.Hydrogenwill,however,alsoincreasinglybeusedasafeedstocktoproduceproductslikeammoniaande-fuelswhichwillthenbeusedforenergypurposes.Thissectionconsidershowmuchhydrogenisusedasfeedstocktoindustrialprocessesandtootherproducts,whichmaythenbeusedforeitherenergyornon-energypurposes.Hydrogenasafeedstockisusedinsixmajorcategories:inoilrefineriesfordesulfurizingdieselandfueloil,productionofammonia,productionofmethanolandotherchemicals,productionofdirectreducediron,productionofammoniaasfuel,andproductionofe-fuelssuchase-methanolande-kerosene.Thelasttwodemandcategoriesdonotyetexistassuch.Despitethis,weforeseethathydrogenderivativesusedasenergycarrierswillbecriticalinsatisfyingtheenergydemandinhard-to-abatesectorssuchasaviationandmaritimeinthefuture.Intotal,195MtH2/yearisneededasfeedstockforbothnon-energyandenergyusesin2050;inotherwords,amorethandoublingofdemandfrom2020.Currently,twomajorneedsforfeedstockhydrogenareforoilrefineries,andforproducingammoniaforfertilizers.Ourforecastshowsthatwhileinabsolutequantitiesthedemandforhydrogeninthesesegmentsseesaslightdecrease,therewillbeaburgeoningneedforderivativestobeusedforenergypurposes.Infact,by2050,thehydrogendemandforproducinge-fuelsandammoniafuelwillbemorethanthatofthecombineddemandforhydrogenforoilrefineriesandfertilizerproduction.Figure5.8showstheevolutionofthefeedstockhydrogenproductionroutes.Atpresent,almostallhydrogentobeusedforindustrialprocessesisproducedeitherthroughcoalgasification,79oil-basedsteamcrackingormethanereforming.Aminisculeamount(lessthan1%)offeedstockhydrogenisproducedbygrid-connectedelectrolysis.Wepredictthatthecurrentproductionroutesforhydrogenasfeedstockwillundergoadramatictransitionby2050(Figure5.8).CO2-intensiveproductionroutes,suchasmethanereformingandcoalgasificationwilllosetheirdominantpositions,replacedbymethanereformingcoupledwithCCS,grid-connectedelectrolysisandelectrolysiscoupledtodedicatedrenewables.RisingcarbonpricesinregionssuchasEurope,willtriggerfasterhydrogenuptakeandwillkick-startthetransitionfromcarbon-intensiveproductionroutestolow-carbonproductionroutes.Thereisregionaldifferentiationontheproductionroutesofhydrogen.Forexample,inMiddleEast&NorthAfrica,methanereformingisthedominantproductionrouteevenin2050,witha52%productionrouteshare.Thisistiedtotherelativelylowercarbonprice-levelintheregioncoupledwithlowercostofproductionofnaturalgas.Ontheotherhand,inOECDPacific(36%)andEurope(42%),therenewables-basedelectrolysisproductionroutewillhavethemajorshare,duetohighernaturalgaspricesandcarbonprices.Inadditiontoregionaldifferentiation,wealsoforecastdifferentiationofproductionroutesacrossthedifferentfeedstockhydrogencategories.Weanalysethisundertwobroadcategories:hydrogenforderivatives,andforoilrefineriesandproductionofdirectreducediron(DRI).HydrogendemandforderivativesTotalhydrogendemandfortheproductionofderivativeswillbe147Mtin2050.Ofthis,two-thirdswillbeforhydrogenderivativesusedasenergycarriersinthetransportsectorandtherestwillbeforproductionofammoniaandotherchemicals(e.g.methanol).Forthetransportsector,wedonotforeseebrownandgreyhydrogen-basede-fuelsandammonia(Figure5.9).Instead,ourforecastshowsthatbluehydrogenwillcometodominatethisdemandsegment,especiallywithitsprevalenceinregionssuchasNorthEastEurasiaandNorthAmerica,whichhaveaccesstorelativelycheaper,domesticallyproduced,naturalgas.HighernaturalgaspricesandtheearlieruptakeofdedicatedrenewablesforhydrogenleadtohalfofEurope’shydrogenforthisdemandsegmentcomingfromdedicatedrenewablesin2050.Totalhydrogendemandfortheproductionofderivativeswillbe147Mtin2050.Ofthis,two-thirdswillbeforhydrogenderivativesusedasenergycarriers.Hydrogen:forecastdemandandsupplyCHAPTER580DNV—Hydrogenforecastto2050Unlikeinhydrogenderivativesusedforenergy,weforecastmethanereformingpersistingtoalargeextent(39%)intheproductionofammonia,methanolandotherchemicals,especiallyinfossil-fuelrichregionssuchasMiddleEast&NorthAfricaandNorthEastEurasia,evenin2050(Figure5.10).HighercarbonpricesinregionssuchasEuropeandNorthAmerica,andrelativelycheaperCCScostsforammoniaproductionalsoensurea24%shareofbluehydrogenintheproductionofammoniaandotherchemicals.Coalgasificationislikelytoloseitscompetitivenessasaresultofhighercarbonprices,intheproductionofammoniaandotherchemicals.Itsshareinproductionreducesfrom32%in2020to8%in2050.CoalgasificationtechnologyisprimarilyusedinChina,whichwillstillbethecasein2050.CoalgasificationcoupledwithCCSwillhavea5%sharein2050,primarilylocatedinGreaterChina.Contrarily,electrolysersrunningondedicatedrenewableelectricityincreasetheircompetitivenessstartingfromlate2030sandby2050achievea13%shareofproduction.Thecost-learning-rateeffectsreducethelevelizedcostofH2producedviaelectrolysiscoupledtodedicatedrenewablepowergeneration,whichinturnspurthegrowingshareinH2productionforammoniaandotherchemicals.Hydrogenforoilrefineriesanddirectreducediron(DRI)ThetotaldemandforhydrogeninoilrefineriesandDRIhadashareof43%oftotalhydrogendemandinindus-trialprocessesin2020.Thisreducesto25%in2050,largelyduetotheburgeoningdemandforhydrogenderivatives.Nevertheless,inabsolutenumbers,hydrogendemandinoilrefineriesincreasesfrom37Mtto41Mtin2030andthenshowsaslightdeclineto34Mtby2050.Hydrogenisusedfordesulfurizingdieselandfueloil.Despitetheworld’soildemandreducingfrompresentdaysto2050,morestringentair-qualitystandardsonfuels,acrossallregions,leadtothedemandforhydrogenbeingmaintained.Historically,mostofthehydrogendemandinoilrefinerieshasbeensatisfiedbyhydrogenproducedwithintherefineries(captiveproduction),duringsteamcrackingprocessesorbydedicatedon-siteproduction.Weforeseethistrendcontinuing,with47%ofhydrogenforoilrefineriesbeingproducedthroughtheoil-basedproductionroutein2050.Outofthis47%,8%willbecoupledwithCCS.Another39%willbefrommethanereformingandmethanereformingcoupledwithCCS.Lessthan15%isthroughelectrolysis,bothgrid-con-nectedanddedicatedrenewables-based.Thehistoricaldemandforhydrogeninthesteelmakingprocesshasbeenverylittle,andin2020,thedemandwas5Mt.Thisisbecausehydrogenismostlyneededasareducingagenttomakespongeironviatheelectricarcfurnace(EAF)route,whoseshareislowwhencomparedtotheconventionalsteelmakingprocess.Nevertheless,weforeseetheDRI+EAFsteelmakingroutebeingfavouredinthefuture,asawaytodecar-bonizesteelproduction,whichinturnalmosttriplesthedemandforhydrogeninthisdemandsegment.Atpresent,themajorityoftheH2forDRIisproducedthroughmethanereforming.Weforeseethistrendcontinuing,with72%ofthedemandof13.5Mtbeingproducedviamethanereformingin2050.Nevertheless,weproject500tonnesofH2forDRIproducedthroughelectrolysisinEuropeby2050.815.3Hydrogenasenergy5.3.1DemandforhydrogeninbuildingsTheuptakeofhydrogeninbuildingsisexpectedtoberelativelylimited.Amongend-usesectors,usinghydrogenforspaceand/orwaterheatinginbuildingsislowerinpriorityandincost-efficiencythansectorswherehydrogen(orhydrogenderivatives)iscurrentlytheonlyfeasiblepathwaytowardsdecarbonization,suchasinmaritime,long-haulaviation,andsteelmaking.Thelimitedprojecteduptakeofhydrogeninbuildingsisexplainedbycomparativeefficiency,costs,safety,andinfrastructureavailabilityinrelationtocompetingtechnologies,mainlyelectricheatpumpsanddistrictheating.Nevertheless,abuildingsfuelmixthatincludeshydrogenalongsideelectricityforheatpumpswillhelpbalanceoutpotentialseasonalpeaksinpowerdemand.5However,evidencesuggeststhathydrogencanreadilybeblendedintoexistingnaturalgaspipelineswithashareofupto20%byvolume,withoutaneedforretrofittingexistingappliancesorpipelines.6Initialblendingofhydrogenintonaturalgasnetworkscaninducesubstantialanddependabledemandforhydrogeninitsearlydeployment,providinganimpetustowardsacceleratedlearningandreducedcostofhydrogenduetotheoperationoftheself-reinforcingvirtuouscyclesofcost-learningdynamics.Overtime,thiswillslowlymaketheuseofpurehydrogeninbuildingseconomicallyviableinsomeregions.Usingpurehydrogeninbuildingsisrelativelycostlyasitwillrequirenewhydrogenboilersorsubstantialretrofittingtoexistingboilers,aswellasnewpipelines.Forinstance,inEurope,wherehydrogenisexpectedtotakeoffbeforeotherregions,thelevelizedcostofheatingbyhydrogeniscurrentlyovertwiceasmuchasusingnaturalgas,andby2050,whenheatpumpswillbethemosteconomicoption,heatingbyhydrogenwillbeabout50%morecostly.Hydrogencanalsocauseembrittlementandsafetyrisksinexistingsteelgaspipelinesandthereforedistributionpipeworkwillneedtobereplacedbypolyethylenepipes.Suchinvestmentscouldmakeeconomicsenseforrelativelylargecommercialbuildingsorfordistrict-heatingnetworks,butnotforsmallerresidentialunits.Therefore,hydrogenuseinbuildingswillmostlybeinblendedformduringtheearlydeploymentphase.Inourforecast,useofpurehydrogeninbuildingsonlyovertakesblendedhydrogenduringthelate2030s(seeFigure5.11).Hydrogen:forecastdemandandsupplyCHAPTER582DNV—Hydrogenforecastto2050Inouranalysis,weprojectanuptakeof1.9EJ/yr(~15.8MtH2/yr)ofhydrogeninbuildingsby2050,constitutingamere1.3%ofthetotalenergydemandinthebuildingssector.Thelargestsharesofthedemandwillcomefromspaceandwaterheating(36and38%,respectively),asshowninFigure5.12.Weexpecthydrogentohaveaslightlyhighershareoftotaldemand(about3-4%)inspaceandwaterheatingthaninthebuildingsectorasawhole.However,theshareofhydrogenisstillminusculecomparedwiththeshareofnaturalgaswhichaccountsforoverathirdofbuildingsheatingdemandby2050.Useofhydrogeninbuildingswillbeconcentratedinfourregionswithexistingnaturalgasinfrastructuresandwithaccesstorelativelymoreaffordablehydrogen—NorthAmerica,Europe,GreaterChinaandOECDPacific.Hydrogenuseinbuildingswillmostlybeinblendedformduringtheearlydeploymentphase.Purehydrogenwillovertakeblendedinlate2030s.5.3.2DemandforhydrogeninmanufacturingVariousindustrialheatapplications,suchassteamcrackersandcementkilns,remainchallengingtodecarbonizeviadirectelectrification.Insuchcontexts,hydrogencanbeusedinsteadoffossilfuelstogeneratehigh-temperatureheat.However,atpresent,negligiblequantitiesofhydrogenareusedforindustrialhigh-heatprocesses.Thisisbecausehydrogenremainsanexpensivealternativefuel,uncompetitiveagainstconventionalfossil-fuelledtechnologies,andlosingouttobioenergyinmostcontextsevenunderhighercarbonprices.Nevertheless,low-carbonhydrogenisexpectedtoplayanimportantroleinthemanufacturingsectorby2050infront-runnerregions,suchasGreaterChinaandEurope.Intheironandsteelindustry,hydrogenisalreadywidelyused(insteadofcarbon)forthereductionofironore(seeSection5.2).Thereplacementratioofhydrogentocoalinironorereductionisexpectedtoincrease.Besidesbeingusedasreducingagent,hydrogenorhydrogen-richgasesalsoshowgreatpotentialasfuelsinsteelmaking.Hydrogenasblendedgasisalreadyusedforheatinblastfurnaceswhichdonotrequirehighpurityhydrogen.Oncehydrogenbecomesavailableatacompetitiveprice,expandingtheuseofpureorblendedhydrogenalsohasthepotentialtoincreaseefficiencyduetoitshighercalorificvaluethanpresentlyusedcokegasesinthesteelindustry.7Withinthebasematerialssubsector,intheproductionofnon-ferrousmetalssuchascopper,electrificationtowardsdecarbonizationischallengingsincefossilfuelsarenotonlyusedforheatingbutalsoasreducingagent.Hereagain,aswiththeproductionofiron,hydrogenholdssignificantpromiseasitcanalsoactasreducingagent.8Inthepaperindustry,pilotprojectsusinghydrogentomakelow-carbonpaperhavealreadystarted.Essity,aSwedishpapermillmanufacturer,hasstartedapilotplantinGermanyusinggreenhydrogenfortheenergy-intensiveoperationofapapermachine.9Unliketheaforementionedhighheatprocesses,thecementsectorisnotexpectedtobecomeanimportanthydrogenusersincehydrogenisnotconsideredanattractivedecarbonizationoption.ThisisbecauseCCSis,inanycase,amustinthecementindustry,with60%of83totalemissionsbeingprocess-related,emittedasaresultofthecalcinationprocessincementproduction.Inaddition,theflyashresultingfromburningfossilfuelsisusedasaningredientwhichaddsstrengthtotheresultingconcretefromthecement.Therefore,cementplantsareexpectedtocontinuetouselow-costfuels(suchascoal,petcoke,orwaste-basedbioenergy)fortheirenergy-intensiveclinkerproductionprocesswhilecapturingbothcombustionandchemicalprocessemissionsviaCCS.Nevertheless,therehavebeenrecentpioneeringdemonstrationprojectswhereahydrogenkilnhasbeendesignedandtestedtoproducecarbon-neutralcement,e.g.,byGermancementproducerHeidelberginaUKfactory.10Hydrogen:forecastdemandandsupplyCHAPTER584DNV—Hydrogenforecastto2050Inourforecast(Figure5.13),demandforhydrogenasanenergycarrierinmanufacturingissettogrowgraduallyuptonearly10.1EJ/yr(~84MtH2/yr)by2050,amountingtoaround7.0%oftotalmanufacturingenergydemand,andaround7.4%ofglobaldemandforhydrogenasenergycarrier.Intermsofdirectuseofhydrogen(asopposedtoblendedhydrogenorhydrogenderivatives),manufacturingwilldominateusagewithanover90%shareuntil2030andover65%sharein2050.Thelargestshareofhydrogendemandinmanufacturing(2.8EJ/yror28%oftotal)comesfromtheironandsteelindustry.Thisisinadditiontothenon-energydemandofhydrogenusedfordirectreductionofironat1.6EJ/yr(~13.5MtH2/yr)(seeSection5.2).Followingironandsteel,base-materialsproduction(whichconsistsofsubsectorssuchaspaper,pulpandprint,woodandnon-ferrousmetals)andtheplasticsandotherpetrochemicalsubsectorswillbethenextlargesthydrogenconsumersinmanufacturing,withashareofaroundone-fifthofthetotaleach.Themanufacturedgoodssubsectorcomesnextwitharound1.8EJ/yr(~15MtH2/yr)by2050,withconstructionandminingfollowingwith1.3EJ/yr(~11MtH2/yr).Asexplainedearlier,hydrogenuseincementproductionisprojectedtoremainnegligible.Regionally,ourforecastshowshowtheuptakeofhydrogenforindustrialhigh-heatprocesseswillbemostnotableinregionswhererelativelyinexpensivehydrogenwillbeaccessible.By2050,thetopfourconsumerregionsofhydrogenwithinmanufacturingareexpectedtobeGreaterChina,Europe,theIndianSubcontinent,andNorthAmericawithsharesof23%,20%,15%and13%,respectively(Figure5.14).HydrogenisnotexpectedtohaveanysignificantpenetrationwithinmanufacturingintheNorthEastEurasiaandSub-SaharanAfricaregionsduetoitsunfavourablecostcompetitivenessagainstfossilfuelsasaresultoflowcarbonpricelevelsintheseregions.Insummary,whilethereisgreatpotentialforhydrogenindecarbonizingenergy-intensiveindustrialprocesses,providingthequantitiesofaffordablelow-carbonhydrogennecessarytomeetdemandwillbethemainbottleneck.Amongthesubsectors,ironandsteelandamongtheregions,Europewillspearheadgrowthindemandforhydrogenforenergypurposesinthemanufacturingsector.Aswithothersectors,weforeseeahighershareofblendedhydrogeninitiallyduringtheearlydeploymentphase,whichwillovertimegivewaytopurehydrogenusage.855.3.3DemandfortransportMaritimeMaritimetransportisbyfarthemostenergy-efficientmodeoftransportationintermsofenergy/tonne-kilometre.Nearly3%oftheworld’sfinalenergydemand,including7%oftheworld’soil,ispresentlyconsumedbyships,mainlybyinternationalcargoshipping.ThepresentInternationalMaritimeOrganization(IMO)strategytargetsa50%absolutereductioninCO2emissionsfrom2008to2050.Comparedwith2018whenthestrategywasestablished,thereisnowmountingpressurefromregulatorsaswellaspartsofthemaritimeindustryforthestrategytobefurtherstrengthened,andIMOplanstorevisethestrategy.OuranalysisexpectsthatthepresentIMOstrategyof50%reductionwillbemetdrivenbythedecarbonizationpush.Themainlevertowards2050willbeamassivefuelswitchingfromoiltonaturalgasandfurthertolow-andzero-carbonfuelssuchasammonia,e-methanol,e-methaneandvariousformsofbiofuel.Improvedfleetandshiputilization,windassistedpropulsion,on-boardCCS,aswellasenergy-efficiencyimprovementswillalsocontributetoemissionsreduction.Thepotentialforelectrificationinthemaritimesectorislimitedtoshorepowerwhenberthingaswellastheshort-seashippingsegment,astheenergydensityofbatteriesbothtodayandinthefutureislikelytoremaintoolowtoplayanysizableroleindeep-seashipping.Therefore,otherlow-andzerocarbonfueloptionsareneeded.IntheforthcomingMaritimeforecastto2050(DNV,202211)wewilldetailvariousmaritimedecarbonizationpathways,boththosecomplyingwiththepresentIMOGHGstrategy,andthosethathaveanetzeroin2050approach.Forthepurposeofthishydrogenforecast,wehavechosenacombinationofsomeofthesemaritimescenariostoarriveatalikelyfuture,whichincludesamodestammoniaande-fueluptakeinthecoming10years.Asthereiscurrentlymarginaldemandforhydrogenininternationalshipping,bunkeringinfrastructurebuildoutisanextensivetaskanditstimingwillinfluenceuptake.Purehydrogen,incompressedorliquidform,isnotlikelytohavelargescaleuseininternationalshipping,mainlyduetoitslowenergydensity,withsafetyconcernsandlackofinfrastructureasadditionalchallenges.Whilehydrogeninpureformwillnotbeasignificantfuelinmaritimeshipping,itsderivativeswillbe.Hydrogenisneededtoproducefuelssuchasammoniaore-methanolHydrogen:forecastdemandandsupplyCHAPTER5ConceptdesignforNorway’sGreenShippingpilotproject‘Ammonia-poweredtanker’,ledbyEquinor.ImagebyandcourtesyofBreezeShipDesign.86DNV—Hydrogenforecastto2050andtheirwidespreaduseinshippingwillcreateasignificantdemandforlow-carbonhydrogen.Methanolcanbeproducedfromalargevarietyoffeedstocksrangingfromcoal,naturalgas,biomasstorenewableelectricity.However,e-methanolandbio-methanolarethemostlikelyshippingoptions.Theuseofmethanolbenefitsfromsomeexistingbunkeringinfrastructure,andlowercostsforstoragetanksonships,eitherasneworretrofits,comparedwithammonia.Shipsarenowbeingbuiltthatcanusemethanolasfuel,butavailabilityofsufficientrenewableelectricityatalowcostwillbeamajorchallengetowidespreaduptakeofbothe-methanolande-ammonia.Towards2050,theavailabilityoflow-costsustainableCO2neededtoproducee-methanolmayalsobeachallenge.Ourforecastofthemostlikelyhydrogenfutureto2050includese-methanoluptakeinshippingof360PJ(2%ofshippingfuelmix)in2030,1400PJ(10%)in2040and1800PJ(14%)in2050.Low-carbon(blueorgreen)ammoniaisanotherhighlypromisingalternativefuelinmaritimeshippingtoachievedecarbonization,althoughitalsohasseveralchallenges.Similartoe-methanol,ammoniacanuselargepartsoftheexistinginfrastructure,buthasthesamechallengeswithsignificantlyhigherproductioncoststhanthepresentalternatives.Ifproducedfromrenewableenergy,theconversionlossesaresignificant,andwewouldneedamassiveramp-upofrenewablepower.CapturingCO2fromnaturalgasduringammoniaproductionis,however,relativelysimple,andthedominantshareofammoniabeingusedinshippingintheforecastwilllikelybeblueammonia.UseofammoniabyshipshastoxicitychallengesasdescribedinChapter1,butwebelievethiswillbesolvedandthattherewillbelarge-scaletransporttakingplacefromcheapproducingregionstotheglobalbunkeringhubs.Ammoniawilllikelyhavealowerinitialuptakethane-methanoluntil2040,butthenscalefastertowardstheendoftheforecastperiod.Thishydrogenforecast,whichlooksatthemostlikelyfuture,includesammoniauptakeinshippingof43PJ(0.3%ofshippingfuelmix)in2030,1100PJ(8%)in2040and4500PJ(35%)in2050.AviationTheaviationindustryemitsabout2.5%ofglobalcarbondioxideemissionstoday,anddecarbonizationisofhighimportance.Whileothersectors,suchaspowerproductionandroadtransportation,havetakenstepstowardsdecarbonization,emissionsfromaviationhavenotdecreasedsignificantlyinthelastdecade,exceptindirectlyasaresultofcovid-relatedimpactsoverthelast3years.Constantimprovementonenergyefficiencyofengines,fuselagesandrouteoptimizationwillnotbesufficient,andaviationfuel-mixchangesarethereforeessentialtodecarbonizethesector.Fromatechnologystandpoint,aviationhasrelativelylimitedoptionstoreplaceoil-basedfuelandisfrequentlytermedahard-to-abatesector.Batterieswillnotworkforlong-haulflightsasbatteryweightmakeselectrificationarealisticoptionforpropulsiononlyintheshort-haulflightsegment.Thetworemainingroutesinvestigatedandexpectedtochangetheaviationfuelmixarepurehydrogenandsustainableaviationfuels(SAFs),includingbiomass-basedfirstandsecondgenerationfuelsaswellaspower-to-liquid-/e-fuelsbasedonhydrogen.Commonforallalternativesolutionsisthatcosts,bothshorttermandtowards2050,willbehigherthancurrentoil-basedfuel.Allfuel-andtechno-logicalchangesarethereforeexpectedtocomeastheresultofregulatoryandindustry-supportedforcessuchas:theReFuelEUAviationinitiative,aspartofthe‘Fitfor55’legislativepackage,whichwillobligeblendingofincreasinglevelsofSAFs,highercarbonpricingfromremovaloffreeallowancestoairlinesfrom2027intheEUemissions-tradingscheme(EUETS),aswellasnetzeropledgesfromairlines.PurehydrogenasafuelinaviationpossessessomeadvantagesoverSAFs.Producedfromrenewablesources,ahydrogenvaluechaininaviationcouldguaranteealmostzeroemissiontransport,assumingtheproducedby-products(watervapourandNOxemissions)aretreatedcarefully.Theanticipatedpenetrationofhydrogeninotherindustriescouldpotentiallyreduceoverallproductioncostsandincreasehandlingandsafetyknowledge.Consequently,theaviationindustryisnowinitiatingextensiveresearchintohydrogenasapossiblefuturefuel,whichislikelymostpromisingfor87medium-haulflights.Thefirstflightofanactualcommercial-gradeaircraftpropelledbyhydrogencapableofcarryingpassengerswasconductedin2020inaretrofittedPiperM-classaircraft.Thisindicatesthatamorewidespreaduseofhydrogeninaviationisstillalongwayoffandweexpecttoseehydrogen-poweredairplanesinregularcommercialuseonlyafter2040inthefirstfewregionssuchasEurope,NorthAmericaandGreaterChina.Long-haulflightscouldpotentiallybeservedbyhydrogenpropelledaircraftaswell.However,itislesssuitablefromatechnicalperspectiveduetothelowenergydensity,andthehydrogentanksneededforthelargeamountofhydrogenwouldrequireaverydifferentairplanedesignwithhighercostsperpassenger.Inaddition,theimplementationofnewdesignstakesatleast20yearsduetothelongoperationtimeofaircrafts.Besidesaircraftdesignandinfrastructureadjustments,handlingandsafetyregulationwouldneedtobeadjustedaswell,andwillneedtoevolveinsynchronywithtechnologydevelopments.Allofthesebarrierstoawidespreadimplementationofpurehydrogeninaviationbeforemid-centuryresultinarelativelysmallshareforpurehydrogeninthesector’senergydemandby2050ofaround4%,whichequalsabout1000PJ(8.4MtH2/yr)(Figure5.15).Aboutthreetimesmoreisprojectedtobesuppliedbye-fuels,aformofSAF.SAFscanbebiobasedaswell,whichisthedominantpathforSAFsthroughoutourforecast.However,inthisanalysiswelookathydrogen-basedSAFs.Thoseliquide-fuelsfromrenewablepowerarebettersuitedfordecarbonizingtheaviationsectorbecausetheyareaviabledrop-infuel,usingexistinginfrastructureandcombustiontechnology.Wewillseesmallsharesofe-fuelsinaviationfromthe2030sonwards,howeveraswithhydrogen,significantuptakewillonlyhappeninthe2040s.Itisworthconsideringwhytherehasbeensolittleuptakeofe-fuelstodate.Onereasonisthattheuseofe-fuelsisonlyenvironmentallybeneficialifrenewablehydrogenisusedasthebasis,whichrequiresmassiveamountsofrenewableenergy.Awideruseofe-fuelsisHydrogen-electricaviationsolutionsproviderZeroAviainitiatedatestinganddemonstrationprogrammeofa19-seataircraftintheUSinMay2022(Image,courtesyZeroAvia)Hydrogen:forecastdemandandsupplyCHAPTER588DNV—Hydrogenforecastto2050achievableonlywithanimmensescale-upofrenewablepowerproduction,becausethereareseveralofftakersofrenewableelectricity,suchasroadtransport,buildingsheating,etc.Moreover,thecurrentcostdifferenceofafactoroffourtofive,comparedwithfossilkerosene,needstobereduced.Weighingthedifferentadvantagesofhydrogenande-fuelsagainsteachother,wewillseethreetimesmoree-fuelsthanpurehydrogenintheaviationsector,representinga13%share,mainlyduetothefactthate-fuelsasatypeofdrop-infuelcanservealltypesofflights,whereashydrogenislimitedtomainlymedium-haulflights.Incombination,theshareofpurehydrogenandhydrogen-basede-fuelrepresentsaround17%ofenergyuseintheaviationsectorby2050.Ofthe3EJ/yrofe-fuelsthatwewillseein2050,afifthisconsumedinbothNorthAmericaandGreaterChina,andatenthinbothEuropeandSouthEastAsia.NorthEastEurasiaandSub-SaharanAfricawillseeonlymarginaluptakeofe-fuels.Hydrogenmighthaveitsroleinhybrid(incombinationwithbattery-electric)orpurehydrogenpropelledintra-continentalshort-tomedium-haulflights,butisoutcompetedbySAFsmainlyduetothefactthatlongaircraftlifespansslowdowntheuptakeofnewaircraftandenginedesigns.RoadTransportElectricpassengervehicles,bothbatteryelectricvehiclesaswellasplug-invehiclesmakeupabout1%oftheglobalpassengercarfleetatthemoment.Bymid-century,electricitywilldominatepassengervehiclepropulsion,outcompetingeveryothersource.Despitebeingresponsibleforlesswheelsontheroadbymid-century,fossilfuelswillstilltakeupthelion’sshareofprimaryenergyusedinroadtransport(Figure5.16)becausetheyareveryinefficient.Wheredoesthatleavehydrogen?Roadtransportiscurrentlyheavilydependentonoil-basedfuels(92%),withaminorshareofbiofuels(3%)andnaturalgas(4%)asshowninFigure5.16.Electrificationiskeytoreducingroadtransportemissions,withonlyminorrolestobeplayedbybiofuelsandnaturalgas.Supportedbypush-and-pullstrategies,theuptakeofelectricvehicles(EVs)—whichweuseasanumbrellatermforbatteryelectricvehicles(BEV)andfuel-cellpoweredvehicles(FCEV)—hasbeguninmanypartsoftheworld.Ongoingpolicysupportsuchasemissionsreductiontargetsandbansofsalesofinternalcombustionenginevehicles(ICEs)willfurtherdriveEVuptakeandthusreduceoverallcosts.FCEVscanreachanoverallwell-to-wheelefficiencyofbetween25–35%,significantlylowerthanthe70–90%forBEVs.Furthermore,FCEVpropulsionismorecomplicated,andthusmorecostly,thanthatofBEVs.Forthesereasons,majorvehiclemanufacturershavefocusedalmostexclusivelyonBEVmodelsforpassengertransport.Todate,fewerthanfiveFCEVmodelsforpassengertransporthavebeenreleasedcommercially,comparedwithhundredsofBEVs.AlloftheaboveleadstoaglobalshareforBEVsof85%ofnewcarsalesin2050,versusonly0.01%FCEVs.Regardinglightcommercialvehicles,theshareswillbe64%and4%,respectivelyin2050.Whereasthesituationforpassengertransportisclear—itisallaboutdirectelectrification—itisdifferentforheavy-dutyandlong-distancecommercialvehicles.Light-dutycommercialvehicleswillmainlybepoweredbyelectricity,asthesamecostandinfrastructureadvantages89applyasforpassengervehicles.Inthesesegments,theupfrontinvestmentcostaswellasoperationalcostsarelowerforBEVsthanforFCEVs.Also,therecharginginfrastructureiseasiertoinstall,asaccesstotheelectricitygridiseasiertoimplementthanhydrogenrefuellingstations.Certainsub-segmentsofheavyandlong-haulcommercial-vehicletransportpresentaclearopportunityforhydrogenapplications.Weforeseebiomethane,bothpureandblendedwithnaturalgastohaveatransitionalroleinthedecarbonizationofheavytransportgivingwaytoelectricityandhydrogeninthelongrun.Heavy-dutytransport,especiallylong-haultrucking,hasadditionalneedsimpactingthefuelchoice.Inthisroad-transportsegment,thecurrentmarkethasbifurcated.WhereassomemajorOEMs(originalequipmentmanufac-turers)arebettingonbatteryelectric,othersfocusonhydrogen.Theviewonbattery-electricsolutionsforheavytransporthaschangedinrecentyearswithbatteryelectrictechnologybecomingmoreviable;andhasalsobeenimpactedbythecharging-stationdensityincreasingcomparedwiththestill-thinnetworkofhydrogenrefuellingstations.Hydrogenwaslongseenastheonlysolutiontodecarbonizeheavytrucking,butasthingsnowstand,battery-electricsolutionsarelikelytohaveadecentshareinthissegment.Also,longerrangesarenowbelievedtobeviableforelectrictrucks,butnotthelongestdistances.Asaresult,weprojecthydrogentoplayonlyaminorroleinroadtransport,namelyforheavy-dutylong-distancetrucking.Bymid-century,hydrogenwillaccountfora2.5%shareofroadtransportenergydemand,slightlylessthenbiomassandnaturalgas.Accountingforthefactthathydrogenwillbeusedinheavy-dutyandlong-distancetruckingwherefuelconsumptionisnaturallyhigher,thisstillamountstoabout2,000PJin2050(16.7MtH2/yr).HalfofthiswillbeconsumedinGreaterChinaalone,owingtothelargevehiclefleetandpolicyfocusondecarbonizedtransport,followedbyEuropeandNorthAmericaeachhavinga15%shareandOECDPacificwitha9%share.RegionssuchasSub-SaharanAfricaorNorthEastEurasiawillnotseehydrogenuptakeforroadtransportuntilmid-centuryduetoalackofsupportingpolicies,whichiskeyforhydrogenuptakeinthistransportsegment.Hydrogen:forecastdemandandsupplyCHAPTER590DNV—Hydrogenforecastto20505.3.4RoleofhydrogeninpowerandseasonalstorageHydrogenproductionfromrenewableelectricityhasalmostzerocarbonemissionsandisacleanandcost-effectivewaytovaloriseexcesselectricitygenerationfromvariablerenewableenergysources,VRES(DNV,201812).Thisexcesselectricitystoredashydrogencanpotentiallylaterbeusedtogenerateelectricityduringperiodsofhighelectricityprices.Thesituationofexcesselectricitytypicallycomesintoplayatpenetrationlevelsof25–30%ofvariablerenewablesinthetotalelectricitysupply.Historically,theelectricitysystemhasbeenshapedbythevariabilityofdemandfollowingdaily,weekly,andannualcycles,andbyconventionalpowergeneratorsrespondingtothisvariabilitybyadjustingtheirsupply.Priceshavebeensetbythemarginalcostofthemost-expensivegenerationtechnology,providingrevenueforallgenerators.However,withthegrowthofproductionfromsolarandwind,combinedwithchangingdemandthroughstorage,Power-to-Xande.g.,electrictransport,aneworderandnewruleswillemerge,pushingconventionalgenerationintoasupportingrole,indicatedbyFigure5.17andFigure5.18,usingthecaseofNorthAmericain2050.AhighpenetrationofVRESwillaffecttheelectricitymarketandhydrogenasare-conversionandstorageoption.Hoursoftheyeararesorted,lefttoright,accordingtowholesaleelectricityprice.Flexibleloadsegmentsarecapableofadjustingtheirdemandinresponsetochangesinprice.Eachdemandsegmenthasanormalizedprofilethatrepresentsregionaldemandoverayear.Theseprofilesareestablishedonthebasisofarepresentativeyearanddonotchangebetweenyears(DNV,202113).Consequently,wewillseehydrogenproductionattimesofcheapelectricityandre-conversiontopowerattimesofhigherelectricityprices.Theexistenceofelectrolysersinthepowersystemreducethenumberofhourswithzeroelectricityprice,andconsequentlyhelpsVREStechno-logiesavoidlosingprofitabilityforfurtherinvestments.MoredetailedinformationaboutthesedevelopmentscanbereadinourlatestEnergyTransitionOutlook2021,andassociatedhydrogenpositionpapers(DNV,201914;DNV,202015).Regardinghydrogenproduction,weprojectthatin2050,oneofthebiggestbuyersofcheapelectricityintheNorthAmericanelectricitymarketwillbe300GWofgrid-connectedelectrolysers.Tobreakevenwithcompetinghydrogenproductionroutes,grid-connectedelectrolysersshouldnotpaymore,onaverage,thanUSD13/MWhforelectricity.Thiscompetitionultimatelydeterminesthethresholdpriceforpower-to-hydrogen.In2050,theNorthAmericanwholesaleelectricitypriceisexpectedtodroptozeroforabout29%ofthetimewithin91ayear,becausetotalsupplyfromsolarandwindwillexceeddemand.Thus,545TWhofsolarandwindsupplywouldbecurtailed,whichrepresents11%ofsolargenerationand6%ofwindgeneration.Thisamountwouldbemuchhigherwithoutflexibilitytechnologies,particularlypower-to-hydrogenproduction,whichactslikeseasonalstoragebypurchasingexcesselectricity,andconvertingittohydrogenforfutureuseasanenergysource.Althoughthereareclearadvantagesinusinghydrogenforpeakbalancingandlong-termelectricitystorage,itneedstobeclearthatthiscomeswithsignificantenergylossesandstoragedemands.Forhydrogentobeofinterestinthepowersystem,storageiskey.Hydrogenneedstobeavailableinsufficientamountsonrequest,whichmakeslarge-scalestorageaprerequisite.Optionsforstorage,theiradvantagesanddrawbacksarepresentedinSection4.2inmoredetail.Weforeseegloballong-termstoragedemandforhydrogentoreach11Gm³in2030and136Gm³in2050.Ontheaverage,thiswillcorrespondto4-5weeks’worthofdemandforhydrogenusedforenergyin2050.8%ofthe2050capacitywillbesitespreviouslyusedfornaturalgasstorage,asnaturalgasdemandwillstarttodeclineinpartsoftheworld.Thepercentageoflong-termstoragesitesin2050thatarerepurposedfromnaturalgasstoragewillbe4%inNorthAmerica,15%inEurope,18%inGreaterChinaand24%inOECDPacific.Thinkingaboutameritorderofhydrogenapplications,re-electrificationislikelytocomelast.Intheshortterm,wewillseehydrogeninpowerproductionasaresultofblendingintothegasgridwhilelosingvalueandcontrolofthefinalenduse.Overtime,naturalgas-firedpowerplantsmighttransitiontorun100%onhydrogen.Thisoptionisattractiveincountrieswithhighsharesofgasgenerationandlessattractiveincountrieswithhighsharesofhydropower.Wewillseehydrogenbeingusedinpowerstationsfrom2030onwards,thoughinverysmallamountsandatfirstmainlyduetofeedinghydrogenintonatural-gasgrids.Later,peak-balancingincreasestheshare.OECDPacificwillbethefrontrunnerinthisdevelopment,followedbyEuropeandGreaterChina.Thesameregionswillincreas-inglyusehydrogenforelectricitygeneration,andasmallamountwillbeusedinNorthAmericafromthemid2040s.Bymid-century,weforeseethatthoseregionswillusealmost8Mthydrogenperyearinpowergeneration.Inanetzerofutureby2050,wewouldexpectanincreasedamountofhydrogeninthepowersectorduetoahighershareofvariablerenewablesinthepowersystemandanimprovedcompetitivesituationforhydrogen,aconclusionsupportedbymodelsensitivityruns.Ourtestsalsoshowthatsustainedhighgaspriceswouldalsoresultinasignificanthighershareofhydrogeninthepowermixasapeakbalanceoptioninthemediumtolongterm.Hydrogen:forecastdemandandsupplyCHAPTER592DNV—Hydrogenforecastto20506TRADEINFRASTRUCTUREAsshowninChapter4,becausethelong-distancetransportofhydrogenrequiressubstantialinfrastructureinvestments,thereareconsiderablebenefitsinkeepingtransportdistancesasshortaspracticable.Theevolutionofthenon-energyhydrogenecosystemtodateunderscoresthispoint.Amajoruseofammoniaandhydrogentodayisforfertilizerfeedstock.Transportingfertilizersismuchcheaperthantransportinghydrogen(byenergyunit),sofertilizermanufacturingtypicallytakesplaceclosetowhereammoniaisproduced.Andsincenaturalgasisthemainingredientofammonia,fertilizerproductionusuallyoccurswheregassupplyisplentiful.Thefactthatfertilizerproductionisoftensubsidized,inadditiontothefactthatfertilizerplantsareoftensituatedfarfromports,explainswhyammoniaasfeedstockseldomtravelsbetweenregions.Butthissituationissettochange.Limitingtheuseofammoniaasafueltomaritimeuses,andfurthermorerequiringsuchconsumptiontocomefromgreenammonia,willopenupaseaofpossibilities:Morethanhalfofsuchammoniawillhaveoriginatedindifferentregionsthanwhereitisconsumedanditwillbetrans-portedonkeel,asshowninFigure6.1.Thetransportofpurehydrogenbetweenregionswillberelativelymarginal.Pipelinetransportismosteconomicaliftransportedvolumesarehigh,andatmediumdistances.Shorterdistancesandsmallervolumescallfortruckingandrail—intanks,usuallyasammonia.Forlongerdistancesseabornetransportisthelogicalalternativewheredepthsand/ordistancesmakepipelinetransportuncompetitive1.However,thatrequiresenergy-intensiveandcostlyliquefactionattheexportingend,andasimilarlycostlyregasificationatimportlocations,togetheraddingUSD1.5-2/kgH2tocosts.Lessthan2%ofglobalhydrogenwillhavespenttimeonkeelin2050,andonlyabout4%willcomethroughinterregionalpipelinesasshowninFigure6.1.936.1SeaborneinterregionaltransportAsexplainedinSection4.5inmoredetail,hydrogenisagasthatcanbetransportedonkeelinthreedifferentways,allofwhichrequireliquefaction:liquidammonia,liquidhydrogen(LH2),orwithliquidorganichydrogencarriers(LOHC).Typically,theenergylossofdualconversionis20to30%ofthehydrogentransported.Allthreetechnologiesexistandmaybecomethetechnologyofchoice2.However,giventhattherealreadyexistsaglobalvaluechainforseabornetransportofammonia,andthatammoniaislikelytobethezero-emissionfuelofchoiceforinternationalshipping,thepresentanalysisassumesthatallseabornehydrogentransportisliquidammonia.Seabornetradeinammonia(NH3)takesplaceonpurpose-builttankersthatcanalsocarryliquidpetroleumgas(LPG).Butthistradeiscurrentlynotextensive.LPGtankersdevotelessthan20%oftheircapacitytoammoniatransportation,andLPGtankersconstitutelessthan1%ofglobalshippingtonnage,andlessthan¼oftheglobalgas(LNG+LPG)tonnage.Allammoniatransportedonkeeloriginatesasammonia,andisconsumedassuch,andthusthereisvirtuallynohydrogentransportedonkeel.Seaborneammoniatraderesultsfromthefactthatitistypicallylessexpensiveperenergyunittotransportammoniaonkeelthantotransportitsmaininput—naturalgas(CH4).About10%ofammoniaproducedgloballyspendstimeonkeel,withseabornetradegloballyvaryingbetween11and14milliontonnesperyearsince1980.Suchammoniaisusedasafeedstockinthemanu-factureofvariousproducts,mineralfertilizerinparticular.Thecomingdecadewillseelittlechangeintradingvolumesandpatterns,butasammoniastartstobeusedinsignificantquantitiesasamaritimefuel,tradevolumeswillincrease.Weexpectatwenty-foldincreaseinammoniaseabornetransportfrom2030to2050,withfuelusegrowingfromvirtuallynothinginthemid-2030sto95%ofthetradein2050—ofatotalshipmentof150milliontonnesatthattime.TradeinfrastructureCHAPTER694DNV—Hydrogenforecastto2050Today,NorthEastEurasia,MiddleEastandNorthAfrica,andLatinAmericadominateseaborneammoniatradeaseachaccountforalittlelessthanathirdofglobalexports.However,therampingupofthetradebetween2040to2050willmeanlessgrowthforLatinAmericaandforMiddleEastandNorthAfrica,asthestrongestexportgrowthwillhappenfromNorthEastEurasia,whoseexportsin2050willbealmosttwiceaslargeasthatofthethreenextexporterregionscombined.Notehowtheregiondominatesglobalexpenditureonammoniaterminals(Figure6.2).NorthEastEurasiawillprovide60%,NorthAmerica15%,LatinAmerica12%andMiddleEastandNorthAfrica8%ofglobalshipmentsonkeel.Thissplitisreflectedintheoutlookforspendonbuildingandoperatingammoniaterminalstofacilitateexports,asshowninFigure6.2,withatotalofUSD525bnsettobespentgloballythroughto2050,withNorthEastEurasiaaccountingforalmosthalfofthisspend(USD235bn).Theworld’sbyfarbiggestimporterwillbetheGreaterChinaregionsuppliedbytheNorthEastEurasiaregion,whichwillhave90Mtseaborneexportsin2050,halfofwhichwillgotoChina.6.2PipelinetransportWhilethereisnegligiblepipelinetradeofhydrogenatpresent,naturalgasistradedviapipelinesinterregionallyinrelativelylargequantitites3.GiventherepurposingpotentialofnaturalgaspipelinestotransportH2,andthatpipelinetransportisthemosteconomicalformoftransportofhydrogenathighvolumesandmediumdistances(distanceslessthan3000km),weforecastabout4%ofthedemandbeingtradedinterregionallyviapipelines.Inotherwords,thevastmajorityofhydrogenmoleculesproducedwillbeconsumedinthesameregioninwhichtheyareproduced.PipelinefacilitatedtradeofH2doesnotbegintohappenatscaleuntilthe2040s,mostlyduetoalackofdemand.In2030,averysmallamountofH2istradedviapipelines(0.6Mtperyear).Thisincreasesto3.3Mtperyearin2040andalmostdoublesto6Mtperyearin2050.Repurposednaturalgaspipelineswillprovidethevastmajorityofinfrastructureforinterregionaltransportofhydrogen.In2050,96%ofthetotalinstalledcapacityofinterregionalH2pipelineswillbepipelinesrepurposedfromtheunderusednaturalgasnetwork.Thisresultunderscoresthevalueofhydrogeninthefutureenergysystem,intermsofitsabilitytouseexistinginfrastructure,whilehavingthepotentialtodecarbonize.In2050,weforeseetheIndianSubcontinent,OECDPacificandEuroperegionsbeingthelargestimportersofH2viapipelines(Figure6.3).WhiletheIndianSubcontinentwillinvestinsomenewinterregionalpipelines,EuropewillrepurposeitsexistingnaturalpipelineswithMiddleEast&NorthAfrica.Correspondingly,MiddleEast&NorthAfricaandGreaterChinaarethelargestexportersofH2viapipelines.GreaterChina’smajorityimportpartnerisOECDPacific,specificallyRepublicofKorea.TheRepublicofKoreainOECDPacificdoesnotcurrentlyhaveanyinterregionalpipelinetradeofnaturalgas.But,asmentioned,weforeseeinterregionalH2pipelinecapacitytobebuiltbetweenOECDPacificandGreaterChinaby2030(200tonnesperyear),whichgrowsto800tonnesperyearcapacityby2050.Thisisduetothevastamountof95dedicatedrenewables-basedelectrolysisthatGreaterChinawillinstallinthecomingdecades,alongwiththepolicypushinChinaforhydrogen(seeChapter2),leadingtoexcesscapacitythatGreaterChinamayexporttoOECDPacific.TheIndianSubcontinentwillalsoinvestinnewH2pipelineswherenaturalgaspipelinesdonotcurrentlyexist.Thesubcontinentwillsupplementitsveryhighdomesticelectricitydemand,withH2importedfromneighbouringregions.Thus,newH2specificpipelineswillbebuiltbetweencountrieslikePakistanandBangladeshintheIndianSubcontinentandGreaterChina,MiddleEast&NorthAfricaandSouthEastAsia,amongothers.Evenin2050,naturalgastradedviainterregionalpipelinesdwarfsH2tradedviapipelines.Weforecast146Mtofmethanetradedviapipelinesin2050,whichissignificantlylowerthanthe226Mttradedin2020.Yet,comparedtothe6MtofH2pipedlongdistancesin2050,naturalgasisstillverylikelytobeacommodity,whileH2tradeviapipelinesisstillnascent.Therearemanyreasonsforthis:naturalgasisanaturalresourcerestrictedbyitsgeographicalavaila-bility,whileH2hasthepotentialtobeproducedatscalewithrenewables,inalmostallregions(asexplainedinSection5.1);secondly,naturalgasisanincumbentintheenergysysteminmanyregionsandH2willplayafarsmallerrolethannaturalgasin2050;finally,thesignificanttradeofmaritimeNH3willreducetheneedforpipelinetransportofH2.TradeinfrastructureCHAPTER696DNV—Hydrogenforecastto20507DEEPDIVE:EVOLUTIONOFSUPPLYCHAINS7.1FourcompetinghydrogenvaluechainsInthischapterwepresentaneconomicevaluationoffourverydifferentgreenhydrogenvaluechainssupplyingcarbon-freehydrogentoNorthwestEuropein2030.Eachofthesevaluechainsisdrivenbydifferentenergysourcesandthehydrogenistransportedbydifferentmeans:—SolarPVinSouthernSpain(long-distancepipeline)—GeothermalenergyinIceland(liquidhydrogentransportedbyship)—OffshorewindontheNorthSea(electricitytransportrequired)—Nuclearpower(short-distancepipeline)Thesevaluechainsareoptimizedfinanciallyandassessedagainsttwomaincriteria:1.Theirabilitytocompete,and2.Theirpathwaytogrowth.Thefirstcriterionhastodowiththecompetitivenessofvariouslow-carbonenergysourcesinthefuture.Greenhydrogencompeteswithfossilfuels+CCS,withrenewableelectricity,andwithrenewableheat.Customerstendtoselecttheirenergysupplybasedonacombinationofcost,continuity,andsecurityofsupply.However,inourview,theyshouldalsoadoptawholevaluechainperspectivecoveringtherobustnessandviabilityofthoseareasinwhichtheyarenotdirectlyinvested:production,transportandthefittodemand.Forcomparison,weselectedsomeofthebestlocationsinEuropetoproducecarbon-freepoweratalowlevelizedcostofelectricity,whichcanthenbeconvertedintohydrogen.Wethenaddtheadditionalcostsofconvertingthehydrogentoatransportableformandthecostofthetransportitself—assumingintheseinstancesthattheendconsumerdoesnotmovetothelocationwherethehydrogenisproducedtoavoidtheaddedcostsoftransport.97Deepdive:evolutionofsupplychainsCHAPTER7FIGURE7.2FourgreenhydrogenvaluechainsconverginginNorthwestEurope98DNV—Hydrogenforecastto2050Thesupplyofgreenhydrogenfromvariablerenewablesisacomplicatingfactor.Oftenhydrogensupplydoesnotmatchdemandandstorageisthereforerequired,forexampleintheprocessindustryorwhenthehydrogenistobemixedwithnaturalgasinthegasgrid.Insteadofstorage,acontinuoushydrogensupplycanbesecuredbyswitchingfromandtocarbon-freehydrogenfromanothersourcesuchasbluehydrogen.AswediscussedinourwhitepaperSectorCoupling1,amixofenergycarriersandevenadoubling-upofinfrastructuremightprovetobeoptimalundercertaincircumstances.Thesecondcriterionwediscussisafeasiblepathwaytogrowth.Hydrogensupplyneedstogrowinsynchronywithdemand,andthatgenerallyrequiresagradualorstepwisepathwaythatallowsunavoidableeconomic,technicalandsystemriskstobeidentifiedingoodtimeandmitigated.Thedynamicsofthegrowthpathandinteractionsbetweenhydrogenvaluechainsarelikelytoresultindifferentmarket‘niches’,thatsuitdifferentcustomers.Theeconomicevaluationofeachvaluechainisbasedoncapitalandoperatingcostsandconsiderstheloaddurationcurvesofthegeneratedelectricitythatfeedstheelectrolyser.Loaddurationcurvesrepresentthehourlygeneratedelectricityinoneyearbutsortedbygeneratedelectricityinsteadofchronologically.Theyprovideimmediateinsightinthevariationoftheavailableelectricity,andnotjustthecapacityfactor(whichcorrespondstoareabelowthecurve).Theeffectofpart-loadefficiencyoftheelectrolysercannotbemodelledcorrectlyusingonlyacapacityfactor.Theloaddurationcurvesareusedtooptimizethesizingofallcomponentsinthevaluechain.AsshowninFigure7.1,loaddurationcurvesdiffersignificantlyforthechosenvaluechainoptions.Forexample,thedurationcurveofasolarplantwithfixedPVpanelsinsouthernSpain(labelled“SolarPVnotracking”inFigure7.1)showsthatthemaximumoutputisonlyreachedforacoupleofhoursperyear.Itdoesnotmakeeconomicsensetosizethesubsequentprocesses,suchastransportationandconversion,tothispeakcapacity.Forexample,theoptimalsizingofasolarplantinverterinNorthwestEuropeiscurrentlysome70%to80%ofthepeakcapacityoftheinstalledsolarpanels.Ifthisinverterisconnectedtoanelectrolyser,theoptimalsizingwillbeevensmaller,resultinginahigherutilizationoftherelativelyexpensiveelectrolyser.Ineachvaluechaindescription,wehighlightanaspectofthevaluechainthatlendsitselftooptimization.Inthefirstcase,whereweusesolarPVastheprimaryelectricitysource,weaddressthetrade-offbetweeninvestmentsandcapacityfactor.Inthesecondcase,whereweproposegeothermalenergyasanelectricitysource,wediscusstheeffectofpart-loadelectrolyserefficiency.Inthethirdcase,offshorewind,weaddresstheeffectofelectricitytransportcombinedwithon-sitehydrogengeneration.Lastly,thefourthcase,basedonnuclearenergy,dealswithcogenerationofhydrogenandelectricityandoperationaloptimizationofthenuclearpowerplant.Thefourcasespresenttheoptimizedlevelizedcostfordeliveringhydrogentoanindustrialconsumerusinghydrogenforfeedstockand/orenergypurposes.Foreachcase,thislevelizedcostissubdivided,asfarasisapplicable,intocostforinputelectricity,conversion,storageandtransportation.Sections7.2to7.5eachdescribeasinglevaluechain,andSection7.6presentsthecomparisonbetweencasesandsomeconclusions.7.2SolarPVinsouthernSpain7.2.1DescriptionofthevaluechainGreenhydrogenwillbeproducedinlocationsoptimalforrenewableenergy,whichmaywellbelocatedfarfromexistinghard-to-abateactivities.Oneoptionmightbetorelocateconsumptionnearthehydrogenproductionsite.Anothercouldbetotransportthehydrogentotheexistingconsumer;ifthatdistanceissufficientlylongitismorefeasibletoexportthehydrogenitselfratherthantherenewableelectricity.Inthischapter,weestimatethecostofproducinghydrogeninsouthernSpainandtransportingittoanindustrialsiteinNorthwestEurope.99Whenconsideringlarge-capacityoverlandtransportofhydrogen,pipelinesemergeasthemostcost-efficientwayoftransportwithinEurope,ashighlightedinthe‘backbone’discussioninSection4.3.Thisisbecausegreenhydrogenproductionfromsolarenergyislikelytobeclusteredaroundlocationswiththehighestirradiationandlowestcostofsolarelectricity—e.g.,southernSpain,ItalyandGreece.ItmayalsobefeasibletolinkEuropetohydrogenproducedbysolarelectricityinNorthAfricaviaasubseapipeline.However,onabroaderintercontinentalscale,theexportofhydrogentoEuropefromkeyproducers—likeChina,Namibia,andChile—willtakeplacebyship.Comparedwiththeothervaluechainsdiscussedinthischapter,thesolarvaluechainischaracterizedbyalowutilizationbecauseofthelimitedcapacityfactorofsolarenergy.Thismeansthatallsubsequentstepsinthevaluechainafterelectricitygeneration,uptothestorage,willhavethesamelowutilization,unlessthesestepshaveareducedcapacitycomparedwiththesolarPVcapacity.Thelowutilizationcausedbythelow-capacityfactorofsolarPVplacesextraimportanceonminimizingcapitalcostsforthisvaluechain,evenifthatimplieshigheroperationalcosts,lowerefficiencyoralowerexpectedlifetime.7.2.2HydrogenproductionAsolarPVplantinsouthernSpainwillhaveanenergyoutputperinstalledcapacityofabout1,600MWh/MWpeakifbaseduponfixedpanels,andupto2,200MWh/MWpeakifpanelsaretrackingthesun(representedbytheareaundertheloaddurationcurvesinFigure7.1).Thesevaluesrepresentthenumberofequivalentfullloadhoursperyear.Dividingthembythetotalnumberofhoursperyear(8760),resultsinthecapacityfactor.AsolarfarminsouthernSpainthushasacapacityfactorofabout18%forfixedpanelsandupto25%forpanelstrackingthesun.Thedirectcurrent(DC)fromthesolarpanelsneedstobeconvertedtoasuitablevoltagebytheinverters,andthenfedintotheelectrolysers.IntegratingthepowerelectronicsfromthePVplantandtheelectrolysersmayDeepdive:evolutionofsupplychainsCHAPTER7100DNV—Hydrogenforecastto2050resultinsignificantcostsavingsrelativetothecostofusingstandardizedinvertersforboththePVsystemandtheelectrolysers.However,itisuncertainhowlargethosesavingsmightbe.Figure7.3showstheoptimaleconomiccapacityofthepowerelectronicsandelectrolysersbasedonthelowestlevelizedcostofhydrogenattheconsumersite.AsnotedinSection7.1,thiscapacityislessthanthepeakcapacityofthePVpanels.Asolarsystemconnectedtothegridwithpowerelectronicsofabout80%ofthecapacityofthepanelswillhavethelowestlevelizedproductioncostofelectricity.Theaddedcapitalcostoftheelectrolysersreducestheoptimalcapacityoftheinvertersandelectrolyserstogethertoabout70%ofthepeakcapacityofthesolarpanels,leadingtothelowestlevelizedcostofhydrogendeliveredtothecustomer.ThisisdemonstratedinthechartontheleftofFigure7.3,whichshowsrespectively:theloaddurationcurvesoftheoutputofthePVsystemthatfeedstheinverter;theoutputoftheinverterthatprovidestheinputfortheelectrolyser;andtheoutputoftheelectrolyser.Decreasingthecapacityoftheelectrolyserto70%ofthecapacityofthePVinstallation,increasesthecapacityfactoroftheelectrolyserfrom26%to32%.ThechartontherightshowsthistobeoptimalfortherelativelycheapelectrolyserofUSD480/kWusedinthecalculations.Electrolysersspeciallydesignedforthislowcapacityfactor,arecurrentlyindevelopment.Theseelectrolysers,withaninvestmentlevelofclosetoUSD480perkWinstalledcapacity,includingbalanceofsystem,areexpectedtoenterthemarketalreadyin20252.7.2.3HydrogentransportandstorageForthiscase,weassumeapipelineconnectionfromtheproductionlocationinSpaintothehydrogentranspor-tationbackboneinNorthwestEurope.Hydrogenwillneedtobestoredattheproductionsiteinsufficientquantitiestobridgetheday-nightcycleinhydrogenproduction.Thiswilllowertherequiredpeakcapacityforthehydrogentransportationpipelineandthusreducepipelinecost.Intheeventoflarge-scalehydrogenOptimalsizingoftheinvertersandelectrolyserto70%ofthecapacityofthesolarpanelsleadstoaminimumlevelizedcostofhydrogen.Aninverterofabout80%wouldleadtothelowestelectricitycost.(Source—PVprofile:PVGIS)101productioninsouthernSpain,linepackintheaccompa-nyinghydrogentransportationinfrastructuremightalsoprovideasignificantstoragepotential,reducingoreliminatingtheneedforlocalstorage.Analternativetoadedicatedhydrogenpipelineistomixhydrogenwithnaturalgastodecarbonizetheexistingnaturalgasgrid.However,forthiscasewehavenotconsideredthatoption.Mostend-useequipment,suchashydrogen-readyburners,isdesignedandtunedtohandleaconstanthydrogenfraction.Thismeansthatthemixingofhydrogeninthenaturalgasgridrequireshydrogenstorageandcoordinationofhydrogenfeed-intoensurethatthehydrogenfractionisconstantevery-whereinthegrid,irrespectiveofthehydrogenproductionrateorlocalgasdemand.Increasingthefractionofhydrogenispossiblebutrequiresmostequipmentandappliancestobere-tuned.Thisentailsplanningandcoordinationandmightbecostand/orlabourintensive.ForthiscasewecalculatedacostofUSD0.42per1000kmperkgofhydrogenforthepipelinebetweensouthernSpainandNorthwestEuropeassumingalarge-scalehydrogenproductionfacility(Khanetal.,2021)37.2.4EnduseandspecificconsiderationsBuildingapipelinefromsouthernSpaintoNorthwestEuropetoaccommodatelarge-scalehydrogenproductionisbothatimeandcapital-intensiveendeavour.SuchapipelinewouldlikelytransporthydrogenproducedfrommanyPV/electrolyserplantsandwouldbebuiltonlyifbothhydrogenproductioninSpainandhydrogendemandinNorthWestEuropearealreadypresentorcertaintodevelopinarelativelyshorttimeframe.Large-scalehydrogenproductioninsouthernSpain(orItaly,orGreece)willnotmaterializeovernightbutwillgrowgradually,andonlyifthehydrogencanbesold.Iflocaldemandisavailable,alocalhydrogeninfrastructurecanbedevelopedandexpanded,whichultimatelyjustifiesaconnectiontoaEuropeanhydrogenbackboneandtootherpartsofEurope.Onceinplace,thistransporthubwillreducemerchantrisksforlocalproducersandsetsintrainaself-reinforcingcycleforthescalingoflow-costPVbasedhydrogenproduction.7.3GeothermalenergyinIceland7.3.1DescriptionofthevaluechainVirtually100%ofIceland’selectricityproductionisfromrenewablesources:geothermal,hydropowerandwindturbines.Thislowcost,renewablepowerhasattractedaluminiumsmeltersthatproducelow-emissionaluminium.BoththeoreandaluminiumaretransportedtoandfromIcelandbyship,buttheavailabilityoflow-costrenewablepowerrendersthisvaluechainfeasible.Byextension,Icelandcouldarguablyexportitslow-costrenewablepowerintheformofgreenhydrogen.Thehydrogenwould,however,needtobeconvertedintoahigh-densityformtomakethelong-distancetransportviable.EstimatesonthefuturecostofelectricityinIcelandvaryandaredependentonthedemandlevelsthatcouldbeboostedbylargeprojectslikeICELINK(theHVDClinkbetweenIcelandandtheUK).Estimatesaslowas27USD/MWhhavebeenreportedbytheIcelandicEnergyIndustryAssociation(Samorka).However,thiscostlevelisprobablyonlyachievableforlimitedproductionlocations.Consideringfuturedomesticrequirementsandcompetitionforlow-costindustriallocations,anaverageestimateof35USD/MWhisusedinthisstudy,whichoptimizesthevaluechainusinggeothermalpowerinIceland.Thiscostlevelcomparesfavourablywithhydropowerprojects,andthiscaseisthusanalogoustohydrogenproducedinisolatedlocationsbyhydropower.Comparedwiththevaluechainsdrivenbyvariablerenewableenergy,thegeothermaldrivenvaluechainischaracterizedbyahighutilizationbecauseofthecontin-uousavailabilityofgeothermalpower.Thishighutilizationmeansthathydrogenproductionefficiencyisextraimportant,evenifthiscomesatacostofahigherinvest-mentlevel.LiquefactionfortransporttoNorthwestEuropeinvolveshighcapitalandoperatingcostsduetothelowcondensationtemperatureofhydrogenandtheortho-paraconversionneededtoavoidexcessiveboiloff4.However,sincetheliquefactionplantcanrunvirtuallycontinuously,thishaslessofanimpactonthelevelizedcostthanitwouldhaveforvaluechainswithaDeepdive:evolutionofsupplychainsCHAPTER7102DNV—Hydrogenforecastto2050lowerutilization.Inalow-utilizationvaluechain,significantstoragecapacityforgaseoushydrogenwouldberequired.Inthegeothermalcase,storage—inliquefied,notpressurizedform—alsoplaysarolebecausetransportofliquefiedhydrogenbycarrierisbatched.7.3.2HydrogenproductionTheefficiencyofbothaPEMandanalkalineelectrolyserdependsontheloadfactor.Thelowertheload,thelowertheelectricalandelectrochemicallossesinthestackandthehighertheDC-efficiencyoftheelectrolyser’sstack.However,balance-of-plantcomponents,suchaspumps,compressorsandelectriccomponentswillbecomelessefficientastheyaredimensionedonthenominalcapacityofthestack.Figure7.4showshowthecombinationoftheseeffectsresultsinthetypicalshapeshowingthetrade-offbetweenefficiencyandoutput.Foragivenelectricityproductioncapacity,usinganelectrolyserwithahighercapacitywillincreasetheefficiency.Usingasmallerelectrolyserwillincreasethehydrogenoutputperinvestment.IncontrasttothesolarPVcase,anelectrolysercoupledtoageothermalsourceproduceshydrogenalmostcontinuouslyduringtheyear.Degradationscaleswiththenumberofoperatinghoursandduringa25-yearperiodtheelectrolyserstackwillneedtobereplaced,addingcostsoverthelifetimeoftheproject.Anelectro-lyserusedinthisconfigurationisoptimizedforlongdurationuseandhighefficiencies.ForthisstudyweassumeaPEMelectrolyserwithanominalefficiencyof68%(LHV)andaspecificcapitalinvestmentofUSD970perkWincludingstackreplacementafter100,000operatinghours.7.3.3HydrogentransportandstorageToefficientlytransporthydrogentomainlandEurope,weassumethathydrogenisliquefied,andLH2-carriersareused.Atthedestination,liquidhydrogenmustbere-gasifiedbeforeitcanbeused.Ifre-gasificationneedstobedonequickly,externalheatisrequired,e.g.,byusingseawaterorbyburningpartofthehydrogenitself.ForLNG,thisiscurrentlycommonpracticeandtheenergypotentialstoredinthecoldLNG(socalledcoldenergy,whichis1%to2%ofthetotalenergycontent)isnotrecovered.Inthecaseofliquidhydrogen,energyisalsostoredincoldform.Fromthiscoldenergyapproximately3to4%isrecoverable.Thisisabout15%oftheelectricalenergyusedtoliquefythehydrogen.Itisvalidtoquestionwhethertheenergystoredinthecoldformcanbevalorised.WeknowfromLNGthatinterdependenciesaredifficulttohandle,soapotentiallyscalablesolutionwithinthesamevaluechainispreferred.Hydrogenisliquifiedusingrelativelow-costIcelandicelectricity.Whenthishydrogenisusedforelectricitygenerationinthereceivingport,thiscoldenergycanbeutilizedto103generateelectricity,benefitingfromrelativelyhighelectricitypricesatthedestinationlocation.Apossiblelow-investmentsolutionisahydrogenturbinewithpre-coolingfromliquidhydrogen.BecauseoftheincreasedCarnotefficiencysuchasystemcanserveasarelativelyprofitablepeakpowerunit.7.3.4EnduseandspecificconsiderationsHydrogenproducedinIcelandfromcheapgeothermalelectricitycompeteswithaluminiumproductionandelectricityexportsviaaDCconnectiontotheUK.WhichoftheseapplicationswillemergeasthemajoruserofgeothermalenergywilldependonthemarketpositionofIcelandcomparedwithotherlocationsforeachofthesecommodities,aswellasthestabilityofthesecommoditymarkets.Nevertheless,Icelandisintheoryaninterestinglocationfortheproductionandexportofhydrogen.Thecontinuousavailabilityofrenewablepowerallowshighlyefficient(butexpensive)electrolyserstooperatewithahighutilization.Transportationbyshipisveryflexiblecomparedwithafixedconnectionlikeapowercableorpipeline.HydrogenfromIcelandcanbetransportedallovertheworldandcanservedifferentmarkets.Whetherthisisanadvantagedependsonthevolatilityofandpricelevelsinthesemarkets.TheambitionoftheEuropeanUniontomake50%ofindustrially-usedhydrogencarbonfreein2030makesEuropethemostattractivegreenhydrogenmarketforlong-termsupplycontracts.AlthoughsuchanarrangementfavoursahydrogenpipelinetoEurope,shippingdoesallowforthecherrypickingofothermarketsforsomeoftheproducedhydrogenatarelativelylowadditionalcost.TransportingthebulkofthehydrogentoNorthwestEuropeprovidesthefinancialstabilityneededtocovertheinvestments.Hydrogencanbereceivedusingliquidhydrogenterminalsthatprovideshort-termstorageandconversiontogaseoushydrogentobefedintothehydrogeninfrastructure.Whencombinedwithelectricitygenerationfromhydrogenturbines,thiscanleadtoveryefficientandflexiblepowergenerationprovidingpowerwhenthepowersystemrequiresit,usingthelowevaporationtemperaturesofhydrogentoincreasetheefficiencyoftheturbines,whileusingthewasteheatoftheturbinestoevaporatetheliquidhydrogen.Deepdive:evolutionofsupplychainsCHAPTER7104DNV—Hydrogenforecastto20507.4OffshorewindontheNorthSea7.4.1DescriptionofthevaluechainOffshorewindfarmscloseto,e.g.,Rotterdamportofferthepossibilityofavaluechainthatisrelativelyshortandcanbecontrolledbyonlyoneparty.Thisisapracticalstartingpointforthedevelopmentofgreenhydrogen.Itrequiresanearbyrenewablepowersource,transportofthepowertoanindustrialsiteandintegrationoftheelectrolyseroutputwiththehydrogendemand.Thecostofoffshorewindhasreducedsubstantiallyinthelastfewyearsandthetechnologyhasevolvedsuchthatamorestableoutputovertimeisobtainedwithaloadfactorofover50%.PowercanbetransportedthroughHVDCcablesbutwhentheconnectiondistanceisrelativelyshort(50-100km),ACcablesareamorecost-effectivesolution.Liketheothercasesdiscussedinthischapter,theprimaryenergysource,inthiscasethewindfarm,provideselectricityexclusivelyfortheproductionofhydrogen.Theelectricinfrastructurecanthusbespecifi-callydesignedand(economically)optimizedtoprovideenergytotheelectrolysers.Unliketheothervaluechainsdiscussed,thereisnopublicinfrastructurerequired.However,somestorage,orasecondarysourceofhydrogen,willberequiredincaseswhereacontinuoussupplyofhydrogenisneeded,forexampleintheprocessindustry.TheutilizationfactoroftheelectrolyserliesinbetweenthoseofthesolarPVandgeothermalcasesdiscussedabove.7.4.2HydrogenproductionFigure7.1showstheloaddurationcurveofamodernoffshorewindfarmintheNorthSeaconsistingoflarge11MWturbines,withacapacityfactorofover50%.Withnoconnectiontothepublicgrid,thewindfarmanditsconnectionsdonothavetocomplywithpublicgrid-coderequirements,reducingthecostofthepowerinfra-structurebyanestimated10%owingtoengineering,legislativeandpartlytechnicalsimplifications.However,othertechnicalrequirementsapply.Forexample,thewindfarmmustbegrid-forming,meaningitcancreateandmaintainthegridfrequencyandvoltage.Thisislandingcapabilityisunderdevelopmentandexpectedtobereadilyavailablein2030.InasimilarmannerasthesolarPVcase(Section7.2),thecableandelectrolyserareunder-dimensionedcomparedwiththenominalcapacityofthewindfarmtoobtainthelowestlevelizedcostofhydrogen.Duetotherelativelyflatgenerationcurveofthewindfarm,theoptimalsizeoftheelectricinfrastructure,cableandelectrolysersisclosetothenominalcapacityofthewindfarm.7.4.3HydrogentransportandstorageAswiththesolarPVcase(Section7.2),thehydrogensupplyisnotcontinuous.Assumingthesupplyneedstobecontinuousandintheabsenceofthebenefitsoflinepackorlarge-scalestorageaspartofaEuropeanhydrogenbackbone,localhydrogenstorageoranalternativesupplyofhydrogenisrequired.Threedaysofshort-termhydrogenstorageisincludedinourassump-tionsforthiscase.Ifthehydrogenistobeusedinexistingindustry,thealternativesourcecouldbehydrogenfromexistingnaturalgas-basedhydrogenproductioncapac-ity.Thiswillsupplementthehydrogensupplyiftheelectrolysersproducetoolittleduetolackofelectricityfromthewindfarmorincaseofmaintenanceoroutages.7.4.4EnduseandspecificconsiderationsTheoffshorewindvaluechainrequirestheleastorgani-zationalefforttorealizeinarelativelyshortterm.Onlyafewstakeholdersneedtobeinvolvedandtheprojectcanberealizedwithinonecountry,avoidingcross-borderregulations.Itdoesnotrequire(new)third-partyinfra-structure,suchasahydrogenbackbone,hydrogencarriersorhydrogenterminalsinports.However,thereremaintechnicalchallengestoovercomewhichrequiresignificantinvestment.ThespacetobuildelectricgenerationintheNorthSeaislimited.Electrolysisthereforecompeteswithotherapplicationsfortheuseofthiselectricity,mainlysellingitdirectlyontheEuropeanelectricitymarkets.However,unlikethegeothermalcase(Section7.3),generationofelectricityfromoffshorewindisvariableandtheelectricitypricesvarywiththeavailabilityofrenewableelectricity.Hydrogenproductionmitigatesthispricerisk.Therewillbeasignificantcorrelationbetweenoffshorewindproductionandlowelectricityprices,giventhestrongambitiontorealize105offshorewindelectricityproductioninNorth-WestEurope.So,whenelectricitygenerationfromoffshorewindislow,thereisasignificantchancethatelectricitypriceswillbehigh.Atthesetimesitmightbeprofitabletoselltheelectricitytothegridusingarelativelysmallgridconnection.Hydrogencanthenbesuppliedfromthealternativehydrogensource,i.e.,naturalgas-basedproductionorfromstorage.Thisallowsforpricearbitragetooptimizerevenues.Deepdive:evolutionofsupplychainsCHAPTER7106DNV—Hydrogenforecastto20507.5Nuclearpower7.5.1DescriptionofthevaluechainTheattractivenessofnuclearpoweristhatitisafirm,almostcarbon-freeenergysource.Firmcapacitymeansthatthiscapacitycanbedependedupontobeavailableandiscontrollablebutnotvariable.Unlikegeothermalenergyandhydropower,itislessrestrictedtoadvanta-geousgeographiclocationsandisnotimpactedbyweatherextremeslikeseriousdroughts.Nuclearpowerasanelectricitysourceforelectrolysisresultsinacontinuousandstablegenerationofhydrogen.Plantsitingcanbechosenrelativelyclosetoindustriesthatrequirehydrogen.Becauseofsafetymanagementandcontrollability,weopted,inthiscase,forarelativelylarge-scalecentralizednuclearpowerplantandassumed50kmofhydrogentransportationpipelines.7.5.2HydrogengenerationTherequiredinvestmentstobuildanuclearpowerstationarehighandleadtimesarelong,due,amongotherreasons,topermittingandadditionallegalandsafetyrequirements.Likethegeothermalcase(Section7.3),therequiredelectrolysersneedtobeefficientanddurableand,asaconsequence,willbemorecostlythanthoseusedforsolar.However,owingtoacapacityfactornearing100%,morerunninghourswillbeachievedthanforsolar-basedelectrolysers.Thiswillreducetheimpactofthehigherupfrontinvestmentonthelevelizedcostofhydrogen.Anotablefeatureofelectrolysersistheincreaseinefficiencyinpartloadoperation(seealsoSection7.3).Thenominalpowerofanelectrolyserisatrade-offbetweenefficiencyandcost.Thesizingoftheelectrolyserthereforedependsonthegenerationprofileofthesourcedelectricity.Thenuclearcaseshowsthatacontinuouspowersupplywarrantsoversiz-ingoftheelectrolyserasthegaininefficiencyoffsetsthehigherinvestment.7.5.3HydrogentransportandstorageWeassumethenuclearplantandelectrolyserinfra-structurecanbebuiltrelativelyclosetothehydrogendemandinNorthwestEurope.Thismeansthatthecostofthehydrogeninfrastructureislimitedandcomparabletothecostofthehydrogeninfrastructurerequiredforonshoreelectrolyserspoweredbyoffshorewind.Weassumethathydrogeniseitherdelivereddirectlytoanindustrialuserwithacontinuousdemandorisdeliveredtoahydrogenbackbone.Inbothcases,hydrogenstorageisnotneededandthusnotincludedinthiscase.7.5.4EnduseandspecificconsiderationsAcombinationofanuclearpowerplantandanelectro-lyserprovidesflexibilitytoswitchfromdeliveringelectricitytodeliveringhydrogen.Itwill,however,stillcompetewithrenewableelectricitybecause,inacompetingmarket,othermarketpartieswillinstallelectrolysersaswelltoprofitfromlowelectricitypricesduringperiodsofhighrenewableproduction,thuscouplingthehydrogenpricetotheelectricityprice.Althoughthepriceeffectfromcombinedhydrogen/electricityproductionisthereforelimitedinadevelopedmarket,thereareotheradvantagestothiscombination.Itmayhelptoavoidexpensivestarts/stopsofthenuclearunitandkeepitrunningupuporaboveitsminimumpartloadpower.Additionalreasonstobuildthecombinationaresecurityofsupplyandindependencefromneigh-bouringproductioncapacity.Itdoesnotmakemuchsensetobuildnuclearpowertoprovidepeakpowertosupplementvariablerenewables,duetothehighinvestmentsandleadtimesfornuclearpowerplants.However,arelativelysmallcapacitythatiscontinuouslyproducinghydrogenasastrategicreservetoreducetheseasonaldependencyoftheweatherandabsorbvariationsofrenewableelectricitygenerationbetweenyearsmightjustifyitshighcost.Theattractivenessofnuclearpoweristhatitisafirm,almostcarbon-freeenergysource.107IntroductionCHAPTER1108DNV—Hydrogenforecastto20507.6ComparisonandconclusionTheEuropeanCleanHydrogenAlliancealreadylistsseveralhundredprojectsacrossEurope,andtherearemanymoreworldwide5.Itisnotclear,however,howgreenhydrogenprojectsarelikelytoclusterandformlarge-scalevaluechains,andwhensuchvaluechainsarelikelytoemerge.SomeinsightcanbegleanedfromourhypotheticalexerciseincomparingfourdistinctvaluechainsdeliveringgreenhydrogentoNorthwestEuropeagainstthecriteriaofcostsandplausiblepathwaytogrowth.Eachofourfourvaluechainshasitsownpeculiaritiesandmerits.TheresultsoftheevaluationintermsofoptimizedlevelizedcostofhydrogenareshowninFigure7.5.Figure7.5showsthathydrogenfromsolar-PVhasthelowestlevelizedcostofhydrogenifproducedinfavourablelocation,andwithanoptimizedcapacityofequipmentinthevaluechain.Fromacostperspectivethisvaluechainisawinner.However,transportviaalargepipelineaddssignificantcostsandthisvaluechaincanonlyberealizedeconomicallyatalargescale.Evenwiththecostsoftransmission,andassumingthatadistributioninfra-structureatthedestinationisavailable,itwillstillhavethelowestlevelizedcostofhydrogenforsupplytoNorthwestEurope.Notably,thisvaluechaincanevolveandgrowinitiallyinsouthernSpainwithoutaEuropeanhydrogentransportbackboneinplace.Ifthecostsassociatedwithtransconti-nentaltransport(summarizedas‘logistics’inFigure7.5)arestrippedout,thehydrogencostisclosetoUSD2.1perkgH2.Theseareattractivepricesforanyindustryrequiringgreenhydrogen,andwillstimulatelocaldemand.Indeed,Europe’slargestgreenhydrogenprojecttodateistakingshapeinsouthernSpain—theHyDealproject,whichisplannedtostartin2025withatotalinstalledcapacityexpectedtoreach9.5GWofsolarpowerand7.4GWofelectrolysersby2030.HyDealwillsupplytolocalmanufacturersofgreensteel,ammoniaandfertilizer6.By2030,lowhydrogencostsinplaceslikesouthernSpainwillcompetewithcarbon-pricednaturalgasprices,triggeringevenmorelocaldemand.Inthelongerterm,asthebusinesscaseforgeneratingelectricitywithsolarPVdeteriorates—iftheelectricitymarketbecomessaturated–hydrogenproductionmightprove109tobeanalternativetoequippingsolarPVplantswithlargebatteries.Ourresultsindicatethatthereisasignificantupsidetobuildingthekindoftranscontinentalpipelineinfrastructurefor2030andbeyondonceitbecomesapparentthathydrogeninfrastructureisevolvinglocallyandregionallyonthebackofdemandforthegreenhydrogenthatcanbeproducedcompetitivelyinsouthernSpain.Allofthevaluechainscoveredinthischapterhavethepotentialtomaterialize—eitherforreasonsofcostadvantage,timingorsomeotherexpediency.Thelevelizedcostofhydrogenfromtheoffshorewindvaluechainissecondlowest,ataroundUSD4.1perkg;itisoutcompetedbythePVvaluechainmeasuredpurelyonthebasisofcost.However,thesolarPVcasetakesseveralyearsormoretoevolveintoatranscontinentalvaluechain;theoffshorewindvaluechaincanberealizedinarelativelyshorttimeframe.Intheoryitcanbeestablishedbyasingleprojectdevelopercontrollingthehydrogendemand,thepowercablesandanoffshorewindfarm.ThisoptionisthemostcosteffectiveintheabsenceoftheEuropeanHydrogenBackbonebringinggreenhydrogenfromthesouth.However,withtherapidlyrisingdemandforgreenhydrogenandlimitedinstallationandrealizationpotentialforalloptionsconsidered,thereislikelytobeconsiderableoverlapinthedevelopmentofthesetwokindsofvaluechains.HydrogenfromgeothermalenergyinIcelandturnsouttobemoreexpensethanthesolarPVandwindvaluechain,mainlybecauseofthetransportationcostbyshipandtherequiredliquefaction.However,thatdoesnotruleoutthecaseforproducinghydrogeninIcelandtosatisfylocaldemandandeventuallyinternationalexport.Icelandichydrogenhasthesecond-lowestproductioncost(excludinghydrogenlogistics)ofthefourlocationsweanalyse.Theliquefactionandtransportationofhydrogenbyshipaddssignificantcost,makingituncom-petitiveforstructuralsupply—andeffectivelyasideshowinIceland’sevolvinghydrogenecosystem.Itcouldbearguedthatoncehydrogenmarketsmatureworldwide,liquidhydrogenfromIcelandmightbeusedforarbitrage,beingshippedtothecontinuallychanginghydrogenmarketswiththehighesthydrogenprices.However,asdiscussedinChapters5and6,itismuchmorelikelythatIcelandichydrogenwillevolvecompetitiveammoniaproduction,bothforlocaluse—attractinggreenindustriestoIceland—andforbunkeringandexport.Hydrogenproducedfromnuclearpoweristhecostliestofthefourvaluechainsweexamined.Economicargumentsalonewillnotconvinceinvestorstofinancethisvaluechain.Governmentfundingorguaranteesarerequired.Renewableresourcerestrictions,landuserestrictions,securityofsupplyandenergyindependenceargumentscouldtriggerpoliticalsupport,regardlessofthecost.Ahybridoperationofanuclearplant(producingbothpowerandhydrogen)mighthaveoperationaladvantages,suchasavoidingstart-stopandpart-loadoperation,thoughthiswillnotdecreasethelevelizedcostofhydrogensignificantly.Allofthevaluechainscoveredinthischapterhavethepotentialtomaterialize—eitherforreasonsofcostadvantage,timingorsomeotherexpediency.Localdemandforhydrogencanactasacatalystforaspecificvaluechaintokickstartandgrow.Onceestablishedatsufficientscale,thesevaluechainswilllikelybeconnectedtoaEuropeanHydrogenBackboneandtolarge-scalestoragefacilitiesinsaltcavernsondepletednaturalgasfieldsaspartofanintegratedgreenhydrogenmarketinEurope.Deepdive:evolutionofsupplychainsCHAPTER7110DNV—Hydrogenforecastto2050Chapter11.DNV(2021)RisingtotheChallengeofaHydrogenEconomy.Availableat:https://www.dnv.com/focus-areas/hydrogen/rising-to-the-challenge-of-a-hydrogen-economy.html2.IEA(2021)HydrogenTrackingreport—November2021,InternationalEnergyAgency,Paris.Availableat:https://www.iea.org/reports/hydrogen3.IEA(2021)AmmoniaTechnologyRoadmap—October2021,InternationalEnergyAgency,Paris.Availableat:https://www.iea.org/reports/ammonia-technology-roadmap4.DNV(2022)ThePowerofOptimism:Managingscaleandcomplexityastheenergytransitionaccelerates.Availableat:https://www.dnv.com/power-renewables/energy-indus-try-insights/index.html5.DNV(2021)SpadeadamResearchandtesting.Availableat:https://www.dnv.com/oilgas/laboratories-test-sites/testing-and-research-dnvgl-spadeadam.html6.DNV(2022)ThePowerofOptimism:Managingscaleandcomplexityastheenergytransitionaccelerates.Availableat:https://www.dnv.com/power-renewables/energy-indus-try-insights/index.html7.DNV(2021)FinancingtheEnergyTransition.Availableat:https://www.dnv.com/energy/campaign/financing-the-ener-gy-transition.html8.DNV(2021)Bluehydrogeninalow-carbonenergyfuture.Availableat:https://www.dnv.com/focus-areas/hydrogen/blue-hydrogen-in-a-low-carbon-energy-future.html9.DNV(2021)RisingtotheChallengeofaHydrogenEconomy.Availableat:https://www.dnv.com/focus-areas/hydrogen/rising-to-the-challenge-of-a-hydrogen-economy.htmlChapter21.WBCSD(2022)H2Zero—HydrogenPledges.Availableat:https://www.wbcsd.org/Programs/Climate-and-Energy/Hydrogen-Pledges2.IRENA&WorldEconomicForum(2022)EnablingMeasuresRoadmapforGreenHydrogen,January2022version.Availableat:https://www.irena.org/-/media/Files/IRENA/Agency/Press-Release/2021/Nov/Enabling_Measures_Roadmap_for_Green_H2_Jan22_Vf.pdf3.IEA(2021)GlobalHydrogenReview2021,InternationalEnergyAgency,Paris.Availableat:https://www.iea.org/reports/global-hydrogen-review-2021;IRENA(2021)GreenHydrogenSupplyaGuidetoPolicyMaking.Availableat:https://irena.org/publications/2021/May/Green-Hydrogen-Supply-A-Guide-To-Policy-Making4.DNV(2021)EnergyTransitionOutlook—AGlobalandRegionalForecastto2050.Availableat:https://eto.dnv.com/2021/about-energy-transition-outlook5.Energymonitor.ai(2022)Datainsight:ThepermittingproblemforEUwindfarms.ByNickFerris,5April2022.Availableat:https://www.energymonitor.ai/policy/data-insight-the-permit-ting-problem-for-eu-wind-farms6.DNV(2021)Pathwaytonetzeroemissions.Availableat:https://eto.dnv.com/2021/about-pathway-to-net-zero7.NationalDevelopmentandReformCommission&NationalEnergyAdministration(2022)Mediumandlong-termplanforthedevelopmentofhydrogenenergyindustry(2021–2035),March2022.Availableat:https://www.ndrc.gov.cn/xxgk/jd/zctj/202203/t20220323_1320046.htmlChapter31.IEA(2021)AmmoniaTechnologyRoadmap—October2021,InternationalEnergyAgency,Paris.Availableat:https://www.iea.org/reports/ammonia-technology-roadmap2.Gov.UK.(2021)HydrogenProductionCosts2021,DepartmentforBusiness,Energy&IndustrialStrategy.Availableat:https://www.gov.uk/government/publications/hydro-gen-production-costs-20213.Zapantis,A.(2021)Bluehydrogen,GlobalCCSInstitute.Availableat:https://www.globalccsinstitute.com/wp-con-tent/uploads/2021/04/Circular-Carbon-Economy-se-ries-Blue-Hydrogen.pdf4.Rath,L.K.(2011)AssessmentofhydrogenproductionwithCO2capturevolume1:Baselinestate-of-the-artplants,NationalEnergyTechnologyLaboratory(NETL).Availableat:https://netl.doe.gov/projects/files/AssessmentofHydrogenProduc-tionwithCO2CaptureVolume1BaselineState-of-the-Art-Plants_111411.pdf;Jordal,K.etal.,(2015)“High-purityH2productionwithCO2capturebasedoncoalgasification”,EnergyVol.88:p.9-17.https://doi.org/10.1016/j.energy.2015.03.1295.Jordal,K.etal.(2015)“High-purityH2productionwithCO2capturebasedoncoalgasification,Energy,Vol.88.https://doi.org/10.1016/j.energy.2015.03.1296.DNV(2021)Bluehydrogeninalow-carbonenergyfuture.Availableat:https://www.dnv.com/focus-areas/hydrogen/blue-hydrogen-in-a-low-carbon-energy-future.html7.Ibid.REFERENCES111IntroductionCHAPTER18.Gov.UK(2021)HydrogenProductionCosts2021,DepartmentforBusiness,Energy&IndustrialStrategy.Availableat:https://www.gov.uk/government/publications/hydrogen-pro-duction-costs-20219.Hauch,A.etal.(2020)“Recentadvancesinsolidoxidecelltechnologyforelectrolysis”,Science,Vol.370,Issue6513.https://doi.org/10.1126/science.aba611810.RechargeNews(2022)BeijinghydrogenbodyadmitsthatChineseelectrolyserscannotcompetewithWesternmachines—yet.ByHackHeyward,19April.Availableat:https://www.rechargenews.com/energy-transition/exclusive-beijing-hy-drogen-body-admits-that-chinese-electrolysers-cannot-compete-with-western-machines-yet/2-1-120283511.Cummins(2021)CumminsandSinopecofficiallylaunchjointventuretoproducegreenhydrogentechnologiesinChina,Newsrelease.Availableat:https://www.cummins.com/news/releases/2021/12/21/cummins-and-sinopec-official-ly-launch-joint-venture-produce-green-hydrogen12.JohnCockerill(2019)CockerillJingliHydrogen,worldleaderinhydrogen,inauguratesitsnewproductioncenteratSuzhou(China),Pressrelease.Availableat:https://johncockerill.com/en/press-and-news/news/cockerill-jingli-hydrogen-world-lead-er-in-hydrogen-inaugurates-its-new-production-center-at-su-zhou-china/Chapter41.JointResearchCentre(2021)AssessmentofHydrogenDeliveryOptions.Availableat:https://joint-research-centre.ec.europa.eu/system/files/2021-06/jrc124206_assessment_of_hydrogen_delivery_options.pdf2.IEA(2019)TheFutureofHydrogen,InternationalEnergyAgency,Paris.Availableat:https://www.iea.org/reports/the-future-of-hydrogen3.Ibid.4.Ibid.5.CarbonLimits&DNV(2021)Re-Stream—StudyonthereuseofoilandgasinfrastructureforhydrogenandCCSinEurope.Availableat:https://www.carbonlimits.no/wp-content/uploads/2022/03/Re-stream-Final.pdf6Ibid.7Stiller,C.etal.(2008)“OptionsforCO2-leanhydrogenexportfromNorwaytoGermany”.Energy,Vol.33,Issue11.https://doi.org/10.1016/j.energy.2008.07.0048Wang,A.etal.(2020)Europeanhydrogenbackbone:Howadedicatedhydrogeninfrastructurecanbecreated.Availableat:https://pgjonline.com/media/6906/2020_european-hy-drogen-backbone_report.pdf9.Bard,J.etal.(2022)TheLimitationsofHydrogenBlendingintheEuropeanGasGrid.Availableat:https://www.iee.fraunhofer.de/content/dam/iee/energiesystemtechnik/en/documents/Studies-Reports/FINAL_FraunhoferIEE_Short-Study_H2_Blending_EU_ECF_Jan22.pdf10RolandBerger(2017)Developmentofbusinesscasesforfuelcellsandhydrogenapplicationsforregionsandcities.Availableat:https://www.fch.europa.eu/sites/default/files/180926_FCHJU_Regions_Cities_Final_Report.pdf11.IEA(2019)TheFutureofHydrogen,InternationalEnergyAgency,Paris.Availableat:https://www.iea.org/reports/the-future-of-hydrogen12EuropeanCommission(2021)ProjectPipeline—InternalMarket,Industry,EntrepreneurshipandSMEs.Availableat:https://ec.europa.eu/growth/industry/strategy/industrial-al-liances/european-clean-hydrogen-alliance/project-pipe-line_en13Wang,A.etal.(2020)Europeanhydrogenbackbone:Howadedicatedhydrogeninfrastructurecanbecreated.Availableat:https://pgjonline.com/media/6906/2020_european-hy-drogen-backbone_report.pdf14DNV(2021)RisingtotheChallengeofaHydrogenEconomy.Availableat:https://www.dnv.com/focus-areas/hydrogen/rising-to-the-challenge-of-a-hydrogen-economy.html15Østensjø(2021)HydrogeniousLOHCTechnologiesandØstensjøGroupjoinforcesandtreadanovelpathtowardssafezero-emissionshipping.Availableat:https://ostensjo.no/hydrogenious-lohc-technologies-and-ostensjo-group-join-forces-and-tread-a-novel-path-towards-safe-zero-emis-sion-shipping/16Eypasch,M.etal.(2017)“Model-basedtechno-economicevaluationofanelectricitystoragesystembasedonLiquidOrganicHydrogenCarriers”.AppliedEnergy,Vol.185,Part1.https://doi.org/10.1016/j.apenergy.2016.10.06817Kawasaki(2021)HydrogenTransportation—DevelopmentofLiquefiedHydrogenCarrier,KawasakiTechnicalReviewNo.182.Availableat:https://global.kawasaki.com/en/corp/rd/magazine/182/pdf/n182en07.pdf112DNV—Hydrogenforecastto205018MossMaritime(2019)Workshoponliquidhydrogensafety—LiquidHydrogenBunkerVessel.Availableat:https://www.sintef.no/globalassets/sintef-industri/arrangement/hydrogen-safety-2019/13_liquid-hydrogen-bunker-ves-sel_m_bohlerengen_moss_maritime.pdf19DNV(2020)Ammoniaasamarinefuel,Whitepaper.Availableat:https://www.dnv.com/publications/ammonia-as-a-ma-rine-fuel-191385Chapter51IEA(2021)GlobalHydrogenReview2021,InternationalEnergyAgency,Paris.Availableat:https://www.iea.org/reports/global-hydrogen-review-20212GlobalCCSInstitute(2021)CO2REFacilitiesDatabase.https://co2re.co/FacilityData3BNEF(2022)1H2022HydrogenMarketOutlook:ExponentialGrowthAhead4RechargeNews(2022)BeijinghydrogenbodyadmitsthatChineseelectrolyserscannotcompetewithWesternmachines—yet.ByHackHeyward,19April.Availableat:https://www.rechargenews.com/energy-transition/exclusive-beijing-hy-drogen-body-admits-that-chinese-electrolysers-cannot-compete-with-western-machines-yet/2-1-12028355IEA(2019)TheFutureofHydrogen,InternationalEnergyAgency,Paris.Availableat:https://www.iea.org/reports/the-future-of-hydrogen6Castek,R.,HarkinS.(2021)“Evidencereviewforhydrogenforheatinbuildings”,ClimateXChange.https://doi.org/10.7488/era/12397Liuetal.,(2021)“Theproductionandapplicationofhydrogeninsteelindustry”,InternationalJournalofHydrogenEnergy,Vol.46,Issue25.https://doi.org/10.1016/j.ijhydene.2020.12.1238Röben,F.etal.,(2021)“Decarbonizingcopperproductionbypower-to-hydrogen:Atechno-economicanalysis”,JournalofCleanerProduction,Vol.306.https://doi.org/10.1016/j.jclepro.2021.1271919Essity(2021)EssitylaunchesgreenhydrogenpilotforCO2-freetissueproduction,Pressrelease.Availableat:https://www.essity.com/media/press-release/essity-launch-es-green-hydrogen-pilot-for-co-2-free-tissue-produc-tion/9259da573b0f34bf/10.HeidelbergCement(2021)HeidelbergCementproducescementwithclimate-neutralfuelmixusinghydrogentechnology,Pressrelease.Availableat:https://www.heidelbergcement.com/en/pr-01-10-202111.DNV(2022)Maritimeforecastto2050,forthcoming2022.12.DNV(2018)HydrogenasanEnergyCarrier,Researchpaper.Availableat:https://www.dnv.com/oilgas/download/hydrogen-as-an-energy-carrier.html13.DNV(2021)EnergyTransitionOutlook—AGlobalandRegionalForecastto2050.Availableat:https://eto.dnv.com/2021/about-energy-transition-outlook14.DNV(2019)Hydrogenintheelectricityvaluechain,Positionpaper.Availableat:https://www.dnv.com/publications/hydrogen-in-the-electricity-value-chain-22585015.DNV(2020)Thepromiseofseasonalstorage,Positionpaper.Availableat:https://www.dnv.com/Publications/the-prom-ise-of-seasonal-storage-172201Chapter61RolandBerger(2021)HydrogenTransport—Thekeytounlockingthecleanhydrogeneconomy.Availableat:https://www.rolandberger.com/publications/publication_pdf/roland_berger_hydrogen_transport.pdf2.IEA(2021)GlobalHydrogenReview2021,InternationalEnergyAgency,Paris.Availableat:https://www.iea.org/reports/global-hydrogen-review-20213.IRENA(2022)GeopoliticsoftheEnergyTransformation—TheHydrogenFactor.Availableat:https://www.irena.org/publications/2022/Jan/Geopolitics-of-the-Energy-Transfor-mation-HydrogenChapter71.DNV(2020)SectorCoupling,Whitepaper.Availableat:https://www.dnv.com/Publications/sector-coupling-1920582.Nel(2021)NelCapitalMarketsDayPresentation.Availableat:https://nelhydrogen.com/cmd/3.Khan,M.A.etal.(2021)“TheTechno-EconomicsofHydrogenPipelines”,TransitionAcceleratorTechnicalBriefs,Vol.1,Issue2.ISSN2564-1379.4.Aziz,M.(2021)“LiquidHydrogen:AReviewonLiquefaction,Storage,Transportation,andSafety”,Energies2021,14,5917.Availableat:https://doi.org/10.3390/en141859175.EuropeanCommission(2021)Hydrogen:Europe'sIndustryrollingouthydrogenprojectsonmassivescale.Availableat:https://ec.europa.eu/info/news/hydrogen-europes-industry-rolling-out-hydrogen-projects-massive-scale-2021-nov-30_en6.PVMagazine(2022)TheHydrogenStream:Europe’slargestgreenhydrogenprojecttakesshape.BySergioMatalucci,February18.Availableat:https://www.pv-magazine.com/2022/02/18/the-hydrogen-stream-europes-largest-green-hydrogen-project-takes-shape/113TheprojectteamTHEPROJECTTEAMSteeringcommitteeRemiEriksen,DitlevEngel,UlrikeHaugen,TrondHodne,LivHovem,JinJamesHuangProjectdirectorSverreAlvik(sverre.alvik@dnv.com)ProjectmanagerandmodellingresponsibleOnurÖzgün(onur.ozgun@dnv.com)CommunicationresponsibleandeditorMarkIrvine(mark.irvine@dnv.com)ContributingeditorChristianParker(christian.parker@dnv.com)Coremodelling,researchteamandauthorsBentErikBakken,FridaBerglund,TheoBosma,HendrikBrinks,IdaSynnøveBukkholm,KavehDianati,JochumDouma,MarcelEijgelaar,RobvanGerwen,ErikAndreasHektor,ThomasHorschig,MichaelJohnson,MagnusKillingland,SarahKimpton,AnneLouiseKoefoed,EricaMcConnell,AlbertvandenNoort,MatsRinaldo,SujeethaSelvakkumaran,TianyuWang,AdrienZambonOthercontributingexpertsJørgAarnes,GrahamBennett,MarioAndrésBilbao,NicholasCole,YerúnFernández,MajaFrost,MarthaRamosGomez,DanielAntonioHerrmann,TchiarlesCoutinhoHilbig,AlexandreImperial,AlokKumar,JamesThorntonLaybourn,NicolasMarquet,MelissaMorrison,RohithNair,KevinDavePeiris,CorinTaylor,AnilThomas,TonvanWingerden,WenQianZhou,RoelJoukeZwartSpecialthankstoShellandWoodsidefortheircommentsonanearlierversionofthisreport.PublishedbyDNVAS.Design:SDG/McCannOslo/Fasett.Images:p.1,2,12,15,23,30,38,92,99,102:Shutterstock,p.7,9,11,25,26,45,47,48,51,56,59,61,83,89,99,107:Gettyimages,p.52:Hystar,p.20,22,81:DNVSpadeadam,p.70:UlsteinDesign&SolutionsB.V.,p85:BreezeShipDesign,p.87:ZeroAvia,p.95:Adobestock,p105:DNV.Headquarters:DNVASNO-1322Høvik,NorwayTel:+4767579900www.dnv.comThetrademarksDNV®andDetNorskeVeritas®arethepropertiesofcompaniesintheDetNorskeVeritasgroup.Allrightsreserved.AboutDNVDNVisanindependentassuranceandriskmanagementprovider,operatinginmorethan100countries,withthepurposeofsafeguardinglife,property,andtheenvironment.Whetherassessinganewshipdesign,qualifyingtechnologyforafloatingwindfarm,analysingsensordatafromagaspipeline,orcertifyingafoodcompany'ssupplychain,DNVenablesitscustomersandtheirstakeholderstomanagetechnologicalandregulatorycomplexitywithconfidence.Asatrustedvoiceformanyoftheworld’smostsuccessfulorganizations,weuseourbroadexperienceanddeepexpertisetoadvancesafetyandsustainableperformance,setindustrystandards,andinspireandinventsolutions.dnv.com/eto

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