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首页文档碳中和资料行业政策碳经济学深度报告：清洁氢革命（英）-高盛

碳经济学深度报告：清洁氢革命（英）-高盛VIP专享VIP免费

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a
result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision. For Reg AC certification and other important disclosures, see the Disclosure
Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not
registered/qualified as research analysts with FINRA in the U.S. The Goldman Sachs Group, Inc.
The clean hydrogen revolution
Clean hydrogen has emerged as a critical pillar to any aspiring global net zero path, aiding the de-carbonization of c.15% of
global GHG emissions, we estimate, with TAM for hydrogen generation alone having the potential to double to
c.US$250 bn by 2030 and reach >US$1 tn by 2050. We believe it is now time to revisit the clean hydrogen theme as
policy, affordability and scalability seem to be converging to create unprecedented momentum for the clean hydrogen
economy.
Policy support is strengthening globally, with >30 national hydrogen strategies and roadmaps pledging a >400-fold
increase in clean hydrogen installed capacity this decade vs 2020 and supportive of a c.50-fold increase in the pace of
annual average green hydrogen new builds. Scalability is already revolutionizing the green hydrogen projects pipeline, with
scope for average project sizes to increase 100x+, from 2MW in 2020 to >200MW by 2025 and a GW scale by 2030,
leading to cost deflation of 40% for electrolyzer systems by 2025E, similar to what has been observed for batteries over
the past five years. Affordability is rapidly improving with green hydrogen likely to be at cost parity with grey in
advantageous regions by 2025E (US$1.5/kg H2) and hydrogen cost parity with diesel in long-haul heavy road transport
likely as early as 2027E. We believe clean hydrogen can develop into a major global market, impacting geopolitical patterns
in energy supply, and we examine the case for international trade, concluding that 30% of global hydrogen volumes
have the potential to be involved in cross-border transport, higher than for natural gas. Regions such as MENA, LatAm,
Australia and Iberia could emerge as key clean hydrogen exporters, while Central Europe, Japan, Korea and East China
could emerge as key importers.
With US$5.0 tn cumulative investments required in the clean hydrogen supply chain, on our estimates, we examine
the hydrogen case for 11 industrial conglomerates with growing exposure to the theme and also initiate coverage on
three leading hydrogen pure-plays.
Carbonomics
Full list of authors inside
Michele Della Vigna, CFA
+44 20 7552-9383
michele.dellavigna@gs.com
Goldman Sachs International
Zoe Clarke
+44 20 7051-2816
zoe.clarke@gs.com
Goldman Sachs International
Note: The following is a redacted version of the original report published February 4, 2022 [144 pgs].
EQUITY RESEARCH | February 4, 2022 | 12:16 AM GMT
AUTHORS
Michele Della Vigna, CFA
+44 20 7552-9383
michele.dellavigna@gs.com
Goldman Sachs International
Zoe Clarke
+44 20 7051-2816
zoe.clarke@gs.com
Goldman Sachs International
Ajay Patel
+44 20 7552-1168
ajay.patel@gs.com
Goldman Sachs International
Chao Ji
+86 21 2401-8936
chao.ji@ghsl.cn
Beijing Gao Hua Securities
Company Limited
Alberto Gandolfi
+39 02 8022-0157
alberto.gandolfi@gs.com
Goldman Sachs Bank
Europe SE - Milan branch
Georgina Fraser, Ph.D.
+44 20 7552-5984
georgina.fraser@gs.com
Goldman Sachs International
Robert Koort, CFA
+1 713 654-8440
robert.koort@gs.com
Goldman Sachs & Co. LLC
Jerry Revich, CFA
+1 212 902-4116
jerry.revich@gs.com
Goldman Sachs & Co. LLC
Neil Mehta
+1 212 357-4042
neil.mehta@gs.com
Goldman Sachs & Co. LLC
Bepul Shahab
+44 20 7774-3694
bepul.shahab@gs.com
Goldman Sachs International
The clean hydrogen revolution: Thesis in charts 4
PM summary: The global clean hydrogen race 7
The emergence of a multi-dimensional clean tech ecosystem 11
The rise of the clean hydrogen economy 14
Hydrogen primer: An introduction to hydrogen, the most abundant element in the universe 20
The role of hydrogen in the energy transition: The key tool for harder-to-de-carbonize sectors 23
Introducing the GS global hydrogen demand models: 7-fold increase in the potential addressable market for
hydrogen for global net zero 25
Decoding the hydrogen rainbow: A colorless gas with a wide color spectrum 30
We estimate that US$5.0 tn of investments will be required in the hydrogen supply value chain for net zero
by 2050 34
Championing sustainable innovation: The economics of clean hydrogen 35
Unlocking green hydrogen cost parity with grey hydrogen before 2030 49
The case of Europe: Higher natural gas and carbon prices tilt the scale in favor of green hydrogen with cost
parity already achieved in key parts of the region 50
Scaling-up: The clean hydrogen projects pipeline is expanding at an unprecedented pace, tracking the GS
‘bull’ scenario to 2025 51
Addressing the remaining hydrogen value chain: Hydrogen conversion, transport and storage unlock a new
infrastructure opportunity 55
From a local to a global market: We see scope for c.30% of global clean hydrogen to be involved in
international trade (cross-border transport) 61
Policy Toolbox: In search of a constructive hydrogen policy and pricing framework to move from ambition to
action 66
The impact of the rising hydrogen economy on electricity, water and natural resources demand 69
Clean hydrogen end markets: The revolution starts with the transformation of the existing hydrogen
economy 78
Carbon sequestration: Carbon capture the key missing piece to the carbon neutrality puzzle 104
Appendix: National hydrogen strategies and roadmaps overview
Disclosure Appendix
4 February 2022
3
Goldman Sachs Carbonomics
Table of Contents
116
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GoldmanSachsdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ForRegACcertificationandotherimportantdisclosures,seetheDisclosureAppendix,orgotowww.gs.com/research/hedge.html.Analystsemployedbynon-USaffiliatesarenotregistered/qualifiedasresearchanalystswithFINRAintheU.S.TheGoldmanSachsGroup,Inc.ThecleanhydrogenrevolutionCleanhydrogenhasemergedasacriticalpillartoanyaspiringglobalnetzeropath,aidingthede-carbonizationofc.15%ofglobalGHGemissions,weestimate,withTAMforhydrogengenerationalonehavingthepotentialtodoubletoc.US$250bnby2030andreach>US$1tnby2050.Webelieveitisnowtimetorevisitthecleanhydrogenthemeaspolicy,affordabilityandscalabilityseemtobeconvergingtocreateunprecedentedmomentumforthecleanhydrogeneconomy.Policysupportisstrengtheningglobally,with>30nationalhydrogenstrategiesandroadmapspledginga>400-foldincreaseincleanhydrogeninstalledcapacitythisdecadevs2020andsupportiveofac.50-foldincreaseinthepaceofannualaveragegreenhydrogennewbuilds.Scalabilityisalreadyrevolutionizingthegreenhydrogenprojectspipeline,withscopeforaverageprojectsizestoincrease100x+,from2MWin2020to>200MWby2025andaGWscaleby2030,leadingtocostdeflationof40%forelectrolyzersystemsby2025E,similartowhathasbeenobservedforbatteriesoverthepastfiveyears.Affordabilityisrapidlyimprovingwithgreenhydrogenlikelytobeatcostparitywithgreyinadvantageousregionsby2025E(US$1.5/kgH2)andhydrogencostparitywithdieselinlong-haulheavyroadtransportlikelyasearlyas2027E.Webelievecleanhydrogencandevelopintoamajorglobalmarket,impactinggeopoliticalpatternsinenergysupply,andweexaminethecaseforinternationaltrade,concludingthat30%ofglobalhydrogenvolumeshavethepotentialtobeinvolvedincross-bordertransport,higherthanfornaturalgas.RegionssuchasMENA,LatAm,AustraliaandIberiacouldemergeaskeycleanhydrogenexporters,whileCentralEurope,Japan,KoreaandEastChinacouldemergeaskeyimporters.WithUS$5.0tncumulativeinvestmentsrequiredinthecleanhydrogensupplychain,onourestimates,weexaminethehydrogencasefor11industrialconglomerateswithgrowingexposuretothethemeandalsoinitiatecoverageonthreeleadinghydrogenpure-plays.CarbonomicsFulllistofauthorsinsideMicheleDellaVigna,CFA+44207552-9383michele.dellavigna@gs.comGoldmanSachsInternationalZoeClarke+44207051-2816zoe.clarke@gs.comGoldmanSachsInternationalNote:ThefollowingisaredactedversionoftheoriginalreportpublishedFebruary4,2022[144pgs].EQUITYRESEARCHFebruary4,202212:16AMGMTAUTHORSMicheleDellaVigna,CFA+44207552-9383michele.dellavigna@gs.comGoldmanSachsInternationalZoeClarke+44207051-2816zoe.clarke@gs.comGoldmanSachsInternationalAjayPatel+44207552-1168ajay.patel@gs.comGoldmanSachsInternationalChaoJi+86212401-8936chao.ji@ghsl.cnBeijingGaoHuaSecuritiesCompanyLimitedAlbertoGandolfi+39028022-0157alberto.gandolfi@gs.comGoldmanSachsBankEuropeSE-MilanbranchGeorginaFraser,Ph.D.+44207552-5984georgina.fraser@gs.comGoldmanSachsInternationalRobertKoort,CFA+1713654-8440robert.koort@gs.comGoldmanSachs&Co.LLCJerryRevich,CFA+1212902-4116jerry.revich@gs.comGoldmanSachs&Co.LLCNeilMehta+1212357-4042neil.mehta@gs.comGoldmanSachs&Co.LLCBepulShahab+44207774-3694bepul.shahab@gs.comGoldmanSachsInternationalThecleanhydrogenrevolution:Thesisincharts4PMsummary:Theglobalcleanhydrogenrace7Theemergenceofamulti-dimensionalcleantechecosystem11Theriseofthecleanhydrogeneconomy14Hydrogenprimer:Anintroductiontohydrogen,themostabundantelementintheuniverse20Theroleofhydrogenintheenergytransition:Thekeytoolforharder-to-de-carbonizesectors23IntroducingtheGSglobalhydrogendemandmodels:7-foldincreaseinthepotentialaddressablemarketforhydrogenforglobalnetzero25Decodingthehydrogenrainbow:Acolorlessgaswithawidecolorspectrum30WeestimatethatUS$5.0tnofinvestmentswillberequiredinthehydrogensupplyvaluechainfornetzeroby205034Championingsustainableinnovation:Theeconomicsofcleanhydrogen35Unlockinggreenhydrogencostparitywithgreyhydrogenbefore203049ThecaseofEurope:Highernaturalgasandcarbonpricestiltthescaleinfavorofgreenhydrogenwithcostparityalreadyachievedinkeypartsoftheregion50Scaling-up:Thecleanhydrogenprojectspipelineisexpandingatanunprecedentedpace,trackingtheGS‘bull’scenarioto202551Addressingtheremaininghydrogenvaluechain:Hydrogenconversion,transportandstorageunlockanewinfrastructureopportunity55Fromalocaltoaglobalmarket:Weseescopeforc.30%ofglobalcleanhydrogentobeinvolvedininternationaltrade(cross-bordertransport)61PolicyToolbox:Insearchofaconstructivehydrogenpolicyandpricingframeworktomovefromambitiontoaction66Theimpactoftherisinghydrogeneconomyonelectricity,waterandnaturalresourcesdemand69Cleanhydrogenendmarkets:Therevolutionstartswiththetransformationoftheexistinghydrogeneconomy78Carbonsequestration:Carboncapturethekeymissingpiecetothecarbonneutralitypuzzle104Appendix:NationalhydrogenstrategiesandroadmapsoverviewDisclosureAppendix4February20223GoldmanSachsCarbonomicsTableofContents116119Thecleanhydrogenrevolution:ThesisinchartsExhibit1:Cleanhydrogenisacriticalpillartoanyaspiringnetzeropath,aidingthede-carbonizationofc.15%ofglobalGHGemissionsonourestimates..CarbonomicscostcurvewithemissionsabatementpotentialattributedtocleanhydrogenindicatedExhibit2:..andourGSglobalnetzeropaths(oneconsistentwith1.5°Cofglobalwarming,oneconsistentwithwellbelow2.0°andoneconsistentwith2.0°)...GSglobalnetzeromodels,CO2emissions(incl.AFOLU)-200-10001002003004005006007008009001,0001,10002468101214161820222426283032343638404244464850525456Carbonabatementcost(US$/tnCO2eq)GHGemissionsabatementpotential(GtCO2eq)De-carbonizationtechnologiesrelyingoncleanhydrogenOtherde-carbonizationtechnologies-10,000010,00020,00030,00040,00050,000200020032006200920122015201820212024202720302033203620392042204520482051205420572060206320662069GSglobalcarbonneutralitymodels-CO2emissions(MtCO2eq)GS<2.0ºCNetzeroby2060scenarioGS1.5ºCNetzeroby2050scenarioGS2.0ºCNetzeroby2070scenarioSource:GoldmanSachsGlobalInvestmentResearchSource:EmissionDatabaseforGlobalAtmosphericResearch(EDGAR)releaseversion5.0,FAO,GoldmanSachsGlobalInvestmentResearchExhibit3:..implyanupto7-foldincreaseintheglobalhydrogendemandonthepathtonetzeroacrossindustries.Globalhydrogendemand(MtH2)underthethreeGSnetzeromodelsExhibit4:WeestimateUS$5.0tnofinvestmentswillberequiredintheglobalcleanhydrogensupplychaintonetzero..Investmentsrequiredinthecleanhydrogensupplychainfornetzero0100200300400500600202020252030203520402045205020202025203020352040204520502020202520302035204020452050BullscenarioBasescenarioBearscenarioGlobalhydrogendemand(MtH2)RefiningAmmoniaMethanolIron&SteelTransport-LDVsTransport-HDVs(trucks,inclbuses)Transport-RailTransport-ShippingTransport-AviationGridblending(heatingindustrial&buildings)PowergenerationGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenarioGlobalnetzeroby2050-1.5ºBullscenarioc.6-7xc.4xc.2xElectrolysers,$1,669CCUS,$1,264Localdistribution,$638Storage,$414Transportandglobaltrade,$961US$5.0trillioncumulativeinvestmentsonthedirectcleanhydrogensupplychainSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit5:..whileTAMforhydrogengenerationhasthescopetodoublefromUS$125bntoc.US$250bnby2030andreach>US$1tnby2050(bullscenario)TAMforglobalhydrogengeneration,transportandstorage(US$bn)Exhibit6:PolicysupportforcleanH2isstrengtheninggloballywith>30nationalH2strategiesandroadmapsexplicitlypledgingc.130GWofcapacityby2030,>400xthe2020level020040060080010001200140016001800Current2030E2040E2050ECurrent2030E2040E2050EGSbasescenarioGSBullscenarioTAMforhydrogen(inclproduction,storageandtransport)US$bnHydrogenproductionLocaldistributionStorageInternationaltransport020406080100120140GlobaltargetsEUcountry-specifictargetsCurrenthydrogencapacitypledgesexplicitinofficialnationalhydrogenstrategies(2030)OmanColombiaChileAustraliaSouthKoreaSwedenUKPolandSpainPortugalFranceNetherlandsItalyGermanyEU'sneighbourhoodtargetSource:GoldmanSachsGlobalInvestmentResearchSource:EuropeanCommission,datacompiledbyGoldmanSachsGlobalInvestmentResearch4February20224GoldmanSachsCarbonomicsExhibit7:Weseegreenhydrogenasthekeyde-carbonizationsolution,benefitingfromthegrowthandcostdeflationinrenewablepower…Levelizedcostofhydrogenproduction(US$/kgH2)Exhibit8:..andtheindustryisgrowingataremarkablepacewithannouncedgreenhydrogenprojectsacrosstheglobetrendingaboveourbasecase..GlobalinstalledgreenH2electrolysiscapacityfromprojectsannouncedcomparedtoGSscenarios0.01.02.03.04.05.06.07.0CoalgasificationCoalgasification+CCUSCoalgasificationCoalgasification+CCUSCoalgasificationCoalgasification+CCUSNaturalgasSMRSMR+CCUSNaturalgasSMRSMR+CCUSNaturalgasSMRSMR+CCUSNaturalgasSMRSMR+CCUSAlkalineelectrolyzerPEMelectrolyzerAlkalineelectrolyzerPEMelectrolyzerAlkalineelectrolyzerPEMelectrolyzerAlkalineelectrolyzerPEMelectrolyzerCoalprice15$/tnCoalprice35$/tnCoalprice55$/tnGasprice$2.5/mcfGasprice$5.0/mcfGasprice$7.5/mcfGasprice$10.0/mcfLCOE$15/MWhLCOE$30/MWhLCOE$45/MWhLCOE$60/MWhLevelisedcostofhydrogen-LCOH(US$/kgH2)Opex($/kgH2)Fuel(coal,NG)orelectricitycost($/kgH2)Capex($/kgH2)GSbasecasecostofproduction-204060801001201401601802002021202220232024202520262027202820292030GlobalinstalledgreenH2electrolysiscapacity(GW)Cum.Installedcapacityfromprojectspipeline(feasibility,FID,construction)Cum.Installedcapacityfromallprojectsunderconsideration(incl.conceptprojects)Globalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenarioSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit9:..representinga>200-foldincreaseto2030,andac.20%-30%CAGRto2050GlobalinstalledelectrolyzercapacityundervariousscenariosandvsGSglobalhydrogenmodels(GW)Exhibit10:Europeleadstheplannedgreenhydrogenprojectspipelineinthenearterm,withAustralia,LatAmandMENAscalingupnotablypost2025ECumulativeinstalledelectrolysiscapacitybasedonannounced/plannedgreenhydrogenprojects32%29%24%20%24%28%32%36%40%02,0004,0006,0008,00010,00012,000BNEF-TheoreticalmaxBNEF-StrongpolicyHydrogenCouncil'H2forNZ'IEANZEIEASDSBNEF-WeakpolicyGSBullscenarioGSBasescenarioGSBearscenario2050CAGR2021to2050(%)Globalinstalledelectrolysercapacity(GW)01234-204060801002021202220232024202520262027202820292030Averageprojectsize(GW)CumulativeinstalledelectrolysisgreenH2capacitybasedonannouncedplannedprojects(GW)EuropeAsiaAustraliaMiddleEastUnitedStatesOtherN.ALatinAmericaAfrica2-yrmovingaverageprojectsizeSource:BNEF,IEA,HydrogenCouncil,GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit11:Scalebringscostdeflationandweestimatethatthecostofelectrolyzerscanfallbyc.40%by2025E,similartowhatweobservedforbatteriesoverfiveyears..CostperkWcapacityforelectrolyzers,renewables,batteries(perkWh)Exhibit12:..unlockingcostparityofgreenwithgreyhydrogenasearlyas2025-26Einadvantageousregions(lowREScost)Levelizedcostofhydrogen(US$/kgH2)forgrey,greenandblueH202040608010012020202021202220232024202520262027202820292030CleantechcapexrebasedSolarPVcostperGW(rebasedto2010)OnshorewindcostperGW(rebasedto2010)OffshorewindcostperGW(rebasedto2010)BatteriescostperkWh(rebasedto2015)AlkalinecostperkW(rebasedto2020)PEMcostperkW(rebasedto2020)Source:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February20225GoldmanSachsCarbonomicsExhibit13:TheuniquedynamicinEuropewithhistoricallyhighgasandcarbonpricesisalreadyleadingtogreenH2costparitywithgreyacrosskeypartsoftheregion(LCOE<US$50/MWh)Levelizedcostofhydrogen-LCOH(US$/kgH2)Exhibit14:Cleanhydrogenatthepumpcanreachcostparitywithdieselforheavydutylong-haultrucksasearlyas2027Eonourestimates(TCObasis)HydrogenpriceatthepumpforcostparitywithdieselforHDTs0.01.02.03.04.05.06.0NG:US$2.5/mcfNG:US$7.5/mcfNG:US$12.5/mcfNG:US$17.5/mcfNG:US$2.5/mcfNG:US$7.5/mcfNG:US$12.5/mcfNG:US$17.5/mcfLCOE:US$15/MWhLCOE:US$30/MWhLCOE:US$45/MWhLCOE:US$60/MWhLCOE:US$75/MWhGreyH2-SMRBlueH2-SMR+CCUSGreenH2-AlkalineLevelisedcostofproductionofhydrogen-LCOH(US$/kgH2)CapexOpexFuel/electricityCarbontax-$100/tnCO2CurrentEUgaspriceenvironment0.01.02.03.04.05.06.07.08.09.02.02.53.03.54.04.55.05.56.06.57.07.5Hydrogenpriceatthepumpforcostparitywithdieseltrucks($/kgH2)Dieselpricepergallon(US$/gl)Long-termFCEVTCOCurrentFCEVTCOSource:GoldmanSachsGlobalInvestmentResearchSource:Companydata,GoldmanSachsGlobalInvestmentResearchExhibit15:Theriseofthegreenhydrogeneconomycallsforalmostonethirdofglobalrenewablecapacityadditionsfrom2030E..AverageannualREScapacityadditionsforgreenH2andasa%ofglobalannualaverageREScapacityadditionsExhibit16:..andcancauseuptoc.5%/18%growthinincrementalaverageannualdemandfornickel/PGMsandamulti-foldincreaseforiridiumAverageannualincrementaldemandforspecificmetalsandmineralsusedinelectrolyzers0%5%10%15%20%25%30%35%020406080100120140BullcaseBasecaseBearcaseBullcaseBasecaseBearcase2021-302030-35%ofannualREScapacityadditions(green)AverageannualREScapacityadditionsforgreenhydrogen(GW,bars)REScapacityrequired%ofannualadditions0%0%1%10%100%1000%0.00.00.00.11.010.0100.0AlkalineDominanttechGSbullcaseGSbasecaseGSbearcaseAlkalineDominanttechGSbullcaseGSbasecaseGSbearcasePEMDominanttechGSbullcaseGSbasecaseGSbearcasePEMDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseNickelZirconiumPlatinumIridiumNickelZirconiumLanthanumYttriumAverageannualincrementaldemandasa%ofcurrentglobalproductionforeachmineral(%)Averageannualincrementaldemand(kt)AlkalinePEMelectrolysersSOECelectrolysersSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit17:Weseepotentialforc.30%oftheglobalhydrogenmarkettobeinvolvedininternationaltradeSource:CompiledbyGoldmanSachsGlobalInvestmentResearch4February20226GoldmanSachsCarbonomicsPMsummary:TheglobalcleanhydrogenraceCleanhydrogenhasemergedasacriticalpillartoanyaspiringnetzeropath,andpolicy,affordability,andscalabilityareconvergingtocreateunprecedentedmomentumforthecleanhydrogeneconomyCleanhydrogenhasemergedasacriticalpillartoanyaspiringglobalnetzeropath,aidingthede-carbonizationofc.15%ofglobalGHGemissionsonourestimates,andweleverageourglobalGSnetzeromodels(oneconsistentwith1.5°Cofglobalwarming,oneconsistentwithwellbelow2.0°andoneconsistentwith2.0°)andCarbonomicscostcurvetoconstructthreeglobalhydrogenscenarios.OurglobalGShydrogenmodelsaredevelopedonasectoralbasis,andincludeamodelingofthetechnologicalmixandactivityforeachofthepotentialhydrogenendmarketsonthepathtonetzero.Underallthreeoftheglobalhydrogendemandpaths,thebull,baseandbear,globalhydrogendemandincreasesatleast2-foldonthepathtonetzero:from2-foldinthebearscenarioto7-foldinthebullscenario.Meanwhile,policysupportisstrengtheningacrosstheglobe,with>30nationalhydrogenstrategiesandroadmapsreleasedpledginga>400-foldincreaseincleanhydrogeninstalledcapacitythisdecadecomparedto2020andsupportiveofac.50-foldincreaseinthepaceofannualaveragegreenhydrogennewbuilds.WeestimateUS$5.0trillionofcumulativeinvestmentsinthecleanhydrogensupplychainwillberequiredfornetzero,whiletheTAMforhydrogengenerationalonehasthepotentialtodoubleby2030E(toUS$250bn)andreach>US$1tnby2050EInvestmentsinthehydrogenindustryhavealreadystartedtoinflectnotablyhigher,particularlyinproductiontechnologydeployment.Focusingonthedirectsupplychainofcleanhydrogen,encompassinginvestmentsrequiredforitsproduction(electrolyzersandCCUSforgreenandbluehydrogen,respectively),storage,distribution,transmissionandglobaltrade,weestimatethat,inaggregate,US$5.0tnofcumulativeinvestmentsinthedirectcleanhydrogensupplychainwillberequiredtonetzero.WenotethisissolelycapexinvestmentsinthedirectsupplychainofcleanhydrogenExhibit18:OurGSglobalhydrogenmodelspointtoremarkablegrowthinthehydrogenmarket,withhydrogendemandincreasingatleast2-foldandupto7xonthepathtonetzero..Globalhydrogendemand(MtH2)underthethreeGSnetzeromodelsExhibit19:..andpolicysupportisstrengtheningacrosstheglobe,with>30nationalH2strategiesandroadmapsexplicitlypledgingc.130GWofcapacityby2030,>400xthe2020level0100200300400500600202020252030203520402045205020202025203020352040204520502020202520302035204020452050BullscenarioBasescenarioBearscenarioGlobalhydrogendemand(MtH2)RefiningAmmoniaMethanolIron&SteelTransport-LDVsTransport-HDVs(trucks,inclbuses)Transport-RailTransport-ShippingTransport-AviationGridblending(heatingindustrial&buildings)PowergenerationGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenarioGlobalnetzeroby2050-1.5ºBullscenarioc.6-7xc.4xc.2x020406080100120140GlobaltargetsEUcountry-specifictargetsCurrenthydrogencapacitypledgesexplicitinofficialnationalhydrogenstrategies(2030)OmanColombiaChileAustraliaSouthKoreaSwedenUKPolandSpainPortugalFranceNetherlandsItalyGermanyEU'sneighbourhoodtargetSource:GoldmanSachsGlobalInvestmentResearchSource:EuropeanCommission,datacompiledbyGoldmanSachsGlobalInvestmentResearch4February20227GoldmanSachsCarbonomicsanddoesnotincludecapexassociatedwithendmarkets(industry,transport,buildings)orupstreamcapexassociatedwiththepowergenerationplantsrequiredforelectricitygenerationforgreenhydrogen.Meanwhile,thetotaladdressablemarket(TAM)forhydrogengenerationalonehasthepotentialtodoubleby2030E,fromc.US$125bncurrentlytoc.US$250bnbytheendofthisdecade,andpotentiallyreach>US$1tnby2050E.Scalabilityunlocksaffordability:Scalabilityisalreadyrevolutionizingtheindustry,unlockingeconomiesofscaleandcostdeflationGreenhydrogenistheultimatede-carbonizationsolution,inourview,benefitingfromthegrowthandcostdeflationinrenewablepower.Thetotalinstalledelectrolyzercapacityforgreenhydrogenproductionwasonlyaround0.3GWbytheendof2020buttheindustryismovingataremarkablepace,withthecurrentprojectspipelinesuggestinganinstalledelectrolysiscapacityofcloseto80GWbyend-2030,includingprojectscurrentlyunderconstruction,havingundertakenFID(finalinvestmentdecision)andpre-FID(feasibilitystudy),andassumingprojectsmeettheguidedstart-uptimeline.Ifweweretoconsiderprojectsinearlierstagesofdevelopment(pre-feasibilitystudystage,‘concept’projects),thenthisfigurewouldgocloseto120GW,trackingour‘bull’hydrogenscenariointhenearterm.Scalabilityisalreadyrevolutionizingthegreenhydrogenprojectspipeline,withscopeforaverageprojectsizestoincrease100x+,from2MWin2020to>200MWby2025andGWscaleby2030,leadingtocostdeflationofc.40%forelectrolyzersystemsby2025E,similartowhathasbeenobservedforbatteriesoverthepastfiveyears.Affordabilityisrapidlyimprovingwithgreenhydrogenatcostparitywithgreyinadvantageousregionsby2025E($1.5/kgH2)andhydrogencostparitywithdieselinlong-haulheavyroadtransportachievedasearlyas2027E,onourestimates.Exhibit20:WeestimateUS$5.0tnofinvestmentswillberequiredintheglobalcleanhydrogensupplychaintonetzero..Investmentsrequiredinthecleanhydrogensupplychainfornetzero(US$bn)Exhibit21:..whileTAMforhydrogengenerationhasthescopetodoublefromUS$125bncurrentlytoc.US$250bnby2030andreach>US$1tnby2050(bullscenario)TAMforglobalhydrogengeneration,transportandstorage(US$bn)Electrolysers,$1,669CCUS,$1,264Localdistribution,$638Storage,$276Transportandglobaltrade,$961US$5.0trillioncumulativeinvestmentsonthedirectcleanhydrogensupplychain020040060080010001200140016001800Current2030E2040E2050ECurrent2030E2040E2050EGSbasescenarioGSBullscenarioTAMforhydrogengeneration(incl.storageandtransportforfutureyears)US$bnHydrogenproductionLocaldistributionStorageInternationaltransportSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February20228GoldmanSachsCarbonomicsTheriseofthecleanhydrogeneconomycallsfor1/3ofglobalaverageannualrenewablepowercapacityadditionsandcancauseincrementaldemandformetalssuchasnickel,PGMsandothermineralssuchasiridiumInthereport,wealsoaddresstheimpactoftheriseofthecleanhydrogeneconomyonglobaldemandforelectricity,water,metalsandminerals.Overall,weestimatethatthecleanhydrogenrevolutioncancausea50+%increaseinglobalpowerdemandandcallsfor1/3ofglobalaverageannualinstalledrenewablepowercapacityadditionsfrom2030Efortheproductionofgreenhydrogen.Furthermore,weestimatethatthewaterrequirementfortheproductionofcleanhydrogenwilllikelyreachc.7bcmby2050,whileelectrolyzersandfuelcellsmanufacturingcancauseuptoc.5%/18%incrementalaverageannualdemandfornickelandPGMs(platinum)respectively,andamulti-foldincreaseforthemorenichemineraliridium.Exhibit22:TheindustryisgrowingataremarkablepacewithannouncedgreenH2projectsacrosstheglobetrackingourbullandbasescenariosinthenearandmediumterm..GlobalinstalledgreenH2electrolysiscapacityfromprojectsannouncedcomparedtoglobalGSscenarios(GW)Exhibit23:..andscalabilityisalreadyrevolutionizingtheprojectspipeline,withscopeforaverageprojectsizestoincrease100x+,from2MWin2020to>200MWby2025andaGWscaleby2030...Cumulativeinstalledelectrolysiscapacityfromannounced/plannedprojectsandaverageprojectsize-204060801001201401601802002021202220232024202520262027202820292030GlobalinstalledgreenH2electrolysiscapacity(GW)Cum.Installedcapacityfromprojectspipeline(feasibility,FID,construction)Cum.Installedcapacityfromallprojectsunderconsideration(incl.conceptprojects)Globalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenario01234-204060801002021202220232024202520262027202820292030Averageprojectsize(GW)CumulativeinstalledelectrolysisgreenH2capacitybasedonannouncedplannedprojects(GW)EuropeAsiaAustraliaMiddleEastUnitedStatesOtherN.ALatinAmericaAfrica2-yrmovingaverageprojectsizeSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit24:..leadingtoeconomiesofscaleandcostdeflation,withelectrolyzercostsfallingc.40%by2025E,similartowhatwasobservedforbatteriesoverthepastfiveyears...CostperkWforelectrolyzers,renewablesandperkWhforbatteriesExhibit25:..andunlockinggreenhydrogencostparitywithgreyinadvantageousregionsasearlyas2025-26E(lowREScost)Levelizedcostofproductionofhydrogen(US$/kgH2)02040608010012020202021202220232024202520262027202820292030CleantechcapexrebasedSolarPVcostperGW(rebasedto2010)OnshorewindcostperGW(rebasedto2010)OffshorewindcostperGW(rebasedto2010)BatteriescostperkWh(rebasedto2015)AlkalinecostperkW(rebasedto2020)PEMcostperkW(rebasedto2020)Source:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February20229GoldmanSachsCarbonomicsWeestimatethatc.30%ofglobalcleanhydrogenvolumeshavethepotentialtobeinvolvedinlongcross-bordertransport,impactingenergysupplygeopoliticsWebelievecleanhydrogencandevelopintoamajorglobalmarket,impactinggeopoliticalpatternsinenergysupply,andweexaminethecaseforinternationaltrade,concludingthat30%ofglobalhydrogenvolumeshavethepotentialtobeinvolvedincross-bordertransport,higherthanfornaturalgas.MENA,LatAm,AustraliaandIberiacouldemergeaskeycleanhydrogenexportingregions,whileCentralEurope,Japan,KoreaandpartsofEastChinacouldemergeaskeyimportingregions.Exhibit26:Theriseofthegreenhydrogeneconomycallsforalmostonethirdofglobalaverageannualrenewablecapacityadditionsfrom2030...AverageannualREScapacityadditionsforgreenH2andasa%ofglobalannualaveragecapacityadditionsExhibit27:..andcancauseuptoc.5%/18%incrementalaverageannualdemandfornickel/PGMsandamulti-foldincreaseforiridiumAverageannualincrementaldemandforspecificmetalsandmineralsusedinelectrolyzers0%5%10%15%20%25%30%35%020406080100120140BullcaseBasecaseBearcaseBullcaseBasecaseBearcase2021-302030-35%ofannualREScapacityadditions(green)AverageannualREScapacityadditionsforgreenhydrogen(GW,bars)REScapacityrequired%ofannualadditions0%0%1%10%100%1000%0.00.00.00.11.010.0100.0AlkalineDominanttechGSbullcaseGSbasecaseGSbearcaseAlkalineDominanttechGSbullcaseGSbasecaseGSbearcasePEMDominanttechGSbullcaseGSbasecaseGSbearcasePEMDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseNickelZirconiumPlatinumIridiumNickelZirconiumLanthanumYttriumAverageannualincrementaldemandasa%ofcurrentglobalproductionforeachmineral(%)Averageannualincrementaldemand(kt)AlkalinePEMelectrolysersSOECelectrolysersSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchMENA,Chile(andotherLatAm),AustraliaandIberiacouldemergeaskeycleanhydrogenexportingregionswhileJapan,Korea,CentralEuropeandpotentiallypartsofEastChinacouldbecomekeycleanhydrogenimportingregions,dependingonthescaleandimportanceofcleanhydrogenintheirrespectiveeconomies0123456789101112GreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueIberia(Spain,Portugal)UKCentralEuropeNordicsEasternEuropeRussiaSaudiArabiaRestofMiddleEastNorthAfricaCentralAfricaSouthAfricaIndiaWestChinaEastChinaJapanOtherAsiaPacificAustraliaWestUSEastUSNorthUSCanadaMexicoChileLatinAmericaEuropeMiddleEastAfricaAsia&AsiaPacificNorthAmericaSouth&CentralAmericaLevelisedcostofproductonofhydrogen-LCOH-2030(US$/kgH2)GreenH2-lowcostscenarioGreenH2-highcostscenarioBlueH2-lowcostscenarioBlueH2-highcostscenarioBasecasescenarioCleanH2importingregionsCleanH2exportingregionsGreenH2exporterBlueH2exporterCleanH2importerLCOH-2030Source:GoldmanSachsGlobalInvestmentResearch4February202210GoldmanSachsCarbonomicsTheemergenceofamulti-dimensionalcleantechecosystemThede-carbonizationprocessisevolvingfromonedimensional(renewablepower)toamulti-dimensionalecosystemascapitalmarkets,corporatesandgovernmentsexpandtheirsustainabilityfocustoencompassawiderrangeofcleantechnologiesInourglobalnetzeropathsreport,Carbonomics:IntroducingtheGSnetzerocarbonmodelsandsectorframeworks,wepresentourmodelingofthepathstonetzerocarbon,withthreeglobalmodelsofde-carbonizationbysectorandtechnology,leveragingourCarbonomicscostcurveofde-carbonization.TheCarbonomicscostcurveshowsthereductionpotentialforanthropogenicGHGemissionsrelativetothelatestannualreportedglobalGHGemissions.Itcomprisesde-carbonizationtechnologiesthatarecurrentlyavailableatcommercialscale(commercialoperation&development),presentingthefindingsatthecurrentcostsassociatedwitheachtechnology’sadoption.Weincludeconservationtechnologiesandprocessspecificsequestrationtechnologies(processspecificcarboncapture)acrossallkeyemission-contributingindustriesglobally:powergeneration,industryandindustrialwaste,transport,buildingsandagriculture.Inourreport,Carbonomics:ThedualactionofCapitalMarketstransformstheNetZerocostcurve,wepresentthelatestupdateofourCarbonomicscostcurveofde-carbonization,encompassing>100differentapplicationsofGHGconservationtechnologiesacrossallkeyemittingsectorsglobally.LookingattheongoingtransformationofourCarbonomicscostcurveofde-carbonization,wearguethatthede-carbonizationprocessisevolvingfromonedimensional(renewablepowerandelectrification)toamulti-dimensionalecosystemascapitalmarkets,corporatesandgovernmentsexpandtheirsustainabilityeffortsandfocustoencompassawiderrangeofcleantechnologies(thenextfrontierofcleantech)thatarerequiredtounlockthepathtoglobalnetzero.Fourtechnologiesareemergingastransformational,havingaleadingroleinthepathtocarbonneutrality:renewablepower,cleanhydrogen,carbonsequestrationandbatteryenergystorage.Exhibit28:Wehaveconstructedthreeglobalcarbonneutralitymodels:oneconsistentwith1.5°Cofglobalwarming,oneconsistentwithwellbelow2.0°andoneconsistentwith2.0°..GSglobalnetzeromodels,CO2emissions(incl.AFOLU)Exhibit29:...leveragingourglobalCarbonomicscostcurveofde-carbonization2021CarbonomicscarbonabatementcostcurveforanthropogenicGHGemissions,basedoncurrenttechnologiesandcurrentcosts-10,000010,00020,00030,00040,00050,000200020032006200920122015201820212024202720302033203620392042204520482051205420572060206320662069GSglobalcarbonneutralitymodels-CO2emissions(MtCO2eq)GS<2.0ºCNetzeroby2060scenarioGS1.5ºCNetzeroby2050scenarioGS2.0ºCNetzeroby2070scenario-20002004006008001,000048121620242832364044485256Carbonabatementcost(US$/tnCO2eq)GHGemissionsabatementpotential(GtCO2eq)Powergeneration(coalswitchtogas&renewables)Transport(road,aviation,shipping)Industry(iron&steel,cement,chemicalsandother)Buildings(residential&commercial)Agriculture,forestry&otherlanduses(AFOLU)Source:EmissionDatabaseforGlobalAtmosphericResearch(EDGAR)releaseversion5.0,FAO,GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202211GoldmanSachsCarbonomicsThenextfrontierofcleantech:Fourinterconnectedtechnologiesareemergingastransformational,havingaleadingroleintheevolutionofthecostcurveandthepathtonetzeroWeidentifyfourtechnologieswhichareemergingastransformational,havingacriticalroleinthepathtonetzero:renewablepower,cleanhydrogen,carbonsequestrationandbatteryenergystorageassummarizedintheinfographicbelow.Notably,allofthesetechnologiesareinterconnected:(1)Renewablepower:Thisisatechnologythatdominatesthe‘low-costde-carbonization’spectrumtodayandhasthepotentialtosupportthede-carbonizationofc.40%oftotalglobalanthropogenicGHGemissions,supportinganumberofsectorsthatrequireelectrification,aswellasbeingcriticalfortheproductionofcleanhydrogenlongerterm(‘green’hydrogen).Thisisthefirsttransformationalcleantechnologythatattractedtheinterestofinvestors,corporatesandregulatorsgivenitscriticalimportance.(2)Cleanhydrogen:Thisisatransformationaltechnologyforlong-termenergystorageenablinganincreasinguptakeofrenewablesinpowergeneration,aswellasaidingthede-carbonizationofsomeoftheharder-to-abatesectors(iron&steel,long-haultransport,heating,petrochemicals).Weestimatethatcleanhydrogencanaidthede-carbonizationofc.15%ofglobalGHGemissions(c.20%ofCO2emissions)whilebecomingakeypillaroftheenergymix.(3)Batteryenergystorage:Itextendsenergystoragecapabilities,andiscriticalinthede-carbonizationofroadtransportthroughelectrification.(4)Carboncapturetechnologies:Theyarevitalfortheproductionofclean(‘blue’)hydrogen,whilealsoaidingthede-carbonizationofindustrialsub-segmentswithemissionsthatarecurrentlynon-abatableunderalternativetechnologies.Inthisreport,weprimarilyaddressthecleanhydrogenandcarboncapturetechnologies,providingadeep-diveintotherelevanttechnologicalinnovation,economics,policy,potentialglobaladdressablemarketsandprojectpipelines.Source:GoldmanSachsGlobalInvestmentResearch4February202212GoldmanSachsCarbonomicsNationalnetzeropledgesworldwidecontinuetogainmomentum,currentlycovering>80%ofglobalCO2emissionsThecommitmenttoachievingnetzeroiswhatcallsforthedevelopmentofabroadersetoftechnologiesbeyonddirectelectrificationtofacilitatetheenergytransition.Overthepasttwoyears,wehaveseenarapidaccelerationinthenumberofnationalnetzeroandclimateneutralpledgesmadebynationaljurisdictionsglobally,aswellascorporates,embeddinganetzerotarget.COP26hasseenanumberofkeyemittingregionsjoiningtheglobalnetzeroambition,withIndia,SaudiArabia,andAustralianotableexamples.Byend-2021,wecalculatethatc.63%oftheglobalCO2emissions(2020)werecoveredbynationalnetzeroandclimateneutralpledgeswhichareincludedinlaw,inproposedlegislationandinpolicydocuments.Anotherc.20%oftheglobalCO2emissionswerecoveredbydeclarednetzero/climateneutralpledgesthatarenotinlaw,legislationorpolicydocumentsatpresent.Aroundhalfoftheemissionscoveredbythesenationalpledges(c.35%ofglobalCO2emissions)areembeddedinnetzero/carbonneutralitytargetsfor2050orearlierwiththerestmostlyaimingfornetzeroby2060orlater(ChinaandIndianotableexamples).Aglobalnetzeroscenariowouldrequiretransformationalchangesacrossallkeypartsoftheglobalenergyecosystemandbroadereconomyandthereforecallsfortechnologicalinnovationthatextendsbeyondrenewablepowerandtouchesthenextfrontierofcleantechnologiesincludingcleanhydrogen,batteryenergystorageandcarbonsequestration.Whilerenewablepowerremainsthecommercial,scalabletechnologythatcurrentlyoccupiesthelowerendoftheCarbonomicscostcurve,aloneitcanonlyde-carbonizeuptoaroundhalfoftheglobalCO2emissions,withtheCarbonomicscostcurvebecomingmuchsteeperforthesecondhalfofglobalde-carbonization.Exhibit30:Therapidlyrisingnumberofnationalnetzero/climateneutralpledges(includingthoseinlaw,legislationandpolicydocuments)worldwidebyYE2021coveredc.83%oftheglobalCO2emissions,ofwhicharoundhalfhaveatimelinefornetzeroby2050orsooner(thekeyexceptionbeingChina)0%5%10%15%20%25%30%35%0.00.00.00.11.010.0100.0EuropeanUnionJapanGermanySouthKoreaCanadaUnitedKingdomFranceSpainNetherlandsChileHungaryNorwaySwedenNewZealandIrelandDenmarkFijiChinaUnitedStatesBrazilTurkeyItalyUkraineAustriaGreeceSingaporeFinlandPortugalEcuadorSriLankaCroatiaSloveniaLithuaniaPanamaLuxembourgCostaRicaLatviaUruguayIcelandMaldivesMaltaBarbadosAntiguaandBarbudaBelizeMarshallIslandsIndiaRussiaSaudiArabiaSouthAfricaAustraliaVietnamKazakhstanMalaysiaThailandUnitedArabEmiratesNigeriaIsraelBahrainEstoniaIndonesiaPakistanArgentinaColombiaSwitzerlandTanzaniaZambiaOthersNetzero/climateneutralinlaworinproposedlegisationNetzero/climateneutralinpolicydocumentNetzero/climateneutraldeclaration/pledgeNetzero/climateneutralunderdiscussionShareofglobalCO2emissionsin2020(%)LogCO2emissions(GtCO2)in2020CO2emissions(GtCO2)in2020-LHSGlobalshareofCO2emissions(%)in2020-RHSOthersunderconsiderationincludemanycountriesandregions(listnotexhaustive)Source:NetZeroTracker,EmissionDatabaseforGlobalAtmosphericResearch(EDGAR)releaseversion5.0,GoldmanSachsGlobalInvestmentResearch4February202213GoldmanSachsCarbonomicsTheriseofthecleanhydrogeneconomyCleanhydrogenplaysacriticalroleontheglobalpathtonetzeroandformsakeyinterconnectingpillarbetweenotherkeycleantechnologiesCleanhydrogenhasamajorroletoplayinthepathtowardsnetzerocarbon,providingde-carbonizationsolutionsinthemostchallengingpartsoftheCarbonomicscostcurve-includinglong-haultransport(buses,rail,long-haulheavytrucks),steel,chemicals(ammonia,methanol),heating(hydrogenboilers,gridblending)andlong-termenergystorage(hydrogenturbines,fuelcellsinpowergeneration).Wenotedpreviouslythatdespitethewealthofrelativelylow-costde-carbonizationopportunities,theabatementcostcurveissteepaswemovebeyond50%de-carbonization,callingfortechnologicalinnovationandbreakthroughstounlockthenetzerocarbonpotential.Examiningtheemergingtechnologiesthatcouldmeaningfullytransformthede-carbonizationcostcurve,itbecomesevidenttousthatcleanhydrogeniscurrentlyattheforefrontofthistechnologicalchallenge:basedonouranalysis,ithasthepotentialtotransform15%/20%ofthetotalglobalGHG/CO2emissionsinourcostcurveandcanbeattractivelypositionedinanumberoftransportation,industrial,powergenerationandheatingapplications.Cleanhydrogen’scostcompetitivenessisalsocloselylinkedtocostdeflationandlargescaledevelopmentsinrenewablepowerandcarboncapture(twokeytechnologiestoproduceit),creatingthreesymbioticpillarsofde-carbonization.Exhibit31:Cleanhydrogenhasemergedasakeytechnology,requiredtode-carbonizec.15%/20%ofglobalGHG/CO2emissionsacrosssectors2021Carbonomicscostcurvewithtechnologiesrelyingoncleanhydrogenindicated-200-10001002003004005006007008009001,0001,10002468101214161820222426283032343638404244464850525456Carbonabatementcost(US$/tnCO2eq)GHGemissionsabatementpotential(GtCO2eq)De-carbonizationtechnologiesrelyingoncleanhydrogenOtherde-carbonizationtechnologiesHydrogenturbinesinpowerHydrogenforpowergenerationenergystorageAmmoniashipsFCbusesChemsCCS(blueH2)ElectrolysisammoniaSyntheticfuelaviationFCtrucksHydrogenboilers-heatingFCtrainsHeatpumpssupportedbyH2seasonalstorageElectrolysismethanolHydrogenDRI-EAFforsteelSource:GoldmanSachsGlobalInvestmentResearch4February202214GoldmanSachsCarbonomicsTherevivalofhydrogen:AnewwaveofsupportandpolicyactionCleanhydrogenisatechnologythathasthepotentialtotransformthepathtoglobalnetzeroacrossanumberofkeyemittingsectorsandindustries.Whilehydrogenhasgonethroughseveralwavesofinterestinthepast50years,noneofthesetranslatedintosustainablyrisinginvestmentandbroaderadoptioninenergysystems.Nonetheless,therecentfocusonde-carbonizationandthescaleupandacceleratedgrowthoflowcarbontechnologiessuchasrenewableshavesparkedanewwaveofinterestinthepropertiesandthesupplychainscale-upofhydrogen.Webelievethatthisisnotanotherfalsestartforcleanhydrogen.Overthepasttwoyears,theintensifiedfocusonde-carbonizationandclimatechangesolutionshasbeguntotranslateintorenewedpolicyactionaimedatthewideradoptionofcleanhydrogen.Byend-2021,morethan30governmentshadreleasednationalhydrogenstrategiesorofficialroadmaps,includingJapan,Korea,Australia,Canada,Chile,CzechRepublic,France,Germany,Hungary,theNetherlands,Norway,Portugal,Russia,Spain,Poland,UnitedKingdom,Colombia,Finland,andBelgiumamongothers.Acrosshydrogenstrategies,thevitalroleofhydrogenforindustrialapplicationsandtransportationishighlighted.Whilethesestrategiesarenotequivalenttobindingpolicymechanismsenactedinlaws,theydorepresentsignificantmilestonesforthelong-termvisionoftheseindustries.Policysupportandeconomicconsiderations,withtheaccelerationoflow-costrenewablesandelectrificationinfrastructure,seemtobeconvergingtocreateunprecedentedmomentumforthecleanhydrogeneconomy.Exhibit32:Thepasttwoyearshaveseenanewwaveofpolicyinterestandsupportforcleanhydrogenacrosstheglobe,reflectedthrougharapidincreaseinnationalhydrogenstrategiesandroadmapsSource:Varioussources;datacompiledbyGoldmanSachsGlobalInvestmentResearch4February202215GoldmanSachsCarbonomicsFromambitiontopolicyaction:ReflectingonhydrogenstrategiesacrosstheglobeTheAppendixprovidesanoverviewofthekeyquantitativedeploymentandproductiontargetsfromvarioushydrogenstrategiesannouncedbycountriesacrosstheglobe.AsiancountriessuchasJapan,SouthKoreaandAustraliahaveallbeenearlymoversintheindustrywiththeirrespectivehydrogenstrategiesallannouncedbeforethe2020waveofhydrogenpolicyannouncements.BothJapanandSouthKoreahavedevelopedstrategiesthatlargelyfocusonthewiderdomesticadoptionofhydrogenacrossendmarketsandthecreationofahydrogeneconomy,includinganemphasisontransport.Australia’shydrogenstrategyontheotherhandlargelyfocusesonthecountry’sprospectandambitionofbecomingamajorhydrogenexporthubleveragingitsvastnaturalgasandlowcostrenewablepowerresourcesforblueandgreenhydrogenproduction,respectively.WhileAsiahaddominatedthehydrogendebateover2017-19,the2020waveofhydrogenpolicyannouncementsthatfollowedwasratherEurope-centric,withtheEUHydrogenStrategyattheepicenter.TheEU’s2x40GWelectrolyzercapacitytargetby2030(40GWinEuropeand40GWinEurope’sneighborhood)istodatethelargestregionalgreenhydrogencapacitytargetgloballyandisbackedbythesubsequentlaunchofvariouscountry-specifichydrogenstrategies,roadmapsandtargetsfrommostkeyEuropeancountries.Addingthecountry-specifictargetsannounced,thesemakeupc.39GWofthe40GWtargetedbytheEUHydrogenStrategy(includingtheUKandSweden’sproposedtargets)withc.1GWremaining,asshowninExhibit33.Overall,whilewhatqualifiesas‘clean’hydrogenvariesbyregions,severalcountrieshaveannouncedexplicitcapacityambitionsembeddedintheseofficialstrategieswhich,onourestimates,amounttoc.130GWofcapacityby2030(includingthe40GWneighboringcountries’targetfromEU),>400xthe2020level.Exhibit33:Severalcountries,aswellastheEuropeanUnion,highlightexplicitcleanhydrogencapacityambitionsintheirhydrogenstrategies.Weestimatethatthesepledgestogetherresultinatotalcapacityofc.130GWby2030,>400xthe2020levelofinstalledelectrolysiscapacity,withthemajoritylinkedtothetargetsoftheEuropeanUnion(2x40GW)andChile(25GW)020406080100120140GlobaltargetsEUcountry-specifictargetsCurrenthydrogencapacitypledgesexplicitinofficialnationalhydrogenstrategies(2030)OmanColombiaChileAustraliaSouthKoreaEU'sneighbourhoodtargetSwedenUKPolandSpainPortugalFranceNetherlandsItalyGermanySource:Varioussources;datacompiledbyGoldmanSachsGlobalInvestmentResearch4February202216GoldmanSachsCarbonomicsOntheothersideoftheAtlantic,bothNorthandSouthAmericahavestartedtoshowclearsignsofaccelerationofpolicyinitiativesonthetopicwithChileandCanadathefirsttopublishnationalhydrogenstrategies.Chile’sstrategyinparticularstandsoutintermsofscale,withthecountryhavinglaidoutitsambitiontohave25GWofcapacityinprojectswithcommittedfundingby2030(whiletheactualinstalledcapacitywilllikelybelowerthanthisasthetargetincludesprojectsunderdevelopmentatthetime,thisrepresentsthelargestsingle-countrytarget),leveragingonthecountry’svast,low-costrenewableenergyresource.Canada’shydrogenstrategy,publishedaroundthesametime,presentsagoalofc.30%oftotalfinalenergyconsumptionby2050attributedtohydrogenandacknowledgesabroaderrangeoflow-carbonhydrogenproductionroutesincludinganyfossilfuel-producedoneswhichcompriseCCUSretrofitting(naturalgas,oil,biomass),aswellaselectrolyticgreenhydrogenandhydrogenproducedasaby-product.TheUSentersthehydrogenpolicywavewithamilestoneUS$9.5bnforthedevelopmentofhydrogenasacleanenergysourceaspartoftheUSInfrastructureInvestmentsandJobsActWhiletheUShasnotyetreleasedanofficialnation-widehydrogenstrategy,theDepartmentofEnergy(DoE)haspublishedtheHydrogenProgramPlanandHydrogenstrategydocumentsthatprovidethestrategicframeworkforthewiderdeploymentandgrowthofthehydrogeneconomyinthecountry.Weseescopeforanation-widehydrogenstrategynonethelessfollowingthebipartisanInfrastructureInvestmentsandJobsAct.RelevantsectionsoftheInfrastructureBillwithrespecttohydrogenincludethefollowing:Section40313oftheinfrastructureplanfocusesontheestablishmentofthencleanhydrogenresearchanddevelopmentplanto(1)advanceresearchanddevelopmentandcommercializetheuseofcleanhydrogeninthetransportation,utilityindustrial,commercial,andresidentialsectors;and(2)demonstrateastandardofcleanhydrogenproductioninthetransportation,utility,industrial,commercial,andresidentialsectorsby2040.Section40314recognizesadditionalcleanhydrogenprogramsincludingfivenimportantprovisionstotheEnergyPolicyAct:(1)RegionalHydrogenHubs-provides$8billionoverfouryearsforthecreationofRegionalHydrogenHubs;(2)NationalEnergyStrategyforHydrogen-requirestheSecretaryofEnergytodevelopatechnologicallyandeconomicallyfeasiblenationalenergystrategyandroadmaptofacilitatewidescaleproduction,processing,delivery,storageanduseofcleanhydrogen;(3)GrantsforResearchandDevelopment-provides$500millionoverfouryearstoawardmulti-yeargrantsandcontractsforresearch,development,anddemonstrationprojectstoadvancenewcleanhydrogenproduction,processing,delivery,storageanduseofequipmentmanufacturingtechnologyandtechniques;(4)CleanEnergyElectrolysisProgram–provides$1billiontofundagrantprogramforresearch,development,demonstration,commercialization,and4February202217GoldmanSachsCarbonomicsdeploymentforthepurposeofcommercialization,andtoimprovetheefficiency,increasethedurability,andreducethecostofproducingcleanhydrogenusingelectrolyzers.Grantswillbeawardedtoeligibleentitiesthatcanachievethefollowinggoalsoftheprogram:(i)reducethecostofhydrogenproducedusingelectrolyzerstolessthan$2perkilogramofhydrogenby2026;and(ii)anyothergoalstheSecretaryofEnergydeterminesareappropriate;(5)CoordinationoftheNationalLaboratories-establishesamechanismforthecoordinationoftheworkoftheNationalEnergyTechnologyLaboratory(NETL),theIdahoNationalLaboratory,andtheNationalRenewableEnergyLaboratory(NREL)andinstitutionsofhighereducation,andresearchinstitutes.Section40315addressesthecleanhydrogenproductionqualification.TheBillndefines‘cleanhydrogen’ashydrogenproducedwithacarbonintensityequaltoorlessthan2kilogramsofcarbon-dioxideequivalentperkilogram(kgCO2eq/kgH2).TheSecretaryofEnergywilldevelopaninitialstandardforthecarbonintensityofcleanhydrogenproductionthatwillsupportcleanhydrogenproductionfromavarietyofsourcesandtakeintoaccounttechnologicalandeconomicfeasibility.Nolaterthanfiveyearsafterthedateunderwhichthestandardisdeveloped,theSecretaryinconsultationwiththeAdministratoroftheEnvironmentalProtectionAgency,shalldeterminewhetherthedefinitionofcleanhydrogenshouldbeadjustedandifso,theSecretaryshallcarryouttheadjustment.Exhibit34:TheagreedUSInfrastructureInvestmentandJobsActallocatesUS$9.5bnincleanhydrogeninitiativesUnitedStatesInfrastructureInvestmentandJobsActselectedenergyR&Dprograms(US$mn)withafocusoncleanhydrogenCarbonmanagement,$12,499Energystorage,$6,630Critialmineralsandmaterials,$1,429Renewableenergy,$420Nuclearenergy,$2,477Gridresilience,$5,000Advancingmanufacturing,$550Regionalcleanhydrogenhubs,$8,000Cleanhydrogenelectrolysisdemonstrationprogram,$1,000Cleanhydrogenmanufacturingandrecyclingprogram,$500Cleanhydrogen,$9,500Source:UnitedStatesInfrastructureInvestmentandJobsAct,datacompiledbyGoldmanSachsGlobalInvestmentResearchMoreover,recently,aten-yeartaxcreditworthupto$3perkilogramof“cleanhydrogen”wasapprovedbytheUSHouseofRepresentativesaspartofPresidentJoeBiden’sBuildBackBetterBill(BBB).However,theBuildBackBetterBillstillrequirestobepassedbytheUSSenateandoureconomistsbelievethislooksunlikelyinitscurrentform.4February202218GoldmanSachsCarbonomicsTheHouseversionoftheBillstatedthatonlyhydrogenwithlifecyclegreenhousegasemissionsoflessthan0.45kgofcarbondioxideequivalent(CO2e)perkgofH2wouldbeeligibleforthefull$3credit.Productionofhydrogenwithhigheremissionswouldbeeligibleforsmallerpercentagesofthecleanhydrogenproductiontaxcreditratesasfollows:0.45-1.5kgCO2eperkgofH2:33.4%ofthefulltaxcredit(i.e.,$1/kgofhydrogen),1.5-2.5kgCO2:25%($0.75/kg),2.5-4kgCO2:20%($0.60/kg),4-6kgCO2:15%($0.45/kg).Projectswouldneedtohavebegunconstructionbefore2029toclaimthetaxcredit,whilefacilitiesinthe4-6kgCO2/kgH2categorywouldhavehadtobeplacedintoservicebefore2027.WhiletheBBBinitscurrentformlooksunlikelytobepassedasmentionedearlier,thisdoesprovideaglimpseintothepotentialincentivesandframeworksthatcouldfurtherencourageandimprovetheeconomicviabilityofcleanhydrogen.Otherkeyregionstowatchonthepolicyfront:TheUAE,restofMENA,LatinAmericaandIndiaWhileAsiaPacificwasinitiallythefront-runnerinthecleanhydrogenstrategyrace,followedbytheEU,withcurrentlyalargeportionoftheregionhavingalreadyannouncednationalhydrogenstrategiesandroadmaps,webelievethecleanhydrogenpolicyfocuscouldstarttoshifttowardstheMENAandLatAmregions.Inparticular,Oman,theUAEandSaudiArabiaallseemtohavetakenmajorsstepsonthecleanhydrogeneconomyfrontwithlarge-scaleprojects(bothforgreenandbluehydrogen)movingahead.Intermsofpolicy,Omanhasanationalhydrogenstrategydue,withpress/industryreports(e.g.S&P)suggestingtargetsof1GWby2025,10GWby2030andaround30GWby2040.TheUAEhasrevealedatCOP26theHydrogenLeadershipRoadmapaimingtosupportdomesticde-carbonizationthroughhydrogenwhilealsobecomingakeyglobalexporthubofthecleanenergycarrierbytargetinga25%marketshareby2030.InLatAm,ParaguayhasfollowedChileandColombiaindevelopingahydrogenroadmapwhileUruguayisalsocurrentlydevelopingitsowngreenhydrogenstrategy.Finally,IndiaappearstohavejoinedtheglobalhydrogenracewiththereleaseofitsNationalHydrogenMissionandwithgrowinginterestcomingfromtheregion.4February202219GoldmanSachsCarbonomicsHydrogenprimer:Anintroductiontohydrogen,themostabundantelementintheuniverseAnintroductiontohydrogen,thelightestandmostabundantelementintheuniverseHydrogen’sroleintheenergyecosystemisnotnewandhasalonghistoryintransportandindustrialapplications,usedasafuelsincethe18thcenturytoliftblimpsandintheproductionofkeyindustrialchemicals,whichisstillrelevanttoday,forinstance,inthecaseofammonia.Lookingatthechemistryofthemoleculeitself,hydrogenisthelightestelementintheuniverse,withthemostcommonisotope(protium,whichrepresents99%ofhydrogenintermsofabundance)havinganatomicnucleusofjustasingleproton.Understandard,ambientconditions,hydrogenisagasofdiatomicmoleculeshavingtheformulaH2(werefertohydrogenusingthischemicalformulaextensivelyinthisreport),consistingoftwohydrogenatomsbondedtogetherwithacovalentbond.Itiscolorless,odorless,non-toxic,andhighlycombustible.Hydrogenisthemostabundantchemicalsubstanceintheuniverse,constitutingroughly75%ofallnormalmatter.Nonetheless,mostofthehydrogenonEarthexistsinmolecularformssuchasinwaterandinorganiccompounds(primarilyhydrocarbons).Assuch,pureH2requiresenergyprocessestobeproducedinthatform,thereforeleadingtoitbeingmostlyconsideredanenergyvectorasopposedtoanenergysource.Hydrogen’sversatilityinproduction,highenergycontentperunitmassandnoemissionsatthepointofuse(combustion)explainitsattractivenessasanenergyvectorandfuelHydrogenhasanumberofvaluableattributesthatmakeitscreenattractivelyrelativetootherfuelsintheeraofde-carbonizationandclimatechange.Theseincludetheversatilityinitsproductionpathways,offeringflexibilityalongthesupplychains,itsveryhighspecificenergyperunitmass(c.2.6xthatofgasolineandc.2.3xthatofnaturalgas)Exhibit35:Hydrogenisthemostabundantandlightestelementintheuniverse,andhasthreedistinctisotopesSource:Companydata4February202220GoldmanSachsCarbonomicswhichimpliestheabilitytoreleasevastamountsofenergywithoutcontributingmeaningfullytotheweightofvariousapplications,and,finally,theabilitytobestoredandusedasacleanfuelwithoutreleasinganydirectemissionsatthepointofuse.Duringitscombustionprocess,hydrogenonlyreleasesoxygenandwaterasproducts.Exhibit36showshowthepropertiesofhydrogencomparetothoseofothercommonlyusedfuels.Despitethecharacteristicsthatmakehydrogenattractiveforenergyecosystems(fuel,vector,feedstock),hydrogeninitsambientformisahighlyreactive(combustible)gaswithverylowenergydensity(energycontentperunitvolume),implyingtheneedforcarefulhandling,transportanddistributionaswellastheuseofhighpressuresystemstypicallyforfinalapplications.Moreover,whileitdoesnotcontributetoGHGemissionsatthepointofuse,thecurrentdominantproductionpathwaysforhydrogen(whichisrarelyfoundinitspureform)arecarbonintenseastheyprimarilyrelyontheuseoffossilfuels(typicallynaturalgasandcoalinspecificregions).Thecombustiblenatureofhydrogenimpliesverylowignitionenergyandlargeenergyreleasewhenitexpandsinair.Nonetheless,itslighter-than-airpropertytosomeextentreducestheriskasitimpliesitcandissipaterapidlywhenincontactwithair.Despitetheoutlinedrisks,wenotethattheriskofcombustibilityandlackofcontainmentisnotnewandisfrequentlythecaseforothercurrentwidelyadoptedfuelssuchasgasoline,diesel,naturalgas.Exhibit36:Hydrogenhas>2xtheenergycontentperunitmasscomparedtonaturalgasandgasolineyetitsverylowweightimpliesmuchlowerenergydensityperunitvolumeinitsgaseousformatambientconditionsFuelpropertiesEnergyperunitmass(MJ/kg)Density(kg/m3)Energydensity(MJ/L)Specificenergy-perunitmass(kWh/kg)Energydensity-perunitvolume(kWh/L)PhysicalconditionsGasoline46.4737.134.2012.899.5000Ambient,1bar,25ºcNaturalgas(ambient)53.60.70.0414.890.0101Ambient,1bar,25ºCLNG53.6414.222.2014.896.1667Liquefactiontemperature:-160ºCHydrogen(ambient)120.10.090.0133.360.0028Ambient,1bar,25ºCLiquidhydrogen120.170.88.4933.362.3586Liquefactiontemperature:-253ºC,1barAbbreviations:MJ=megajoules,m3=cubicmeters,L=litre,kWh=kiloWatthour,kg=kilogramsSource:EIA,IEA,GoldmanSachsGlobalInvestmentResearchExhibit37:Hydrogenhasveryhighgravimetricenergydensitybutlowervolumetricenergydensitycomparedtootherconventionalfuelswidelyusedtoday...VolumetricvsgravimetricdensityofcommonlyusedfuelscomparedtohydrogenExhibit38:..andcanhaveacriticalroleintheenergytransitionasitdoesnotemitanyGHGemissionsatthepointofuse(combustion)anditisveryversatileintermsofproductionCarbonintensityatthepointofconsumptionvsgravimetricdensityofcommonlyusedfuelscomparedtohydrogenCrudeoilConventionalgasolineLow-sulfurdieselPetroleumnaphthaLiquefiedpetroleumgas(LPG)Liquefiednaturalgas(LNG)RenewableDieselII(UOP-HDO)LiquidHydrogenEthanolButanePropaneHydrogen(35Mpa)Hydrogen(70Mpa)05,00010,00015,00020,00025,00030,00035,00040,000020406080100120140Volumetricdensity(MJ/M3)Gravimetricdensity(MJ/kg)NaturalgasCrudeoilConventionalgasolineLow-sulfurdieselPetroleumnaphthaLiquefiedpetroleumgas(LPG)Liquefiednaturalgas(LNG)HydrogenPropane01020304050607080020406080100120140Carbonintensity(gCO2/MJ)Gravimetricdensity(MJ/kg)Source:EIA,USDEO,datacompiledbyGoldmanSachsGlobalInvestmentResearchSource:EIA,USDEO,datacompiledbyGoldmanSachsGlobalInvestmentResearch4February202221GoldmanSachsCarbonomicsAglimpseintothecurrenthydrogenmarket:Afeedstockforkeyindustrialprocesses-refining,productionofammonia,methanolandsteelCurrently,H2isprimarilyusedasafeedstockinanumberofkeyindustrialprocesses,thereforeplayingaverylimitedroleintheenergytransitionaswearestilltounlockhydrogen’spotentialasanenergyvectorandfuel.AccordingtotheIEA,globalhydrogendemandwasaround90Mtin2020.Thisincludesmorethan70MtH2usedaspurehydrogen,primarilyinoilrefiningandammoniaproduction,andlessthan20MtH2mixedwithcarboncontaininggasesprimarilyformethanolproductionandsteelmanufacturing.Thisexcludesaround20MtH2thatispresentinresidualgasesfromindustrialprocessesusedforheatandelectricity.Oilrefiningisthelargestconsumerofhydrogencurrently,accountingforc.41%ofglobalhydrogendemandin2020.Inoilrefining,hydrogenisprimarilyusedinhydrosulfurizationtoremovesulphurcontentsincrudeandinhydrocrackingprocessestoupgradeheavyresidualoilsintohigher-valueproducts.Aroundhalfofthisdemandismetwithhydrogenproducedasaby-productfromotherprocessesintherefineriesorfromotherpetrochemicalprocessesintegratedinrefiningplantswhiletheremainingdemandismetbydedicatedon-sitehydrogenproductionormerchanthydrogensourcedexternally.Thechemicalsindustryconsumesaboutc.53%ofglobalhydrogen,primarilyasafeedstockforammoniaandmethanolproduction,eachrequiringaround180and130kgofhydrogenpertonneofproduct,respectively.Theremainingc.6%ofhydrogenisusedinthesteelindustryandstemsspecificallyfromtheDRI-EAFsteelmakingprocessrouteusedtoreduceironoretospongeiron(inamixturewithcarbonmonoxide).Hydrogendemandfromthesethreekeyindustries(refining,chemicalsandsteel)hasbeengrowingsteadilyovertheyears,asshowninExhibit40,yetwebelieveclimatechangeandtheincreasingfocusofinvestors,corporatesandregulatorsonthetopicofde-carbonizationandsustainabilityislikelytounlocknewendmarketsforhydrogen,whichwediscussinthenextsectionsofthisreport.Exhibit39:Hydrogendemandcurrentlystemsfromitsuseasafeedstockacrosskeyindustrialprocessesincludingrefining,ammonia,methanolproductionandsteel...2020Globalhydrogendemandsplit(%)Exhibit40:..andcurrentlyexceeds80MtH2pa,analreadylargeandestablishedindustryattheonsetoftransformationGlobalhydrogendemand(MTH2)Refining41%Ammonia38%Methanol15%Iron&Steel6%0102030405060708090100200020052010201520162017201820192020Globalhydrogendemand(MtH2)RefiningAmmoniaMethanolIron&SteelSource:IEA,datacompiledbyGoldmanSachsGlobalInvestmentResearchSource:IEA,GoldmanSachsGlobalInvestmentResearch4February202222GoldmanSachsCarbonomicsTheroleofhydrogenintheenergytransition:Thekeytoolforharder-to-de-carbonizesectorsTheroleofcleanhydrogenintheenergytransition:Unlockingc.20%ofglobalCO2emissionsabatementacrosskeyhard-to-abatesectorsAswementionearlierinthisreport,netzerohasbecomethenewnormal,with>80%ofglobalCO2emissionscurrentlycoveredbyglobalnetzeronationalpledgesworldwide.Thepathtonetzeroemissionsrequirestransformationalchangestothecurrentenergyecosystemwhichwebelievecallsforasubstantiallywideruseofhydrogenandhydrogen-basedfuelsacrossindustries.Increasingtheuseofhydrogenasanewenergyvectorisalong-termendeavor,implyingamulti-decadelongprocesstosignificantlypenetratetheenergymix.Thisdecadeisthereforeadecisiveoneinlayingthefoundationsfortheroleofcleanhydrogenintheenergytransition.Whileaccesstorenewablepoweranddirectelectrificationisthefirststepofde-carbonization,potentiallyaidingtheabatementofaroundhalfofglobalemissions,aswemovetoharder-to-abatesectorsincludinglong-haulheavytransport,heavyindustry,andhightemperatureindustrialheat,directelectrificationfacesseveralhurdlesandcleanhydrogencouldbethedominanttechnologyintheseindustries.AsshowninmatrixpresentedinExhibit43,thepreferredde-carbonizationtechnologyvariesdependingonwhetherdirectelectrificationandcleanhydrogenarepossibleandachievablefordifferentsectors.Ingeneral,weviewthatwheredirectelectrificationiscurrentlyavailableforthede-carbonizationofanindustry,andhasbeendevelopedatscale,itislikelytobethepreferredde-carbonizationrouteowingtoitsoveralllowercost,laterstageofdevelopment,alreadyformedsupplychainsandhigherenergyefficiencyatthepointofuse.Examplesofthisincludede-carbonizationoflight-dutyvehicleswheretheExhibit41:Hydrogencouldhaveacriticalroleinaidingde-carbonizationacrossawidevarietyofsectors,includinglong-haultransport,industry,energystorageinpowergenerationandheatinginbuildingsSource:HydrogenCouncil,GoldmanSachsGlobalInvestmentResearch4February202223GoldmanSachsCarbonomicscommercializationofbatterytechnologyhasunlockedthedirectelectrificationpotential,particularlyforshorthaulroutes.Onthecontrary,forindustrieswherecurrentdirectelectrificationtechnologieshavenotyetreachedcommercialscale,orwhereelectrificationtechnologiesfacenotablehurdles,cleanhydrogenislikelytobethedominanttechnology,assumingitisapplicableinthatindustry.Thisisconsistentwiththeindustriesweviewtobethekeyaddressableendmarketsdominatinggrowthinglobalhydrogendemandlongerterm.Amongthesearelong-haulheavytransport(wherethecurrentstateofbatterytechnologiesfaceshurdlesintermsofweightandrefuelingtimes),high-temperatureindustrialheat(forheavyindustriessuchassteel,glassandcement),steelandpetrochemicals.Finally,forindustrieswhereneitherdirectelectrificationnorcleanhydrogenareapplicablecurrently,weviewtheneedforothercleantechnologies,namelybioenergyandcarbonsequestration(carboncapture).Exhibit42:Accesstocleanrenewablepoweristhefirststeptonetzero,potentiallyunlockingc.50%abatementofGHGemissionsonourestimatesacrosssectors..2021CarbonomicscostcurvewithtechnologiesrelyingonaccesstorenewablepowerindicatedExhibit43:..yetisnotsufficienttoachieveglobalnetzeroacrossallsectors,withthekeyindustriesforhydrogen’spotentialaddressablemarketbeingtheoneswheredirectelectrificationbasedontoday’stechnologiesiscurrentlynotpossible-200-10001002003004005006007008009001,0001,10002468101214161820222426283032343638404244464850525456Carbonabatementcost(US$/tnCO2eq)GHGemissionsabatementpotential(GtCO2eq)De-carbonizationtechnologiesrelyingonrenewablepowerOtherde-carbonizationtechnologiesYesNoYesCompetitionpossibleyetoverallcostandenergyefficiencycouldbenefitdirectelectrificationExamples:Light-dutyroadtransport,buildingsheat,low-temperatureindustrialheat,powergenerationElectrificationdominanceNoHydrogendominanceExamples:Longhaulheavy-transport,shipping,hightemperatureindustrialheat,petrochemicals,steelOthercleantechnologiesandinnovationrequiredsuchasbioenergyandcarboncaptureExamples:CementHydrogentechnolologyapplicableDirectelectrificationapplicableSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202224GoldmanSachsCarbonomicsIntroducingtheGSglobalhydrogendemandmodels:7-foldincreaseinthepotentialaddressablemarketforhydrogenforglobalnetzeroWeadoptasectoralapproachtoconstructourglobalGShydrogendemandmodels,eachconsistentwithadifferentpathtonetzeroandresultingtemperatureriseInourreport,Carbonomics:IntroducingtheGSnetzerocarbonmodelsandsectorframeworks,weintroducedourglobalpathstonetzerocarbon,withglobalmodelsofde-carbonizationbysectorandtechnology,leveragingourCarbonomicscostcurve.Ourthreepathstoglobalnetzero,asshowninExhibit44,are:GS1.5°:Anemissionspathforglobalnetzerocarbonby2050,whichwouldbenconsistentwithlimitingglobalwarmingto1.5°C,withlimitedtemperatureovershoot.Forthisscenario,weassumedacarbonbudgetforremainingnetcumulativeCO2emissionsfromallsourcesfrom2020tobec.500GtCO2,inlinewithestimatesfromtheIPCCAR6WGISummaryforPolicymakers,andconsistentwitha50%probabilityoflimitingwarmingto1.5°Cby2100.GS<2.0°:AmoreachievableglobalnetzeromodelwhichisconsistentwiththenParisAgreement’saimtokeepglobalwarmingwellbelow2°Candachievingglobalnetzeroaround2060.WedefinethecarbonbudgetforourGS<2.0°modeltobeonewithacumulativeremainingamountof750GtCO2,consistentwitharound1.65°Cglobalwarmingwitha50%probability.GS2.0°:Alessaspirationalscenariothataimsforglobalcarbonneutralityby2070nandisconsistentwitha50%probabilityof2.0°Cglobalwarmingto2100,andwithacumulativecarbonbudgetfrom2020of1,350GtCO2,inlinewiththecarbonbudgetsoutlinedintheIPCCAR6WGISummaryforPolicymakers.Inthisreport,weintroduceourGSglobalhydrogendemandmodels,leveragingonourglobalGSnetzerocarbonmodelsandframeworkstoassessthepotentialglobaladdressablehydrogenmarketunderthreedistrictde-carbonizationscenarios,asshowninExhibit45.Exhibit44:WeleverageourthreeglobalGSnetzerocarbonmodels,eachconsistentwithaspecificcarbonbudgetandresultingtemperaturerise..GSnetzeroglobalmodels,CO2emissions(incl.AFOLU)Exhibit45:..toconstructourthreeglobalGShydrogendemandmodels,representingthreedistinctscenariosto2050Globalhydrogendemand(MtH2)underthethreeGSnetzeromodels-10,000010,00020,00030,00040,00050,000200020032006200920122015201820212024202720302033203620392042204520482051205420572060206320662069GSglobalcarbonneutralitymodels-CO2emissions(MtCO2eq)GS<2.0ºCNetzeroby2060scenarioGS1.5ºCNetzeroby2050scenarioGS2.0ºCNetzeroby2070scenario2203685390100200300400500600201520172019202120232025202720292031203320352037203920412043204520472049Globalhydrogendemand(MtH2)Globalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenarioSource:EmissionDatabaseforGlobalAtmosphericResearch(EDGAR)releaseversion5.0,FAO,GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202225GoldmanSachsCarbonomicsTheriseofthecleanhydrogeneconomycouldseeglobaldemandforhydrogenincreasing7-foldto>500MtH2paunderaglobalnetzeroby2050scenarioOurglobalGShydrogendemandmodelsaredevelopedonasectoralbasis,andincludeamodelingofthetechnologicalmixandactivityforeachofthepotentialhydrogenendmarketsonthepathtonetzero.WepresentinExhibit46andExhibit47globalhydrogendemandresultingfromthevarioushydrogenendmarketsunderthethreescenarios.Underallthreeoftheglobalhydrogendemandpaths,thebull,baseandbear,globalhydrogendemandincreasesatleast2-foldonthepathtonetzero:2-foldinthebearscenario(whichisinlinewith2degreesofglobalwarmingandglobalnetzeroby2070)to7-foldinthebullscenario(whichisinlinewith1.5degreesofglobalwarmingandglobalnetzeroby2050).Thisincludeshydrogendemandassociatedwiththeproductionofhydrogen-basedfuelsincludingammoniaforshippingandsyntheticfuelsforaviation.Globalhydrogendemandhascontributionsacrossindustries,bothexistingendmarkets,suchasrefiningandammoniaandmethanolproduction,andnewemergingmarketsincludinglong-haulheavyroadtransport,shipping,aviation,rail,gridblendingforheating,powergenerationforenergystorage,andsteel.OursectoralframeworkfollowsthematrixlogicshowninExhibit43withthedominantemerginghydrogendemandmarketsbeingoneswheredirectelectrificationisfacinghurdlesinitscurrenttechnologicalstate.Moreover,thepaceofrisinghydrogenpenetrationineachoftheseindustriesisdeterminedbythecurrentpositioningoftherespectivehydrogentechnologyonourCarbonomicscostcurve,asshowninExhibit49.Exhibit46:UnderallthreeGSglobalhydrogendemandscenarios,theaddressablemarketforhydrogenincreasessubstantiallyto2050,fromadoublingindemandunderthebearscenariotoa7-foldincreaseunderthebullscenarioGlobalhydrogendemandforthethreescenarios,splitbyindustry(MtH2)0100200300400500600202020252030203520402045205020202025203020352040204520502020202520302035204020452050BullscenarioBasescenarioBearscenarioGlobalhydrogendemand(MtH2)RefiningAmmoniaMethanolIron&SteelTransport-LDVsTransport-HDVs(trucks,inclbuses)Transport-RailTransport-ShippingTransport-AviationGridblending(heatingindustrial&buildings)PowergenerationGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenarioGlobalnetzeroby2050-1.5ºBullscenarioc.6-7xc.4xc.2xRefining41%Ammonia38%Methanol15%Iron&Steel6%2020GlobalhydrogendemandRefiningAmmoniaMethanolIron&SteelSource:GoldmanSachsGlobalInvestmentResearch4February202226GoldmanSachsCarbonomicsExhibit47:Thepathtonetzeroemissionsrequirestransformationalchangestothecurrentenergyecosystemandcallsforasubstantiallywideruseofhydrogenandhydrogen-basedfuels.Wesummarizeinthistablethekeyaddressablemarketsforcleanhydrogenintheeraofde-carbonizationunderourthreeGSglobalhydrogendemandmodelsSource:GoldmanSachsGlobalInvestmentResearch4February202227GoldmanSachsCarbonomicsComparingourglobalhydrogendemandmodelstootheravailableglobalclimatescenariosThereexistawiderangeofpotentialhydrogendemandscenarios,releasedbyanumberofagenciesandorganizationsincluding,amongothers,theInternationalEnergyAgency(IEASustainableDevelopmentandNetZeroscenarios),theHydrogenCouncil,BloombergNewEnergyFinance(BNEF),andIRENA.InExhibit48,weshowhowtheGSglobalhydrogendemandscenariosscreenagainstthesevariousotherglobalscenarios.Ourbullscenario(whichassumesglobalnetzeroby2050isreachedwithacarbonbudgetinlinewith1.5degreesofglobalwarming)resultsin2%higher2050hydrogendemandcomparedtoIEA’sNZEscenario,owingtoamoremoderateassumedstep-upinefficiencyandsmallerroleofbehavioralenergyconsumptionchangesleadingtohigherdemandforhydrogeninpowergenerationseasonalenergystorage,aviation,heavyroadtransportandsteel.Nonetheless,our‘bull’scenarioisc.18%/23%lowerthanwhatisestimatedbythemoreoptimisticHydrogenCouncil’s‘H2forNZ’andBNEF’sStrongPolicyscenarioswhichassumelargerandbroaderglobalpolicycoordinationonachievingglobalcarbonneutralitythaniscurrentlyobserved.Overall,weremainverybullishonthecleanhydrogeneconomyandviewcleanhydrogenasanecessarypillartoanyaspiringnetzeropath.Exhibit48:DifferentglobalhydrogendemandscenariosshowawiderangeofestimatesforthepotentialglobalhydrogenmarketgiventhedifferenceinthepaceandextentofhydrogenpenetrationassumedacrossthevariousendmarketsGlobalhydrogendemandunderdifferentscenarios(MtH2)1310696660614536528269190539368220-2%0%2%4%6%8%10%12%0200400600800100012001400HydrogenCouncil'H2forNZ'IEANZEIEASDSGSBullscenarioGSBasescenarioGSBearscenarioBNEF-GreenscenarioBNEF-StrongpolicyHydrogenCouncil'H2forNZ'IRENA1.5°CScenarioA.T.KearneyIEANZEIEASDSBNEF-GrayscenarioGSBullscenarioGSBasescenarioGSBearscenario20302050CAGRto2030and2050(%)Globalhydrogendemandunderdifferentscenarios(MtH2)Source:BNEF,IEA,HydrogenCouncil,ATKearney,GoldmanSachsGlobalInvestmentResearch4February202228GoldmanSachsCarbonomicsInourGSglobalhydrogendemandmodels,thepaceandultimatepenetrationofcleanhydrogentechnologiesineachindustryiscorrelatedtothecarbonabatementcostandtechnologicalreadinessofthesetechnologiesonourCarbonomicscostcurveGiventhebroadrangeofendusesandpotentialmarketsforhydrogen,thescenariosreflectabroadrangeofestimates,withthekeydifferenceprimarilystemmingfromdifferenthydrogenpenetrationratesassumedacrossthesemarkets.Webelievethetwokeyfactorsthatultimatelyinfluencethepenetrationofhydrogenintheseindustriesare(a)thelevelofpolicysupportand(b)thecostassociatedwithhydrogenadoptioncomparedtoalternativetechnologiesineachoftheseindustries.InourGSglobalhydrogendemandmodels,thepaceandultimatepenetrationofcleanhydrogentechnologiesineachindustryisthereforecorrelatedtothecarbonabatementcostandtechnologicalreadinessofthesetechnologiesasaddressedbyourCarbonomicscostcurve.Exhibit49demonstratesthehighcorrelationbetweenthepenetrationofcleanhydrogenacrossvariousendmarketsandthecarbonabatementcostofthesetechnologiesbothinour‘base’and‘bull’scenarios.Theonlyexceptiontothistrendissteel,wheredespitethecomparativelylowerimpliedcarbonabatementcostassociatedwiththeswitchfromexistingcoalBF-BOFplantstoH2DRI-EAFplants,theveryyoungexistingplantfleet,particularlyinChina,coupledwiththelongusefullifeoftheseassetsimpliesarelativelyslowerpaceofpenetrationincreaseinthatindustry.Exhibit49:ForourglobalGShydrogendemandmodels,weassumethatthepaceofcleanhydrogentechnologies’penetrationineachindustryisrelatedtothecurrentpositioningonourCarbonomicscostcurveCleanhydrogenpenetrationbyindustryin2040vsabatementcost(bluefortheBasescenarioandgreenfortheBullscenario)Heat&powerAmmoniaproductionMethanol&otherchemsproductionFCEVtrucklong-haulAmmoniafuelforshipsFCtrainFCEVbusesPrimarysteelHeat&powerAmmoniaproductionMethanol&otherchemsproductionFCEVtrucklong-haulAmmoniafuelforshipsFCtrainFCEVbusesPrimarysteelR²=0.99R²=0.970%10%20%30%40%50%60%70%80%050100150200250300350400450500Hydrogencleantechpenetrationin2040underBullandBasescenarioHydrogencleantechcarbonabatementcostontheCarbonomicscostcurve(US$/tnCO2e)Source:GoldmanSachsGlobalInvestmentResearch4February202229GoldmanSachsCarbonomicsDecodingthehydrogenrainbow:AcolorlessgaswithawidecolorspectrumHydrogenhasanumberofvaluableattributesaswelaidoutinanearliersectionofthisreport,twoofwhichmakeituniqueintheageofclimatechange:(1)itsabilitytobestoredandusedasacleanfuelwithoutdirectemissionsofGHGgasesand/orairpollutantsand(2)thewidevarietyofcleanproductionpathwaysthatcouldbeadoptedinitsproduction(versatility),offeringflexibilityalongsupplychains.Therearesixwell-definedcolorsofhydrogen,dependingontheproductionrouteandtechnology:brown,grey,blue,green,pink,andturquoise.Thisiswhatwerefertointhisreportasthehydrogenproductionrainbow.Exhibit50:Summaryofthekeyhydrogenshades,includingprocesstechnologydescriptionandkeymetricsDirectcarbonintensityScalabilityProcessFeedstockProcessdescriptionkgCO2e/kgH2kWh/kgH2%LHVTypicalplantsizeTemperatureºCWaterBrownGasificationCoal,Biomass,Oil,SolidwasteCoalisheatedinapyrolysisprocessto400degrees,vaporisingvolatilecomponentsoffeedstockinH2,CO,CO2,CH4.Thenoxygenisaddedinthecombustionchamberandcharundergoesgasificationreleasinggases,tarvapors,solidresidues(COandH2).Water-gasshiftreactionconvertsCOintoCO2andH2andthenpurificationthroughmethanationorPSAoccurs.19.5kgCO2e/kgH241-4770-80%500,000kgH2pd80-1,8009L/kgH2TurqoisePyrolysisNaturalgasHydrocarbonsundergoheatingwithoutaircombustionsplittingintohydrogenandsolidcarbonblack.Therearefourtypes:slow,flash,fastandmicrowavepyrolysis.-47-6650-70%10,000-50,000kgH2pd200-760n.a.Steammethanereforming(SMR)Naturalgas(methane)andhigh-temperaturesteamaremixedwithnickelcatalysttoproducehydrogen,COandasmallamountofCO2.Heatistypicallyprovidedbyburningfuelgas.Awater-gasshiftreactionoccurswhereCOandsteamarethenreactedfurthertoproduceCO2andmorehydrogen.Inthefinalstep,hydrogenisseparatedfromthetailgasthroughselectiveadsorption.9-11kgCO2e/kgH25264%200,000-500,000kgH2pd750-1,1004.5L/kgH2Autothermalreforming(ATR)ATRcombinestheendothermicreactionofsteamreformingandexothermicreactionofoxidation.Feedstocknaturalgas,steam,orsometimesCOanddioxygenaremixedbeforepre-heating.InthecombustionzonepartialoxidationoccursproducingamixtureofCO2andhydrogen.Inthecatalyticzonegasesleavingthecombustionzonereachequilibrium.Awater-gasshiftreactionhappenspostATRreactingCOwithsteamtoproducemorehydrogenandCO2.9kgCO2e/kgH240-4278-82%upto1,500,000kgH2pd980-1,200n.a.Steammethanereforming(SMR)+CCUSSimilarprocesstoSMRabovebutwithanintegratedcarboncapturesystemadded.CO2capturecanbedoneonthreestreams:ontheshiftedsyngaswithMDEA,onthePSAtailgaswithMDEAorfromtheSMRfuelgasusingMEA.0.9-2.5kgCO2e/kgH2lowerendofrangelowerendofrange200,000-500,000kgH2pd750-1,1004.5L/kgH2Autothermalreforming(ATR)+CCUSSimilarprocesstoATRabove.CarboncaptureistypicallymoreeffectiveinATRcomparedtoSMRgiventhehigherconcentrationofCO2inthestream.0.5-1.35KgCO2e/kgH2lowerendofrangelowerendofrangeupto1,500,000kgH2pd980-1,200n.a.Alkalineelectrolysis(AE)-48-6452-69%Scale-upongoing60-809-15L/kgH2Proton-exchangemembraneelectrolysis(PEM)-43-6060-75%Scale-upongoing50-809-15L/kgH2Solidoxideelectrolyzercell(SOEC)RenewableElectricity,Steam-40-4574-81%Research/Pilot650-1,0009-15L/kgH2PinkNuclearelectrolysisNuclearenergy,WaterPinkhydrogenisgeneratedthroughelectrolysispoweredbynuclearenergy.Nuclear-producedhydrogencanalsobereferredtoaspurplehydrogenorredhydrogen.-n.a.n.a.Research/Pilotn.an.aMicrobialelectrolysisElectricity,WaterCombineselectricalenergywithmicroorganism(suchasbacteria)activationtoproducehydrogen.-47c.70%Researchn.an.aBiomassdarkfermentationBiomass,WaterDarkfermentationconvertsorganicmattertohydrogenthroughbiochemicalreactions(typicallyusingbacteriatotriggerseriesofreactions)->7030-40%Research25-40n.aPhotoelectricalsynthesisSunlight,WaterPhotolytictechnologiesfocusondirectlyconvertingsunenergyintohydrogen.Thisprocesstypicallyinvolvestheuseofmicroorganisms.-n.an.aResearchn.an.aConditionsGreyBlueNaturalgasNaturalgasHydrogencolourEfficiencyHydrogenproductionprocesstechnologyForalloftheseelectrolysisroutesdirectcurrentpassesthroughanionicsubstanceproducingchemicalreactionattheelectrodes.ElectrodesareimmersedinelectrolyteandseparatedbyamediumwhereHydrogenionsmovetowardsthecathodetoformH2andreceiverscollectthishydrogenandoxygen(otherelectrode)ingaseousformsElectrolysisMicrobialOtherThermochemicalRenewableElectricity,WaterGreenSource:KearneyEnergyTransitionInstitute,datacompiledbyGoldmanSachsGlobalInvestmentResearch4February202230GoldmanSachsCarbonomicsExhibit51:Whilebrownandgreyhydrogentechnologiesarethemostmature,bothgreenelectrolysisandcarboncaptureforbluehydrogencontinuetomovefurtherdownthehydrogentechnologicalmaturitycurve.Storageandtransportation,aswellasnewnovelhydrogenproductionrouteshavealsostartedtomakeanentrySource:Companydata,KearneyEnergyTransitionInstitute,compiledbyGoldmanSachsGlobalInvestmentResearch4February202231GoldmanSachsCarbonomicsFossil-fuelhydrogensupplydominanceatpresentbutthehydrogenrainbowexpansionisgainingmomentumwith‘blue’and‘green’hydrogensettingthesceneforde-carbonizationGlobalhydrogendemandofaround90MtH2,asoutlinedearlierinthisreport,wasalmostentirelymetwithhydrogensupplyrelyingonfossilfuels,with72MtH2comingfromdedicatedhydrogenproductionplantsandtheremainingproducedasaby-productinfacilitiesthatweredesignedprimarilyfortheproductionofotherproducts(suchasrefineries,accordingtotheIEA).Today,overc.60%ofhydrogenisproducedfromnaturalgas,c.19%fromcoal,andc.21%asaby-product.Lessthanc.1%-2%ofhydrogenproductioniscurrentlyproducedviaelectrolysis,theleastcarbonintensehydrogenproductionpathway.Whileelectrolysisisnotnew,andhasinfactbeenaroundfornearlyacentury,asshowninExhibit51,productionofhydrogenthroughlowcarbonelectricity(greenhydrogen)isnotcurrentlycarriedoutonalargecommercialscaleandstillshowsawiderangeofvariability,includingthecapitalexpenditurerequirementsassociatedwithelectrolyzers,operatingtime,conversionefficiencyandthecostofelectricity.Inourview,thisisakeyareainthede-carbonizationdebatethatcallsforinnovationandtechnologicalprogressandthatcouldpotentiallyunlockthe‘green’hydrogenscale-upopportunity.Similarly,carboncapture,utilizationandstoragetechnologies(CCUS)forbluehydrogen,whiledevelopedatscale,havebeenlargelyunder-investedoverthepastdecadecomparedtoothercleantechnologiesandhavenotenjoyedtheeconomiesofscalethatothertechnologieshave,yetarecriticalinthelow-carbon,low-costtransitiontocleanhydrogen.Webelievethetechnologicalandfuelmixofhydrogenproductionislikelytoundergoarevolutionarychangeinthecomingdecadesonthepathtoglobalcarbonneutrality.WeshowinExhibit52belowhowweanticipatethehydrogenproductionmixtoevolveinthecomingdecadesbasedonourthreeglobalhydrogenscenarios.Exhibit52:Whilefossil-basedhydrogenproductiondominatesglobalH2supply,weexpect‘green’and‘blue’hydrogentosetthestageforde-carbonizationinthecomingyearswithmaterialgrowthundereventheGSbearcasescenario,fromjustaboutc.1%todayGlobalhydrogensupplybysource0%10%20%30%40%50%60%70%80%90%100%0100200300400500600202020252030203520402045205020202025203020352040204520502020202520302035204020452050BullscenarioBasescenarioBearscenarioGlobalhydrogensupply(MtH2)By-productFossil-basedhydrogenBluehydrogenGreenhydrogen%shareofcleanhydrogenNaturalgas,59%Oil,1%Coal,19%NaturalgaswithCCUS,1%Electrolysis,0%By-product,20%2020GlobalhydrogensupplyNaturalgasOilCoalNaturalgaswithCCUSElectrolysisBy-productSource:IEA(2020),GoldmanSachsGlobalInvestmentResearch4February202232GoldmanSachsCarbonomicsAsshownintheaboveexhibit,weprimarilyfocusonthe‘blue’and‘green’cleanhydrogenproductionroutesforthepurposeofthisreportandpathstonetzero.Thesetworoutesarenotonlythelow-carbonintensitypathwaysthathavereachedcommercialscaleforhydrogenproductiontoday,buttheyalsomakehydrogenuniquelypositionedtobenefitfromtwokeytechnologiesinthecleantechecosystem-carboncaptureandrenewablepowergeneration.‘Blue’hydrogenreferstotheconventionalnaturalgas-basedhydrogenproductionprocess(SMRorATR)coupledwithcarboncapturewhile‘green’hydrogenreferstotheproductionofhydrogenfromwaterelectrolysiswhereelectricityissourcedfromzerocarbon(renewable)energies.Inalatersectionofthisreport,wegointofurtherdetailsonthetechnologies,costsandoutlookforthesetwocolorsofhydrogenaswebelievetheyarelikelytosetthestageforde-carbonizationinthecomingdecades.Exhibit53:Cleanhydrogenformsakeyconnectingpillarbetweentwokeyde-carbonizationtechnologies-renewablepowerandcarboncapture,eachinterconnectedwithoneanotherSource:GoldmanSachsGlobalInvestmentResearch4February202233GoldmanSachsCarbonomicsWeestimatethatUS$5.0tnofinvestmentswillberequiredinthehydrogensupplyvaluechainfornetzeroby2050Investmentsinthehydrogenindustryhavealreadystartedtoinflectnotablyhigher,particularlyinproductiontechnologydeployment.Nonetheless,weestimatethatalotmoreinvestmentwillberequiredtosetusonapathconsistentwithnetzeroby2050(‘bull’hydrogendemandscenario).Governmentactionwillbecriticalforthis,andweaddressthewiderangeoftoolsavailableforpolicysupporttoencouragethewiderdeploymentofcleanhydrogenandde-risktheinvestmentpropositioninalatersectionofthisreport(‘PolicyToolbox’).Governmentactionmorebroadlyhasstartedtonotablygainmomentum,asdemonstratedbythemorethan20newlylaunchednationalhydrogenstrategiesoverthepasttwoyearsalone,whichweseespurringthestrongpaceneededforinvestments.Forinstance,aspartofitsnationalhydrogenstrategy,GermanyannouncedaEUR9bnpackage,which,accordingtotheGermangovernment,willlikelyleadtoanadditionalEUR33bnofprivateinvestments.Weexpectthat,justaswehaveobservedinthesolarandwindindustries,publicinvestmentswilllikelyleadtoeverhigherprivateinvestmentsfuelinganaccelerationoftheindustry.Focusingonthedirectsupplychainofcleanhydrogen,encompassinginvestmentsrequiredforitsproduction(electrolyzersandCCUSforgreenandbluehydrogen,respectively),storage,distribution,transmissionandglobaltrade,weestimatethatanetzeroby2050scenariocallsforUS$5.0tnofcumulativeinvestmentsinthedirectcleanhydrogensupplychainto2050,andc.US$0.6tnto2030.Weviewtheseassolelycapexinvestments(notincludingopexorothercosts)inthedirectsupplychainofcleanhydrogen(asoutlined)andnotincludingcapexassociatedwithendmarkets(industry,transport,buildings)orupstreamcapexassociatedwiththepowergenerationplantsrequiredforelectricitygenerationforgreenhydrogen.Thiscorrespondstoanannualaverageofc.US$55/165bnparequiredto2030/50E,respectively.Exhibit54:Weestimatethatc.US$5.0tnofinvestmentsinthedirectsupplychainofcleanhydrogenwillbeneededforascenarioconsistentwithnetzeroby2050...Investmentsrequiredinthecleanhydrogensupplychain(excl.upstreamRESandendmarkets)fornetzeroby2050Exhibit55:..withc.US$55bnpaannuallyrequiredinthe2020sAverageannualhydrogeninvestmentrequirementsfornetzeroby2050(US$bn)Electrolysers,$1,669CCUS,$1,264Localdistribution,$638Storage,$414Transportandglobaltrade,$961US$5.0trillioncumulativeinvestmentsonthedirectcleanhydrogenvaluechain050100150200250300Avearge2021-30Avearge2031-2040Average2041-50Globalaverageannualhydrogeninvestmentrequirementsforthenetzeroby2050scenario(US$bn)ElectrolysersCCUSLocaldistributionStorageTransportandglobaltradeSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202234GoldmanSachsCarbonomicsChampioningsustainableinnovation:TheeconomicsofcleanhydrogenAsmentionedearlierinthisreport,therearemanytypes(colors)ofhydrogen,dependingontheproductionpathwayinconsideration.However,thelow-carbonintensitypathwaysforhydrogenproductionandwhatmakesthefueluniquelypositionedtobenefitfromtwokeytechnologiesinthecleantechecosystem-carboncaptureandrenewablepowergeneration-are‘blue‘and‘green‘hydrogen.Thesearealsocurrentlythecommercializedroutesofcleanhydrogenproduction.While‘blue’and‘green’hydrogenarethelowestcarbonintensityhydrogenproductionpathways,bothofthesetechnologiesarecurrentlycostlywhencomparedtothetraditionalhydrocarbon-based‘grey’hydrogenproductionmethod,basedonourhydrogencostofproductionanalysis,asshowninExhibit56,callingforfurthertechnologicalinnovationandwideradoptionthatwouldunlockthebenefitsofeconomiesofscale.Wenotethatthecostspresentedbelowarebasedoncurrentcostestimatesforelectrolyzer(‘green’)andcarboncapture&storage(‘blue’).Exhibit56:‘Blue’and‘green’hydrogensetthestageforde-carbonization,yetbotharemorecostlythantraditional‘grey’hydrogen-thusthereisaneedfortechnologicalinnovationandinvestmentinbothcarboncaptureandelectrolyzertechnologies0.01.02.03.04.05.06.07.08.0CoalgasificationCoalgasification+CCUSCoalgasificationCoalgasification+CCUSCoalgasificationCoalgasification+CCUSNaturalgasSMRSMR+CCUSNaturalgasSMRSMR+CCUSNaturalgasSMRSMR+CCUSNaturalgasSMRSMR+CCUSAlkalineelectrolyzerPEMelectrolyzerSOECelectrolyzerAlkalineelectrolyzerPEMelectrolyzerSOECelectrolyzerAlkalineelectrolyzerPEMelectrolyzerSOECelectrolyzerAlkalineelectrolyzerPEMelectrolyzerSOECelectrolyzerAlkalineelectrolyzerPEMelectrolyzerSOECelectrolyzerCoalprice15$/tnCoalprice35$/tnCoalprice55$/tnGasprice$2.5/mcfGasprice$5.0/mcfGasprice$7.5/mcfGasprice$10.0/mcfLCOE$15/MWhLCOE$30/MWhLCOE$45/MWhLCOE$60/MWhLCOE$75/MWhHydrogencostofproduction($/kgH2)Opex(inclstackreplacement)($/kgH2)Fuel(coal,NG)orelectricitycost($/kgH2)Capex($/kgH2)GSbasecaseLCOH-2021($/kgH2)GreenhydrogenBluehydrogenGreyhydrogenBrownhydrogenSource:GoldmanSachsGlobalInvestmentResearch4February202235GoldmanSachsCarbonomics1)‘Blue’hydrogenandthecriticalroleofsequestrationinsupportingthelowcarbonhydrogentransition‘Blue’hydrogenreferstotheproductionofhydrogenfromnaturalgasthrougheithersteam-methanereforming(SMR)orautothermalreforming(ATR)wherebyemissionsarecapturedthroughcarboncapturetechnologies(CCUS).Theproductionof‘blue’hydrogenforde-carbonizationoffersseveraladvantagesintheneartomediumtermasitutilizesthecurrentconventional,large-scalecommercialhydrogenproductionpathwaysandinfrastructure,withc.60%ofglobalhydrogenproductionrelyingonnaturalgasSMRplants.Themostwidespreadmethodforhydrogenproductionisnaturalgas-basedsteam-methanereforming,whichisaprocessthatuseswater(steam)asanoxidantandasourceofhydrogen.NaturalgasinSMRactsasbothafuel(c.30%-45%ofitiscombustedtofueltheprocessgivingrisetoadilutedCO2stream)andfeedstock.Thetypicalstepsoftheprocessinvolve:(1)afeedstockpre-treatmentunit(desulfurization)wheresulphurandchlorineisremovedfromthenaturalgasfeedstock;(2)thestreamsubsequentlyentersthesteam-methanereformerunitwherenaturalgasiscombinedwithpressurizedsteamtoproducesyngas(ablendofcarbonmonoxideandhydrogen);(3)thesyngasoutletstream,mostlyconsistingofcarbonmonoxideandhydrogen,undergoesa‘water-gasshift’reactionwherecarbonmonoxideandwaterarereactedusingacatalysttoproducecarbondioxideandmorehydrogen;and(4)thefinalprocessstepremovescarbondioxideandotherimpuritiesfromthehydrogenstream,increasingitspurityinwhatisreferredtoas‘pressure-swingadsorption’(PSA).AdoptingCCUStechnologiestoSMRandATRplantsforhydrogenproductioncanresultinac.90%reductionincarbonemissionsinaggregateaccordingtoindustrystudies.While30%-40%ofemissionsarisefromusingnaturalgasasafueltoproducesteamandheat,givingrisetoadilutedCO2stream,therestofthenaturalgasusedinthisprocessissplitintohydrogenandamoreconcentratedCO2stream,wherec.60%ofcapturecanoccur.Combiningcarboncaptureacrossbothstreamscanachieve90%reductionsorhigher.AnalternativeprocesstoSMRisapartialoxidationprocess(usingoxygenastheoxidant),yetmoretypicallyacombinationofbothprocessesisused-knownasautothermalreforming(ATR).ATRcarboncaptureisconsideredeasiertoachievegiventhehigherconcentrationofCO2inthesyngasstream.However,thevastmajorityofnaturalgashydrogenproductionfacilitiesgloballyadopttheSMRtechnology.TheschematicofatypicalSMRprocesswithCCUSisshowninExhibit57,whichindicatesthethreepotentialcarboncapturelocations(SMRfluegas,shiftedsyngasandPSAtailgas)withtheSMRfluegasbeingthestreamwiththehighestCO2concentrationandhighestcarboncapturepotential.4February202236GoldmanSachsCarbonomicsThescale-upof‘blue’hydrogenissolelyreliantonthewideradoptionandintegrationofcarboncapture,utilizationandstoragetechnologies,whichresembletheincrementalcostfortheproductionof‘blue’hydrogenvs‘grey’.AswehavehighlightedinourglobalnetzeromodelsCarbonomicsreport,sequestrationislikelytoplayavitalroleinaidingde-carbonizationefforts,particularlyinharder-to-abatesectorsandinachievingnetzeroanthropogenic(i.e.relatedtohumanactivities)emissions.Wepresentmoredetailsaroundthistechnologyandaddressthecurrentpipelineofcarboncaptureprojectsinalatersectioninthisreport.Thetwokeyvariablesdeterminingthelevelizedcostofbluehydrogen(LCOH)are(a)thepriceofnaturalgassinceeachkgofhydrogentypicallyrequires2.5-4kgofmethaneand(b)thecostofCCUS(includingbothcapexandopex).Bothoftheseparametersvarysignificantlybetweenregionsglobally,includingtheabilityandcosttostorethecapturedCO2(withonshorestoragebeingmorecostcompetitivethanoffshorestorage,withregionswithvastamountsofstoragepotentialindepletedoil&gasfieldsscreeningbetterthanothersinthataspect).Inthetablebelow,wepresentthesensitivityoftheLCOHtothenaturalgaspriceandCCUScost.Exhibit57:Schematicdiagrampresentingthestepsofatypical‘blue’hydrogenproductionprocesscombiningSMRwithcarboncaptureMDEA+CO2+H2O=MDEAH++HCO3-60-70%85-90%CaptureofCO2fromshiftedsyngaswithMDEAwithH2-richburnersCaptureofCO2fromSMRfuelgasusingMEAMEA+CO2=H2O+C3H5NO2-+N2CaptureofCO2fromPSAtailgasusinglowtemperatureandmembraneseparationCO2liquefiedandpurified50-55%CaptureofCO2fromshiftedsyngaswithMDEAMDEA+CO2+H2O=MDEAH++HCO3-50-55%CaptureofCO2fromPSAtailgaswithmdeaMDEA+CO2+H2O=MDEAH++HCO3-50-55%ProcessdescriptionCapturerateCarboncapturestreamFeedstockPre-treatmentStream-methanereformer(SMR)Water-gasshiftreactionPressureSwingAdsorber(PSA)Naturalgas(feedstock)Naturalgas(fuel)CombustionairSteam(highpressure)FluegasoutletstreamPSAtailgasInputprocessstreamsProcessstreamsCarboncapturestreams1234CarbonCaptureonsyngasCarbonCaptureonSMRfluegasCarbonCaptureonPSAtailgasDe-carbonizedfluegasCO2streamHydrogenH2outletstreamCO2streamSyngasRecycledhydrogenH2CO2stream123123Source:Companydata,GoldmanSachsGlobalInvestmentResearch4February202237GoldmanSachsCarbonomicsExhibit58:ThepriceofnaturalgasandthecostofcarboncaptureandstoragearethetwokeydeterminantfactorsfortheblueLCOHLevelizedcostofbluehydrogen(LCOH),US$/kgH250751001251501752.51.21.41.61.82.02.25.01.61.82.02.22.42.67.52.02.22.42.62.83.010.02.42.62.83.03.23.412.52.83.03.23.43.63.815.03.23.43.63.84.04.217.53.53.73.94.24.44.6Carboncaptureandstoragecost-US$/tnCO2NaturalgaspriceUS$/mcfSource:GoldmanSachsGlobalInvestmentResearchExhibit59:BelowwepresenttheresultsofasensitivityanalysisforthecostofproductionofbluehydrogenunderdifferentnaturalgaspricesandcarboncapturecostassumptionsLevelizedcostofbluehydrogen(LCOH),US$/kgH20.00.51.01.52.02.53.03.54.04.5$2.5/mcf$5.0/mcf$7.5/mcf$10.5/mcf$12.5/mcf$15.0/mcf$2.5/mcf$5.0/mcf$7.5/mcf$10.5/mcf$12.5/mcf$15.0/mcf$2.5/mcf$5.0/mcf$7.5/mcf$10.5/mcf$12.5/mcf$15.0/mcf$2.5/mcf$5.0/mcf$7.5/mcf$10.5/mcf$12.5/mcf$15.0/mcf$2.5/mcf$5.0/mcf$7.5/mcf$10.5/mcf$12.5/mcf$15.0/mcfUS$50/tnCO2US$75/tnCO2US$100/tnCO2US$125/tnCO2US$150/tnCO2Levelisedcostofhydrogen-LCOH(US$/kgH2)Source:GoldmanSachsGlobalInvestmentResearch4February202238GoldmanSachsCarbonomics2)‘Green’hydrogen:Theultimatede-carbonizationtool‘Green’hydrogenistypicallyproducedviawaterelectrolysis,anelectrochemicalprocessinwhichwaterissplitintohydrogenandoxygen.Dedicated‘green’hydrogenproductionelectrolysisremainsaverynichepartofglobalhydrogenproductiontoday(<1%);yetwithrenewableenergysourcedelectricitycostshavingreducedsubstantiallyovertheyears(solarPV,onshoreandoffshorewind),andwithde-carbonizationfocusfrominvestors,corporatesandpolicymakersaccelerating,weseegrowinginterestinthespace.Thekeyunderlyingtechnologyforgreenhydrogenproductioniselectrolyzer,whichuseselectricitytoproducehydrogen,andtherearethreedistincttypesthathavereachedcommercialization:alkalineelectrolysis,protonexchangemembraneelectrolysis(PEM)andsolidoxideelectrolysiscells(SOECs).Exhibit60:Simplifiedschematicofthethreecurrentlycommercializedelectrolysistechnologiesfortheproductionof‘green’hydrogenSource:TheFuelCellsandHydrogenJointUndertaking(FCHJU),Companydata,compiledbyGoldmanSachsGlobalInvestmentResearch4February202239GoldmanSachsCarbonomicsAlkalineandPEMtechnologiesdominatingtheelectrolyzermarkettoday,yetinnovationisongoing,withnewtechnologiesmakinganentryAlkalineelectrolysis:Themostwidelyadoptedandmaturetechnologyisalkalinenelectrolysis,characterizedbyrelativelylowelectrolyzercapitalcost(lessexpensivemetalstypicallyusedcomparedtootherelectrolysistechnologies)andrelativelyhighefficiencies-typicallyvaryingfrom55%to70%.Thereactionoccursinasolutioncomprisedofliquidelectrolyte(typicallypotassiumhydroxide)betweentwoelectrodes.Whensufficientvoltageisappliedbetweentheelectrodes,theoppositelychargedions(OH-andH+)areattractedtotheoppositelychargedelectrodes.Theanodeaccumulateswater(throughthecombinationofOH-ions)whilethecathodegiveshydrogen.Whilethetechnologyisthemostmatureandhasbeenaroundforoveracenturythankstoitsuseinthechlorineindustry,thecomparativelylowcurrentdensity,longerresponsetime(lowerflexibility)andloweroperatingpressurevsothertechnologiespresentkeychallengesfortheadoptionofthistechnologyacrosstheentirecleanhydrogenapplicationspectrum.PEMelectrolysis:Thistechnologyisbasedontheprincipleofusingpurewaterasntheelectrolytesolutionandthereforeovercomessomeoftheissuesassociatedwithhydroxidesolutions(usedforalkalineelectrolysis).Theprocessinvolvestheuseofaconductivesolidpolymermembrane.Whenvoltageisappliedbetweenthetwoelectrodes,oxygeninthewatermoleculescreatesprotons,electronsandO2attheanodewhilethepositivelychargedhydrogenionstravelthroughtheprotonconductingpolymertowardsthecathodewheretheycombinetoformhydrogen(H2).Theelectrolyteandtwoelectrodesaresandwichedbetweentwobipolarplateswhoseroleistotransportwatertotheplates,transportproductgasesawayfromthecell,conductelectricityandcirculateacoolantfluidtocooldowntheprocess.PEMelectrolyzerstypicallyrequiretheuseofexpensiveelectrodecatalystmaterials(suchasplatinumandiridium)andmembranematerials,resultinginoverallhighercostsvsalkalineatpresent.Nonetheless,theytendtobemorecompact,haveabetterresponsetime,andoperateathigherpressuresresultinginacompetitiveadvantagecomparedtoalkalineforseveralapplications.Solidoxideelectrolysiscells(SOEC):Thistypeofelectrolysistechnologyismuchnlesswidelyadoptedandhasnotreachedlargescalecommercializationtodate.Principally,thisusesceramicsastheelectrolyteandoperatesatveryhightemperatures(>500°C)usingsteamasopposedtowater.Itskeybenefitisthepotentialtoreachefficiencies>70%andtheneedforlowerelectricityconsumptionandthereforereducedelectricitycost.Keychallengesincludethehightemperaturerequired,limitedflexibilityandlowceramicmembranedurabilityduetoextremeoperatingconditions.Anionicexchangemembrane(AEM):ThisisanemergingtechnologythatusesannexchangemembranesimilartoPEM,yet,unlikePEM,thereactionoccursunderalkalineconditionsimplyingnorequirementforexpensiveplatinumgroupmetalsascatalystsandexpensivetitaniumbipolarplatestosurvivethehighlycorrosiveacidicenvironments.InthemildalkalineenvironmentoftheAEMelectrolyzer,theremaininghydroxideion(OH–)fromthereactionwillreturntotheanodehalf-cellviathemembrane.4February202240GoldmanSachsCarbonomicsBreakingdownthecostofproductionof‘green’hydrogen:Renewableelectricitycostandavailability,electrolyzercapex,efficiencythekeydeterminingdriversElectrolysisacrossbothalkalineandPEMelectrolyzers(thetwomostwidelyadoptedatpresent)haveefficienciesthattypicallyrequirebetween50-55kWhofcleanelectricityperkgofhydrogen,withthetheoreticalmaximumpotentialefficiencystillresultingin33kWhperkgofhydrogen.Thismakesthecostofelectricitythesinglemostimportantdeterminantofthecostofproductionofgreenhydrogencurrently,accountingforoverhalfoftheLCOH,asshowninExhibit62.Thisisfollowedbythecostoftheelectrolyzersystem,accountingforaroundonefourthofthetotalcost,onourestimates,atpresent,aswellasthecostofstackreplacement(typicallyrequiredafter7-10years).Finally,whilewateristheonlykeyrawmaterial,itscosthasarelativelysmallcontributiontothetotalLCOH,alongwiththeremainingotheroperatingcost.1)Electrolyzercapex:Theareaofgreatestpotentialforcostreduction,benefitingfromongoingtechnologicalinnovationandeconomiesofscaleFollowingthecostofelectricity,thecostoftheelectrolyzersystemisthesecondmostimportantdeterminantofthelevelizedcostofhydrogen.Thecostvariesdependingontheelectrolyzertechnology,asshowninExhibit60,withdifferenttechnologiescurrentlyatdifferentstagesoftechnologicalmaturityandreadiness.Forthepurposeofthisanalysis,weprimarilyfocusonthecostofalkalineandPEMelectrolyzers,whicharethetwoelectrolysistechnologiesfoundfurtherdownthehydrogentechnologicalmaturitycurve,asshowninExhibit51.Thecostsofbothtypesofelectrolyzershavebeentrendingdownwardsovertime,withPEMelectrolyzerscurrentlyconsideredmorecostlybasedonquotedsystempricesgiventheyounger,lessmaturestateofthetechnology.TheexhibitsbelowshowthewiderangeofelectrolyzercostestimatesforalkalineandPEMelectrolyzersystemsestimatedbyhydrogenmanufacturingcompaniesandenergyagenciesglobally.Thedifferentdotsrepresentprojectionsfromelectrolyzermanufacturingcompaniesandagencies.Exhibit61:ThecurrentelectrolyzermarketisdominatedbyalkalineandPEMtechnologies..Globalinstalledelectrolyzercapacity(MW)Exhibit62:..forwhichthecostofrenewablepowerandelectrolyzercapexarethetwokeycontributorsoftheLCOHLCOHsplitbycostcontributor050100150200250300350201520162017201820192020Globalinstalledelectrolyzercapacity(MW)AlkalinePEMSOECUnknownElectricity,58%Capex,25%Stackreplacement&maintenance,14%Otheropex(inc.water),4%Source:IEAAssumesUS$750/kWelectrolyzercapex,stackreplacementafter8years,$35/MWhelectricitycostand52kWh/kgefficiency,8%IRRSource:GoldmanSachsGlobalInvestmentResearch4February202241GoldmanSachsCarbonomicsTechnologicalinnovationandeconomiesofscale:Intheexhibitsthatfollow,weshowwhatconstitutesfixedelectrolyzercostsforalkalineandPEMsystems.Forbothtechnologies,thecostcanbesplitintotwokeycomponents:theelectrolyzerstackandthebalanceofplant,eachmakingaroundhalfofthefullsystemcost(asthemodulesizeincreasesthecostsplitbetweenthebalanceofplantandstackmaydeviatefromthat).Theprocessesincludedinthebalanceofplantcostcomponentaretypicallyindustrialandchemicalprocesses,whicharewellunderstoodandwidelydeployedacrossindustrialapplicationsandthereforehave,inourview,lowertechnologicalinnovationpotentialcomparedtothestackwherewebelievethelargestopportunityfortechnologicalinnovationlies.LookingatPEMelectrolyzerfullsystems,thestackcostisitselfsplitintovariouscomponents,includingthecostanddesignofthebipolarplants,thecatalystmaterialcoatingthemembrane,theporoustransportlayerandothersmallercomponents.Allthesearekeyareasofongoingresearchandtechnologicaldevelopmentandoptimization,withperhapsthecatalystcoatingthemembranehavingattractedthemostfocusandinterest,giventhepreciousmetalsinvolved(iridiumandplatinum)andthebenefitsoflowercost,higherperformanceandhigherdurabilitythatcouldbeunlocked.Whilethepreciousmetalsoverallmakeupjustaboutc.10%ofthetotalsystemcostforsmallscaleelectrolyzers,securingsupplyforthesemetalsmaybeakeyconstraintlongertermastheindustryscalesup.Foralkalineelectrolyzers,thecostsplitatthefullsystemlevelissimilarbetweenthestackandthebalanceofplant.Thediaphragmmakesasubstantialproportionofthestackcost(morethan50%)yettheelectrodesformasmallercomponentgiventheuseofsimplerdesignsandcheapermaterials(mostlynickel-based).Exhibit63:Thereexistawiderangeofestimatesforboththehistoricalandfuturetrajectoryofelectrolyzersystemcosts..Alkalineelectrolyzersystemcost(US$/kW)Exhibit64:..withPEMelectrolyzersystemscostscurrentlyscreeninghigherthanthecompetingalkalinetechnologycostsowingtoPEM’smorerecenttechnologicaldevelopmentPEMelectrolyzercostevolution(US$/kW)05001,0001,5002,0002,500201020112012201320142015201620172018201920202021202220232024202520262027202820292030Alkalineelectrolysercostevolution(US$/kW)05001,0001,5002,0002,500201020112012201320142015201620172018201920202021202220232024202520262027202820292030PEMelectrolysercostevolution(US$/kW)Source:Companydata,GoldmanSachsGlobalInvestmentResearchSource:Companydata,GoldmanSachsGlobalInvestmentResearch4February202242GoldmanSachsCarbonomicsOverall,thetwokeyareasofongoingtechnologicalinnovationthatcanunlockcostreductionforbothelectrolyzersystemsare(1)stackdesignandcellcompositionand(2)economiesofscaleandincreaseinmodulesize,whicharelikelytoimprovethecostpositioningofbothtechnologies.InExhibit66,weshowthekeyareaswhereweseethegreatestscopefortechnologicalandcostreductionbreakthroughsinthecomingyearsforbothelectrolyzertechnologies.Exhibit65:Costbreakdownforatypical1MWPEMelectrolyzer(top)andalkalineelectrolyzer(bottom)BalanceofPlant(BoP),55%Stackcomponentsincl.CCM,45%PowerSupply,50%Deionisedwatercirculatio…Hydrogenprocessing,20%Coolin…Poroustransportlayer,17%Bipolarplates,53%Catalystcoatedmembrane,24%Stackassemblyandendplates,3%Smallparts,3%Manufacturing,42%PFSAmembrane,21%Iridium,25%Platinum,13%BalanceofPlant(BoP),55%Stackcomponentsincl.CCM,45%PowerSupply,50%Deionisedwatercirculation,22%Hydrogenprocessing,20%Coolin…Poroustransportlayer,8%Structurallayers,14%Smallparts,…Bipolarplates,7%Stackassembly,10%Diaphragm,57%Manufacturing,72%Diaphragm,14%Nickelbasedanodes,11%Nickelbasedcathodes,4%Source:IRENAExhibit66:KeyareasoftechnologicalinnovationandongoingoptimizationforelectrolyzersystemsSource:GoldmanSachsGlobalInvestmentResearch4February202243GoldmanSachsCarbonomicsOurglobalGShydrogenscenariosallshowstellargrowthofthecleanhydrogeneconomy.Weassumethatbothblueandgreenhydrogenplayacriticalroleineachofthesepathsandassumealong-termsplitbetweenthetwotechnologiesof40%and60%,respectively.Assumingautilizationrate,thisenablesustoestimatetheglobalinstalledelectrolyzercapacityrequiredtomeetgreenhydrogendemandinthesescenarios.TheoutcomesareshowninExhibit67andExhibit68below.Overall,weestimatethatbetween65and180GWofelectrolyzercapacitywillneedtobeinstalledby2030and500-3,200GWby2050underthethreescenarios.Thisrepresentsastellar200-570-foldincreaseto2030,giventheverylowstartingbaseofaround0.3-1.0GW(2021),anda20%-30%CAGRto2050dependingonthescenarioconsidered.Withtheindustrylikelytoexperiencesubstantialgrowth,webelievethatthecostoftheseelectrolyzerunits(inUS$/kW)hasthepotentialtodecreaseby50%/65%by2030foralkalineandPEMelectrolysissystems,respectively.Weexpectthat,longerterm,thecostofalkalineandPEMelectrolyzersislikelytoconvergetoaroundUS$300-400/kW(2030E),withPEMenjoyingahigherlearningratecomparedtoalkalinegivenitshigherstartingpointandearlierstageofdevelopment.Weseetheindustry’sscale-upastheprimarycontributortothisreductionwiththescale-upcominginthreedistinctforms:thescale-upofindividualmodules’size,thescale-upandfurtherautomationofthefactoriesthatmanufacturethem(larger-sizedgigafactories),andthescale-upoftheprojectsinwhichtheseelectrolyzersystemsaredeployed.InExhibit69,wecomparethecostevolutionforelectrolyzerstothatforothercleanenergytechnologies,includingsolarPV,onshoreandoffshorewind,andbatteries(rebasedto2010forrenewablepowerand2015forbatteries).Weestimatethatelectrolyzersystemcostswillhavealearningratebetween10%-15%thisdecade,butnotethatthislearningratecouldbeevenhigherifweusetheratesobservedintherenewablepowerindustryasaproxy.Overall,weassumeacompoundedannualreductionofc.7%/10%paforalkalineandPEMelectrolyzers,respectively(higherforPEMgivenultimateconvergencearound2030yetahighercoststartingpoint).Exhibit67:Totalinstalledelectrolyzercapacityincreases>200-foldand>1000-foldunderallthreeGSglobalhydrogendemandmodelsto2030and2050,respectively..GlobalinstalledelectrolyzercapacitybasedonourGSglobalhydrogendemandmodels(GW)Exhibit68:..resultinginac.20%-30%CAGRto2050,asubstantialscale-upfortheindustryGlobalinstalledelectrolyzercapacityundervariousscenariosandvsGSglobalhydrogenmodels(GW)05001,0001,5002,0002,5003,0003,5002020202220242026202820302032203420362038204020422044204620482050GlobalinstalledgreenH2electrolysiscapacity(GW)BullscenarioBasescenarioBearscenarioGlobalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenario32%29%24%20%24%28%32%36%40%02,0004,0006,0008,00010,00012,000BNEF-TheoreticalmaxBNEF-StrongpolicyHydrogenCouncil'H2forNZ'IEANZEIEASDSBNEF-WeakpolicyGSBullscenarioGSBasescenarioGSBearscenario2050CAGR2021to2050(%)Globalinstalledelectrolysercapacity(GW)Source:GoldmanSachsGlobalInvestmentResearchSource:BNEF,HydrogenCouncil,IEA,GoldmanSachsGlobalInvestmentResearch4February202244GoldmanSachsCarbonomicsExhibit69:Weexpectelectrolyzersystemcoststomorethanhalvebytheendofthedecade(2030),trackingthetrajectoryoftechnologiessuchasonshorewindandbatteriesCostperkWelectrolyzercapacity,perkWofrenewablepowercapacityandperkWhofbattery02040608010012020202021202220232024202520262027202820292030CleantechcapexrebasedSolarPVcostperGW(rebasedto2010)OnshorewindcostperGW(rebasedto2010)OffshorewindcostperGW(rebasedto2010)BatteriescostperkWh(rebasedto2015)AlkalinecostperkW(rebasedto2020)PEMcostperkW(rebasedto2020)Source:GoldmanSachsGlobalInvestmentResearchExhibit70:BasedonourestimatesoftheevolutionofalkalineandPEMelectrolyzercosts,theimpliedlearningrateislowerthantheoneobservedinsolarandonshorewindover2010-20aswellasbatteriesin2015-20,butmoreinlinewiththelearningrateofoffshorewind,leavinguswithfurtherupsidetopotentialcostreductionCostindexperunitcapacityofvariouscleantechnologiescomparedtothecumulativecapacityinstalled(inMWorMWh)0204060801001201001,00010,000100,0001,000,000CostIndexperunitcapacityCumulativecapacityinMWorMWh(logarithmic)Onshorewindcost(2010-20)SolarPVcost(2010-20)Offshorewindcost(2010-20)Batterycost(2015-20)Alkalineelectrolysercost(2020-30E)PEMelectrolysercost(2020-30E)Source:IRENA,GoldmanSachsGlobalInvestmentResearch4February202245GoldmanSachsCarbonomics2)Renewablepower:ThereductioninthecostofrenewablepowerakeyenableroftheriseofthecleanhydrogeneconomyAsmentionedearlierinthereport,cleanhydrogenformsakeyinterconnectingpillarbetweenothercriticalde-carbonizationtechnologies.Inthecaseofgreenhydrogen,thisreferstorenewablepower,withthetwotechnologiesinter-linked;greenhydrogenrequiresrenewableenergyforitsproductionandatthesametimetheenergystoragecapabilities(incl.seasonal)offeredbygreenhydrogencouldenablethelargeruptakeofrenewablesintheglobalpowersystem.Thereductioninthelevelizedcostofelectricity(LCOEs)observedoverthepastdecadeisakeyenableroftheemergenceofthecleanhydrogeneconomy.SolarPVLCOEshavefallenc.80%since2010whilewindLCOEshavefallenbyaround60%inasimilartimeframe.Thiswasdrivenbybothongoingoperationalcostreductionfromeconomiesofscaleandareductioninthecostofcapitalforthesecleanenergydevelopments,contributing,onourestimates,c.1/3ofthecostreductionsince2010.Intheexhibitsthatfollow,wepresentoursensitivityanalysisoftheimpactofthecostofpowerandthecostoftheelectrolyzersystemontheresultinglevelizedcostofhydrogen(LCOH).Asshownbelow,thecostofelectricityhasthepotentialtomateriallyinfluencetheresultingcostof‘green’hydrogen.Overall,weestimatethatforanelectrolyzerofanefficiencyof64%operatingfor5,000fullloadhours,anLCOEthatislowerthanc.US$30/MWhisrequiredtobeatcostparitywith‘blue’hydrogen,andlowerthanc.US$20/MWhtobeatcostparitywith‘grey’hydrogen.Thiscanbeimprovedbyareductioninthecostofelectrolyzeraswellasanimprovementintheelectrolyzerefficiencyandhigherutilization,whichwewilladdressinalatersection.Exhibit71:TheLCOEforrenewablepowerhasreducedbyc.80/60%forsolarandwind,respectively,since2010..Levelizedcostofelectricity(LCOE,EUR/MWh)Exhibit72:..onthebackofongoingoperationalcostreductionfromeconomiesofscaleandareductioninthecostofcapitalforthesecleanenergydevelopments,contributingc.1/3ofthecostreductionsince2010RenewablesLCOE%reductionfrom2010base,splitbetweenoperationalandfinancial(costofcapital)010203040506070809010011012013014015016020082009201020112012201320142015201620172018201920202021E2022E2023E2024E2025E2026E2027E2028E2029E2030ESolarWindOnshoreWindOffshore-77%-36%-32%-53%-33%-90%-80%-70%-60%-50%-40%-30%-20%-10%0%10%20%20102011201220132014201520162017201820192020ERenewablesLOCE%reduction(from2010base)splitbetweenoperationalandfinancialSolarPV-operationalreductionSolarPV-financialreductionOnshorewind-operationalreductionOnshorewind-financialreductionSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202246GoldmanSachsCarbonomicsExhibit73:TheLCOEandelectrolyzercapexarethetwokeycontributingfactorstothelevelizedcostof‘green’hydrogen,whichweestimatecanvaryfromUS$2-7/kgH2currentlyLevelizedcostof‘green’hydrogen(US$/kgH2)0.01.02.03.04.05.06.07.08.0$15/MWh$30/MWh$45/MWh$60/MWh$75/MWh$90/MWh$15/MWh$30/MWh$45/MWh$60/MWh$75/MWh$90/MWh$15/MWh$30/MWh$45/MWh$60/MWh$75/MWh$90/MWh$15/MWh$30/MWh$45/MWh$60/MWh$75/MWh$90/MWh$15/MWh$30/MWh$45/MWh$60/MWh$75/MWh$90/MWhUS$400/KwUS$600/KwUS$800/KwUS$1000/KwUS$1,200/KwLevelisedcostofgreenhydrogen-LCOH(US$/kgH2)CapexStackreplacementOtheropexElectricityopexSource:GoldmanSachsGlobalInvestmentResearchExhibit74:Overall,weestimatethatforanelectrolyzerofanefficiencyof64%andoperatingfor5,000fullloadhours,anLCOEthatislowerthanc.US$30/MWhisrequiredtobeatcostparitywith‘blue’hydrogen,andlowerthanc.US$20/MWhtobeatcostparitywith‘grey’hydrogenLevelizedcostofgreen,blueandgreyhydrogenunderdifferentelectrolyzercapexassumptions0.01.02.03.04.05.06.07.08.015.025.035.045.055.065.075.085.095.0Levelisedcostofhydrogen-LCOH(US$/kgH2)LCOE(US$/MWh)Capex:$400/kWCapex:$600/kWCapex:$800/kWCapex:$1,000/kWSource:GoldmanSachsGlobalInvestmentResearch4February202247GoldmanSachsCarbonomics3)HigherutilizationandimprovedefficiencyhavethepotentialtodrivefurthercostreductionInadditiontothecostofelectricityandtheelectrolyzersystem,thefullloadhoursofoperation(loadfactor)oftheelectrolyzeraswellastheelectrolyzerefficiency(whichultimatelydeterminestheamountofelectricitytobeusedperkgproduced)aretwootherrelevantparametersthatcaninfluencetheoverallcostastheindustrygrowsandongoinginvestmentandtechnologicalinnovationenhancessystemoptimization.Intheexhibitsbelow,wepresenthowthelevelizedcostofhydrogen(LCOH)varieswithLCOEfordifferentutilizationlevelsandelectrolyzerefficiencies.Overall,asshowninExhibit75,higherutilizationoftheelectrolyzerreducestheLCOH,yetthereductionbecomeslesssignificantonceutilizationexceeds4,000fullloadhours(c.46%loadfactor),andasthecapexofelectrolyzerreduces(asshownbythelowercurvesteepnessfora$750/kWelectrolyzercomparedtoa$1,100/kWone).Nonetheless,theultimateutilizationdependsonthefinalelectrolyzersystemownerandthenatureoftheproject(higherutilizationlevelstypicallyforonesconnectedonthegridcomparedtodistributedrenewablepower).Similarly,higherefficiencyreducestheoperatingelectricitycost,asexpected,resultinginlowerLCOH.Exhibit75:HigherutilizationcancontributetoLCOHreductionyetitbecomeslessimportantoncethisexceeds45%andasthecostofelectrolyzerreduces..Levelizedcostofhydrogenfordifferentutilizationandelectrolyzercapexlevels(US$/kgH2)Exhibit76:Efficiencyimprovementscanreducetheoperatingcostassociatedwithelectricityuse,yetitsimpactontheLCOHislesswhencomparedtotheLCOEorcostoftheelectrolyzerLevelizedcostofhydrogenfordifferentelectrolyzerefficiencies(US$/kgH2)0.02.04.06.08.010.012.014.016.018.01,0002,0003,0004,0005,0006,0007,0008,000Levelisedcostofhydrogen-LCOH(US$/kgH2)Utilization(fullloadhours)$15/MWh,$750/Kw$45/MWh,$750/Kw$75/MWh,$750/Kw$15/MWh,$1,100/Kw$45/MWh,$1,100/Kw$75/MWh,$1,100/Kw0.01.02.03.04.05.06.07.08.050%55%60%65%70%75%80%Levelisedcostofhydrogen-LCOH(US$/kgH2)Electrolyserefficiency(%)LCOE$15/kWLCOE$30/kWLCOE$45/kWLCOE$60/kWLCOE$75/kWSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202248GoldmanSachsCarbonomicsUnlockinggreenhydrogencostparitywithgreyhydrogenbefore2030Asoutlinedearlierinthereport,ourglobalGShydrogenscenariosallshowstellargrowthofthecleanhydrogeneconomywithscopeforbetween65and180GWofelectrolyzercapacitytobeinstalledby2030.Thisrepresentsaremarkable200-600foldincrease,makingthisdecadeacriticaloneforthedevelopmentofthecleanhydrogeneconomy.Thetwokeycontributingfactorsoftechnologicalinnovationandeconomiesofscale,onourestimates,leadtogreenhydrogencostsfallingmoreswiftlythanpreviouslyanticipated,whileutilizationislikelytoincreasetooasthede-carbonizationprocessunfolds.Bluehydrogencostsarealsolikelytocomedownastechnologicalinnovationandscale-upcontinuesinthecarboncapturetechnologywithmoreprojectscurrentlyinthepipelineaswellastheongoingscale-upofcarbonstorageinfrastructure,particularlyinCCSclustersthathavestartedtoemergeacrosskeyregions.Exhibit77presentsourestimatesfortheevolutionofgreenandbluehydrogenovertime,intheabsence(top)andpresence(bottom)ofglobalcarbonpricing.Exhibit77:Greenhydrogencanachievecostparitywithgreyhydrogenbeforetheendofthisdecade,dependingontheregionalgasprice.Asglobalcarbonpricesincrease,thepathtowardscostparityacceleratesLevelizedcostofgrey,blueandgreenhydrogenovertime(US$/kgH2)0.01.02.03.04.05.06.07.08.02020E2021E2022E2023E2024E2025E2026E2027E2028E2029E2030E2031E2032E2033E2034E2035E2036E2037E2038E2039E2040E2041E2042E2043E2044E2045E2046E2047E2048E2049E2050ELevelisedcostofhydrogen-LCOH(US$/kgH2)GreenH2BlueH2GreyH2PotentialcostparityofgreenH2withgreyinregionswithlowcostRES(US$15/MWh,suchasMENA,Chile)andhighgasprice($10/mcf,suchasChina)CostparityofgreenH2withgreyinregionswithaveragecostRES(US$30-40/MWh)andaveragegasprice(US$5/mcf)CostparityofblueH2inlowgaspriceregions(US$2.5/kg),suchastheUS)withgreyH2inhighgaspricecostregions(US$10/mcf)0.01.02.03.04.05.06.07.08.02020E2021E2022E2023E2024E2025E2026E2027E2028E2029E2030E2031E2032E2033E2034E2035E2036E2037E2038E2039E2040E2041E2042E2043E2044E2045E2046E2047E2048E2049E2050ELevelisedcostofhydrogen-LCOH(US$/kgH2)GreenH2BlueH2GreyH2CostparityofgreenH2andblueH2withgreyinregionswithaveragecostRES(US$30-40/MWh)andaveragegasprice(US$5/mcf)withaglobalcarbonpriceofUS$45/tnC2Source:GoldmanSachsGlobalInvestmentResearch4February202249GoldmanSachsCarbonomicsThecaseofEurope:HighernaturalgasandcarbonpricestiltthescaleinfavorofgreenhydrogenwithcostparityalreadyachievedinkeypartsoftheregionHighernaturalgaspricesandcarbonpricesarecreatingauniquedynamic,withgreenhydrogenalreadyreachingcostparitywithgreyacrosskeypartsoftheregion..Whilegreenhydrogen’smovetowardscostparitywithgreyhydrogenisaccelerating,andweexpectthistobereachedbefore2030acrossregionsoflowrenewablepowercosts,wenotethatthecurrentmacrodynamicofstructurallyhighercommodityprices,andinparticularnaturalgas,combinedwithhighercarbonpricesiscreatingauniquegreenhydrogencostparitydynamicinEurope.Withmostcurrentlyproducedhydrogenbeingsourcedfromnaturalgasintheregion,thenotablyhighernaturalgaspricetowhichtheregioniscurrentlyexposedistiltingthescaleinfavorofgreenhydrogenfromaneconomicstandpoint.Weestimatethatthecarbonpriceimpliedbythecurrenthighernaturalgaspriceenvironmentintheregionisequivalentto>US$150/tnCO2eq(whenaccountingforthescope1,2,3carbonintensityofnaturalgas)whileEuropeanETScarbonpricesalsocontinuetoedgehigher,currentlyapproachingUS$100/tnCO2eq.ThisissufficienttobridgethecostofgreyhydrogenwithgreenacrossregionsofEuropewitharenewablepowerLCOElowerthanUS$50/MWh...providinganincentivefortheregiontoescalateitseffortsincleanhydrogenThecurrentnaturalgaspricesituationinEuropeisencouragingtheaccelerationofeffortstoscaleupthecleanhydrogeneconomy.Inparticular,theEnergyNetworksAssociationannouncedinastatementinJanuarythattheUK’sgasgridcouldbereadytoblendupto20%hydrogenintothegasnetworksacrossthecountryfrom2023,amorethandoublingofthecurrentblending.Germanyisalsoexpandingitseffortshere,approvinginDecemberEUR900mn(aroundUS$1bn)intoafundingschemetosupportgreenhydrogen.InDecember2021,theEUCommissionhasalsoproposedanewEUframeworktode-carbonizegasmarkets,promotinghydrogen.Exhibit78:HigherEuropeancarbonandnaturalgaspricesarealreadycreatingauniquedynamicintheregion..EUETScarbonpricesandcarbonpricesimpliedbynaturalgaspricesinEurope(TTF)inUS$/tnCO2eqExhibit79:..withgreenhydrogenreachingcostparitywithgreyforregionswithrenewablepoweravailability<US$50/MWhLevelizedcostofproductionofhydrogen-LCOH(US$/kgH2)050100150200250300350400Jan-19Mar-19May-19Jul-19Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Nov-20Jan-21Mar-21May-21Jul-21Sep-21Nov-21Jan-22EUETScarbonpriceandimpliedcarbonpriceassociatedwithEuropeannaturalgasprices(US$/tnCO2)EUETScarbonpriceNaturalgasTTFimpliedcarbonpriceSource:ThomsonReutersDatastream,GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202250GoldmanSachsCarbonomicsScaling-up:Thecleanhydrogenprojectspipelineisexpandingatanunprecedentedpace,trackingtheGS‘bull’scenarioto2025Globalinstalledcapacityof‘green’hydrogenprojectsisacceleratingwithEurope,Australia,LatinAmerica,andtheMiddleEastleadingprojectpipelinegrowth..WehaveaddressedtheglobalhydrogendemandopportunityandevolutionunderourthreeGSglobalhydrogenmodelsaswellasthekeytechnologicaldevelopmentsinthespaceinprevioussectionsofthereport.Inthissection,weutilizeourcleanhydrogenprojectsdatabasetolookatthecurrentsupplyandprojectpipelinetrendsthathavestartedtoemerge.Wetrackthedevelopmentof>600cleanhydrogenprojectsacrossallkeyregionsglobally.While,ashighlightedpreviously,thetotalinstalledelectrolyzercapacitywasonlyaround0.3GWbytheendof2020,thecurrentprojectspipelinewouldsuggestthisgrowstocloseto80GWbyend-2030,includingprojectscurrentlyunderconstruction,havingundertakenFID(finalinvestmentdecision)andpre-FID(feasibilitystudy),andassumingprojectsmeettheguidedstart-uptimeline.Ifweweretoconsiderprojectsinearlierstagesofdevelopment(pre-feasibilitystudystage,‘concept’projects),thenthisfigurewouldgocloseto120GW.Whilethiswouldappeartotrendinlinewithour‘Bull’casescenarioto2025,wenotethatnotalloftheseprojectsarelikelytomaterializeinlinewiththeirguidedtimeline,withprojectsunderconstructionandthosethathavereachedfinalinvestmentdecision(FID)onlyaccountingforc.7GW.Ontheotherhand,whileourprojectsdatabaseiscomprehensiveandcaptures,webelieve,thevastmajorityofnear-termprojects(to2025E),wenotethatgiventheleadprojecttimesmanyoftheprojectsforthesecondhalfofthisdecade(2026-30E)havenotyetbeenannouncedandarethereforenotcapturedhere,implyingfurtherupsideinthesecondhalfofthisdecadeandexplainingtheflatteningoftheredlineintheexhibitbelowpost2028E.Exhibit80:Thecurrentprojectspipelinesuggestsinstalledcapacitygrowthintheneartermthatcouldtrackourbullscenario..Globalinstalledelectrolyzercapacity(GW)underthethreeGSscenarioscomparedtoinstalledcapacityimpliedbyplannedprojects(redline)Exhibit81:..butwiththevastmajorityoftheseprojectsnotyetreachingafinalinvestmentdecision(infeasibilitystudystage)Installedelectrolyzercapacityadditionssplitbyprojectstatus(MW)-204060801001201401601802002021202220232024202520262027202820292030Globalinstalledelectrolysiscapacity(GW)Cum.Installedcapacityfromprojectspipeline(feasibility,FID,construction)Cum.Installedcapacityfromallprojectsunderconsideration(incl.conceptprojects)Globalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenario-2,0004,0006,0008,00010,00012,00014,00016,00020202021202220232024202520262027202820292030Installedelectrolysiscapacityadditionsbasedonprojectsunderconstruction,FID,feasibilitystudy(MW)DEMOFeasibilitystudyFIDUnderconstructionOperationalSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202251GoldmanSachsCarbonomicsFromaregionalperspective,weseethemajorityofcapacityadditionsstemmingfromEuropeandtheMiddleEastinthenearterm(2021-25E)andfromAustralia,Europe,LatinAmericaandAfricapost2025E.Europe,inparticular,isleadingplannedelectrolyzercapacityadditionswithc.27GWcumulativeto2030E,followedbyAustralia(c.20GW),LatinAmerica(c.13GW),Africa(15GW)andtheMiddleEast(c.3GW).CapacityadditionsbykeyregionandcumulativeannualinstalledcapacityarepresentedinExhibit82andExhibit83...withprojectsizesenteringaGWscaleandunlockingbenefitsassociatedwitheconomiesofscalethatwouldaidelectrolyzersystems’costreductionTheindustryisnotonlyscalingupintermsofthenumberofprojectscurrentlyinthepipelinebutalsointermsoftheaveragesizeoftheseprojects.Weestimatetheaveragesizeofprojectsincreasingfromc.2MWin2020toc.200MWby2025andaGWscaleby2030withanumberofGW-scaleprojectscurrentlyinthepipelineaswell,particularlypost2024,asshowninExhibit85.AmongthesearetheNEOMprojectinSaudiArabia(2GW),theCentralQueenslandCQ-H2project(3GW)inAustralia,theH2MagallanesprojectofTotalEnergiesinChile(8GW),themaingreenhydrogenproject(14GW),andtheNortH2projectintheNetherlands(4GW).Exhibit82:Europe,Australia,LatinAmericaandtheMiddleEastleadthegreenhydrogenprojectspipelinethisdecade..Installedelectrolyzercapacityadditionsbasedonprojectsunderconstruction,FID,feasibilityExhibit83:..withglobalinstalledelectrolyzercapacityreachingc.80GWby2030,a>250-foldincreaseiftheprojectscurrentlyplannedmaterializeinlinewiththeirguidedtimelineCumulativeinstalledelectrolyzercapacitybyyear-end(GW)-2,0004,0006,0008,00010,00012,00014,00016,00020202021202220232024202520262027202820292030Installedelectrolysiscapacityadditionsbasedonprojectsunderconstruction,FID,feasibilitystudy(MW)EuropeAsiaAustraliaMiddleEastUnitedStatesOtherN.ALatinAmericaAfrica-1020304050607080902021202220232024202520262027202820292030Cumulativeinstalledelectrolysiscapacitybasedonannouncedplannedprojects(GW)EuropeAsiaAustraliaMiddleEastUnitedStatesOtherN.ALatinAmericaAfricaSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit84:Theaveragesizeofprojectsisrapidlyincreasing...Sizeofelectrolyzerprojectsbyprojectstartyear(MW)Exhibit85:..reachingGWscalebeforethemiddleofthisdecadeSizeofelectrolyzerprojectsbystartyear,focusingonprojectswith>1GWcapacity02004006008001,0001,2002015201620172018201920202021202220232024202520262027202820292030Sizeofelectrolyserprojectsbystartyear(MW)020004000600080001000012000140002024202520262027202820292030SizeofelectrolyserprojectsbystartyearinGWscale(MW)Source:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202252GoldmanSachsCarbonomicsEuropeandAustraliaofferinggreatersupport(intermsoffunding)forcleanhydrogenprojectsThisnewgenerationofhydrogenprojectsisprimarilyfocusedinregionssuchasEuropeandtheMiddleEastinthenearterm(2021-25E)andinAustralia,Europe,LatinAmericaandAfricapost2025E.EuropeandAustraliaarethetworegionsinparticularwhichareleadingplannedelectrolyzercapacityadditionswithc.27/20GWcumulativeto2030E,respectively(fromprojectsinfeasibilitystudystage,FID,andunderconstructionbutexcludingconceptprojects).Thisisnotsurprisingtousgiventhetworegionsofferamongthegreatestavailabilityoffundingforgreenhydrogenprojects,asshownintheexhibitbelow.Germany,inparticular,hasbeenkeytounlockingEurope’sgreenhydrogenpotential,havingapprovedattheendoflastyearEUR900mnforgreenhydrogenprojects(aspartoftheinnovativefundinginstrumentH2Global).Exhibit86:EuropeandAustraliaarethetworegionsofferingthegreatesthydrogenprojectsupportandthereforedominatingthenear-termprojectpipelineAverageannualfundingpotentiallyavailableforhydrogenprojects(US$bn,asofmid-2021)0.00.51.01.52.02.53.03.54.04.55.0ChilePortugalChinaPolandDenmarkCanadaSpainNorwayUSItalyUKSouthKoreaFranceJapanNetherlandsAustraliaGermanyEuropeanUnionTargetedsupportforhydrogen(US$bn)Technology-neutralfundsforwhichhydrogenprojectscanapply(US$bn)Source:IRENAadoptedfromBNEF4February202253GoldmanSachsCarbonomicsBluehydrogenprojectsarealsogainingmomentum,typicallyoccurringatlargerscalecomparedtogreenandmoreregionallyconcentratedWhilegreenhydrogenprojectsareacceleratingatanextraordinarypace,asoutlinedabove,thebluehydrogenprojectpipelineisalsogainingmomentum.Hydrogenproductionmethodsusingthenaturalgasreformingprocessandfromcoalusinggasificationarewell-establishedtechnologiesandcurrentlydominateexistingglobalhydrogensupplyandhydrogenproductionplantassets.However,botharecarbonintensiveroutesforhydrogenproduction,makingcarboncapturetechnologiesnecessaryforemissionsabatementintheseplants.CCUSisimportantintheproductionoflow-carbonhydrogenfromfossilfuelsourcesforthreeimportantreasons:(1)itcanaidthereductionofupto90%ofemissionsfromtheexistinghydrogenplantsacrossrefining,ammonia,methanolandotherchemicalplants,(2)itsapplicationdoesnotrequiretheretirementofexistingassets,avoidingthereforethedebatearoundstrandedassets,particularlyinregionsoftheworldwhereindustrialplantsarestillrelativelyyoungcomparedtotheirusefullife,and(3)itcanofferthepotentialforscale-upoflow-carbonhydrogenproductioninregionsoftheworldwhererenewablepowerresourceavailabilitymaybeconstrainedorunreliable.Wegointofurtherdetailonthevariouscarboncapturetechnologiesandcurrentstateofthemarketinalatersectionofthereport.Outofthecurrentc.40MtCO2paglobalcarboncapturecapacityinoperation,aroundtwo-thirdsisattributedtonaturalgasprocessingfacilities,giventhehighcarbondioxideconcentrationintheresultingstreamthatultimatelyreducesthecostofcarboncapture.Basedonourcompiledprojectsdatabase,weestimatethataround16projectsarecurrentlyproducinghydrogenfromfossilfuelroutescombinedwithCCUS,withannualproductionofaround0.7MtH2in2020(accordingtotheIEA),whichalsocapturescloseto10MtCO2(c.one-fourthofthetotalglobalcarboncaptureoperatingcapacity).Exhibit87:Thepipelineofbluehydrogenprojectsisalsogainingmomentum,particularlyinEuropeandNorthAmerica(theUSandCanada)..Cumulativeoperatingcapacityofbluehydrogenprojectssplitbykeyregion(MtCO2captured)Exhibit88:...wherethemajorityoftheexistingfossil-basedhydrogenproducingplantsarenaturalgasSMR/ATRplantsCumulativeoperatingcapacityforbluehydrogensplitbysource(MtCO2captured)010203040506070802021202220232024202520262027202820292030Cumulativeoperatingcapacityofbluehydrogenprojects(MtCO2)EuropeAsiaAustraliaMiddleEastUnitedStatesOtherN.ALatinAmericaAfrica0102030405060702021202220232024202520262027202820292030Cumulativeoperatingcapacityforbluehydrogen(MtCO2)NGwCCUSCoalwCCUSOilwCCUSSource:GlobalCCSInstitute,GoldmanSachsGlobalInvestmentResearchSource:GlobalCCSInstitute,GoldmanSachsGlobalInvestmentResearch4February202254GoldmanSachsCarbonomicsAddressingtheremaininghydrogenvaluechain:Hydrogenconversion,transportandstorageunlockanewinfrastructureopportunitySafeandcost-efficienttransport,storageanddistributionofhydrogenwillbecriticalinsettingthepaceofitslarge-scaledeployment.Thelowenergydensityofthefuelunderambientconditions,itshighdiffusivityinsomematerialsincludingdifferenttypesofsteelandironpipes,anditshighlyflammablenature(lowMIE)presentimportanttechnologicalandinfrastructurechallengestoitslarge-scaleadoption.Ifnaturalgaswasusedasadirectcomparableforthedevelopmentofthehydrogenvaluechain,itwouldbeexpectedthathydrogen’sinitialaccelerationanduseislikelytobemorelocallyconcentrated(hydrogenhubs)whilealarge-scalegloballyintegratedvaluechainislikelytotakelongertoemerge.Wenote,however,thattherearekeydifferencesbetweenthetwogases,whichmayalterthetrajectoryandpaceofdevelopmentofhydrogenfromalocaltoaglobalmarket.Itsnature(fromachemicalandphysicalperspective)mayimplythatglobalmarketemergenceismorechallenging,while,ontheotherhand,theextraordinaryengagementandfocusofcorporatesandinvestorsonthethemeofde-carbonizationandhydrogen’snecessityfornetzeroaspirationsmayaccelerateitsdevelopmentleadingtotheemergenceofaglobalmarketfasterthanwhathasbeenobservedfornaturalgas.Exhibit89:Hydrogenhasveryhighenergygravimetricdensitycomparedtootherfuels..Gravimetricenergydensity(MJ/kg)Exhibit90:..yetithasverylowdensityinitsambientgaseousform,makingconditioninganecessityforeffectivetransportationHydrogenandhydrogencarriers’density(kgH2/m3)020406080100120140AmmoniaWood,oakCoal(wetbasis)EthanolCrudeoil1)Low-sulfurdiesel1)Conventionalgasoline1)RenewableDieselII(UOP-HDO)1)Petroleumnaphtha1)ButaneLiquefiedpetroleumgas(LPG)1)PropaneNaturalgasHydrogen(35Mpa)Gravimetricdensity(MJ/kg)PhysicalconditioningChemicalconditioning020406080100120140160Hydrogengas-1barHydrogengas-100barHydrogengas-300barHydrogengas-500barHydrogengas-1,000barLiquefiedhydrogenEthylbenzolDME(Dimethlyether)EthylmethyletherToluolMethanolEthanolMetalhydrideAmmoniaHydrogendensityacrossdifferentconditionsandhydrogencarriers(kgH2/m3)PhysicalconditioningChemicalconditioningSource:DOE,EIA,GoldmanSachsGlobalInvestmentResearchSource:H2Tools,DOE,GoldmanSachsGlobalInvestmentResearchExhibit91:Theverylowliquefactionpointofhydrogenmakesliquefactionmoreenergyintense/costlycomparedtonaturalgas..LiquefactiontemperatureofdifferentfuelsExhibit92:..anditslowMIE(highflammability)makesthefuelmorechallengingtohandleMinimumIgnitionEnergy,MIE(MJ)-300-250-200-150-100-50050100HydrogenNitrogenMethane(LNG)Propane(LPG)AmmoniaMethanolLiquefactiontemperature(ºC)00.10.20.30.40.50.60.70.80.9HydrogenMethanolPropane(LPG)Methane(LNG)GasolineMinimumIgnitionEnergy-MIE(MJ)Source:USDOE,GoldmanSachsGlobalInvestmentResearchSource:EIA,H2Tools,GoldmanSachsGlobalInvestmentResearch4February202255GoldmanSachsCarbonomicsHydrogenconditioningaprerequisitebeforehydrogentransportandstoragetoincreaseenergydensityAsshowninExhibit90,whilehydrogenhasveryhighenergydensityperunitmass,ithasverylowdensityperunitvolume,makingtransportation,distributionandstoragechallenging.Assuch,hydrogenconditioningisaprerequisiteandnotanoption.Hydrogenconditioningisbroadlyclassifiedintotwocategories,physicalandchemicalconditioning;physicalconditioningencompassesallprocesseswhichchangethephysicalconditionsofhydrogenbutdonotinterferewithitschemicalproperties.Theseincludethechangeofpressure(pressurizedhydrogen)aswellaschangesinthephysicalstate,suchasliquefactionorcryo-compression.Chemicalconditioningontheotherhandentailsthetransformationofhydrogenintoadifferentchemicalcompoundforwhichhydrogenisaconstituentelement,ahydrogencarriersuchasammonia,methanol,liquidorganichydrogencarriers(LOHCs),andmetalhydrides.Wesummarizethekeyroutesofhydrogenconditioning(conversionandre-conversion)inExhibit93andExhibit94,includingkeyconsiderationsofeachroute,overallefficiencyofconversionandre-conversion,theresultingenergydensityofhydrogen,thestageofdevelopment,andkeyadvantagesanddisadvantagesofeach.Whiletheintentionisnottotakeaviewonthelikelihoodofthemostsuccessfulhydrogentransportandstoragetechnology,wehighlightthattheendmarketanditslocationareultimatelylikelytodeterminethechosenconditioning(aswellasthecostandavailabilityofnecessaryinfrastructure),andfurthernotethatcompressionappearstobeanattractiveoptionforlocalhandling,whileammonia,methanolandLOHCsappearamoresuitablesolutionforlong-haul,seabornetransportationcomparedtoliquefiedhydrogen.Exhibit93:Hydrogenconditioningeitherthroughphysicaltransformationorchemicalcombinationisrequiredforthestorage,transport,distributionofhydrogen,unlessconsumeddirectlyonsitepostproductionSource:USDepartmentofEnergy,GoldmanSachsGlobalInvestmentResearch4February202256GoldmanSachsCarbonomicsTransportationanddistributionofhydrogen:Afunctionofvolume,distanceandtype/formofhydrogencarrierTransportationanddistributioncostsforhydrogenareafunctionofthevolumetransported,thedistanceandthetypeofhydrogencarrier(hydrogenconditioningpathway).Forthepurposeofthisanalysis,wethereforecategorizetransportanddistributionintothreeareas:localdistribution(<500km),shorttransmission(<1000km)andlong-distancetransmission(>1,000km).Thetransportanddistributionmethodsforhydrogenincludepipelines,truckingandshipping,usingarangeofpotentialcarriers.Whiletheoptimaldistributionandtransportationmethodwilldependonthetargetedenduseandterraintobecovered,ingeneral,thefollowingconclusionscouldbereacheddependingonthedistanceconsidered.Localdistribution:Forlocaldistribution,pipelinescanachieveverylowhydrogenntransportationcosts,particularlyforretrofittedinfrastructureutilizingexistingassets,andthereforecouldbethepreferredoptionfortransportation.Theexactcostdependsontheavailabilityofexistingnetworksandsuitableretrofitting(typically,gaspipelinesmadeofsteelwouldneedapolymerretrofittoavoidhydrogenleakageand,giventhehigherleakageandignitionrangewhichisaboutseventimesthatofmethane,anupgradetoleakdetectionandflowcontrolsystemsmayberequired),demandforhighvolumesofhydrogenandhighutilization.Newlybuilthydrogenpipelineswillrequirehigherupfrontcapitalexpenditurethanretrofitting,includingthenecessarynetworkplanningpermits.AnalysisbytheEuropeanHydrogenBackbonestudyandtheHydrogenCouncilsuggestsconversioncostsaretypically10%-40%ofthecostofanewhydrogenpipelinemakingretrofittingamoreeconomicallyattractivesolution.Overall,accordingtotheIEA,dependingonthepressureofhydrogentransportedandtheamount,thecapitalcostassociatedwithhydrogenpipelinescanbeintherangeofUS$0.3-1.0mnperkmforlocaldistribution(c.>10%higherthannaturalgasequivalentpipelines).HydrogenpipelinestodayExhibit94:Summaryofkeyhydrogenconditioningpathways(conversionandreconversion)DensitykWh/kgh2%LHVkgH2/M3Gasat150barc.1>90%11Gasat350barc.4>85%23Gasat700barc.680%38LiquefiedH2Coolingat-253throughcryo-compressionc.965-75%71CouldunlockglobaltradepotentialandcouldbeeconomicallyviableinregionsofhighdemandwithlimitedspaceHighereneryintensity,costandenergylossescomparedtoLNGconversionAmmonia,NH3ReactionwithnitrogenforconversionandthenreconversionbacktoH2c.3forconversionandc.8forreconversion82-93%forconversionandc.80%forreconversion121CouldunlockglobaltradepotentialwithamatureindustrythathasthepotentialtoleverageexistinginfrastructureHighenergyrequirement(andthereforelowerefficiency)forreconversion,toxicityandairpollutionMethanol,MeOHHydrogenwithcarbonmonoxide(syngas)reacttoformmethanol99CouldunlockglobaltradepotentialwithamatureindustrythathasthepotentialtoleverageexistinginfrastructureRelativelylowertoxicitycomparedtoammoniaLiquidorganichydrogencarriers(LOHC)MixingwithaLOHCsuchasMCHandconvertbacktoH2Conversionexothermic,c.12forreconversionc.65%forreconversion110ConversionisexothermicLowefficiencyatreconversion,toxicity,flammabilityandavailabilityoftolueneMetalhydridesChemicalbondingwithmetalsandthenreheatingbacktoH2c.488%80-100HigherefficiencythanmostalternativesStorageunitcanbeheavywithlongresponsetimesandlifetimeConsPhyscialHydrogengasisflammableandmorechallengingtohandleathighpressuresChemicalCompressionofH2gastodesiredpressureincreasingdensityEnergyrequirementRelativelyefficient,maturetechnologyoccuringatambienttemperature.PEMtechnologiesalreadyproducehighpressurehydrogenHydrogenconditioningProcessdescriptionProcessmaturityProsNA,GSassumptionforsimilartoammoniaSource:KearneyEnergyTransitionInstitute,IEA,Companydata,GoldmanSachsGlobalInvestmentResearch4February202257GoldmanSachsCarbonomicscoveraround5,000kmwiththemastmajoritylocatedinEuropeandtheUS.Hydrogenpipelines,accordingtotheHydrogenCouncil,arenotablycheapercomparedtoelectricitytransmissionlines,andcantransport10xtheenergyat1/8ththecost.Short-distancetransmission:Forshort-distancetransmission(definedforthenpurposeofthisreportastransmissionofdistancesupto1,000km),bothonshorepipelines(whichcancostc.US$0.6-1.2mnforretrofittedandc.US$2.2-4.5mnperkmfornew),asdescribedabove,andtrucksappeartobecompetitivesolutions,especiallyfordistancesabove500km.Today,hydrogendistributionmostlyreliesoncompressedgastrailertrucks.Trucksandtrailersusingliquefiedhydrogenorammoniaarealsofeasible.Intheexhibitthatfollows,weperformasimplifiedlevelizedcostofhydrogentransportanalysisthatcomparesdifferentcostsoftransportation/distributionofhydrogenforlocaldistributionandshort-distancetransmission(i.e.upto1,000km).Exhibit95presentssolelythecostoftransport,whileExhibit96includestheconversion(importantforliquefaction)andreconversioncostsincurred(forammonia,LOHCs),providingafairerrepresentationofcostsforcomparisonpurposes.Whenlookingatthisexhibit,itisevidentthatthemosteconomicaldistributionsolutionforhydrogenisretrofittedpipelinesfordistances<1,000km,wherethoseareavailable.Trucks(ammonia,LH2)onlystarttolookmorecompellingatlargerdistances,whilethecostoftruckinggaseoushydrogenincreasesnotablywithdistance.Long-distancetransmission:Forlong-distance(>1,000km)transmission,pipelinesn(onshoreandsubsea)aswellasshipping(invariousformssuchasammonia,methanol,LOHCsandLH2)bothappeartobefeasiblesolutions,similartothewaynaturalgasmostlymovesworldwidethroughpipelinesorasLNGinships.Wenotethatfortheglobalscale-upofthehydrogeneconomy,includinginternationaltrade,developingsolutionsandthesupplychainforlong-distanceandcross-seatransportExhibit95:Thecostoftransportationintheabsenceofconversion/reconversioncostswouldsuggestthatbothtrucking(ammonia,LH2,LOHCs)andpipelinesappearcompetitiveroutesoftransportation...Levelizedcostoftransportofhydrogen(US$/kgH2)Exhibit96:..butpipelines(especiallyretrofitted)arethemosteconomicalsolutionforlocalandshort-distancedistribution/transmissiononceconversion/reconversioncostsareconsideredLevelizedcostofhydrogentransportincludingconversion/reconversioncost(us$/kgH2)0.000.501.001.502.002.5001002003004005006007008009001000Levelisedcostofhydrogentransport(US$/kgH2)Distance(km)Newpipeline(100tnpd)Newpipeline(400tnpd)Retrofittedpipeline(100tnpd)Retrofittedpipeline(400tnpd)Truck(gasH2)Truck(LH2)Truck(ammonia)Truck(LOHC)0.000.501.001.502.002.5001002003004005006007008009001000Levelisedcostofhydrogentransportincludingconversion/reconversioncost(US$/kgH2)Distance(km)Newpipeline(100tnpd)Newpipeline(400tnpd)Retrofittedpipeline(100tnpd)Retrofittedpipeline(400tnpd)Truck(gasH2)Truck(LH2)Truck(ammonia)Truck(LOHC)Source:HydrogenCouncil,GoldmanSachsGlobalInvestmentResearchSource:HydrogenCouncil,GoldmanSachsGlobalInvestmentResearch4February202258GoldmanSachsCarbonomicswillbeessential.Pipelinesforlong-distancetransmission,bothonshoreandsubsea,dependingontheterrainanddistance,couldbethemosteconomicalsolutionfordistancesupto2,000-3,000km,inparticularretrofittedonshorepipelines.Subseapipelinescancost1.3-2.3xthecostofonshoreones,accordingtotheHydrogenCouncil.Asthetransmissiondistanceincreases,thecostoftransportinggaseoushydrogenthroughpipelinesincreasesatafasterpacethanshippinginaliquidform(LH2,ammonia,LOHC)sinceagreaternumberofcompressorstationsarerequired.Similartonaturalgas,shippingliquefiedhydrogencouldformapotentialsolutionlongerterm,yetgiventheverylowliquefactionpointofhydrogen(-253°C),technologicalinnovationisnecessarytoenhancethefeasibilityandeconomics(currently,itisaveryenergyintensiveprocessandhasrelativelylowefficiency,consumingabout1/3oftheenergyofhydrogen).Theexpectationwouldbethattheseshipswillbefueledbythehydrogenthatboilsoffduringthejourney.Ammonia,methanolandLOHCs(suchastoluene)forhydrogentransportbyshiparethepreferredoptions,asperindustryplayers,astheydonotrequirecryogenicconditionsforliquefactionorhandlingandaresomeofthecommonlyusedmethodsforlong-distancetransporttoday.Thesesolutionsappearmoreeconomicthanpipelinesandgaseoustransportfordistances>2,500km.Efficiency,energylossesandcostsassociatedwiththeconversionandreconversionprocessesareakeydrawbackofthisroute(inadditiontotoxicityforammonia).Storage:Multipleoptionswithstorageduration,volumeandgeographicalavailabilitybeingthekeydeterminingparametersHydrogenstorageisanothercorepartofthehydrogenvaluechainwiththescale-upofthecleanhydrogeneconomylikelytoincreasetheneedforawidevarietyofstorageoptionssuitablefordifferentlevelsofvolumes,durationofstorage,andrequiredspeedofdischargeaswellasdifferinggeographicalavailability.Exhibit97:Whenconsideringthecostoflong-distancetransmissionalone(excl.conversionandreconversioncostsbutincl.storage),transportingintheformofammoniaorLOHCappearsparticularlyattractive...Levelizedcostofhydrogenlong-distancetransmissionexcludingconversion/reconversioncost(US$/kgH2)Exhibit98:..butonceconversion/reconversioncostsareconsidered,thisisonlythecasefordistances>2,500kmLevelizedcostofhydrogenlong-distancetransmissionincludingconversion/reconversioncost(US$/kgH2)0.000.501.001.502.002.503.003.500500100015002000250030003500400045005000Levelisedcostofhydrogentransport(US$/kgH2)Distance(km)Onshorenewpipeline(1000tnpd)Onshoreretrofittedpipeline(1000tnpd)Subseanewpipeline(1000tnpd)Subsearetrofittedpipeline(1000tnpd)ShippingLH2ShippingammoniaShippingLOHC0.000.501.001.502.002.503.003.500500100015002000250030003500400045005000Levelisedcostofhydrogentransportincludingconversion/reconversioncost(US$/kgH2)Distance(km)Onshorenewpipeline(1000tnpd)Onshoreretrofittedpipeline(1000tnpd)Subseanewpipeline(1000tnpd)Subsearetrofittedpipeline(1000tnpd)ShippingLH2ShippingammoniaShippingLOHCSource:HydrogenCouncil,IEA,GoldmanSachsGlobalInvestmentResearchSource:HydrogenCouncil,IEA,GoldmanSachsGlobalInvestmentResearch4February202259GoldmanSachsCarbonomicsShort-term,small-scalestorage:Forshort-durationstorage,typicallyrequiredonasmall-scale,dailybasis,theuseofpressurizedcontainersisalreadyamature,widelyadoptedandeconomicstoragesolution.ThecostsassociatedwiththisarealreadybelowUS$0.2/kgH2,makingnegligiblecontributiontothetotalcostofhydrogendelivery.Thesetankstendtohavehighdischargeratesandefficiencies(around98%-99%).Iftherequiredstorageextendsbeyondacoupleofdays,thecapitalcostsofthesevesselsandcompressorsbecomesadrawbackgiventhehighoperationalrecyclingraterequiredtomakethemeconomicallyfeasible.Mediumandlong-termstorage(seasonal),large-scale:Forlarge-scale,long-termstorage,avarietyofoptionsexists,includingsaltcaverns,depletedgasfields,rockcaverns,andaquifers.Thesestorageoptionsareusedfornaturalgascurrentlyandcouldprovidebenefitsassociatedwitheconomiesofscale,highefficiencyandlowoperationalcosts.Oftheseoptions,saltcavernsappeartobethemosteconomicallyattractive(accordingtoareportbyBNEF,thelevelizedcostofstorageofthesecanbebelowUS$0.3/kgH2)whilehavingaround98%efficiencyandlowriskofhydrogencontamination.Depletedoil&gasfieldsaretypicallylargercomparedtosaltcaverns,buttheyalsotendtobecharacterizedbyhigherpermeabilityandmaycontaincontaminantswhichwouldimplytheneedfortheirremovalandpurificationofhydrogenbeforeuse,addingtotheadditionalcostofstorage.Worthnotingthatthefeasibilityandcostofstoringhydrogenindepletedfieldsandinaquifersarelargelystillunproven,asthesemeansofstorageremaininearlystagesofdevelopment.Nonetheless,onceviabilityisestablished,theseoptionscouldofferthelarge-scalestoragebenefitsrequiredforseasonalenergystorage,particularlyusefulinlocationswithoutsaltcaverns.Exhibit99:Thecostofstorageforhydrogendependsontherequiredvolume,durationandgeographicalavailability.Pressurizedcontainersappearthecheapestoptionforsmall-scale,short-durationstoragewhilecavernsappearthemosteconomicallyattractivesolutionforlong-term,large-scalestorage.Otherliquidformsofstorageexistwithlowstoragecostbuthighconversionandreconversioncostsassociatedwiththem(aswellascomparativelylowerefficiency)Levelizedcostofstorage(inc.conversion/reconversionforliquidstates)-US$/kgH20.00.51.01.52.02.53.03.54.04.55.0SaltcavernsDepletedgasfieldsRockcavernsPressurizedcontainersAmmoniaLOHCsLH2GaseousstateLiquidstateLevelisedcostofstorage-LCOS(incl.conversion/reconversioncosts)(us$/kgH2)BNEFBenchmarkLCOSGSBaseLCOSBNEFPossiblefutureLCOSSource:BNEF,GoldmanSachsGlobalInvestmentResearch4February202260GoldmanSachsCarbonomicsFromalocaltoaglobalmarket:Weseescopeforc.30%ofglobalcleanhydrogentobeinvolvedininternationaltrade(cross-bordertransport)InternationaltradeandpotentialkeyexportingandimportingregionsashydrogenevolvesintoaglobalmarketAstheenergytransitionunfoldsandhydrogendemandgrowthaccelerates,internationaltradewilllikelybeanimportantpartofthecleanhydrogeneconomy.Whilewebelievethatcleanhydrogenislikelytofirstdeveloplocallybeforebecomingaglobalmarket,similartowhathappenedwithnaturalgasandLNG,asdemandmorethandoublesinthecomingdecadesunderallthreeofourGSglobalhydrogendemandscenarios,webelievethataninternationalhydrogentrademarketislikelytoemerge.Inthissection,wethereforeattempttocomparethelevelizedcostofcleanhydrogen(consideringboth‘blue’and‘green’)acrosskeyregionsintheworld,bothundercurrentcosts(2021)andthepotential2030outlook.Overall,weidentifytwocriticalparametersthatdeterminearegion’sabilitytodevelopintoamajorcleanhydrogenexporthub:(1)Theavailabilityandcostoftherequiredresources,renewablepowerinthecaseof‘green’hydrogenandtheavailabilityandcostofnaturalgasandcarboncaptureandstoragecapabilitiesinthecaseof‘blue’hydrogen;(2)theabilitytoproducebeyondthequantitythatisrequiredtomeetlocalregionaldemand,particularlyimportantforthelargestglobalhydrogendemandhubs(theUS,Europe,Japan,KoreaandChina).WepresenttheoutcomeofouranalysisinExhibit100belowforboth2021and2030.Theseexhibitspresentthelevelizedcostofhydrogenproduction(LCOH)acrossregions,withthewidevariabilityinrenewablepoweravailabilityandcosts(thereforeLCOEs)aswellasgaspricingandavailabilityofcarbonstorageresultingintheobserveddifferencesofLCOHsacrossregions.Whilewepresentheresimplythecostofproduction,theorangebandisrepresentativeoftheaverageglobalcostoftransportationandconversionforhydrogen.TheimplicationofthiswouldbethatregionswithaLCOHbelowthelowerboundoftheorangebandcouldexporttoregionswithaLCOHabovetheupperboundoftheorangeband,as,evenwhenthecostoftransportationisconsidered,exportedhydrogencostwouldstillbelowthatofwhatisregionallyproduced.Thecolorsforeachregionarerepresentativeofitspotentialroleininternationalhydrogentrade,withgreenrepresentingregionswithpotentialtobegreenhydrogenexporters,blueforregionswithpotentialtobebluehydrogenexportersandorangeforregionswithpotentialtobecleanhydrogenimporters.Overall,weestimatethatc.30%oftheglobalhydrogenmarketcouldendupbeinginvolvedininternationaltrade(cross-bordertransportation).Thiscomparestoc.25%fornaturalgas.4February202261GoldmanSachsCarbonomicsExhibit100:MENA,Chile,andAustralia(amongothers)couldemergeaskeycleanhydrogenexportingregionswhileJapan,Korea,CentralEuropeandpotentiallypartsofEastChinacouldbecomecleanhydrogenimportingregions,dependingonthescaleandimportanceofcleanhydrogenintheirrespectiveeconomiesLevelizedcostofgreenandbluehydrogen(LCOH)inUS$/kgunder2021and2030assumptions01234567891011GreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueIberia(Spain,Portugal)UKCentralEuropeNordicsEasternEuropeRussiaSaudiArabiaRestofMiddleEastNorthAfricaCentralAfricaSouthAfricaIndiaWestChinaEastChinaJapanOtherAsiaPacificAustraliaWestUSEastUSNorthUSCanadaMexicoChileLatinAmericaEuropeMiddleEastAfricaAsia&AsiaPacificNorthAmericaSouth&CentralAmericaLevelisedcostofproductonofhydrogen-LCOH(US$/kgH2)GreenH2-lowcostscenarioGreenH2-highcostscenarioBlueH2-lowcostscenarioBlueH2-highcostscenarioBasecasescenarioCleanH2importingregionsCleanH2exportingregionsGreenH2exporterBlueH2exporterCleanH2importerLCOH-2021Source:GoldmanSachsGlobalInvestmentResearch0123456789101112GreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueGreenBlueIberia(Spain,Portugal)UKCentralEuropeNordicsEasternEuropeRussiaSaudiArabiaRestofMiddleEastNorthAfricaCentralAfricaSouthAfricaIndiaWestChinaEastChinaJapanOtherAsiaPacificAustraliaWestUSEastUSNorthUSCanadaMexicoChileLatinAmericaEuropeMiddleEastAfricaAsia&AsiaPacificNorthAmericaSouth&CentralAmericaLevelisedcostofproductonofhydrogen-LCOH-2030(US$/kgH2)GreenH2-lowcostscenarioGreenH2-highcostscenarioBlueH2-lowcostscenarioBlueH2-highcostscenarioBasecasescenarioCleanH2importingregionsCleanH2exportingregionsGreenH2exporterBlueH2exporterCleanH2importerLCOH-2030Source:GoldmanSachsGlobalInvestmentResearch4February202262GoldmanSachsCarbonomicsMENA,Australia,ChilecouldemergeasthekeycleanhydrogenexportingregionsamongothersAsshowninExhibit100,webelievetheregionsthathavepotentialtobecomekeyexportersofcleanhydrogen,especiallyoncetheseabornemarketisconsidered,wouldbethosethat(a)haveavastavailabilityoflowcostrenewablepowerresourceornaturalgasandcarboncapturestorageand,(b)willlikelybeabletosupplycleanhydrogenquantitieslargerthanwhatisrequiredtosupporttheirdomesticdemand.Threekeyregionsappeartofulfillbothofthesecriteria:theMiddleEast&NorthAfrica,AustraliaandChileandotherLatAm.Australia,ChileandNorthAfricaowethistotheirvast,low-costrenewablepowerresourcepotentialwhiletheMiddleEastcanrelyonbothitslowcostsolarpowerresourceanditsnaturalgassuppliesandcarboncaptureandstoragecapabilities.WhiletheUSalsofulfillsthefirstcriterion,webelievethedomestichydrogeneconomymaydeveloptoascalethatislargeenoughtoconsumesupply.Japan,KoreaandpotentiallyCentralEurope(amongothers)couldemergeascleanhydrogenimportingregionsdependingonthepaceofhydrogenpenetrationintheirlocaleconomiesJapanandKoreaaretwooftheeconomieshavingpotentialcleanhydrogendemandhubs,owingtothestrongpolicysupport(bothregionshavepledgednetzerobymid-century)andappetiteforthedevelopmentofcleanhydrogenasakeypillaroftheirdomesticenergyecosystemandenergytransition.Dependingonthepaceofhydrogenpenetrationintheseregions,weseescopeforbothcountriestobecomecleanhydrogenimporterslongerterm.CentralEuropecouldalsobecomeacleanhydrogenimporter,withtheEU’sHydrogenStrategyaimingfor40GWofdomesticallyinstalledgreenhydrogencapacityby2030,andanother40GWfromneighboringcountries.Exhibit101:PotentialevolutionofaninternationalcleanhydrogenmarketSource:CompiledbyGoldmanSachsGlobalInvestmentResearch4February202263GoldmanSachsCarbonomicsDemonstratinganexampleofall-incostsforexportinggreenhydrogenfromAustraliatoJapanAsdemonstratedbyouranalysisabove,weseepotentialforJapantobeakeyimportingregionforcleanhydrogen.Whileanumberofregionscouldbesuppliers,wedemonstratetheall-incostsofimportinggreenhydrogenfromAustraliaasanexample.WeperformthisanalysisbycomparingthedomesticcostofproductionofgreenhydrogenanddistributiontotheenduseinJapantotheall-incostofimportingitintheformofliquefiedhydrogen,ammoniaandLOHCfromAustralia.Ouranalysisindicatesthatevenunderthemorecostlyliquefiedgreenhydrogenroute,importedgreenhydrogenfromAustraliaislikelytobedeliveredatalowercostthanwhatisproduceddomestically,reaffirmingouranalysispresentedearlierthatJapancouldemergeasakeycleanhydrogenimporter.Demonstratinganexampleofall-incostsforexportinggreenhydrogenfromtheMiddleEasttoEuropeIntheexhibitbelow,weperformasimilaranalysisforexportinggreenhydrogen(invariousforms)fromSaudiArabiatotheportofRotterdamthroughtheSuezCanal.WenotethatthisexampleisspecifictoNorth-WestandCentralEurope(andparticularlythePortofRotterdam),acknowledgingthatthecostofrenewablepowerandthereforethecostofproductionofgreenhydrogencanbehigherorlower(inthecaseofIberiaforexample)thanindicateddependingontheregion.OuranalysisindicatesthatNorth-WestEuropewouldindeedbenefitfromimportinggreenhydrogenfromtheMiddleEastorNorthAfrica,evenwhenthecostoftransportationandconversion/reconversionareincluded.ThisisconsistentwithouranalysisaboveandalsowiththeEU’sstrategytodevelop40GWofinstalledelectrolyzercapacityby2030buttoalsosourcehydrogenfromanother40GWofinstalledcapacityfromnearbyregions.Exhibit102:Asummaryofall-incostsofJapanimportinggreenhydrogenfromAustraliaundervariousforms0.01.02.03.04.05.06.07.08.0HydrogenLH2LOHCAmmoniaDomesticImportedfromAustraliaCostofdeliveringgreenhydrogenfromAustraliatoJapan(US$/kgH2)DistributionReconversionTransmissionImport/exportterminals(storage)ConversionCostofproductionSource:GoldmanSachsGlobalInvestmentResearch4February202264GoldmanSachsCarbonomicsDemonstratinganexampleofall-incostsforexportinggreenhydrogenfromChiletoEuropeIn2021,theMinistryofEnergyofChileandthePortofRotterdamAuthoritysignedaMemorandumofUnderstanding(MoU)onthepotentialexportofgreenhydrogen.Intheyear,theChileanMinistryofEnergyalsosignedaMoUwiththeportsofAntwerpandZeebruggetoworktogethertomakegreenhydrogenflowsbetweenChileandEuropeareality.Intheexhibitbelow,wepresentthepotentialall-incostsfortheexportofgreenhydrogenfromChiletoEurope,and,morespecifically,fromPuertoValparaiso,Chile,tothePortofRotterdam,Netherlands.Indeed,exportingintheformofammoniaorotherLOHCwouldprovidealowerhydrogendeliverycostvsthecostofdomesticproduction.Liquefiedhydrogencosts,however,increasesubstantiallywithlongerdistances(inthiscase,weassume17,900kmfortheroutebetweenthetwoports),makingitalessattractiveoptioneconomically.Exhibit103:Asummaryofall-incostsforNorth-WestEuropeimportinggreenhydrogenfromSaudiArabiaundervariousforms0.01.02.03.04.05.06.0HydrogenLH2LOHCAmmoniaDomesticImportedfromSaudiArabiaCostofdeliveringgreenhydrogenfromSauditoEurope(US$/kgH2)DistributionReconversionTransmissionImport/exportterminals(storage)ConversionCostofproduction..Source:GoldmanSachsGlobalInvestmentResearchExhibit104:Asummaryofall-incostsofNorth-WestEuropeimportinggreenhydrogenfromChileundervariousforms..0.01.02.03.04.05.06.0HydrogenLH2LOHCAmmoniaDomesticImportedfromChileCostofdeliveringgreenhydrogenfromChiletoEurope(US$/kgH2)DistributionReconversionTransmissionImport/exportterminals(storage)ConversionCostofproductionSource:GoldmanSachsGlobalInvestmentResearch4February202265GoldmanSachsCarbonomicsPolicyToolbox:InsearchofaconstructivehydrogenpolicyandpricingframeworktomovefromambitiontoactionWhilecostparityofcleanwithfossil-fuelhydrogenisnearingreality(supportedbythehighercommoditypriceenvironmentandcarbonprices),thereisstillamajorneedforaconstructivehydrogenpolicyandpricingframeworkforharder-to-de-carbonizeendmarketsThecurrenthighercommoditypriceenvironment(particularlyfornaturalgas)ishelpingachievegreenhydrogencostparitywithfossilfuel-basedhydrogen(grey)alreadyacrossseveralregionsoftheglobe.Evenundernormalizedcommodityprices,weestimatethecarbonpricerequiredtobringgreenhydrogenproductioncostatparitywithgreyinarangeofUS$70-250/tnCO2onaverage(forUS$2/kgH2greyhydrogenprice),implyingthatcurrentcarbonpricesobservedintheEUETScouldalreadybesufficienttobridgethecostofproductiongapinlow-renewablepowercostregionsinEurope.Similarly,weestimatethatacarbonpriceinarangeofUS$50-120/tnCO2isrequiredtobridgethegapbetweenthecostofproductionofbluehydrogenandthatofgreyacrosstheglobe(tocompensateforthecostofCCS).Despitetheachievablecarbonprices(implicitorexplicit)requiredtobringcleanhydrogenatcostparitywithgreyatthepointofproduction,whenconsideringthefinaldeliveredpriceofhydrogen(includingcostsacrossthevaluechain)anditsuseinnewharder-to-abateendmarkets,ourCarbonomicscostcurvesuggestsamuchhigherrangeofcarbonpricesisrequiredtoincentivizecleanhydrogenadoptionandcompetewithcurrentfossilfuel-relyingtechnologiesacrosstheindustry,transport,heating,andpowergeneration.Exhibit105:WhiletheEuropeanETScarbonpricehasincreasedtorecordlevelsoverthepastyear..EUETScarbonprice(EUR/tnCO2eq)Exhibit106:..carbonpricesassociatedwithglobalnationalandsub-nationalcarbonpriceinitiatives(carbontaxes&ETS)showawideregionalvariability..CarbonpricesthroughtaxesandETS(mid-2021)0102030405060708090100Jan-19Mar-19May-19Jul-19Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Nov-20Jan-21Mar-21May-21Jul-21Sep-21Nov-21Jan-22EUETScarbonprice(EUR/tnCO2)020406080100120140SwedencarbontaxLiechtensteincarbontaxSwitzerlandcarbontaxFinlandcarbontaxNorwaycarbontaxEUETSFrancecarbontaxSwitzerlandETSLuxembourgcarbontaxIrelandcarbontaxBCcarbontaxNetherlandscarbontaxIcelandcarbontaxAlbertaTIERGermanyETSPortugalcarbontaxDenmarkcarbontaxNewZealandETSUKcarbonpricesupportCaliforniaCaTQuebecCaTSpaincarbontaxKoreaETSLatviacarbontaxTamaulipascarbontaxZacatecascarbontaxSouthAfricacarbontaxRGGIChinanationalETSCarbonprice/tax(US$/tnCO2eq)Source:ThomsonReutersEikonSource:WorldBankGroup4February202266GoldmanSachsCarbonomicsInsearchofaconstructivepolicyframework:Weseetheneedfornewexplicitandimplicitcarbonpricingandsupportmechanismstoencouragelarge-scalehydrogenadoptionacrossharder-to-abatesectorsandnewapplicationsGiventhattheexistingcarbonprices,bothintheEUETS(asshowninExhibit110bytheblueline)andglobally,arebelowthecarbonabatementpricesrequiredforcleanhydrogentobecomeeconomicallycompetitiveintheharder-to-abatesectorsandnewendmarkets(asestimatedaspartofourCarbonomicscostcurve),weseetheneedforadditionalmechanismsandpolicyinstrumentstobridgethatgapandencouragerisingpenetrationofcleanhydrogeninthesemarkets.Anumberofkeyregionsgloballyareworkingondevelopingpolicyframeworksandsupportschemesthatwouldprovidecorporatesandinvestorswithanappropriateriskprofileandcostofcapitaltoinvestinthesetechnologies.AmongtheseregionsaretheEU,whichisexaminingoptionstoExhibit107:..andcarbonpricinginitiativescoveronlyupto25%ofglobalGHGemissions,evenwiththeadditionofChina,by2021Carbonpricinginitiatives’shareofglobalGHGemissionscovered(%)Exhibit108:Assuch,notonlyhigherETScarbonpricesbutalsohighercarbonpricesimpliedbycommoditybenchmarksareaidingtheeconomiccompetitivenessofcleanhydrogenCarbonpriceimpliedbyvariouscommoditybenchmarksandcarbonETSscheme(US$/tnCO2eq)0%5%10%15%20%25%200720082009201020112012201320142015201620172018201920202021ShareofglobalGHGemissionscoveredbycarbonpricing(%)ChinanationalETSEUETSJapancarbontaxKoreaETSSouthAfricacarbontaxGermanyETSCaliforniaCaTMexicopilotETSUkrainecarbontaxUKETSMexicocarbontaxCanadafederalfuelchargeFrancecarbontaxOthers050100150200250GlobalEUETSOilBrentTTFEuropeHenryHubCoalCarbonpriceimpliedbycommoditypricebenchmarks(US$/tnCO2eq)20202021CurrentCarbonpricefromETSschemesCarbonpriceimpliedbycommoditybenchmarkspriceSource:WorldBankGroup,GoldmanSachsGlobalInvestmentResearchSource:ThomsonReutersEikon,Bloomberg,GoldmanSachsGlobalInvestmentResearchExhibit109:Whilethecombinationofhighercarbonandcommoditypricesbringsbothblueandgreen(atLCOEs<$45/MWh)atcostparitywithgreyhydrogeninEuropeatthepointofproduction..Levelizedcostofproductionofhydrogen-LCOH(US$/kgH2)Exhibit110:..highercarbonpricesarerequiredatthepointofusetoencouragelarge-scaleadoptionandpenetrationofcleanhydrogeninthehard-to-de-carbonizeendmarketsCarbonomicscostcurvecarbonabatementprice(US$/tnCO2eq)forcleanhydrogenapplications0.01.02.03.04.05.06.0NG:US$2.5/mcfNG:US$7.5/mcfNG:US$12.5/mcfNG:US$17.5/mcfNG:US$2.5/mcfNG:US$7.5/mcfNG:US$12.5/mcfNG:US$17.5/mcfLCOE:US$15/MWhLCOE:US$30/MWhLCOE:US$45/MWhLCOE:US$60/MWhLCOE:US$75/MWhGreyH2-SMRBlueH2-SMR+CCUSGreenH2-AlkalineLevelisedcostofproductionofhydrogen-LCOH(US$/kgH2)CapexOpexFuel/electricityCarbontax-$100/tnCO2CurrentEUgaspriceenvironment020406080100120140160180200Jan-19Mar-19May-19Jul-19Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Nov-20Jan-21Mar-21May-21Jul-21Sep-21Nov-21Jan-22Carboncabatementprice(US$/tnCO2eq)HydrogenDRI-EAFOtherchemsCCUSPowergenenergystorageGreenammonia(electrolysis)Greenchems(electrolysishydrogen)AmmoniaCCUSRefining250300350400450500GreenammoniafuelforshippingFCEVlong-haulheavytrucksFCEVbusesFCtrainsHydrogeninheating(residential)Source:GoldmanSachsGlobalInvestmentResearchSource:ThomsonReutersEikon,GoldmanSachsGlobalInvestmentResearch4February202267GoldmanSachsCarbonomicsutilizeanumberofmechanismssuchascarboncontractsfordifference(CCfDs),grants,andpurchaseagreementssimilartowhathasbeenachievedintherenewablepowerindustry,aswellastheUS,withataxcreditrecommendationincludedintheBuildBackBetterplan(BBB)thatnonethelessispendingapproval.Inthetablebelow,wesummarizeexamplesofsomeofthekeymarketandnon-market,directandindirectmechanismsthatcouldencourageawideradoptionofcleanhydrogen(utilizingourownknowledgeandpolicysuggestionsbytheHydrogenCouncil).Guaranteesoforigin:Guaranteesoforiginwilllikelybeavitalcomponentforthesourcingofhydrogenasthecleanhydrogeneconomycontinuestogainscale.GuaranteesofOrigin(GOs)isacredit-basedchainofcustodysystemthatisalreadywidelyusedintheEUtoguaranteethesourceofelectricityisrenewable.TherevisedEURenewableEnergyDirective(2018/2001/EU)extendedthescopeofGOsalsotohydrogenandmandatedEuropeanStandardOrganisationsCEN/CENELECtoreviewthestandardEN16325,whichiscurrentlyunderrevisiontosupportthenewprovisionoftheDirective.TheGOsystemaimstoprovidegreatertransparencyandcredibilitytothecleanhydrogenvaluechain.Webelievesuchasystemwillbevitalacrosstheglobeasthecleanhydrogenrevolutionunfolds.KeypolicymechanismPotentialinstrumentsDescriptionEmissionTradingSchemes(ETS)ETS,includinganyexpansiontoexistingschemesforadditionalcoverageAcentralauthoritycapscarbonemissionsandallocatesasetnumberofpermitstoemitters,whocanbuypermitsinthemarkettocovertheirexcessemissionsorselltheirexcesspermitstogeneraterevenue.CarbontaxesCarbontaxLeviestaxoncarbonemissionsgeneratedbyeconomicactivitiesinordertointernalizethesocietalcostofthoseemissionsandtheirglobalimpact.Directsupportmechanisms(whichincludecompetitiveauctions)CarbonContractsfordifference(CCfDs),ContractsforDifference(CfDs),Feed-inTariffs(FiTs),taxincentives(suchastaxcredits)Variousformsofsubsidiestoguaranteeinvestorsahigherrevenuestreamorloweroperationalcosts,increasingprofitability,visibilityandreducingrisk.DirectfinancialsupportmechanismsMonetarysupportincludinggrantsorloansFinancialsupportcouldbeprovideddirectlybythegovernmentorauthoritiestoprojectsthatmeetspecificthresholdrequirements,loweringupfrontinvestmentcosts.AlternativerevenuestreamsPaymentsgivenforaddedgridflexibility(bufferingandstorage)etc.Toolsaimedatprovidingsecondaryrevenuestreamsalongsidemainbusinessrevenuegeneration.GuaranteedofftakeLong-termcontractsLong-termcommercialcontractswhichincludeanagreementforsetvolumesofhydrogenandhydrogen-basedproductstobeguaranteedtobesoldtoanentityatasetpriceforthelengthofthecontract.Thiswouldde-risktheprojects,guaranteeingdemandandprovidingrevenuecertainty.Investmentde-riskmechanismsBalancesheetsupporttoolssuchasdebtguaranteesandequityPublic-privatecollaborationthatcouldbeusedtofinance,buildandoperateprojects,thereforereducingtheupfrontinvestmentconstructionandtechnologyrisk.Returnoninvestmentde-riskRegulatedAssetBaseModel(RABM),availabilitypayments,minimumrevenueguarantee,futurepurchasecommitmentToolsusedtosecurereturnoninvestmentfordevelopersbypassingdowncoststoconsumers,increasingrevenuecertainty.Quotas,targetsandstandardsDirectregulatoryinterventionwithquotas,emissionperformancestandards,targets(directlyoninstalledhydrogencapacityoronemissionreductionoremissionintensity),targetsforspecificsectors(penetrationratesandsales),midstreamtargets(blendingrequirementsofhydrogeninthegrid)Mandatoryemissionreductionorcleanhydrogencapacitytargetscouldbereachedthroughlegislation,eithereconomy/country-wideorforspecificsectors.Directquotasandperformancestandardscanalsobeused.4February202268GoldmanSachsCarbonomicsTheimpactoftherisinghydrogeneconomyonelectricity,waterandnaturalresourcesdemandGreenhydrogencouldbethenexttransformationaldriverforpowerdemand,withpotentialforover50%increaseonthepathtonetzeroForelectrolysis-producedhydrogentoqualifyas‘green’andaidtheglobalenergytransitiononthepathtonetzero,ithastobesourcedfromcleanelectricity(renewableelectricityfor‘green’,nuclearpowerfor‘purple’hydrogen).Thiswillthereforecontributetotherisingneedoffurtherrenewablepowerinstalledcapacity,beyondpowergenerationdemandgrowthfortheongoingdirectelectrificationofothersectorssuchasroadtransportation,low-temperatureindustrialprocessesandmanufacturing,andbuildingsenergy.Inthissection,wepresenttheresultsofouranalysisoflikelypowerdemandtomeetthethreeGShydrogendemandscenarios.Assumingatechnologicalsplitbetweenalkaline,PEM,SOECelectrolysistechnologiesovertime,andincorporatingtheefficiencyofeachtechnologyandhowthisislikelytoimproveovertime,ouranalysisconcludesthatproductionofgreenelectrolysishydrogencanleadto15,000TWhofincrementalpowerdemandby2050(underour‘bull’scenariowhichisconsistentwithnetzeroby2050globallyand1.5degrees).Thisisequivalenttotheentirenon-OECDpowerdemand(2020)andrepresentsc.57%ofthe2020globalpowerdemand,evenafterhavingincorporatedelectrolyzerefficiencyimprovementsandanincreasingpenetrationofhigh-efficiencySOECelectrolyzerunits.Our‘base’GShydrogenmodelstillsuggestssubstantialgrowthinpowergenerationdemand,largerthantheentirepowergenerationofNorthAmerica.Wenotethatthisanalysisassumesablue/greenhydrogensplitof40/60andthereforeanyratiothatsubstantiallydiffersfromthatinfavorofgreenhydrogenleavesfurtherpotentialupsidetothepowergenerationdemandscenariospresentedbelow.Exhibit111:Greenhydrogencouldbethenexttransformationaldriverofpowerdemandgrowth..Greenhydrogenproductionpowerdemand(TWh)underourthreeGShydrogenscenariosExhibit112:..leadingtoincrementalpowergenerationdemandequivalenttoentirenon-OECDgenerationin2020(bullcase)andhigherthantheentirepowergenerationofNorthAmerica(basecase)Powergenerationacrossregions(2020)vsrequiredgenerationofgreenhydrogenimpliedbyglobalGShydrogenmodels(TWh)02,0004,0006,0008,00010,00012,00014,00016,00018,000202120232025202720292031203320352037203920412043204520472049Greenhydrogenproductionpowerdemand(TWh)BullscenarioBasescenarioBearscenarioGlobalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenario02,0004,0006,0008,00010,00012,00014,00016,00018,000Non-OECDTotalAsiaPacificOECDTotalNorthAmericaTotalEuropeTotalCISTotalS.&Cent.AmericaTotalMiddleEastTotalAfricaGSbullscenario-GreenH2GSbasescenario-GreenH2GSbearscenario-GreenH220202050Powergeneration(TWh)Source:GoldmanSachsGlobalInvestmentResearchSource:BPStatisticalReview,GoldmanSachsGlobalInvestmentResearch4February202269GoldmanSachsCarbonomicsAssumingaverageloadfactorsforrenewablepowerofc.30%(weightedaverageofsolarPV,onshoreandoffshorewind,asweexpecttherenewablepowerenergymixtoevolveovertime),our‘bull’casescenariosuggestsaneedforatleast5,000GWofadditionalrenewableinstalledcapacityby2050(forglobalnetzero-‘bull’casescenario)tosatisfyincrementalpowerdemandfortheproductionofgreenhydrogen.Toputthisintoperspective,lookingintothisdecade,weestimatethattherequiredaverageannualrenewablecapacityadditionsfortheproductionofgreenhydrogencouldrepresent5%-15%ofthetotalglobalaverageannualcapacityadditions(withthelowendof5%representingthe‘bear’andtheupperendof15%representingthe‘bull’scenarios).Aswemovefurtheroutintime,over2030-35,weestimatethatupto1/3ofglobalaverageannualREScapacityadditionswillbeneededfortheproductionofgreenhydrogen.Whilenotoutofreach,thisisasignificantportion,leadingtoarisingfocusontheavailabilityofrenewablecapacity.WateravailabilityandcostmanageableonaglobalbasisbutcouldbearegionalconstraintforlocationspronetowatersupplystressInadditiontoenergy,wateristhenextkeyrequirementforwhichglobalavailabilityandtheresourceneedtobeconsideredasthecleanhydrogeneconomyscalesup.Waterdemandforhydrogenproductionviaelectrolysis,aswellasreformingorgasificationisconsideredmarginalinabsoluteamounts.Inthecaseofwaterelectrolysis,about9-10kgofwaterperkgofhydrogen(‘green’)isneeded,withtheelectricity-basedtechnologyforwhichtherequirementissignificantlyhigherbeingelectrolysisvianuclearelectricity(‘purple’hydrogen),whichuses,accordingtotheHydrogenCouncil,morethan200kgofcoolingwaterperkgofhydrogenduetonuclearpowerproduction.ForSMR/ATR,specificwaterdemandishigherthanfor‘green’electrolytichydrogenwith13-18kgofwaterperkgofhydrogenrequired,whilecoalgasificationusesaround40-85kgofwaterperkgofhydrogenproduced(‘brown’).Exhibit113:Assuminga40/60blue/greenhydrogensplitandanaverageloadfactorof30%,weestimatethattherequiredinstalledrenewablecapacityforgreenhydrogenproductionwouldbecloseto5,000GWby2050(‘bull’)..GreenhydrogenrequiredinstalledREScapacity(GW)Exhibit114:..withtheaverageannualcapacityadditionsin2021-30and2030-35requiredforgreenhydrogenrepresentingc.5%-15%/8%-30%ofthetotalglobalaverageREScapacityadditionsinthoseperiods,respectivelyAverageannualREScapacityadditionsrequiredforgreenhydrogenand%oftotalglobalaverageREScapacityadditions01,0002,0003,0004,0005,0006,000202120232025202720292031203320352037203920412043204520472049GreenhydrogenrequiredinstalledREScapacity(GW)BullscenarioBasescenarioBearscenarioGlobalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenario0%5%10%15%20%25%30%35%020406080100120140BullcaseBasecaseBearcaseBullcaseBasecaseBearcase2021-302030-35%ofannualREScapacityadditions(green)AverageannualREScapacityadditionsforgreenhydrogen(GW,bars)REScapacityrequired%ofannualadditionsSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202270GoldmanSachsCarbonomicsLeveragingourglobalGShydrogendemandmodels,weestimatethetotalwaterrequirementforthescale-upofthecleanhydrogenindustry(both‘green’and‘blue’hydrogenconsideredheregiventheircomparablewaterconsumption)atc.7/3.3bcmby2050underour‘bulland‘base’hydrogendemandscenarios,respectively.Toputthisintoperspective,theenergysector’swaterconsumptiongloballywasestimatedtobearound47bcm(IEA)in2016whiletheenergysector’stotalwaterwithdrawalwasestimatedtorepresentaround10%ofthegloballevel.Assuch,waterconsumptionforhydrogenproductionisestimatedtoreachupto15%oftheglobalenergysector’swaterconsumptionunderour‘bull’scenario.Wethereforeconcludethat,fromaglobalperspective,theavailabilityofwatertosupporttheriseofthecleanhydrogeneconomyisnotlikelytobeakeyconstraint,especiallyifcleanhydrogenisreplacinghighlywater-consumingandenergyintensivefossil-fuelextractionprocesses,whichaccountforthemajorityoftheenergysector’swaterconsumptiontoday.Nonetheless,withagrowingpipelineofGW-scaleprojects,whichcouldbesignificantwaterconsumerslocally,therecouldberegionalsupplychallengesinareaspronetowatersupplystress.Fortheselocations,seawaterdesalinationtechnologiesmayberequired.Mosthydrogenelectrolysistechnologiestodayrequirehigh-puritywaterandassuchalreadyhaveanintegratedde-ionizeraspartoftheirsystem,makingdesalination(reverseosmosis)-sourcedwaterapossibility.Whilethisaddslittleincrementalelectricityneedsforelectrolysisprojects,itrequirestheenvironmentallybenignmanagementoftheeffluentbrine.Fromacostperspective,weestimatethetotalcostforwaterdesalinationataround$0.5-3.0/cm(requiringaround3-4kWhpercm),whichwouldimplyanadditionalcosttotheLCOHofaroundUS$0.01-0.05/kgH2,anegligiblelevel.Exhibit115:Waterdemandforhydrogenproductionviaelectrolysis,aswellasreformingorgasificationisconsideredmarginalinabsoluteamounts,yetcanbesignificantinregionspronetowatersupplystressGrosswaterconsumptionfactorsforhydrogenproductionpathways(kgH2O/kgH2,LHV)7427.6499.541485.9411817.317.313.613.119.1119.9Bio-CH4(crops)+SMRWoodchips+BiomassgassificationNuclear+PEMCoalgasificationCCS(China)CoalgasificationCCS(Australia)Bio-CH4(waste)+SMRNG+ATRNG+ATRCCSNG+SMRNG+SMRCCSSolar+PEMWindonshore+PEMHydro+PEMGrosswaterconsumptionfactor(kgH2O/kgH2)Wateruse-energyproductionrelatedWateruse-hydrogenproductionrelatedWateruse-capexrelatedforrecycling,virginmaterialsSource:HydrogenCouncil,LBST4February202271GoldmanSachsCarbonomicsWateravailabilityisaregionalchallengeandbotheconomicandsocialfactorshavetobetakenintoconsiderationwhenaddressingthewaterresourcelocally.WeutilizeFAO’sGlobalInformationSystemonWaterandAgriculture,includingthegeospatialdatabaseandAQUAMAPS,whichsummarizestheproportionofwaterresourceswithdrawn(pressureonwaterresources)acrossregions.MENAappearstobethekeyregionwithwatersupplystress,yetalsoaregionofvast,low-costrenewablepoweravailability,whichwebelievesuggestspotentialforittobecomeakey‘green’hydrogenexportingregion(asoutlinedinasectionearlier).Wateravailabilityanddesalinationtechnologiesarethereforelikelytobecriticalforthecleanhydrogeneconomyscale-up.Exhibit116:Waterrequirementfortheproductionofcleanhydrogenwilllikelyreachc.3.3-7bcmby2050(underour‘base’and‘bull’scenarios)...Cleanhydrogenproductionwaterconsumption(bcm)Exhibit117:...which,fromaglobalperspective,isnotverymaterial,representingc.15%ofthetotalenergysector’swaterconsumptionWaterwithdrawal(left)andconsumption(right)fortheenergysectorandforcleanhydrogenproductionunderourGShydrogenmodels(bcm)012345678202120232025202720292031203320352037203920412043204520472049Cleanhydrogenproductionwaterconsumption(bcm)BullscenarioBasescenarioBearscenarioGlobalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenario050100150200250300350400Energysectorwaterwithdrawal(2016)Waterwithdrawalandconsumption(bcm)0204060Energysectorwaterconsumption(2016)GSH2BullscenarioGSH2BasescenarioGSH2BearscenarioPowergen:OtherRESPowergen:BiomassPowergen:NuclearPowergen:OilPowergen:GasPowergen:CoalPrimaryenergy:BiofuelsSource:GoldmanSachsGlobalInvestmentResearchSource:IEA,GoldmanSachsGlobalInvestmentResearch4February202272GoldmanSachsCarbonomicsTheimpactoftheriseofcleanhydrogenonmetalandmineralresources:Nickel,Platinum,IridiuminfocusDemandfornaturalresources,inparticular,metalsandminerals,isoneoftheprimeconsiderationsofanyaspiringpathtonetzeroandforanyenergytransitionscenario.Inthissection,weaimtoassessthepotentialincrementaldemandthatcouldresultfromtheriseofthehydrogeneconomyleveragingourthreeGSglobalhydrogendemandscenarios.Thenaturalresources(metalsandminerals)requiredtofacilitatethescale-upofthecleanhydrogeneconomywilllargelydependontheultimatepenetrationofthevarioustechnologies.Forinstance,lookingatthe‘green’hydrogeneconomyinparticular,differentelectrolysistechnologies(alkaline,PEM,SOEC,andAEMasoutlinedpreviously)willrequiredifferenttypesandquantitiesofmetalsforthemanufactureoftheelectrolyzersystems.Alkalineelectrolysisreliesontheavailabilityofnickel,whichpotentiallyplacesitincompetitionforthemineralwithtechnologiessuchasbatteries(despitethemuchlowernickelintensityofelectrolyzers)Alkalineelectrolyzershavelowcapitalcostscomparedtosomeothertechnologies,primarilyduetotheavoidanceofpreciousmetals.However,currentdesignsdorequirenickelinquantitiesofmorethanonetonneperMWofelectrolyzercapacity.Nickelisrequiredtoresistthehighlycausticenvironmentwhilesomechlor-alkalidesignsalsoincludesmallamountsofplatinumandcobalt.Forthepurposeofthisanalysis,weassumeatypicalalkalineelectrolyzersystemwhichreliesonnickelandsteelintheabsenceofnote-worthyquantitiesofplatinumandcobalt(whichisrequiredonlyforaspecificclassofalkalineelectrolyzers).Wecouldseeareductioninnickeldemandforalkalineelectrolyzersasmetalloadingsreduceandaresubjecttofurtheroptimizationovertime,butnotrequiringitatallisunlikely.Usingthelatestelectrolyzerdesigns,whichrequirearound800kgperMW,andassumingc.44%long-termpenetrationinthemarketby2050(basedonourglobalGShydrogenmodels)withfullrecycling,weestimateaverageannualincrementalnickeldemandforelectrolyzersamountsto39ktExhibit118:Differentmineralsandmetalsarerequiredforthemanufactureofdifferenttypesofelectrolysistechnologies,withPEMingeneralbeingmorepreciousmetals-reliantwhilealkalineandSOECarenickel,steelandpotentiallyzirconiumdependentDemandforspecificmetalsandmineralsperMWelectrolyzercapacity(kg/MW)0.0000.0000.0010.0100.1001.00010.000100.0001,000.000NickelZirconiumNickelZirconiumLanthanumYttriumPlatinumPalladiumIridiumAlkalineelectrolysersSOECelectrolysersPEMelectrolysersDemandforspecificmetalsandmineralsperMWelectrolysercapacity(kg/MW)Source:IEA,IRENA,GoldmanSachsGlobalInvestmentResearch4February202273GoldmanSachsCarbonomicsandrepresentsjust1.5%ofcurrentglobalnickelproduction.Evenifalkalineelectrolyzersbecomethedominantelectrolyzermarkettechnology(whichwouldimplyaverageannualincrementalnickeldemandof89ktpaforelectroyzers,c.4%-5%ofcurrentglobalproduction,onourestimates),nickeldemandforelectrolyzerswouldremainmuchlowerthanthatforbatteriesandmarginal,inourview.However,competitionfornickelsupplieswithbatterymanufacturerscouldemergeasachallenge,whichcouldseethepriceofnickelstructurallymovehigherovertime.Inadditiontonickel,1MWofalkalineelectrolyzercouldrequirearound100kgofzirconiumtoday,halfatonneofaluminiumandmorethan10tonnesofsteel,alongwithsmalleramountsofcobaltandcoppercatalysts,accordingtotheIEA.PEMelectrolysisthekeytechnologyfacingmineralavailabilityconstraints,withiridiumandPGMsattheforefrontbutwithrapidlyreducingloadingTheuseofcriticalmineralsisconsideredabiggerchallengeforthePEMelectrolyzertechnology,albeitwenotethatcoatingsofelectrodesforalkalineelectrolyzersoftencontainsmallquantitiesoftheseminerals.Theanodeistypicallycoatedwithiridium,ascarcemineralthatisnonethelessrequired,giventhehighoxidizingpotentialoftheanodeinthissystemwithnotmanymaterialsavailabletowithstandtheseconditions.Additionally,theporoustransportlayertypicallyrequirestitanium-basedmaterialscoatedwithPGMs(typicallyplatinumorpalladium).Thecathodeitselfistypicallycoatedwithplatinum.Assumingalong-termpenetrationrateforPEMelectrolyzersof44%(similartoalkaline),fullrecyclingandaplatinumrequirementof0.3kgperMW(the2030EUtargetforpreciousmetalsinelectrolyzersis0.4kg/MWwithPEMmanufacturingcompaniessuchasITMalreadyhavingmetthistarget),weestimateannualaverageincrementalplatinumdemandtobearound15tonnespaforthepathtonetzeroby2050.Thisrepresentsc.8%ofglobalannualproductioncurrently.IfPEMweretobethedominanttechnology,accountingfortheentirecapacityby2050,thiswouldleadtoaverageannualincrementalplatinumdemandofc.18%,which,whileaconsiderableincrease,islikelytobepartlyoffsetby(a)additionalplatinumcapacityresultingfromhigherrecyclingratesand(b)reduceddemandforplatinumrequiredforcatalyticreformersthatareusedininternalcombustionenginevehiclesastheenergytransitionunfoldsandelectricandfuelcellvehiclesincreasetheirpenetrationintheglobalsalesmix.However,wedonotethatwhenfuelcellsalsoenterthePGMdemandequation,itislikelytoseehigherdemandoverall,giventhehigherplatinumintensityoffuelcellsrelativetocombustionengines.ThisleadsustoconcludethatbeyondthecostassociatedwithPGMs,thereisnotamajoravailabilityconstraintasfaraselectrolysisisconcerned,butsuchaconstraintcouldemergewhenfuelcellsarealsoconsidered.TheuseofiridiuminPEMelectrolyzers,ontheotherhand,couldbeanimportantcauseforconcern.Assumingalong-termpenetrationrateforPEMelectrolyzersof44%(similartoalkaline),fullrecyclingandaneedfor0.7kgofiridiumperMW,weestimateaverageannualincrementaldemandforiridiumcanincrease>4-foldonthepathtonetzero.IfweassumePEMbecomesthedominanttechnology,thiscanleadtoa10-foldincreaseinannualiridiumdemand.WethereforehighlighttheimportanceofreducingiridiumcontentinPEMelectrolyzers.Wenotethatthecompaniescurrentlyinvolvedinthemanufacturingofthistypeoftechnologyarealreadylayingout4February202274GoldmanSachsCarbonomicstargetstosubstantiallyreducethecontentofbothPGMsandiridiumlongertermandthereforeweviewthisasakeyareaofinnovationinthecomingyears.IndustrybodiessuchasIRENAandEUCommissionhavesuggestedthescopeforreducingthedependenceoncriticalmaterials,andweidentifythebelowmeasureswhichcouldhelpachievethis:(1)materialsubstitutionwherepossibleandareductioninmaterialquantityrequirementperunitcapacitythroughhighersurfaceareasupportedcatalysts,theuseofthinnercoatinglayers,andinnovativetechnologiesincludingAEM,whichcombinealkalinewithPEM(ordifferentalloys,nanoparticles,orachangeinmorphologyofelectrodes),(2)anextensionoftheusefullifeofequipmentoranincreaseinefficiency,whichwouldimplytheneedforasmallerarea,(3)recycling,withourestimatesformineraldemandoutlinedabovealreadyassumingfullrecycling.Finally,lookingattheSOECtechnology,giventherelativelyearlystageofdevelopmentandabsenceoflarge,commercialscaleproductioncurrently,atleastnottotheextentobservedforalkalineandPEMtechnologies,wenotethatthereisawidevariabilityinthequantitiesofmineralsrequiredforthesedesigns.Forthepurposeofouranalysis,weutilizeIEA’sestimateswhichincludenickel(150-200tn/GW),zirconium(40tn/GW),lanthanum(20tn/GW),andyttrium(<5tn/GW).Undertheseassumptions,evenwhenconsideringSOEC’stechnologicaldominancelongtermwheretheentireelectrolyzercapacitywouldrelyonthistechnology,by2050,theimpactonaverageannualincrementaldemandforthesemetalswouldbemarginal,inourview,owingtothehigherefficiencyofSOECelectrolyzers,whichinherentlyimpliesalowerquantityofinstalledelectrolyzercapacityrequiredtomeethydrogendemand.WenotethatgiventheearlierstageofdevelopmentofSOECtechnologies,anumberofdifferentdesignshaveemerged,including,forinstance,Ceres’SteelCelltechnology,whichreliesprimarilyonsteelasopposedtonichematerials.Exhibit119:Alkalineelectrolyzers’impactondemandforitsconstituentmineralsislikelytobemarginalevenunderan‘alkalinetechnologydominance’scenario;forPEMelectrolyzers,therelianceoniridiuminparticular(andPGMstoalesserextent)couldbeamajorconstraintthatmayneedtobeaddressedthroughongoingtechnologicalinnovationandloadingoptimization.AverageannualincrementaldemandforspecificmineralsunderalkalineandPEMelectrolyzertechnologies(LHS),andasa%ofcurrentglobalproduction(RHS)0.0%0.1%1.0%10.0%100.0%1000.0%0.000.000.010.101.0010.00100.00AlkalineDominanttechGSbullcaseGSbasecaseGSbearcaseAlkalineDominanttechGSbullcaseGSbasecaseGSbearcasePEMDominanttechGSbullcaseGSbasecaseGSbearcasePEMDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseSOECDominanttechGSbullcaseGSbasecaseGSbearcaseNickelZirconiumPlatinumIridiumNickelZirconiumLanthanumYttriumAverageannualincrementaldemandasa%ofcurrentglobalproductionforeachmineral(%)Averageannualincrementaldemand(kt)AlkalineelectrolysersPEMelectrolysersSOECelectrolysersSource:GoldmanSachsGlobalInvestmentResearch4February202275GoldmanSachsCarbonomicsOverall,weconcludethatbothalkalineandSOECtechnologiesarelikelytohaveonlyamarginalimpactondemandforthemineralsandmetalsusedintheirmanufacturing.PEMisthetechnologythatismostlikelytofaceconstraintsfromanavailabilityandcostperspective,givenitsrelianceoniridiumandPGMs.Havingsaidthat,wehighlightthattheloadingofpreciousmetalsandiridiumhasbeentrendingdownwardsandislikelytocontinuetocomedownsubstantiallyinthecomingyearsascompaniesfocusonongoingloadingoptimizationandtechnologicalinnovation.Weviewthisasnecessary,notonlybecauseoftheresourceavailability(iridium)andcost(PGMs)issues,butalsogivenbothplatinumandiridiumaretwoofthemostcarbon-intensivematerialstypicallyusedinelectrolyzers(fromalifecycleGHGandenergyintensityperspective),asshowninExhibit120.Nonetheless,giventhehighenergyintensityoftheelectrolyzersystems,theenergyrequiredtoproducethemetalsupstreamisstillminimalincomparison.Finally,lookingatthesupplyofthemineralsrequiredforthemanufactureofelectrolyzers,asshowninExhibit121,itisevidentthatthesupplyofcriticalmaterialssuchasplatinumandiridiumarebothconcentratedgeographicallyinjustafewregionsglobally,namelySouthAfrica,ZimbabweandRussia.ThiscouldbeakeysupplyconsiderationasPEMelectrolyzermanufacturingislikelytobelinkedtoafewregionswithlimitedshort-termalternatives.Foralkalineelectrolyzers,ontheotherhand,whiledesignoptionsthatuseplatinumandcobaltexist,thenewcommercialdesignsexcludetheseandprimarilyrelyonnickelandsteelforwhichsupplyismuchmorediversifiedgeographically.Finally,SOECelectrolyzermanufacturingcouldfaceasimilargeographicalsupplyconcentrationissue,sincemostofthesupplyofcriticalmineralsusedinthissystemiscurrentlyconcentratedinChina.Nevertheless,wehighlighttheuncertaintyassociatedwithSOECdesignsandtheirmaterialloadingsgiventheearlierstageofdevelopmentofthistechnology.Exhibit120:PlatinumandiridiumtypicallyusedinPEMelectrolyzersystemshaveamongthehighestenergyandlifecycleGHGintensitiescomparedtootherimportantmaterialsusedacrosselectrolyzertechnologies..LifecycleglobalwarmingpotentialandcumulativeenergydemandformaterialstypicallyusedinelectrolyzersystemsExhibit121:..whilesupplyisalsohighlyconcentratedgeographically(e.g.SouthAfrica),similartowhatisseenforscarcemineralssuchasyttriumandlathaniumusedinSOECsystems(China)Globalproductiongeographicalshareformaterialstypicallyusedinelectrolyzersystems(%)1101001,00010,000100,0001,000,000PtIrNiZrCoTaGdLaCeYLifecycleglobalwarmingpotentialandcumulativeenergydemandkgCO2eq/kgmetalMJeq/kgmetal0%10%20%30%40%50%60%70%80%90%100%PtPdIrCoNiTaGdZrLaCeYGlobalproductiongeographicalshare(%)SouthAfricaRussiaZimbabweCongoChinaCanadaJapanRwandaBrazilAustraliaGermanyUSOtherSource:IRENA,NussandMatthew(2014)Source:EuropeanCommission(2020),USGS,IRENA,GoldmanSachsGlobalInvestmentResearch4February202276GoldmanSachsCarbonomicsMoreover,beyondsupplyconcentrationgeographicallyformostofthemorenichemetalsinvolvedinelectrolyzermanufacturing(particularlyPEM),thesituationofrelativelyconstrainedsupplyandunderinvestmentthathasledtoastructuralbullmarketacrossmanycommodities(energyandnaturalresources)in2021hasalreadystartedtotranslateintonotableinflationinpricesofthesemetals.Intheexhibitsbelow,weshowpricesofthefourkeymaterialsusedinalkalineandPEMelectrolyzers;nickelandzirconiumfortheformerandplatinum/palladiumandiridiumforthelatter.Thepricesofallcommoditiesshownhavebeenveryvolatileandmostlybeenonanupwardtrajectoryin2021.Iridium,inparticular,standsout,withitspricehavingquadrupledsince2018(andrisensignificantlyinparticularin2021).Thisisreflectiveofthetrendsoutlinedearlier,withiridiumbeingthekeymaterialthatcouldfacesupplyconstraintsgiventhepotentialdemandfromitsuseinPEMelectrolyzers.Exhibit122:Pricesofthematerialstypicallyusedinthemanufactureofelectrolyzerscanbeveryvolatileandhaveingeneralstartedtotrendupwardsin2021(withtheexceptionbeingplatinum)...CommoditypricesinUS$/tnorUS$/ozforkeymaterialsusedinelectrolyzers(alkalineandSOECtopchart,PEMbottomchart)Exhibit123:..withiridiuminparticularhavingexhibitedanextraordinaryincreaseinpricein2021Commodityprices(ofmaterialsusedinelectrolyzers)rebasedto1Jan2018050001000015000200002500030000050100150200250Steel-$/tn-RHSNickel-$/tn-LHS010002000300040005000600070000500100015002000250030003500Jan2018Mar2018May2018Jul2018Sep2018Nov2018Jan2019Mar2019May2019Jul2019Sep2019Nov2019Jan2020Mar2020May2020Jul2020Sep2020Nov2020Jan2021Mar2021May2021Jul2021Sep2021Nov2021Jan2022Palladium-US$/oz-LHSPlatinum-$/oz-LHSIridium-$/oz-RHS-100%0%100%200%300%400%500%600%Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19Jul-19Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Nov-20Jan-21Mar-21May-21Jul-21Sep-21Nov-21PalladiumPlatinumNickelIridiumZirconiumSource:ThomsonReutersDatastream,Bloomberg,GoldmanSachsGlobalInvestmentResearchSource:ThomsonReutersDatastream,Bloomberg,GoldmanSachsGlobalInvestmentResearch4February202277GoldmanSachsCarbonomicsCleanhydrogenendmarkets:TherevolutionstartswiththetransformationoftheexistinghydrogeneconomyWebelievethestartofthecleanhydrogenrevolutionbeginswiththede-carbonizationofexistinghydrogenendmarkets,includingrefiningandchemicalsCurrently,H2isprimarilyusedasafeedstockinanumberofkeyindustrialprocessesandthereforeplaysaverylimitedroleintheenergytransitionaswearestilltounlockhydrogen’spotentialasanenergyvectorandfuel.AccordingtotheIEA,globalhydrogendemandwasaround90Mtin2020.Thisincludesmorethan70MtH2usedaspurehydrogen,primarilyinoilrefiningandammoniaproduction,andlessthan20MtH2mixedwithcarboncontaininggases,primarilyinmethanolproductionandsteelmanufacturing.Thisexcludesaround20MtH2thatispresentinresidualgasesfromindustrialprocessesusedforheatandelectricity.Webelievethecleanhydrogenrevolutionbeginswiththede-carbonizationofexistinghydrogenendmarkets.Therefore,weseethestartingpointofthecleanhydrogeneconomyasthede-carbonizationofthe70Mtpaofcurrentdedicatedfossilfuel-basedhydrogenproduction.Evenintheabsenceoffurtherhydrogenpenetrationintonewendmarkets,thispresentsaremarkableopportunityforcleanhydrogentogrowfrom<1Mtpacurrentlytoover70Mtpainanetzeroworld.Aspointedearlier,inthe‘PolicyToolbox’section,whilehighercarbonandcommodityprices(particularlynaturalgas)aremakingcostparityofcleanhydrogenwithgreyareality,higherimpliedcarbonabatementpricesandmoretechnologicalinnovationandcostdeflationarerequiredtoachievecostparityacrosshydrogen’sendmarketsandfinalapplications.Thelowestcarbonabatementpriceseemstobeforexistinghydrogenendmarkets,inparticularrefining,ammoniaandmethanol,supportingourthesisthatthecleanhydrogenrevolutionbeginswiththede-carbonizationofexistinghydrogenmarkets.Exhibit124:TheexistingendmarketsforhydrogenaretheonesrequiringlowercarbonabatementpricesandthereforeareaswhereweseethebeginningofthecleanhydrogenrevolutionCarbonomicscostcurvecarbonabatementprice(US$/tnCO2eq)forcleanhydrogenapplications020406080100120140160180200Jan-19Feb-19Mar-19Apr-19May-19Jun-19Jul-19Aug-19Sep-19Oct-19Nov-19Dec-19Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Oct-20Nov-20Dec-20Jan-21Feb-21Mar-21Apr-21May-21Jun-21Jul-21Aug-21Sep-21Oct-21Nov-21Dec-21Jan-22Carboncabatementprice(US$/tnCO2eq)HydrogenDRI-EAF(greensteel)OtherchemsCCUSPowergenenergystorageGreenammonia(electrolysis)Greenchems(electrolysishydrogen)AmmoniaCCUSRefining250300350400450500GreenammoniafuelforshippingFCEVlong-haulheavytrucksFCEVbusesFCtrainsHydrogeninheating(residential)Source:ThomsonReutersEikon,GoldmanSachsGlobalInvestmentResearch4February202278GoldmanSachsCarbonomicsOilrefining:Theonlyhydrogenendmarketfacingstructuraldecline,yetwithbiofuelsandsyntheticfuelsofferingsupportOilrefiningisthelargestconsumerofhydrogencurrently,accountingforc.41%ofglobalhydrogendemandin2021(GSestimates).Inoilrefining,hydrogenisprimarilyusedinhydrosulfurizationtoremovesulphurcontentsincrudeandinhydrocrackingprocessestoupgradeheavyresidualoilstohigher-valueproducts.Theongoingrisingfocusonairqualityhasledtothereductionofsulphurcontentinfinalrefinedproducts,asshowninExhibit126,whilehydrocrackingisbecomingmoreimportantasdemandforlightandmiddledistillateproductsisgrowingattheexpenseofheavyresidualoils.Aroundhalfofthisdemandismetwithhydrogenproducedasaby-productfromotherprocessesintherefineriesorfromotherpetrochemicalprocessesintegratedinrefiningplantswhiletheremainingdemandismetbydedicatedon-sitehydrogenproductionormerchanthydrogensourcedexternally.Overall,underallthreeofourGSglobalnetzeroscenarios,oildemandentersaperiodofstructuraldeclinepost2030,implyinglowerhydrogendemandforrefining.Nonetheless,inthenearterm,acombinationoftighteningsulphurregulationsandrisingoildemandcanbesupportiveforhydrogendemandinthisendmarket.Longerterm,increasingdemandforbiofuelsandsyntheticfuelscanprovidefurthersupportashydrogenisrequiredforbiofuels’hydrotreatmenttoremoveoxygenandimprovethequalityofvegetableoilsandanimalfatsprocessedintodieselsubstitutes.Productionofadvancedbiofuelscanbeevenmorehydrogenintensethantraditionaloilrefinedproducts,leavingpotentialforfurtherhydrogendemandupsidethere.Giventherelativelytightrefiningmarginsglobally,higherrefiningmargins,highercarbontaxesandlowercleanhydrogencostswillalllikelyberequiredtoachievecostparitywithexistinggrey(EuropeandUS)andbrown(China)hydrogenuse,asshowninExhibit129.WeprimarilyfocusontheUS,EuropeandChina’srefiningeconomicsasthesethreeregionsarethelargestconsumersofhydrogeninrefining,makinguparoundhalfoftheglobalrefininghydrogendemand.Exhibit125:Whileourthreeglobalnetzeromodelsallsuggeststructurallydecliningoildemandpost2030,implyinglowerdemandforhydrogeninrefining..OildemandinEJandkbpdunderthreeGSnetzerocarbonmodelsExhibit126:..ongoingtighteningofsulphurstandardscouldleadtohigherhydrogendemandperunitofrefinedproductforthedesulphurizationprocessinthenearterm...Allowedsulphurcontentinrefinedproducts(Mtpa,LHS)vsglobaloilsupply(kbpd,RHS)020,00040,00060,00080,000100,000120,00005010015020025020192021202320252027202920312033203520372039204120432045204720492051205320552057205920612063206520672069Oildemand(kbpd)Oildemand(EJ)GS<2.0ºGS1.5ºGS2.0º70,00075,00080,00085,00090,00095,000100,000105,000101214161820222420052006200720082009201020112012201320142015201620172018201920202021E2022EAllowedsulphurcontentinrefinedproducts-lhsOilsupply(kbpd)-RHSSource:GoldmanSachsGlobalInvestmentResearchSource:IEA,GoldmanSachsGlobalInvestmentResearch4February202279GoldmanSachsCarbonomicsChemicals:Ammoniaandmethanolproduction,keyendmarkets,bothlikelytoseesolidgrowthinthecomingyearsanddecadesThechemicalsindustryconsumesaboutc.53%ofglobalhydrogen,primarilyasafeedstockforammoniaandmethanolproduction,withbothrequiringaround180and130kgofhydrogenpertonneofproduct,respectively.Chemicalsisabroadsub-sectorincludingaverylargevarietyofcommoditypetrochemicals,specialtychemicalsandproductsincludingplastics,fertilizers,pharmaceuticals,explosives,paints,solventsandmore.Inthissection,weprimarilyfocusonbulkcommoditychemicals,namelyammoniaandmethanol,andmuchlessonhigh-value-chemicals(HVCs,includingethylene,propylene,benzeneandotherolefinsandaromatics).Whilehydrogenisapartofthemolecularstructureofalmostallchemicals,afewkeyprimarychemicalsrequireExhibit127:..whileadvancedbiofuelsandsynfuelscouldoffersupportforrefininghydrogendemandlongerterm,accordingtoourGSglobalnetzeromodelsAdvancedbiofuelsandsynfuelsdemandundertwoGSglobalnetzeroscenarios(kbpd)Exhibit128:Asuch,whileweexpectglobaldemandforhydrogenfromrefiningtodeclineovertime,wedonotexpectittodiminishHydrogendemandforrefining(MtH2)01,0002,0003,0004,0005,0006,0007,0008,0009,000AdvancedbiofuelsSynfuelsAdvancedbiofuelsSynfuelsGS1.5GS<2.0kbpd202520302035204020452050051015202530354045202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Hydrogendemandforrefining(MtH2pa)GS<2.0ºCNetzeroby2060scenarioGS1.5ºCNetzeroby2050scenarioGS2.0ºCNetzeroby2070scenarioSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit129:Cleanhydrogenproductioncostscouldformalargeportionofrefiningmargins,makinghighercarbonpricesandcleanhydrogentechcostdeflationessentialforincreasingcleanhydrogenpenetrationRefiningmarginandhydrogencostperbarrel(US$/bl)012345678910Avr.RefiningmarginGreyhydrogencostBluehydrogencostGreenhydrogencostAvr.RefiningmarginGreyhydrogencostBluehydrogencostGreenhydrogencostAvr.RefiningmarginBrownhydrogencostGreyhydrogencostBluehydrogencostGreenhydrogencostUnitedStatesEuropeAsiaUS$/blCapexOpexFuel/electricityElectricityrangeRefiningmargin(average2012-21)Source:ThomsonReutersEikon,GoldmanSachsGlobalInvestmentResearch4February202280GoldmanSachsCarbonomicslargequantitiesofdedicatedhydrogenproductionforuseasfeedstock,notablyammoniaandmethanol.Fossilfuelshavehistoricallybeenthemosteconomicandmaturemethodofproducingammoniaandmethanol,primarilynaturalgas(exceptinAsiaand,inparticular,China,wherealotofproductionstillreliesonthemorecarbonintensivecoal).Thisresultsinrelativelyhighcarbonintensitiesforbothchemicals(around2.4tnCO2eq/tnforammoniaandc.2.3tnCO2eq/tnformethanol),whichneedtobeaddressedforanyaspiringpathtoglobalnetzero.Therefore,notonlyisthereaneedtoimplementnewprocessroutesandfeedstockstode-carbonizetheexistingproductionfacilitiesforammoniaandmethanol,butalsotofacilitatestronggrowthindemandforbothchemicals.Ammoniaisprimarilyusedasafeedstockforthemanufactureoffertilizerssuchasureaandammoniumnitratewhiletheremainderisusedforindustrialapplicationssuchassyntheticfibersandotherspecialtychemicals,whicharebecominganincreasinglyimportantcomponentforammoniademand.Methanol,ontheotherhand,isusedinawiderangeofindustrialapplicationsincludingthemanufactureofformaldehydeandvarioussolvents.Thedevelopmentofmethanol-to-olefinsandmethanol-to-aromaticstechnologieshasalsoopenedupademandopportunityforthemanufactureofplastics.Ourscenariosassumeac.1%-1.5%CAGRforammoniaandmethanoldemandto2050.Wenotethatthisdoesnotincludeadditionaldemandforbothchemicalsthatwouldstemfromtheiruseasestablishedenergycarriersforthetransportandtransmissionaswellasstorageofcleanhydrogen,ordemandthatcouldemergeiftheyweretobeusedasfuelsontheirown.Wediscussthisincrementaldemandfromtheiruseasfuelslaterinthissection,addressingtheirpotentialuseasafuelintheshippingindustry.Alternativeprocesstechnologiesandfeedstockswillberequiredtomeetgrowingdemandfordedicatedhydrogenproductionforbothchemicalswhilereducingthecarbonfootprint.Inourglobalnetzeromodels,wefocusonthreekeyprocessroutes:(a)utilizingexistingfossilfuel-basedproductionroutesbutincludingcarboncapture(CCUS)toreduceemissions(bluehydrogenequivalent),(b)usingelectrolysis-derivedhydrogenwithrenewablepower,(c)usingbiomassfeedstocksassumingsustainablesourcingandhandling.Alloftheseoptionsarecurrentlymorecostlythanthetraditionalfossilfuel-basedroutes,asshowninExhibit130usingourlevelizedcostofammoniaanalysis,andthereforecallfortechnologicalinnovationandaconstructivepolicyframeworktobridgetheUS$80-160/tnCO2impliedcarbonabatementprice(asshowninExhibit124).CCUSappearstobethecheapestcleanproductionroute,giventherelativelyhighconcentrationofCO2inthestreamfortheammoniaprocess,withelectrolysisthenextavailableoption.Wehaveperformedasimilaranalysisfortheproductionofmethanol,asshowninExhibit131,andreachedsimilarconclusions.4February202281GoldmanSachsCarbonomicsExhibit130:CCUSandelectrolysisappeartobethemostcostcompetitiveroutestode-carbonizeammoniaproduction..Levelizedcostofammonia-LCOA(LHS,US$/tnNH3)anddirectcarbonintensitypertonneofammonia(RHS,tnCO2/tnNH3)Exhibit131:..andmethanolproduction,albeitthecleanproductionroutesforbothappearmoreexpensivethanthefossilfuelalternativeroutes,callingfortechnologicalinnovationandaconstructivepolicyframeworkLevelizedcostofmethanol-LCOM(LHS,US$/tnMeOH)anddirectcarbonintensitypertonneofmethanol(RHS,tnCO2/tnMeOH)-0.51.01.52.02.53.03.5-100200300400500600700800900Coal-basedNH3NGSMRNH3Coal-basedNH3withCCUSNGSMRNH3withCCUSNGATRNH3withCCUSElectrolysisgreenNH3BiomassgasificationNH3Directcarbonintensitypertonneammonia(tCO2/tnNH3)Levetizedcostofammonia-LCOA(US$/tnNH3)CapexFixedopexFuelopexFeedstockopexCCScost(transport&storage)CO2intensity-0.51.01.52.02.53.03.5-100200300400500600700800Coal-basedMeOHNGMeOHCoal-basedMeOHwithCCUSNGSMRMeOHwithCCUSElectrolysisgreenMeOHBiomassMeOHDirectcarbonintensitypertonnemethanol(tCO2/tnMeOH)Levetizedcostofmethanol-LCOM(US$/tnMeOH)CapexFixedopexFuel&feedstockopexCCScost(transport&storage)CO2intensitySource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit132:ElectrolysisforammoniamanufacturingbecomescompetitiveatrenewablepowerpricesbelowUS$25/MWh..Levelizedcostofammonia-LCOAvselectricitypriceExhibit133:..similartomethanolelectrolysis,withsuchprices,whilelowerthantheglobalaverage,beingachievableincertainregionsLevelizedcostofmethanol-LCOMvselectricityprice-2004006008001,0001,20001020304050607080Levetizedcostofammonia-LCOA(US$/tnNH3)Electricityprice(US$/MWh)CoalCoalwithCCUSNGSMRNGSMRwithCCUSNGATRwithCCUSBiomassgasificationElectrolysishydrogen-10020030040050060070080001020304050607080Levetizedcostofmethanol-LCOM(US$/tnMeOH)Electricityprice(US$/MWh)CoalCoalwithCCUSNGNGwithCCUSBiomassElectrolysisSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit134:CCUSappearstobeamoreeconomicallycompetitivetechnologyforthede-carbonizationofammoniaandmethanolmanufacturing...Levelizedcostofammonia-LCOAvsCO2priceExhibit135:..butheavilyreliesontheavailabilityofstorageorutilizationoptionalityforCO2Levelizedcostofmethanol-LCOMvsCO2price-2004006008001,0001,2000255075100125150175200Levetizedcostofammonia-LCOA(US$/tnNH3)CO2price(US$/tnCO2)CoalCoalwithCCUSNGSMRNGSMRwithCCUSNGATRwithCCUSBiomassgasificationElectrolysishydrogen-2004006008001,0001,2000255075100125150175200Levetizedcostofmethanol-LCOM(US$/tnMeOH)CO2price(US$/tnCO2)CoalCoalwithCCUSNGNGwithCCUSBiomassElectrolysisSource:Companydata,GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202282GoldmanSachsCarbonomicsSteel:Anexistingendmarketthathasthepotentialtotransformintooneofthekeyemergingcleanhydrogenopportunitiesasitembarksonitsownde-carbonizationjourneyAroundc.7%ofcurrenthydrogendemand(fourthlargestsinglesource)comesfromthesteelindustryandstemsspecificallyfromtheDRI-EAFsteelmakingprocessrouteusedtoreduceironoretospongeiron(inamixturewithcarbonmonoxide).Currently,aroundthree-quartersoftotalglobalsteeldemandismetthroughprimaryproductionmethods,whiletherestutilizescrapsupplies.Asfarasprimaryproductionroutesareconcerned,theblastfurnace-basicoxygenfurnace(BF-BOF)routesaccountforaround90%ofcurrentglobalprimarysteelproduction,giventhelargesteelproductionbaseofChina,whichprimarilyreliesoncoalforsuchhighenergyprocesses.Itproduceshydrogenasaby-product(ratherthanrequiringdedicatedhydrogenproduction).Thedirectreductionoftheiron-electricarcfurnace(DRI-EAF)routeaccountsforaround7%ofprimarysteelproductiongloballyandutilizesamixtureofcarbonmonoxideandhydrogenasareducingagent.Thishydrogenisproducedbydedicatedproductionroutesandnotasaby-product,makinguphydrogendemandfromthesteelindustrytoday.Theiron&steelindustryaccountsforc.2.6GtCO2oftotalemissions(2019)(GSestimates),thesinglehighestemitteramongindustrialsub-sectors.However,acombinationoffuelswitchesandinnovativeprocessroutescanaidthelow-carbontransitionpathfortheseferrousalloys.OurGS1.5°scenarioseesaradicaltechnologicaltransformationoftheiron&steelsub-sector,largelybasedontheongoingshiftfromcoalblastfurnaceroutes(conventionalBF-BOF)toelectricarcfurnaceroutes(eitherthroughnaturalgas,cleanhydrogenorscrap).Iron&steelisahighlyenergy-intensiveindustry,accountingforc.15%ofglobalprimarycoaldemand(IEA).By2050,inourGS1.5°path,electricityandnon-fossilfuelsaccountforc.70%ofthetonnesofsteelproduced,whiletheremainingfossilfuel-reliantplantsareretrofittedwithCCUS.CCUSandtheswitchfromcoalBF-BOFtonaturalgasDRI-EAFandscraparethekeynear-termde-carbonizationtoolsforsteel,webelieve,beforetherapiduptakeofthecleanhydrogenprocess(H2DRI-EAF)post2030.WethereforeseeincrementalhydrogendemandcomingnotonlyfromtheincreasingshareofthecurrentconventionalDRI-EAFprocessbutalsofromtheemergenceandscale-upofthehydrogenDRI-EAFproductionroute,formingakeyemergingcleanhydrogenendmarketonthepathtonetzero.Overthepastfewyears,wehaveseenanumberofinnovativealternativecleansteelproductionprocessesbeingdeveloped,primarilyfocusingontheincreasinguseofelectricityandcleanhydrogen.OurGS1.5°model’sarchitectureforheavyindustriesconsistsofthreemaincomponents:activityprojections,technologymixmodeling(theselectionoftechnologiesandmixrequiredtomeettheseactivitylevels)and,finally,emissionsmodeling,largelyrelyingonthetechnologymixandincorporatingenergyandmaterialefficiencywhereappropriate.4February202283GoldmanSachsCarbonomicsSimilartotheanalysisoflevelizedcostofammoniaandmethanolbyproductionroutewepresentedearlierinthereportonchemicalsdemandforhydrogen,wepresenthereourlevelizedcostofsteelanalysisacrossthekeycleanproductionpathwayscurrentlyavailableandinpilotorcommercialscale,asshowninExhibit140.ThecleanproductionpathwaysforsteelproductionarecurrentlylesscostcompetitivewiththetraditionalBF-BOFprocessorgas-basedDRI-EAF.Intheabsenceoffurthercostreduction,technologicalinnovationandacompellingcarbonpriceframework,weestimatethecostoftheswitchtocleanhydrogentoreplacenaturalgasintheDRI-EAFprocessorthetraditionalBF-BOFprocesstobec.45%/60%higher,respectively(onapertonneofsteelbasis).Giventherelativelytightmarginsofthesteelindustry,suchadifferentialisasubstantialincreaseinthecostbaseofexistingsteelproducers.Overall,webelieveacombinationofincreasingsecondaryproductionandCCUSretrofittingcouldbethemosteconomicalsolutionnearterm(particularlyfortheexistingplantbaseinAsia,giventheveryyoungaveragelifeoftheseassets,around13yearscomparedtoanaverageExhibit136:Finalenergyconsumptionofthesteelindustryisdominatedbycoal,whichaccountsforc.70%ofthesub-sector’senergymix...Finalenergydemandofkeyheavyindustrysub-sectorsandtheshareoffossilfuels(2019)Exhibit137:...andourGS1.5degreespathassumesaradicaltransformationofthesectorwithc.70%ofglobalsteelproducedin2050sourcedfromnon-fossilfuelprocesseswiththeremaininglargelyretrofittedwithCCUSSteelproductiontechnologymix(%)0%10%20%30%40%50%60%70%80%90%0102030405060ChemicalsSteelCementShareoffossilfuelsinthefinalenergymix(%)Finalenergydemandofkeyheavyindustrries(EJ)CoalOilNaturalgasElectricityBioenergyOtherRESImportedheatSharefossil-fuels(%)0%10%20%30%40%50%60%70%80%90%100%2019203020402050Steelproductiontechnologymix(%)BF-BOFBF-BOF/SR-BOFwithCCUSNGDRI-EAFNGDRI-EAFwithCCUSH2DRI-EAFScrapEAFSource:IEA,GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearchExhibit138:OurGS1.5degreespathassumesacombinationoftechnologiesinthesteelsectorwillcontributetothesectoralmostbeingentirelycarbon-freeby2050Iron&steelsectoremissionsbridgetonetzeroby2050(MtCO2)Exhibit139:..leadingtoanotablereductioninoveralldirectcarbonintensityovertimeSteeldirectemissionscarbonintensity(tnCO2/tnsteel)05001,0001,5002,0002,5003,000Iron&steelemissions2019ActivitywithcurrenttechnologymixEmissionsreductionto2050Iron&steelemissionsin2050Iron&Steelsectoremissionsbridgetonetzeroby2050(MtCO2)H2DRI-EAFBF-BOF/SR-BOFwithCCUSScrapEAFNGDRI-EAFwithCCUSEfficiencyimprovement1.251.010.710.420.170.000.200.400.600.801.001.201.401.6020192020202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Steelcarbonintensity(tnCO2eq/tnsteel)Source:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202284GoldmanSachsCarbonomicsusefullifeof30-40years)untiltechnologicalinnovationandcostdeflationmakecleanhydrogenthemostattractivecarbon-freeproductionroute.WeestimatethatforthecleanhydrogenDRI-EAFproductionroutetoreachcostparitywiththenaturalgasDRI-EAFroute,anelectricitypricebelowUS$25/MWhandongoingcapexreductionandimprovingelectrolyzerefficienciesarerequired.Thisanalysisisheavilyreliantonassumedcommoditypricesaswell.Forthepurposeoftheexhibitshownbelow,weassumeanaturalgaspriceofUS$8/mcf,coalpriceofUS$100/tn,andelectricitypriceofUS$40/MWh(withthecleanhydrogenDRI-EAFrouterelyingentirelyonrenewableelectricity),adiscountrateof8%.Exhibit140:HydrogenDRI-EAFcouldbeakeyemergingde-carbonizationtechnologyforthesteelindustry,yetitscurrenteconomicscallforfurthertechnologicalinnovation,scaleandhighercarbonpricingLevelizedcostofsteel-LCOSS(US$/tnsteel)vscarbonintensityofsteel(tnCO2/tnsteel)-0.51.01.52.02.5-100200300400500600700BF-BOFGas-basedDRI-EAFScrapEAFBF-BOFwithCCUSGas-basedDRI-EAFwithCCUS100%H2DRI-EAFCO2carbonintensitypertonnesteel(tCO2/tnsteel)Levelizedcostofsteel-LCOS(US$/tnsteel)CapexFixedopexFuelopexRawmaterialsopexCCScost(transport&storage)CO2intensitySource:Companydata,GoldmanSachsGlobalInvestmentResearchExhibit141:VerylowrenewablepowerpriceswouldbeneededtodaytobringhydrogenDRI-EAFprocessesatcostparitywithalternativesintheabsenceoftechnologicalinnovation,scale,costreduction...Levelizedcostofsteel-LCOS(US$/tnsteel)vselectricityprice(US$/MWh)Exhibit142:..andahigherCO2price,withtheimpliedcarbonabatementpricefortheswitchataroundUS$120/tnCO2onourestimatesLevelizedcostofsteel-LCOS(US$/tnsteel)vsCO2price(US$/tnCO2)30035040045050055060065070075080001020304050607080Levetizedcostofsteel-LCOS(US$/tnsteel)Electricityprice(US$/MWh)BF-BOFBF-BOFwithCCUSNGDRI-EAFNGDRI-EAFwithCCUSScrapEAFH2DRI-EAF3003504004505005506006507007508000255075100125150175200Levetizedcostofsteel-LCOS(US$/tnsteel)CO2price(US$/tnCO2)BF-BOFBF-BOFwithCCUSNGDRI-EAFNGDRI-EAFwithCCUSScrapEAFH2DRI-EAFSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202285GoldmanSachsCarbonomicsCleanhydrogenanditsroleinthede-carbonizationofsteelAswehighlightinthesectionabove,akeyindustrialapplicationofcleanhydrogen,andonethathasrecentlyattractedindustryinterest,istheproductionofnetzerocarbonsteel,tohelpmeetgrowingglobalsteeldemandwithloweremissions.Anumberofprojectsarecurrentlyunderwaytodeveloptheseprocessesandmovetowardscommercialization,asoutlinedbelow.SALCOS:AninitiativeundertakenbySalzgitterAGandtheFraunhoferInstitutetodevelopaprocessnforhydrogen-basedreductionofironoreusingtheDRI-EAFroute.Theprocessinitiallyinvolvesthereductionofironoretoironwiththeaidofnaturalgasandahighervolumeofhydrogeninadirectreductionreactor.Basedonthismethod,areductionofironofupto85%canbeachievedaccordingtotheoperators,withCO2savingsofinitiallyupto50%theoreticallypossible.ΣIDERWIN:AresearchprojectbyArcelorMittalwhichisinthepilotphase.Itutilizesannelectrochemicalprocesssuppliedbyrenewablesourcestotransformironoxidesintosteelplatewithasignificantreductionofenergyuse.ArcelorMittalalsoannouncedthatitsSestaoplantinSpainwillbecometheworld’sfirstfull-scalezerocarbon-emissionssteelplant.Accordingtothecompany,by2025,theSestaoplantwillproduce1.6milliontonnesofzerocarbon-emissionssteel.STEAGandThyssenkrupp’shydrogenproject:STEAG,Duisburg-basedsteelproducerthyssenkruppnSteelandDortmund-basedthyssenkruppUhdeChlorineEngineers,specializinginelectrolysistechnology,areworkingonajointfeasibilitystudyfortheconstructionofawaterelectrolysisplantattheSTEAGsiteinDuisburg-Walsum.HYBRIT:In2016,SSAB,LKABandVattenfallformedapartnershipforthede-carbonizationofsteelnthroughamodifiedDRI-EAFprocess,aimingatproducingthefirstfossil-freesteelmakingtechnologywithanetzerocarbonfootprint.During2018,apilotplantforfossil-freesteelproductioninLuleå,Exhibit143:Schematicsummaryofpossiblesteelmanufacturingroutesandassociatedemissionsintensity(tnCO2eq/tnsteel)Feedstock(extraction)IronReductionTransformationForming,downstreamprocessingCoalIronoreNaturalgasIronoreCleanhydrogenIronoreScrapBF-BOFBlastFurnace-BlastOxygenFurnaceDRIDirectironreduction(naturalgas)DRIDirectironreduction(cleanhydrogen)ElectricArcFurnace(EAF)Zero-carbonelectricity:GridelectricityDownstreamprocessing–coldrollingandcastingZero-carbonelectricity:Gridelectricity1.8-2.00.60.00.00.3-0.4Figuresinblueindicatetheemissionspertonnesteelproduced–tnCO2/tnsteel0.1-0.20.0Emissionsintensity1.9-2.10.6-1.20.0-0.60.0-0.6Source:EnergyTransitionsCommission,GoldmanSachsGlobalInvestmentResearch.4February202286GoldmanSachsCarbonomicsSweden,startedconstruction.ThetotalcostforthepilotphaseisestimatedatSkr1.4bn.TheSwedishEnergyAgencywillcontributemorethanSkr500mntowardsthepilotphaseandthethreeowners,SSAB,LKABandVattenfall,willeachcontributeonethirdoftheremainingcosts.TheSwedishEnergyAgencyearliercontributedSkr60mntothepre-feasibilitystudyandafour-yearresearchproject.InNovember2021,TheHYBRITinitiativewasgrantedsupportfromtheEuropeanUnion,asoneofthesevenlarge-scaleinnovativeprojects,undertheInnovationFund.Theprojectwillproduceapproximately1.2Mtcrudesteelannually,representing25%ofSweden’sproduction.H2FUTURE:Apilotplantforcarbon-neutralproductionofhydrogensuccessfullycommencedoperationnin2019attheVoestalpinesiteinLinz,aspartoftheEU-fundedH2FUTUREproject,withpartnersincludingVERBUND,Siemens,AustrianPowerGrid,K1-METandTNO.COURSE50:AninitiativefromtheJapaneseIronandSteelFederationwhichaimstoreducethencarbonfootprintofsteelproductionthroughtheuseofahigherproportionofhydrogenforironorereduction,aswellascapturingtheCO2contentoftheprocessstreams.HIsarna:In2004,agroupofEuropeansteelcompanies(includingTataSteel)andresearchinstitutesnformedULCOS,whichstandsforUltra-LowCarbonDioxideSteelmaking.Itsmissionistoidentifytechnologiesthatmighthelpreducecarbonemissionsofsteelmakingby50%pertonneby2050.HIsarnaisoneofthesetechnologiesandisaprocessinvolvinganupgradedsmeltreductionthatprocessesironinasinglestep.Theprocessdoesnotrequirethemanufacturingofironoreagglomeratessuchaspelletsandsinter,northeproductionofcoke,whicharenecessaryfortheblastfurnaceprocess.Exhibit144:HYBRITprocessrouteschematicdiagramSource:HYBRIT,Companydata4February202287GoldmanSachsCarbonomicsTransportation:Akeyemerginghydrogendemandopportunity,spanningacrossmodels(heavy-road,shipping,aviation,rail)Transportationmostlysitsinthe‘high-cost’areaofthede-carbonizationcostcurve,withthesectorresponsibleforc.22%oftheglobalanthropogenicCO2emissions(2019,incl.AFOLU)(EUEDGARdatabase).AspartofourGSnetzeromodels,welayoutthepathtonetzeroemissionsfortransportation,asshowninExhibit148,addressingallkeytransportationmodes:shortandmedium-haulroadtransport,heavylong-haultransport,rail,aviationandshipping.Thespeedofde-carbonizationvariesdependingonthetransportmode,andislargelydrivenbythedifferenceincostsandtechnologicalreadinessoftheavailablecleanalternativesrequiredforeachsub-sector.Light-dutyvehiclesandrail(whichisalreadylargelyde-carbonizedthroughelectrification)arethetwotransportmodeswithfasterrelativede-carbonization,giventhereadinessandnotablecostdeflationofcleantechnologiesforboth(electrification).Conversely,aviationandshippingarede-carbonizingataslowerpace,giventhestilllargelyundevelopedorearlystagede-carbonizationalternativesforboth(sustainableaviationfuels,syntheticfuels,cleanhydrogenandammonia),whichweexpecttoenjoyalargeuptakeinadoptionandaccountforanotablepartofthefleetonlypost2030.WefurtheraddresstheevolutionofthefuelmixofenergyconsumptionoftransportovertimeinourGS1.5scenarioandpresenttheresultsbothinaggregateandbykeytransportmodeinExhibit147.Overall,weseeelectricity’sshareincreasingintotaltransportenergyconsumptiontoc.50%by2050,whilefossilfuel’ssharedeclinesfrom>95%atpresenttojust3%.Bioenergy,cleanhydrogen&syntheticfuels,andammoniaallemergeasimportantenergysourcesfortransportation,accountingforc.20%/23%/6%,respectively.Exhibit145:Transportationisemergingasakeyindustryforcleanhydrogendemandlongterm,whichcouldreachcloseto250MtH2by2050(‘Bull’scenario),c.3xthecurrentglobaldemandforhydrogen...Transportationhydrogendemand(MtH2pa)underthethreeGSglobalhydrogenmodelsExhibit146:..withcontributionacrosstransportmodes,includingheavylong-haulroadtransport,aviation,shipping,andrail,withgrowthacrossallacceleratingpost2030GlobalhydrogendemandfromtransportationfortheGS‘Bull’scenario(MtH2)050100150200250300202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Transportpotentialhydrogendemand(MtH2)Globalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenario050100150200250300202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050GlobalhydrogendemandfromtransportationundertheGSBullscenario(MtH2)Transport-LDVsTransport-HDVs(trucks,inclbuses)Transport-RailTransport-ShippingTransport-AviationSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202288GoldmanSachsCarbonomicsRoadtransport:Long-haulheavy-dutyroadtransportthesweetspotforcleanhydrogenandalternativefuels,electrificationlikelytobethemostattractivetechnologyforpassengertransportWebelieveroadtransportisatthestartofitsmostsignificanttechnologicalchangeinacentury,withelectrification,autonomousdrivingandcleanhydrogenatthecoreofthede-carbonizationchallenge.Forlightdutyvehicles(LDVs)(primarilyconstitutingpassengervehicles,commercialvehiclesandshort/medium-haultrucks),weconsiderelectrificationthekeyde-carbonizationtechnology.Forlong-haulheavytrucks,weconsidercleanhydrogenacompetitiveoption,owingtoitsfasterrefuelingtime,lowerweightandhighenergycontent.Overall,weestimatethatthetotalLDVroadfleet(includingpassengervehiclesandshortandmedium-haultrucks)willincreasealmosttwo-foldto2050(froma2019base),withnewenergyvehicles–NEVs(includingallofBEVs,PHEVsandFCEVs)–reachingalmost100%penetrationintheroadtransportfleet,forapathconsistentwithnetzeroemissionsgloballyby2050andpeakemissionsbefore2030inourglobalnetzeromodelby2050(1.5degrees).Whilewebelievethatelectricvehiclesscreenasthemostattractivede-carbonizationsolutionforLDVs,includingshortandmedium-haultransport,webelievethatcleanhydrogencouldbeakeycompetingtechnologywhenlong-haulheavytransportisconsidered(HDVs),givenitshighenergycontentperunitmass(lighter)andfasterrefuelingtime.AlthoughtheFCEVs(fuelcellelectricvehicles)globalstockwasestimatedtohaveexceededonly40,000in2021(IEA),owingtoalimitedproductoffering,non-competitivepricepointsandlittleinfrastructure,weseetherecentpolicydrivetowardsde-carbonizationasareasontoreconsiderthepotentialforFCEVs.Currently,FCEVdeploymenthasbeenconcentratedlargelyonpassengerLDVs,whichiscontrarytowherewebelievethetruehydrogenopportunitylies,i.e.inheavy-long-haultransport(trucks,busesandforklifts)where,despitesmallabsolutevolumes,growthofFCEVscouldacceleratenotably.Overall,ournetzeropathby2050(GS1.5°)callsforasalesmixthatevolvesnotablyinthecomingyears,withFCEVsandEVsmakingupc.22%/100%%oftotalHDVsalesby2030/40E.Exhibit147:Weexpecttheenergymixofthetransportsectortoevolvedramaticallyovertimeforapathconsistentwithnetzero...Transportenergyconsumptionbyfuel(EJ)Exhibit148:..andwemodeltheemissionsfromallkeymodelsofthetransportsectorinourGS1.5°pathtoglobalnetzeroby2050Transportsectoremissions(MtCO2)splitbykeytransportmode02040608010012014020192020202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Transportconsumptionbyfuel(EJ)FossilfuelsElectricityBioenergyHydrogen&hydrogen-basedsyntheticfuelsAmmonia01,0002,0003,0004,0005,0006,0007,0008,0009,00020052007200920112013201520172019202120232025202720292031203320352037203920412043204520472049Transportemissions(MtCO2)Light-dutyvehicles(LDVs)Heavy-dutyvehicles(trucks,incl,buses)RailAviationShippingSource:GoldmanSachsGlobalInvestmentResearchSource:EmissionDatabaseforGlobalAtmosphericResearch(EDGAR)releaseversion5.0,FAO,GoldmanSachsGlobalInvestmentResearch4February202289GoldmanSachsCarbonomicsExhibit149:GlobalFCEVsdeploymenthassurpassed40,000in2021,largelyconcentratedinAsia(China,Korea,Japan)andtheUS..FCEVsstockbyregion(kunits)Exhibit150:...withinfrastructuredevelopmentandavailabilitybeingakeyconstraintHRSsvsFCEVsperHRS0510152025303540455020172018201920202021Fuelcellvehiclesstock(kunits)KoreaUnitedStatesChinaJapanEuropeRoW01020304050607001002003004005006002017201820192020Hydrogenrefuellingstations(HRSs)Hydrogenrefuellingstations(HRSs)FCEVsperHRSSource:IEA,AFCTCP,GoldmanSachsGlobalInvestmentResearchSource:IEAExhibit151:HydrogenoutperformssignificantlywhenwecomparetherefuelingtimesofFCEVsversusBEVsatdifferentkWcharginglevels...minstorefuel/rechargeExhibit152:...andalsoprovidesarangeadvantageforpassengervehicles,albeitothermodelsmeettheaverageweeklythresholdtoo...BEV/FCEVmodelrangeoverview3330150020406080100120140160ICEFCEVBEV-DC(100kW)BEV-AC(22kW)Timetorefuel(measuredinminutes)505km420km395km275km275km250km235km180km666km502kmTeslaModelYVWID.3ProRenaultZoeR135OpelCorsa-ePeugeote-208Fiat500eBMWi3sMiniCooperSEHyundaiNexoToyotaMiraiAverageEUweeklydistance:250kmSource:Companydata,GoldmanSachsGlobalInvestmentResearchSource:Companydata,compiledbyGoldmanSachsGlobalInvestmentResearchExhibit153:...makingtheapplicationwheretherangeadvantageismostimportant,i.e.long-haultrucksandbusesZEVClass8trucksandrange(km)Exhibit154:FCEVsusingcompressedhydrogenscreenattractivelyonaweightperunitofoutputenergybasiswhencomparedwithBEVsWeightperunitofoutputenergy(tank-to-wheelbasis,kg/MJ)foraveragepassengervehicleand%increaseinaveragevehicleweight200km200km210km300km400km483km500km805km1,000kmMaxEUdailytruckdistance:c.800km0%5%10%15%20%25%30%35%40%45%50%0.00.20.40.60.81.01.21.41.61.82.0Gasoline&ICECompressedH2(350bar),fuelcell&storagetankCompressedH2(700bar),fuelcell&storagetankLi-battery%increaseinaveragevehicleweight(%)Weightperunitofoutputenergy(tanktowheel)(kg/MJ)EUmaxdailydrivingtimeat9hours(assumingaveragespeedof90km/h)Source:Transport&Environment,EU,compiledbyGoldmanSachsGlobalInvestmentResearchSource:USDepartmentofEnergy,EIA,GoldmanSachsGlobalInvestmentResearch4February202290GoldmanSachsCarbonomicsIntheexhibitsbelow,wecomparethetotalcostofownershipforICE,BEVandFCEV,bothforpassengervehiclesandtrucks.Itisclearthatthetechnologicalandcostcompetitiveadvantageofbatteryelectricvehiclesforpassengerandshort-haultransportmakebatterythepreferredtechnologyforthisroadtransportsegment.However,aswelookintoheavy-roadlong-haultransport,wefindthehydrogenpropositioncompetitive,withaTCOthatissimilartothatofBEVbutbenefitingfromlowerweightandfasterrefuelingtimes.WhilebothoptionsremainmorecostlythanconventionaldieselICEtrucks,weexpecttechnologicalinnovationandcostdeflationthatgenerallycomesonthebackofeconomiesofscaletoreducethecostsofbothtechnologiesovertime.Exhibit155:Long-haulheavytransportcouldbeanewpotentialendmarketforhydrogen,withFCEVtrucksbecomingmorecostcompetitivewithfurtherfuelcelltechnologicalinnovationandofferingfasterrefuelingtimes,longerrangesandlowerweightTotalcostofownershipofaClass8truck(15yearsassumedusefullife)00.10.20.30.40.50.60.70.80.9ICEDieselBEVFCEVICEDieselBEVFCEVCurrentLong-termTCOforlong-haulheavytruck($/km)CostofthetruckMaintenance&operationsFuel/electricitycostSource:Companydata,GoldmanSachsGlobalInvestmentResearchExhibit156:Longerterm,weestimateahydrogenpricearoundUS$4-4.5/kgH2wouldbesufficientforcostparitywithdiesel(normalizeddieselprices),whileatcurrentFCEVcostsahydrogenpriceofUS$3-3.5/kgH2wouldbeneededforcostparity,wellbelowc.$8-12/kgH2atthepumpcurrentlyHydrogenpriceatthepumprequiredforcostparitywithdiesel0.01.02.03.04.05.06.07.08.09.02.02.53.03.54.04.55.05.56.06.57.07.5Hydrogenpriceatthepumpforcostparitywithdieseltrucks($/kgH2)Dieselpricepergallon(US$/gl)Long-termCurrentSource:GoldmanSachsGlobalInvestmentResearch4February202291GoldmanSachsCarbonomicsExhibit157:Hydrogenhaslowefficiency,onacomparativebasis,withelectricvehiclesbeingtwiceasefficientonawell-to-wheel/power-to-wheelbasisSource:GoldmanSachsGlobalInvestmentResearch4February202292GoldmanSachsCarbonomicsShipping&Aviation:Along-termopportunityforcleanhydrogen,eitherinpureformorintheformofalternativefuelssuchasammonia,methanol,andsyntheticfuelstode-carbonizetwoofthehardest-to-abateindustriesShipping:Maritimeshippingisresponsibleforc.0.9GtCO2eqofemissions(2019)(GSestimates),accountingforasimilarshareoftheglobalCO2emissionsasaviation.Shippingisanothersectorwithhard-to-abateemissions,givenalackofwidespreadadoptionofavailablelow-carbonde-carbonizationtechnologiesatscale,andtherelativelylongoperatinglifeofvessels.Similartoaviation,wedonotexpectgrossemissionsinshippingtoreachabsolutezeroin2050,yetwedomodelanotablereductioninemissions,asalternativefuelsbecomemorewidelyadopted.Theseincludeliquefiednaturalgas(LNG),whichwhilenotazero-emittingfuel,canplayakeyroleasatransitionfuelfortheshippingsector.Longerterm,weexpectedadvancedbiofuels,andcleanammoniaandhydrogentoplayalargerroleastheultimatede-carbonizationtechnologiesforthesector.Internalcombustionenginesforammonia-fueledvesselsarecurrentlybeingdeveloped,andweexpecttheycanbemadereadilyavailabletothemarketby2030(accordingtoguidancefromcompanies).Methanolhasalsobeendemonstratedasafuelforthemaritimeshippingsectorandisrelativelymorematurethanhydrogenandammoniawhilealsobeingpotentiallycompatiblewithexistingmaritimeengines,webelieve.InourGS1.5°path,consistentwithour‘bull’globalhydrogenscenario,weassumecleanammoniaaccountsforc.69%ofthetotalenergyinshippingin2050andsustainablebiofuelsprovidec.20%oftotalshippingenergyneeds,withtheremainingenergyprovidedbyfossilfuels(oilandLNG).However,wenotethatthevastmajorityofdemandforammonia,methanolorhydrogen-basedfuelsfortheshippingsectorislikelytocomepost2030.Exhibit158:Our‘bull’scenario,consistentwithnetzeroby2050,callsforaradicalfuelmixintheshippingsectortoalternativefuelsincludingbioenergy,LNGandammonia(ormethanol)...Shippingenergyconsumptionbyfuel(EJ)Exhibit159:..potentiallyresultingin52MtH2palong-termdemandinanetzeroby2050scenario(‘Bull’scenario),yetwithgrowthoccurringalmostentirelypost2035underallthreeofourscenariosPotentialH2demandfortheshippingindustry(MtH2pa)02468101220192020202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Shippingenergyconsumptionbyfuel(EJ)OilBioenergyLNGAmmonia0102030405060202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Shippingpotentialhydrogendemand(MtH2)Globalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenarioSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202293GoldmanSachsCarbonomicsAviation:AviationsitsatthetopofourCarbonomicscostcurve,andisoneofthetoughestsectorstode-carbonize.Sustainableaviationfuels(SAFs),syntheticfuelsandimprovedaircraftefficiencyare,inourview,allkeypartsofthesolution.Inthenearterm,weviewthenewgenerationofaircraftandfleetrenewalaslikelytoachievethelowest-costaviationemissionsabatement.Thepotentialroleofhydrogeninthisindustrylongertermcouldcomeintwoforms:(a)itspureformwiththeuseoffuelcells(shortandpotentialmedium-haulflights)ordirectcombustion(longerflights)and(b)intheformofsyntheticfuels,whoseproductioninvolvescombiningcleanhydrogenwithcapturedCO2.Technically,hydrogencombustion(insteadoffuelcells)couldbeusedforlong-haulflightswithnotablylowerfuelrequirements(giventhemuchhigherenergycontentofhydrogencomparedtoconventionaljetfuel),yetNOxemissionswouldneedtobeaddressed.Moreover,usinghydrogeninitspureformwouldrequirenovelaircraftenginedesignsforbothdirectcombustionandfuelcelloptions.Therefore,weuseliquidfuelssuchasbiofuelsandsyntheticfuelsprimarilyinourmodelstonetzerowhichdonotrequiresubstantialinnovationbeyondexistingaircraftenginedesigns.Syntheticfuelsdo,however,relyontheavailabilityandcostcompetitivenessofcleanhydrogenandcapturedCO2,implyingitislikelytohavealonger-termhorizongiventheneedfortheemergenceandscale-upofthecleanhydrogenandcarboncaptureindustriesfirst.Assuch,weseeanypenetrationofsyntheticfuelsinaviationreallyacceleratingpost2040underallscenarios.Airbusiscurrentlyexploringvariousaircraftconceptswiththeaimofhavingacommercialaircraftavailableby2035.Exhibit160:Alternativefuelssuchashydrogen,bioenergyandsyntheticfuelsarelikelytobenecessaryinanindustrywheredirectelectrificationisnotconsideredatechnologicaloptionsuchasaviation...Energymixevolutionforthetransportsectorbymode,underourGS1.5netzeroby2050scenario(%)Exhibit161:..withtheopportunityforhydrogen,whilelarge(c.65MTH2by2050inour‘bull’scenario),onlycomingthroughpost2035inthisindustry,underallourscenarios,giventhelackoftechnologicalreadinessAviationpotentialhydrogendemand(MtH2pa)underthethreeGSglobalhydrogenscenarios0%10%20%30%40%50%60%70%80%90%100%20192030204020502019203020402050201920302040205020192030204020502019203020402050Light-dutyvehiclesHeavy-dutyvehiclesRailAviationShippingOilGasBioenergyHydrogenAmmoniaElectricitySyntheticfuels010203040506070202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Aviationpotentialhydrogendemand(MtH2)Globalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenarioSource:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February202294GoldmanSachsCarbonomicsRail:Anopportunitytocontributetothelastpieceofthede-carbonizationpuzzleinafront-runnersectorintheenergytransitionWhiletherailindustryisalreadyafront-runnerintheenergytransition,c.20%ofrailtrafficand40%ofthenetworkisstillunderthedieselregime.Withinthiscontext,webelievethathydrogentrainswillhelptoreducefurthertheemissionsandnoiselevelscausedbytheindustry.FuelCellsandHydrogen(FCH)trainshavebecomeafocusforrailOEMsinrecentyears.WhileFCHtechnologytestsstartedin2005,thefirstcommercialtrainswerepresentedin2016byAlstom,andenteredoperationinGermanyin2018.Whilestillinearlydevelopmentand,accordingtoAlstom,>25%higherintermsofupfrontcosts,itsenvironmental,technicalandeconomicprofilemakeshydrogentrainsattractivetoreplacethediesel-poweredfleet.AccordingtotheFuelCellsandHydrogenJointUndertaking(FCHJU)andtheShift2RailJointUndertaking(S2RJU),thetechnologycouldformupto20%ofnewEuropeantrainsby2030,replacingc.30%ofdieseltrains.4February202295GoldmanSachsCarbonomicsSynthetichydrogen-basedfuelsandfeedstocksSyntheticfuelsareanothermeansofdealingwiththede-carbonizationchallengeforindustriessuchasaviation.Anaccelerationoflarge-scalehydrogenadoptioninlong-haultransportcouldmaterializeonthebackofitsabilitytoformammoniaandotherliquidorganichydrogencarriers(LOHCs),butalsoitsabilitytocombinewithCO2/COtoproducesynthetichydrocarbons/liquidfuelssuchassyntheticmethanol,dieselandjetfuel.Inourview,theformer(abilitytoformammoniaandLOHCs)hasthepotentialtoenhancethepaceofhydrogenadoptionbyaidingstorageandtransportation,whilethelatter(abilitytocombinewithCO2/CO)actsasaCO2utilizationroutewithawiderangeofapplications.Somehydrogen-basedsyntheticfeedbacksandfuelsdevelopedinclude:Syntheticmethane:Thisisthemostcommonlyproducedsynthetichydrogen-basedfuel,andthenproductionpathwayinvolvesamethanationprocess(mostlycatalyticbutbiologicalroutesarealsopossible)thatutilizesthedirectreactionbetweenhydrogenandCO2toproducemethane,withwaterthemainreactionby-product.Syntheticmethanol:Methanolhasc.80%higherenergydensitythanhydrogen,anditsproductionnroutefromsyngas(throughhydrogen)iswelldevelopedcommercially.ThefirstCO2-to-methanolfacility,knownasGeorgeOlahRenewableMethanePlant,islocatedinIcelandandwascommissionedin2012withacapacityof1,000tpaofmethanolbeforeitsexpansionto4,000tpain2015.TheCO2feedstockiscapturedfromanearbypowerplantwhilehydrogenisproducedviaelectrolysisandusedtodirectlyhydronatethecapturedCO2.The‘Vulcanol’productisthensoldforuseasagasolineadditiveandfeedstockforbiodieselproduction.Syntheticdiesel,keroseneandotherfuels:Syntheticdieselorkeroseneistheresultofareactionnoccurringbetweencarbonmonoxide(CO)andhydrogen.CarbonmonoxidecouldbeobtainedfromcapturedCO2,withtheresultingsyngas,CO2andhydrogenconvertedintosyntheticfuelsviatheFischerTropschsynthesisroute.Exhibit162:CleanhydrogencanbeusedinCO2utilizationprocessesfortheproductionofsynthetichydrogen-basedfuelsRenewablepowergenerationHydrogenelectrolysis2H2O↔2H2+O2Methanisation(directreaction)CO2+4H2→2H2O+CH4Oxygen,O2Water,H2OHydrogen,H2CapturedCarbondioxide,CO2EnergyWater,H2OMethane,CH4RenewablepowergenerationHydrogenelectrolysis2H2O↔2H2+O2Productionofhydrogen-basedliquidfuelsOxygen,O2Water,H2OHydrogen,H2CapturedCarbondioxide,CO2viamethanolsynthesisCO+2H2→CH3OHviaFischer-TropschSynthesisCO+H2→HCchainsMethanol,CH3OHGasoline,diesel,kerosene(olefins,alkanes,alkenes)water,H2OSource:TheRoyalSociety,compiledbyGoldmanSachsGlobalInvestmentResearch4February202296GoldmanSachsCarbonomicsBuildingsheating:Limitedscopeforlargemarketsharegiventhelowerefficiencyandavailabilityofmoreefficient,costcompetitivealternativesBuildings’waterandspaceheatingaccountsforalmost55%ofglobalbuildings’energyuseandisresponsibleforalmostallofbuildings’directCO2emissions,which,in2019,accountedforc.9%ofglobalCO2emissions(EUEDGAR).Whilewecontinuetoseeglobalactivitycontinuinginthesector,withtheglobalfloorareaincreasingfrom240bnmeterssquaredtoc.410bnmeterssquaredby2050,thetransformationalenergyshiftawayfromfossilfuelstocleaneralternatives,coupledwithanaccelerationofenergyefficiencyimprovementscouldbringthecarbonintensityofbuildingstoclosetozero.Whilethekeytechnologiesthatgovernthede-carbonizationofbuildingsinthenearandmediumtermarereadilyavailable,includingelectricheatpumps(airandgroundsource)andresidentialsolar,geothermal,andbioenergy,thelonglifespanofbuildingsmakestheneedforcomparativelycostlyretrofitsessentialtoachievenetzeroemissionsby2050,particularlyforresidentialbuildingswheretheswitchislargelyreliantonconsumerpreference.Assuch,anyaspirationforgrosszeroemissionsinbuildingshastocomewithanacceleratedpaceofretrofits.Whilehydrogen’sprospectsforbuildingsspecificallyremainslimited,reflectingthehighefficiencyofelectricity-basedde-carbonizationoptionsincludingheatpumpsandthecomparativelylowefficiencyofhydrogen,particularlywhentransportationandconversionisconsidered,itcouldaidthepathtonetzeroparticularlywheregasinfrastructurealreadyexistsandwheretheexistingbuildingstockisverydifficulttoretrofitforelectricity-basedsolutions.Co-existenceofhydrogenandotherheatproductiontechnologiescanalsoaddflexibilitytothegridtofacilitatedemand-drivenresponses,particularlyincoldclimates.TheIEAidentifiesfourmaingroupsoftechnologieswhichcouldoperateonhydrogenforbuildings:hydrogenboilers,fuelcellsthatco-generateheatandelectricity,hybridheatpumps,andgas-drivenheatpumps.Exhibit163:Theprospectsforhydrogentobeusedindirectbuildings’heatingarefairlylimitedinplaceswhereheatpumptechnologycanbesuccessfullydeployed,giventherelativelylowefficiency(highprimaryenergyfactor)..PrimaryenergyfactorofheatproductionacrosstechnologiesandfuelsExhibit164:...andthereforeweassumealowshareinbuildings’energyBuildingstotalfinalenergyconsumptionfuelmixevolution(%)0123456DistrictResistanceHeatpumpBiolerHeatpumpStoveBiolerHybridheatpumpFuelcellHeatElectricityNaturalgasBiomassHydrogenPrimaryenergyfactorofheatproduction0%10%20%30%40%50%60%70%80%90%100%20192020202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050BuildingsfinalenergyconsumptionRenewables(geothermal,solar,bioenergy)HydrogenElectricityOther(incl.dist.heat)OilNaturalgasCoalSource:IEASource:GoldmanSachsGlobalInvestmentResearch4February202297GoldmanSachsCarbonomicsGridblending:Amajorpotentialaddressablemarketforhydrogenthatisimportantforvariousexistingnaturalgasend-usersandbenefitingfromexistinginfrastructureWebelievethat,inthenearterm,gridblendingislikelytobethekeydriverofhydrogendemandforheatingandoffersauniqueopportunitytoutilizeexistingassetsthatfacetheriskofbecomingstrandedinanetzeroworld.Furthermore,gridblendingcanaidthede-carbonizationofabroaderrangeofnaturalgascustomerscurrently,includingindustry,buildingsandpowergeneration,leadingtoamuchlargeraddressablemarketthanbuildings’heatingalonewouldsuggest.Blendingcleanhydrogeninexistingnaturalgasinfrastructurewouldavoidsignificantcapitalcostsassociatedwithdevelopingnewtransmissionanddistributioninfrastructure,asexplainedearlierinthereport.Overall,onourestimates,hydrogenblendinginexistinginfrastructurewouldlikelyincreasecostsbyaroundUS$0.2-0.5$/kgH2ontopofthecostsofhydrogenproductionduetotheneedforinjectionstationsonthetransmissionanddistributiongridsaswellashigheroperationalcosts.Evensmallblendingvolumeratesofhydrogencanhaveamajorimpactonitsaddressablemarket;forinstance,weestimatethata15%globalhydrogenblendratecanleadtoc.60Mtpaofadditionalhydrogendemand.However,anumberofchallengeshavetobeaddressed:(a)thelowenergydensityperunitvolumeofhydrogencomparedtogas(aroundathird)whichwouldimplygreaterrequiredgasvolumes,(b)thesmallersizeofhydrogenmolecules,whichwouldimplyhigherriskofleakagethroughsteelpipelinenetworks,suggestingtheneedforpolymer-basedretrofittingatblendingratesthatexceed20%-30%,(c)theincreasedriskofflammabilityandtheodorless,colorlessnatureofthegasleadingtorisingneedforflamedetectorsandmonitoring,(c)variabilityofthevolumeofhydrogenblendedintothestream,whichcouldhaveanadverseimpactontheoperationoftheequipment,whichoftenisdesignedwithanarrowrangeofadaptabilitytodifferentgases.Europeisoneoftheleadingcountrieswhenitcomestosettingtheregulatoryframeworkforhydrogenblending.Germany,forinstance,specifiesamaximumof10%providedtherearenoCNGfillingstationsconnectedtothenetwork.TherearecurrentlymanyprojectsinEuropeexaminingthepotentialforhydrogenblendinginexistinggasnetworksincludingGRHYDinFrance,andHyDeploy,H21andHy4HeatintheUK.The‘EuropeanHydrogenBackbone’dedicatedhydrogeninfrastructurestudypublishedin2020,authoredbyelevengasinfrastructureplayers,describedthevisionofhowdedicatedhydrogeninfrastructurecanbecreatedinasignificantportionofEurope.Thisdescribesa6,800kmpipelinenetworkby2030anditsfurtherscale-upto23,000kmby2040,requiringanestimatedEUR27-64bnbasedontheassumptionof75%naturalgaspipelinesconvertedand25%newpipelinestretches.Assumingthebackboneisequippedwitharobustcompressionsystem,theproposednetworkshouldbeabletomeet1130TWhannualhydrogendemandinEuropeby2040.Morerecently,inDecember2021,theEuropeanCommissionproposedanewEUframeworktode-carbonizegasmarkets,promotehydrogenandreducemethaneemissions.Themarketruleswillbeappliedintwophases,beforeandafter2030,andnotablycoveraccesstohydrogeninfrastructure,separationofhydrogenproductionandtransportactivities,andtariffsetting.AnewgovernancestructureintheformoftheEuropeanNetworkofNetworkOperatorsforHydrogen(ENNOH)willbecreatedto4February202298GoldmanSachsCarbonomicspromotededicatedhydrogeninfrastructure,cross-bordercoordinationandinterconnectingnetworkconstruction,andelaborateonspecifictechnicalrules.Thenewruleswillmakeiteasierforrenewableandlow-carbongasestoaccesstheexistinggasgrid,byremovingtariffsforcross-borderinterconnectionsandloweringtariffsatinjectionpoints.Theyalsocreateacertificationsystemforlow-carbongases,tocompletetheworkstartedintheRenewableEnergyDirectivewiththecertificationofrenewablegases.Exhibit165:Thepotentialhydrogendemandweestimatefromgridblendingcouldreachcloseto60MtH2painour‘bull’scenario,consistentwithglobalnetzeroby2050..Gridblendingpotentialhydrogendemand(MtH2pa)Exhibit166:..yetwouldrequirefurthertestingandanupgradeofglobalhydrogenblendinglimitsHydrogenblendinglimitsinnaturalgasgridbyvolume(%)0102030405060202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Gridblendingpotentialhydrogendemand(MtH2)Globalnetzeroby2050-1.5ºBullscenarioGlobalnetzeroby2060-<2.0ºBasescenarioGlobalnetzeroby2070-2.0ºBearscenario0%5%10%15%20%25%30%CaliforniaBelgiumJapanLatviaFinlandNetherlandsSwitzerlandLithuaniaUSAAustriaSpainAustraliaFranceUKGermanyHydrogenblendinglimitsinnaturalgasgridbyvolume(%)H2blendlimitAllowableundercertaincircumstancesSource:GoldmanSachsGlobalInvestmentResearchSource:S&PGlobalPlatts4February202299GoldmanSachsCarbonomicsPowergeneration:Hydrogennecessaryasasourceofflexibilityinpowergenerationandforlong-termseasonalenergystorageHydrogencurrentlyhasaverynicheandimmaterialroleinpowergeneration.However,aspowergenerationundergoesacompletetransformationonthepathtonetzero,thismaychangeandhydrogencouldemergeasakeyinterconnectingpillarinthisindustry.Powergenerationisthemostvitalcomponentforanynetzeroscenario,withthesectorcontributingtoc.32%ofglobalanthropogenicCO2emissions(incl.AFOLU)(EUEDGAR),makingitthemostcriticalareaoffocustotacklethenetzerochallenge.Theroleofpowergenerationis,inourview,onlylikelytoincreaseinthecomingdecades,asthepenetrationandpaceofelectrificationrapidlyincreasesacrosssectors(includingroadtransport,buildingheating,industrialmanufacturingprocessesandlow-temperatureindustrialheat)astheyprogressivelyfollowtheirownde-carbonizationpath.Overall,weexpecttotaldemandforpowergenerationinaglobalnetzeroscenarioby2050toincreasethree-fold(vs.thatin2019)andsurpass70,000TWhasthede-carbonizationprocessunfolds.BasedonourCarbonomicscostcurveanalysis,powergenerationcurrentlydominatesthelowendofthecarbonabatementcostspectrum,withrenewablepowertechnologiesalreadydevelopedatscaleandcostshavingfallenrapidlyoverthepastdecade,makingthemcompetitivewithfossilfuelpowergenerationtechnologiesinmanyregionsglobally.However,renewablepowergenerationsuffersfromtwokeyproblemsthatneedtobeaddressed:intermittencyandseasonality.Hydrogencanhelpwithbothoftheseproblems.Exhibit167:Basedonourglobalnetzeroby2050path,powergenerationdemandincreasesthree-foldto2050...Globalelectricitygeneration(TWh)Exhibit168:...whiletheglobalpowergenerationmixundergoestransformationalchanges,withthenon-fossilfuelshareinournetzeropathrisingfromc.36%currentlyto>95%by2050..Globalpowergenerationfuelmix(%)010,00020,00030,00040,00050,00060,00070,00080,00020002002200420062008201020122014201620182020202220242026202820302032203420362038204020422044204620482050Powergeneration(TWh)CoalPetroleumLiquidsNaturalGas(andothergas)NG/Coal+CCUSNuclearHydroelectricConventionalSolarPVOnshorewindOffshorewindBiomass&geothermalOther(incl.pumpedhydro,wasteetc)H2CGGTGSprojections0%10%20%30%40%50%60%70%80%20002002200420062008201020122014201620182020202220242026202820302032203420362038204020422044204620482050Powergenerationmix(%)Renewables(excl.Hydro)CoalPetroleumLiquidsNaturalGas(andothergas)HydroelectricConventionalH2CGGTNG+CCUSNuclearBy2030:Non-fossilshare:c.70%By2040:Non-fossilshare:95%By2025:Non-fossilshare:c.50%Source:BPStatisticalReview,GoldmanSachsGlobalInvestmentResearchSource:BPStatisticalReview,GoldmanSachsGlobalInvestmentResearch4February2022100GoldmanSachsCarbonomicsWeidentifyfourkeyrolesofcleanhydrogeninthepowergenerationindustrythatarelikelytoleadtoitsuseasakeypillarofthissector’sde-carbonization:(a)Ammoniaco-firinginexistingcoalpowerplants:Hydrogencanactasadirectde-carbonizationfuelusingco-firingofcleanammoniainexistingcoalpowergenerationplants,thereforereducingthecarbonintensityoftheconventionalcoalpowergenerationplants.Blendingratesofaround20%couldbeachievablewithonlyminoradjustmentsandplantmodifications.Thisisespeciallyimportantfortheneartermforcountrieslargelystillrelyingoncoalfortheirpowergenerationandthosethatcurrentlyhaveaveryyoungcoalplantfleet,whichisthecaseforChinaandIndia.Withoutco-firingofammoniaorcarboncapturetechnologies,theimpliedrequiredretirementoftheseassetsforaglobalnetzeroscenariocouldresultinamajorstrandedassetsissue,withyoungcoalpowerplantsofteninneedofretirementtwodecadesbeforetheiraverageusefullife(showninExhibit169).Thekeyconstrainttoammoniaco-firingremainsthelackofeconomiccompetitiveness,asshowninExhibit170,intheabsenceofcarbonpricing.Weestimatethatforammoniaco-firingtobeatcostparitywithaconventionalcoalpowerplantinAsia,anammoniapriceofUS$300/tnNH3andacarbonpriceclosetoUS$100/tnCO2wouldberequired.(b)Flexiblepowergeneration:Hydrogen-firedgasturbinesandcombined-cyclegasturbinescouldbeusedasasourceofflexibilityinelectricitysystemswithincreasingsharesofvariablerenewableenergy(VRE)aidingtheintermittencyproblem.Fuelcellscanalsobeusedwithelectricalefficienciestypicallyexceeding50%-60%(similartothoseofturbines)andthestationaryfuelcellsmarkethasbeensteadilygrowingoverthepastdecade.However,fuelcellstypicallyhaveshortertechnicallifetimesthangasturbinesandsmallerpoweroutputmakingthemmoresuitedtodistributedpower.Inthepowersector,thetimingofvariableelectricitysupplyanddemandisnotwellmatchedrequiringadditionaloperationalflexibility.Variousoptionsexisttoresolvethisintermittencyissue,suchasgridinfrastructureupgradesortechnologiesforshort-orlonger-termbalancingofsupplyanddemand(dynamicpowernetworks),flexibleback-upgeneration,demand-sidemanagement,orenergystoragetechnologies.Exhibit169:Coalpowerplantretirementswillneedtotakeplaceby2035inthe1.5°scenario,20yearsbeforetheendoftheirusefullife...Coal-firedpowerplantsnetretirements(GW)Exhibit170:..makingCCUSandammoniaco-firingimportanttoavoidstrandedassets,albeiteconomiccompetitivenessintheabsenceofacarbonpriceisveryhardtoachieveatcurrentcostsLCOEforcoalpowergenerationvscarbonintensity020040060080010001200140016001800Before20252025-20352035-20452045-2055Beyond2055Coal-firedpowerplantnetretirements(GW)NaturalretirementsprogressionGS<2.0ºGS1.5º-1002003004005006007008009001,000-50100150200250CoalCoal+CCUS30%Ammoniaco-firing($300/tnNH3)30%Ammoniaco-firing($600/tnNH3)60%Ammoniaco-firing($300/tnNH3)60%Ammoniaco-firing($600/tnNH3)Carbonintensity(gCO2eq/kWh)LCOE-Coalpowergeneration(US$/MWh)CapexOtheropexCoalfuelAmmoniafuelShippingCCUS(all-incost)Carbonprice(US$100/tnCO2)Carbonintensity(gCO2e/kWh)Source:GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachsGlobalInvestmentResearch4February2022101GoldmanSachsCarbonomics(c)Buffer,back-upandoff-gridpowersupply:Hydrogenhasvaluableattributesthatcouldmakeitakeysolutionforpowergenerationsystemback-upaselectrolysiscanconvertexcesselectricityintohydrogenduringtimesofoversupply.Theproducedhydrogencanthenbeusedtoprovideback-uppowerduringpowerdeficitsorcanbeusedinothersectorssuchastransport,industryorresidential.Hydrogenoffersacentralizedordecentralizedsourceofprimaryorback-uppower.Powerfromhydrogenhasarelativelyquickresponsetimemakingitusefultodealingwithsuddendropsinrenewableenergysupply.Inaddition,electrolyzersmayprovideancillaryservicestothegrid,suchasfrequencyregulation.Fuelcellsthereforeincombinationwithstorageareconsideredacost-effectivede-carbonizationalternativetodieselgeneration(currentlyoftendeployedforback-uppower).(d)Long-term,large-scaleseasonalenergystorage:Intheformofgaseoushydrogenorammonia,methanol,LOHC,andsyntheticfuels,hydrogencouldalsobecomeasolutionforlong-termenergystoragerequiredtobalanceseasonalvariationofpowergenerationdemand,particularlyimportantastheshareofelectricitythroughheatpumpsforresidentialheatingbecomesamoreprominentfeatureandrisesinshareintotalpowergenerationdemand.Hydrogenrepresentstheoptimaloverallsolutionforlong-term,carbon-freeseasonalstorage,inourview.Whilebatteries,super-capacitors,andcompressedaircanalsosupportbalancing,theylackeitherthepowercapacityorthestoragetimespanneededtoaddressseasonalimbalances,asoutlinedbytheHydrogenCouncilandshowninExhibit172.Whilepumpedhydrooffersanalternativetohydrogenforlarge-scale,long-termenergystorageandthereforehasbeentodatethepreferredpowerstoragesolution,accountingformorethan95%ofglobalpowerstorage,itsremaininguntappedpotentialissubjecttolocalgeographicconditions.Thekeydisadvantageofhydrogen-basedstorageoptionsremainsitslowround-tripefficiencywiththeprocessofelectrolysisandthenconversionofhydrogenbacktoExhibit171:Bothcarboncaptureandhydrogenturbinesandfuelcellscanbeusedforloadbalancing,withhydrogenturbinesandfuelcellstypicallyrequiringahydrogencostbelow$2/kgH2(costparitywithgrey)tobecompetitiveLevelizedcostofelectricity-LCOE(US$/MWh)-50100150200250$3/mcf$6/mcf$9/mcf$3/mcf$6/mcf$9/mcf$3/mcf$6/mcf$9/mcf$1.5/kgH2$2.0/kgH2$3.0/kgH2$1.5/kgH2$2.0/kgH2$3.0/kgH2$1.5/kgH2$2.0/kgH2$3.0/kgH2GasturbineNGCCGTNGCCGTNG+CCUSGasturbineH2CCGTH2FuelcellH2LCOE(US$/MWh)CapexOtheropexFuelcostCCUS(all-incost)Carbonprice($100/tnCO2)Source:Companydata,GoldmanSachsGlobalInvestmentResearch4February2022102GoldmanSachsCarbonomicselectricityconsumingc.60%ofthetotalenergy,asopposedtobatterieswhereonly10%-15%oftheenergyislost.Exhibit172:Hydrogencouldbetheoptimalsolutionforlarge-scale,longdurationenergystorage,particularlyfordischargedurationsbeyond50hoursCapacityvsdischargedurationforenergystorageSource:HydrogenCouncilExhibit173:Webelievelong-termseasonalenergystorageisthesweetspotforhydrogen,whileutilityscalebatteriesmaybemoresuitedforintra-daystoragegiventheirhigherefficiencyEnergystorageEfficiencyComparison1Energygeneration100%Transportation,distribution85-95%ElectricBatterystorage70-90%PowergenerationOverallefficiency70-90%2BatterystorageHydrogenstoragePowergenerationOverallefficiency25-40%Energygeneration100%ElectrolyzerH2production60-70%Compression&distribution45-65%Fuelcellelectricity25-40%Source:Companydata,GoldmanSachsGlobalInvestmentResearch.4February2022103GoldmanSachsCarbonomicsCarbonsequestration:CarboncapturethekeymissingpiecetothecarbonneutralitypuzzleWeenvisagetwocomplementarypathstoenabletheworldtoreachnetzeroemissions:conservationandsequestration.Theformerreferstoalltechnologiesenablingthereductionofgrossgreenhousegasesemittedandthelatterreferstonaturalsinksandcarboncapture,usageandstoragetechnologies(CCUS)thatreducenetemissionsbysubtractingcarbonfromtheatmosphere.Theneedfortechnologicalbreakthroughstounlockthepotentialabatementoftheemissionsthatcannotatpresentbeabatedthroughexistingconservationtechnologiesmakestheroleofsequestrationacriticalpieceofthepuzzleinsolvingtheclimatechangechallengeandleadingtheworldtonetzerocarbonemissionsatthelowestpossiblecost.Carbonsequestrationeffortsarecriticalforaglobalcarbonneutralitypath,astheycan(a)unlockemissionsabatementacrossthehardest-to-abatesectors,wheretechnologicalnetzeroalternativeshavenotyetbeendevelopedorremainhighlyinefficientandexpensive,withheavy,highlyenergy-intenseindustrialprocessesbeingaprominentexample,(b)avoidtheearlyretirementofyoungplantfleetsandassetsthereforeaidingthedebatearoundstrandedassetsintheageofde-carbonization,and(c)reducethetotalloadofgreenhousegasesintheatmospheretotherequiredcarbonbudgetthereforecorrectingforanyovershoot,withdirectaircarboncapturethekeytechnologytoabatealreadyemittedandaccumulatedemissionsdirectlyfromtheatmosphere.Carbonsequestrationeffortscanbebroadlyclassifiedintothreemaincategories:(1)Naturalsinks,encompassingnaturalcarbonreservoirsthatcanremovecarbondioxide.Effortsincludereforestation,afforestationandagro-forestrypractices.(2)Carboncapture,utilizationandstoragetechnologies(CCUS)coveringthewholespectrumofcarboncapturetechnologiesapplicabletotheconcentratedCO2streamcomingoutofindustrialplants,carbonutilizationandstorage.(3)Directaircarboncaptureandstorage(DACCS),thepilotcarboncapturetechnologythatcouldrecoupCO2fromtheair,unlockingalmostinfinitede-carbonizationpotential,irrespectiveoftheCO2source.Inthissectionofthereport,weprimarilyfocusonthetechnologicalaspectofsequestrationthatencompassescarboncapturetechnologies(CCUSandDACCS).4February2022104GoldmanSachsCarbonomicsCarbonCapture:Regainingmomentumaftera‘lostdecade’CCUStechnologiescanbeaneffectiveroutetoglobalde-carbonizationforsomeofthe‘harder-to-abate’emissionsources:theycanbeusedtosignificantlyreduceemissionsfromcoalandgaspowergeneration,aswellasacrossindustrialprocesseswithemissionscharacterizedas‘hardertoabate’suchasiron&steel,cementandchemicals.CCUScanalsofacilitatetheproductionofcleanalternativefuelssuchasbluehydrogen,asmentionedintheprevioussection,aswellasadvancedbiofuels(BECCS).CCUSencompassesarangeoftechnologiesandprocessesthataredesignedtocapturethemajorityofCO2emissionsfromlargeindustrialpointsourcesandsubsequentlyprovidelong-termstoragesolutionsorutilization.WehaveincorporatedcarboncapturetechnologiesinourGSglobalnetzeromodelsandunderallthree,carboncapturegrowstobeamajorindustry.InourGS1.5°pathforcarbonneutralityby2050,CCUScontributesacrosssectorsanannualCO2abatementofc.7.2GtCO2by2050,asshowninExhibit174below.ThesinglelargestcontributortotheCCUSabatementisindustry,withsectorssuchascement,steel,non-ferrousmetals,fugitiveandwasteemissionsallinneedofcarbonsequestrationtechnologiesintheabsenceoftechnologicalbreakthroughs.ThisisfollowedbytheCCUSretrofitsrequiredfortheproductionofcleanhydrogenfromindustrialhydrogenplants(bluehydrogen).Finally,CCUScanberetrofittedtothenewestgasandcoalpowerplantsinpowergeneration,aswellascontributetothefullabatementofemissionsthroughtheuseofbiofuels(weassumetheuseofadvancedbiofuelsinouranalysis,yetweappreciatethepotentialavailabilityconstraintofwasteandotheradvancedbiofuels’sourcesandassuchwefurtherincorporatesomeCCUStocomplementtheuseofbioenergy).DACCS,thepotentiallyinfinitelyscalablede-carbonizationtechnology,complementsprocess-specificCCUSandcontributestoc.1GtCO1annualabatementby2050.Exhibit174:OurGS1.5pathhighlightstheimportanceofCCUS,withtheannualCCUSabatementreachingc.7.2GtCO2by2050withindustrialsourcesthekeycontributorGlobalCO2emissionscapturedbysourceinourGSGL0S(MtCO2)0100020003000400050006000700080002020202520302035204020452050GlobalCO2emissionscapturedbysourceinGS1.5pathtonetzeroby2050(MtCO2)PowergenerationIndustryHydrogenproductionBiofuelsproductionDACCSSource:GoldmanSachsGlobalInvestmentResearch4February2022105GoldmanSachsCarbonomicsDespitetheircriticalroletoanyaspirationalpathaimingtoreachnetzeroby2050,carboncapturetechnologieshavebeentodatelargelyunder-invested.Wenonethelessbelieveinthereturnofinterestinthetechnologyfollowingalostdecadewithmoreprojectsunderdevelopment.Currently,weidentifymorethan25commercialscaleCCSfacilitiesoperatingglobally(mostlyintheUS,Canada,UKandNorway),withatotalcapacityaround37Mtpa,withanother4projectsunderconstructionbringingthetotalcapturecapacitytoc.40Mtpa.2021marksanotheryearofastrongincreaseinthetotalpotentialCCScapacityfromprojectscurrentlyinthepipeline,asshowninExhibit175,withthetotalpotentialcarboncapturecapacityoftheseprojectssumminguptoc.149MtCO2pa,fourtimesthecurrentoperatingcapacityimplyingthepotentialquadruplingofthisindustrybytheendofthisdecade.Notably,weseealargeportionofthecurrentCCSprojectspipelinefocusingonnewprocesses’capturesuchaspowergeneration,industrialprocessesincludingchemicals,cement,oilrefiningandhydrogenproductionasopposedtothetraditionalnaturalgasprocessingindustrialseparation.Overall,weidentifythreekeytransformationaldriversthatarelikelytocontinuetosupporttherenewedmomentumforCCUS:(1)Anyaspiringnetzeroplansmakecarbonsequestrationanecessityandnotanoption:Agrowingappreciationthatcarboncaptureisanecessarypillartoachievingnationalandglobalgoalsforcarbonneutralityandnetzero.(2)Theinvestmentpropositionhasstartedtoimproveonthebackofrenewedpolicysupportmomentum:WeseearisingmomentumofpolicysupportforcarboncaptureprojectswiththeUS(expansionofthe45Qtaxcredit),CanadaandEurope(governmentsupportforclustersdevelopmentandEUR10bnEuropeanInnovationFund)leadingonthatfront.(3)Theriseofthecleanhydrogeneconomy,withCCSprovidingaplatformfor‘blue’hydrogen:Growinginterestinproducinglow-carbonhydrogenhasresultedin>15large-scaleCCSfacilitiestocaptureCO2fromhydrogen-relatedprocessesandanother30smallerprojectsunderway.Exhibit175:Thepipelineoflarge-scaleCCSfacilitiesisregainingmomentumaftera‘lostdecade’...AnnualCO2capture&storagecapacityfromlarge-scaleCCSfacilitiesExhibit176:...asmoreprojectsinthedevelopmentstagestarttofocusonindustrieswithlowerCO2streamconcentrations(industrialprocessessuchascement,chemicals,oilrefining,hydrogenproduction&powergeneration)Large-scaleCCSprojectsbystatusandindustryofcapture(Mtpa,2021)020406080100120140160201020112012201320142015201620172018201920202021CO2annualcaptureandstoragecapacity(Mtpa)OperatingUnderconstructionAdvanceddevelopmentEarlydevelopment010203040506070OperatingUnderconstructionAdvanceddevelopmentEarlydevelopmentLargescaleCCSprojectscapacitybystatusandindustry(Mtpa)NaturalgasprocessingFertilizerproductionHydrogenproductionIronandsteelproductionEthanolproductionMethanolproductionPowergenerationChemicalproductionCementproductionOilrefiningBioenergyVariousUnderevalutationDACCSWasteIncinerationSource:GlobalCCSInstituteStatusReport2021Source:GlobalCCSInstitute,GoldmanSachsGlobalInvestmentResearch4February2022106GoldmanSachsCarbonomicsExhibit177:Summaryofgloballarge-scaleCCSprojectsincludingoperating,underconstructionandunderearlydevelopmentprojectsSource:GlobalCCSInstituteCO2RE,DatacompiledbyGoldmanSachsGlobalInvestmentResearch4February2022107GoldmanSachsCarbonomicsHistoricalunder-investmentinCCUShasheldbacklarge-scaleadoptionandeconomiesofscale.However,thetidemaybeturning,withseveralprojectsmovingforwardCostremainstheprimarybarriertothedeploymentofCCStechnologies.Theincrementalcostsofcaptureandthedevelopmentoftransportandstorageinfrastructurearenotsufficientlyoffsetbygovernmentandmarketincentives,albeiteffortshaveintensifiedinregionssuchasNorway(wherecarbonpricesareatthehigherendoftheglobalcarbonpricespectrum)andtheUS(withtheintroductionofthe45Qscheme).ThecostofindividualCCSprojectscanvarysubstantiallydependingonthesourceofthecarbondioxidetobecaptured,thedistancetothestoragesiteandthecharacteristicsofthestoragesite,althoughthecostofcaptureistypicallythelargestdriverofthetotalexpenseanditshowsaninverserelationtotheconcentrationofCO2inthestreamofcapture.Althoughcarbonsequestrationhasseenarevivalinrecentyears,ithasnotyetreachedlarge-scaleadoptionandeconomiesofscalethattraditionallyleadtoabreakthroughincostcompetitiveness,especiallywhencomparedwithotherCO2-reducingtechnologiessuchasrenewables.Despitethekeyroleofsequestrationinanyscenarioofnetcarbonneutrality,investmentsinCCSplantsoverthepastdecadehavebeen<1%oftheinvestmentsinrenewablepower.Althoughweareseeingaclearpick-upinCCSpilotplantsaftera‘lostdecade’,wedonotyetknowwherecostscouldsettleifCCSattractedsimilareconomiesofscaleassolarandwind.ThevastmajorityofthecostofcarboncaptureandstoragecomesfromtheprocessofsequestrationandisinverselyrelatedtotheCO2concentrationintheairstreamfromwhichCO2issequestered.ThecostcurveofCCSthereforefollowstheavailabilityofCO2streamsfromindustrialprocessesandreachesitshighestcostwithdirectaircarboncaptureandstorage(DACCS),whereeconomicsarehighlyuncertain,withmostestimatesatUS$40-400/tonandonlysmallpilotplantscurrentlyactive.TheimportanceofDACCSliesinitspotentialtobealmostinfinitelyscalableandstandardized,thereforesettingthepriceofcarboninanetzeroemissionscenario.Exhibit178:SolarPVcostperunitofelectricityhasfallen80%+overthelastdecadeascumulativesolarcapacityhasincreasedexponentially...SolarPVcapex(US$/kW)vs.globalcumulativesolarPVcapacity(GW)Exhibit179:...whilethelanguishinginvestmentinCCSsequestrationtechnologieshaspossiblypreventedasimilarcostimprovementAnnualinvestmentinsolarPV(LHS)andlarge-scaleCCS(RHS)010020030040050060070080001,0002,0003,0004,0005,00020102011201220132014201520162017201820192020Solarcapacity(GW)SolarPVcapex(US$/kW)SolarPVCAPEX(US$/kw)CumulativeinstalledsolarPVcapacity(GW)050100150200250051015202530201020112012201320142015201620172018SolarPVannualinvestment(US$bn)CCSanualinvestment(USbn)CCSannualinvestment(US$bn)SolarPVannualinvestment(US$bn)Source:Companydata,GoldmanSachsGlobalInvestmentResearchSource:Companydata,IEA,IRENA,GoldmanSachsGlobalInvestmentResearch4February2022108GoldmanSachsCarbonomicsAglimpseintothecurrentcarboncapturetechnologiesOneofthekeyparametersforCO2capturetechnologiesistheabilitytoincreasetheconcentrationofCO2intheresultingstreamandprovideasufficientlyhighpressuretobetransportedtothestoragesite.Dependingontheplantandprocessapplication,therearefourtechnicalpathwaystocaptureCO2:Post-combustion:ThesesystemsoperatethroughseparatingCO2fromthefluegases(postncombustiongases)producedbythecombustionoftheprimaryfuelinair.TheytypicallyinvolvetheuseofliquidsolventtochemicalbindtoCO2presentinthefluegasstream.ThistechnologicalapproachhasbeendemonstratedinthemajorityofoperatingpowergenerationplantsadoptingCCS,includingmodernpulverizedcoal(PC),naturalgascombinedcycle(NGCC)andcement.Pre-combustion:Thesesystemsprocesstheprimaryfuelwithsteamandair(oroxygen)inareactornproducingamixtureofmainlyCOandH2(‘syngas’).TheresultingCOcanbeusedtoproducefurtherhydrogeninasecondreactorinvolvingsteam(‘shiftreactor’).ThefinalmixtureofhydrogenandCO2isthenseparatedintoaCO2gasstreamandastreamofhydrogen.Thisprocessrouteinvolvesmorerobustandcostlyinitialconversionstepsthanpost-combustionsystems,yetthehighconcentrationofCO2producedbythefinalshiftreactorandthehighpressuresareoftenbeneficial.Pre-combustionhasalsobeendemonstratedinplants,suchasintegratedgasificationcombinedcycle(IGCC).Oxyfuelcombustion:ThesesystemsrelyonoxygeninsteadofairforcombustionoftheprimaryfuelnresultinginastreamprimarilycomposedofwatervapourandCO2.TheresultingstreamhasahighCO2concentrationmakingtheprocessthemostsuccessfulinachievingaconcentratedCO2stream,yetfurthertreatmentofthefluegasmaybeneededtoremoveairpollutantsandnon-condensedgases.Oxyfuelcombustioncouldpotentiallybeusedforindustrialplantssuchascement,yetremainsinearlierstagesofdevelopment.Industrialseparation:Thisapproachinvolvesthelowest-costtechnologyandisapplicableinindustrialnplantswhereahighlyconcentratedCO2streamisgeneratedaspartoftheexistingplantseparationprocess(intrinsicprocess).Thisistypicallythecasefornaturalgasprocessingandammoniaplantswherethemajorityofoperatinglarge-scaleCCSplantshavebeeninvolvedtodate.Exhibit180:ThereexistdifferentCO2captureprocessesforuseinpowergenerationandindustrialplantsCCSSource:ProvidedbyGlobalCCSInstitute,IPCC,GoldmanSachsGlobalInvestmentResearch4February2022109GoldmanSachsCarbonomicsThecostofcaptureishighlyprocess-specificwhilstthecostoftransportandstorageshowsawideregionalvariabilityCCUSencompassesarangeoftechnologiesandprocessesthataredesignedtocapturethemajorityofCO2emissionsfromlargeindustrialpointsourcesandthentoprovidelong-termstoragesolutionorutilization.TheCCUSchainconstitutesprocessesthatcanbebroadlycategorizedintothreemajorparts:(1)theseparationandcaptureofCO2fromgaseousemissions;(2)thesubsequenttransportofthiscapturedCO2,typicallythroughpipelines,tosuitablegeologicalformations;and(3)thestorageoftheCO2,primarilyindeepgeologicalformationssuchasformeroilandgasfields,salineformationsordepletingoilfieldsortheutilizationofcapturedCO2foralternativeusesandapplications(forinstance,wehaveexamineditspotentialforusetoproducesynthetic-hydrogenbasedfuelsintheprevioussection).ThecostofCCScanthereforebebrokendownintothreekeycomponents:(a)thecostofcapturefromtheindustrialpointsource,(b)thecostoftransport,eitherthroughonshoreoroffshorepipelinesorviashipping,and(c)thecostofstorage.ThecostofcapturingCO2isthekeycontributortothetotalcostandcanvarysignificantlybetweendifferentprocesses,mainlyaccordingtotheconcentrationofCO2inthegasstreamfromwhichitisbeingcaptured,theplant’senergyandsteamsupply,andintegrationwiththeoriginalfacility.Forsomeprocesses,suchasethanolproductionornaturalgasprocessingorafteroxy-fuelcombustioninapplicationssuchaspowergeneration,CO2canbealreadyhighlyconcentratedleadingtocostsbelowUS$50/tnCO2(suchasinnaturalgasprocessing,ethanol,ammonia).FormoredilutedCO2streams,includingthefluegasfrompowerplants(wheretheCO2concentrationistypicallybelow20%)orablastfurnaceinasteelplant(20-30%),thecostofCO2captureismuchhigher.Exhibit181:ThelevelizedcostofcarboncapturedependsontheconcentrationofCO2inthecapturestream.Lowerconcentrationtypicallyrequiresmoreenergyandcostincapturing.LevelizedcostofCO2capturebyindustry0100200300400500600DACCSBECCSCementNGCCIGCCCoalPCIron&SteelHydrogen(NGSMR)EthanolAmmoniaNaturalgasprocessingLevelisedcostofCO2capturebyindustry(US$/tnCO2)Source:Companydata,GlobalCCSInstitute,GoldmanSachsGlobalInvestmentResearch4February2022110GoldmanSachsCarbonomicsPostthecaptureoftheCO2,compressionandtransportarethetwostepsthattypicallyfollow.TheavailabilityofCO2transportinfrastructureisthereforeanessentialdeterminantforthedeploymentofCCUS.Thecurrentlylarge-scaleavailabletechnologiesforthetransportofCO2includepipelines(bothonshoreandoffshore)andshipping.Transportviapipelinesistheoptionthathascurrentlybeendevelopedatlarge,commercialscale,whilstCO2shippingisstillatearlystagesofdevelopmentyetcouldutilisethetechnologicalknowledgeofshippingofliquefiedpetroleumgas(LPG)andliquefiednaturalgas(LNG).TherealreadyexistsanextensivepipelinenetworkforCO2transportationintheUnitedStates,currentlyusedforenhancedoilrecovery(EOR)inonshoredepletedshaleoilandgasfields,whilstthelaunchoftheAlbertaCarbonTruckLine(ACTL)opensupfurtherthepossibilityfortheformationofanintegratedCO2pipelinetransportsystem.Trucksandrailcouldalsobeusedforshorterdistancesyettendtobemoreeconomicallyunattractiveoptions.Forshorterdistances,pipelinesappeartobethemosteconomicallyattractiveoption,yetthisisverymuchdependentontheregionandtheinfrastructureconstraints.WhilethepropertiesofCO2leadtodifferentdesignspecificationscomparedwithnaturalgas,CO2transportbypipelinebearsmanysimilaritiestohigh-pressuretransportofnaturalgas.Repurposingexistingnaturalgasoroilpipelines,wherefeasible,wouldnormallybemuchcheaperthanbuildinganewline.ShippingCO2byseamaybeviableforregionalCCUSclusters.Insomeinstances,shippingcancompetewithpipelinesoncost,especiallyforlong-distancetransport,whichmightbeneededforcountrieswithlimiteddomesticstorageresources.Theshareofcapitalintotalcostsishigherforpipelinesthanforships,soshippingcanbethecheapestoptionforlong-distancetransportofsmallvolumesofCO2.Finally,theCO2willeitherbeutilized(wediscussthepotentialofCO2utilisationinthesectionthatfollows)orpermanentlystored.StoringCO2involvestheinjectionofcapturedCO2intoadeepundergroundgeologicalreservoirofporousrockoverlaidbyanimpermeablelayerofrocks,whosepurposeistosealthereservoirandpreventtheupwardmigrationofCO2.ThereareseveraltypesofreservoirsuitableforCO2storage,withdeepsalineformationsanddepletedoilandgasreservoirshavingthelargestExhibit182:PipelinetransportappearstobethemosteconomicallyattractiveoptionforlargeCO2transportcapacity...TransportcostofCO2(US$/tnCO2)Exhibit183:..andforsmallerdistances,asshippingbecomesmoreeconomicallyattractivefordistances>1000kmTransportcostofCO2(US$/tnCO2)01020304050607080900.5125102030Transportcost(US$/tnCO2)Transportcapacity(MtCO2pa)OffshorepipelineOnshorepipelineShipping0510152025303540455010030050070090011001300Transportcost(US$/tnCO2)Transportdistance(km)OffshorepipelineOnshorepipelineShippingSource:Companydata,IPCC,GoldmanSachsGlobalInvestmentResearchSource:Companydata,IPCC,GoldmanSachsGlobalInvestmentResearch4February2022111GoldmanSachsCarbonomicscapacity.Theavailabilityofstorageisthekeydeterminantfactorinfluencingtheassociatedstoragecostandthisvariesconsiderablyacrossregionsglobally,withNorthAmerica,RussiaandAustraliaappearingtoholdthelargestcapacities.DatabytheGlobalCCSInstitutesuggeststhatthereissufficientstoragepotentialforwhatisrequiredtobealignedwiththemostambitiousclimatescenarios.Exhibit184:BasedourGS1.5pathtonetzeroby2050,c.100GtCO2willbecapturedintotalby2050(cumulative)acrosssectors...CumulativeCO2abatedthroughCCUS(MtCO2)Exhibit185:...withtheglobalCO2storageresourcepotentialinmajoroil&gasfieldsalonemorethansufficienttocompensateforthis,accordingtotheGlobalCCSInstituteCO2storageresourceinmajors’oil&gasfields(MtCO2)020,00040,00060,00080,000100,000120,000202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050CumulativeCO2abatedthroughCCUS(MtCO2)PowergenerationIndustryHydrogenproductionBiofuelsproductionDACCS205,00010,0004,0005,0005,0008,00016,6002,80016,0001101001,00010,000100,0001,000,000UnitedStatesRussiaBrazilUAESaudiArabiaChinaAustraliaUKNorwayCO2storageresourceinmajoroil&gasfields(MtCO2)Source:GoldmanSachsGlobalInvestmentResearch4February2022112GoldmanSachsCarbonomicsCapturedCO2Utilization:ApotentiallyvaluablecommodityinsearchofnewmarketsGlobally,>200MtpaofCO2isusedeveryyear,withthemajorityofdemandcomingfromthefertilizerindustry,theoil&gasindustryforenhancedoilrecovery(EOR),andfood&beverages.TherisingfocusonCO2emissionsreductionandcarboncapturetechnologieshassparkedfurtherinterestinCO2utilizationacrossanumberofapplications,involvingbothdirectuse(CO2notchemicallyaltered)andCO2transformationorconversion.CO2has,asamolecule,someattractivequalitiesforutilizationpurposes,includingitsstability,verylowenergycontentandreactivity.ThemostnotableexamplesofthoseincludetheuseofcapturedCO2withhydrogentoproducesyntheticfuelsandchemicals,theproductionofbuildingmaterialssuchasconcrete(replacingwaterduringconcreteproduction,knownasCO2curing,aswellasafeedstocktoproduceaggregatesduringthegrindingphase)andcropyieldboostingforbiologicalprocesses.CO2utilizationcanformanimportantcomplementtocarboncapturetechnologies,providedthefinalproductorservicethatconsumedtheCO2hasalowerlife-cycleemissionintensitywhencomparedwiththeproduct/processitdisplaces.ForCO2utilizationtoactasanefficientpathwayforemissionsreduction,therearethereforeafewkeyparametersthatneedtobeassessed,including:thesourceofCO2,theenergyintensityandthesourceusedintheprocess(netzeroenergyisvitalinmostcaseswhereelectricityandheatrequirementsarelarge)andthecarbon’sretentiontimeintheproduct(canvaryfromoneyearforsyntheticfuelstohundredsofyearsinbuildingmaterials).Exhibit186:ThereexistsaverywiderangeofpotentialusesandapplicationsforcapturedCO2globally,involvingbothdirectuseandconversionFuels•Syntheticfuelssuch(diesel,gasoline,jet)•SyntheticfeedstockssuchasmethaneChemicals•Chemicalintermediates(methane,methanol&otherolefins)•PolymersBuildingmaterials•Aggregates(fillingmaterial)•Cement&concrete(suchasCO2curing)Yieldboosting•Greenhouse,algae•Urea/fertilizerproductionSolvent•Enhancedoilrecovery(EOR)inoil&gasfields•Decaffeination•DrycleaningHeattransferfluid•Refrigeration•SupercriticalpowersystemsOther•Foodandbeverages•Welding,metalfabrication•MedicalusesCCSinPowergenerationConversionDirectuseBECCSCCSinindustryDACCSUndergrounddepositsSource:IEA,GoldmanSachsGlobalInvestmentResearch4February2022113GoldmanSachsCarbonomicsThemostscalabletechnology:DirectAirCarbonCaptureandStorage(DACCS)Directaircapture(DAC)isadifferentformofsequestration,asitdoesnotapplytoaspecificprocess(liketraditionalCCUS),buttakesCO2fromtheairinanylocationandscale.NascentDACtechnologiesarecapableofachievingphysicaland/orchemicalseparationandconcentrationofCO2fromatmosphericair,unlikeCCS,whichcapturescarbonemittedfrom‘pointsource’industrialprocessingstreams(fluegas).CarboncapturedthroughDACcanthenberepurposedforotheruses,forexampletomakecarbon-neutralhydrocarbonfuels.ItisearlydaysforDACCS,however,asthetechnologyisstillbeingdevelopedandexistingimplementationprojectsaresmall-scaleandveryhighcost.Nonetheless,weidentifythistechnologyasapotentialwildcardinthechallengeofclimatechangeasitcouldintheoryunlockalmostinfinitelyscalablede-carbonizationpotential.AsummaryofthemostprominentDACCSdesignstodateandtheassociateddetailsisdescribedinthesummaryboxthatfollows.Exhibit187:DACCS:AroadmapofchallengeswithyetuniqueopportunitiesaheadStrengthsChallengesOpportunities1)Verylargecumulativepotentialinrelationtoothercarbonremovalpathwaysthatcouldbeinfinitelyscalable1)Newconceptinneedoffurthertechnologicalinnovationrequiredtobringenergyrequirementsandcostsdowntoalevelthatiscommerciallycompetitive.1)PrimaryenergyconsumptioninDACCSisattributedtotheheatrequiredforsorbent/solventregeneration.IdentifyingsorbentsthatoptimizethebindingtoCO2suchthatitisstrongenoughtoenableefficientcapturebutweakenoughtoreduceheatrequirementduringregenerationiskey.2)DACCScanbesitedinaverywiderangeoflocationsincludingareasnearhighenergysourcesandgeologicalstoragepotentialsincethereisnoneedtobeclosetosourcesofemissions2)TheverysmallconcentrationofCO2inair(c0.04%)comparedtoindustrialstreamsmakestheeconomicsofthecaptureprocessunattractiveandcallsforfurtherinnovation.2)ReactionkineticsareimportantastheyimpacttherateatwhichCO2canberemovedfromair.Iftherateislowamuchlargerareaforair-sorbent/solventmaterialcontactwillberequiredwhichtranslatesintoalargeaircontactorareaandthushighercapitalcosts.Optimizationofaircontactordesignthroughgeomteryandpumpingstrategyisanotherkeytechnologicalaspect.3)TherearelimitedlandandwaterrequirementsforDACrelativetootherpathwayssuchasnaturalsinksorBECCS.3)Giventhehighenergyintensityofcarboncapturetechnologies,thereisanevidentneedforzerocarbonelectricityforthemostefficient,fromaclimatechangestandpoint,operation.3)CO2offtake,transportandutilizationisakeycomponentforanefficientsystemoperation.FindingnewopportunitiesforCO2utilizationisthereforevital.Examplesincludesyntheticfuelsandpetrochemicals.4)TechnologicaladvantagesoverconventionalCCSincludetheabsenceofhighlevelsofcontaminantspresentinplants'fluegasstreams,andnoneedforadesigntargetingthecompleteCO2capturewithasinglestreampasswhichisusuallythecaseforCCSappliedtoindustrialfluegasstreams.DirectAirCarbonCapture(DACCS)Source:ICEFRoadmap,GoldmanSachsGlobalInvestmentResearch4February2022114GoldmanSachsCarbonomicsRelatedResearchExploreourdedicatedCarbonomicspageCarbonomics:10keythemesfromtheCarbonomicsconference&linktoreplays17Nov2021WehostedoursecondCarbonomicsconferencelastNovember.Speakersincludingtheco-hostsofCOP26(UKPrimeMinisterJohnsonandMinisterCingolanifromItaly)and40CEOsofleadingcorporatesdiscussedprofitableinvestmentstode-carbonisepower,mobility,buildings,agricultureandindustryinaninteractivedayofvirtualfiresidechats.Visittheconferencepageforreplays>Carbonomics:ThedualactionofCapitalMarketstransformstheNetZerocostcurve10Nov2021Weexaminehowcapitalmarkets'deepengagementinsustainabilityisdrivingde-carbonizationthroughadivergenceinthecostofcapitalofhighcarbonvs.lowcarboninvestments.ThisishavingadualimpactontheCarbonomicscostcurve,loweringthecostofcapitalforlowcarbondevelopmentswithgoodregulatoryvisibility(drivingc.1/3ofrenewablepowercostdeflationoverthepastdecade),whileincreasingthecostofcapitalforhighcarbonsectors.Carbonomics:TakingtheTemperatureofEuropeanCorporates:AnImpliedTemperatureRise(ITR)toolkit27Oct2021WeleverageourCarbonomicsNetZeroPathstogaugetheimpliedtemperaturerise(ITR)ofcorporatede-carbonizationstrategiesthroughthelensesof>110corporatesinthe15mostcarbonintensivesectorsoftheEuropeanmarket.IncollaborationwithGSSUSTAIN,wetestdifferentITRtoolsinordertodetermineamethodologythattakesintoaccounteachcorporate’sgrowthoutlook,technologicalreadinessandpositioningonthede-carbonizationcostcurve.Carbonomics:FivethemesofprogressforCOP2624Sep2021COP26,heldintheUKinlate2021,presentedahistoricopportunitytoacceleratethede-carbonizationpledgeslaidoutbyCOP21(theParisAgreement)in2015.Inthisreportweanalyzefivekeythemesofde-carbonizationwebelievecandriveprogress:1)Carbonpricing;2)Consumerchoice;3)Capitalmarketspressure;4)NetZero;and5)Technologicalinnovation.Carbonomics:IntroducingtheGSnetzerocarbonmodelsandsectorframeworks23Jun2021Wepresentourmodelingofthepathstonetzerocarbon,withtwoglobalmodelsofde-carbonizationbysectorandtechnology,leveragingourCarbonomicscostcurve.WepresentascenarioconsistentwiththeParisAgreement’sgoaltokeepglobalwarmingwellbelow2°C(GS<2.0°),andamoreaspirationalpath,aimingforglobalnetzeroby2050,consistentwithlimitingglobalwarmingto1.5°C(GS1.5°).Carbonomics:ChinaNetZero:Thecleantechrevolution20Jan2021China’spledgetoachievenetzerocarbonby2060representstwo-thirdsofthec.48%ofglobalemissionsfromcountriesthathavepledgednetzero,andcouldtransformChina'seconomy,startingwiththe14thFive-YearPlan.Wemodelthecountry'spotentialpathtonetzerobysectorandtechnology,layingoutUS$16tnofcleantechinfrastructureinvestmentsby2060thatcouldcreate40mnnetnewjobsanddriveeconomicgrowth.Carbonomics:Innovation,DeflationandAffordableDe-carbonization13Oct2020Netzeroisbecomingmoreaffordableastechnologicalandfinancialinnovation,supportedbypolicy,areflatteningthede-carbonizationcostcurve.Theresult:abroaderconnectedecosystemforde-carbonizationthatincludesrenewables,cleanhydrogen(bothblueandgreen),batteriesandcarboncapture.Weupdateour2019Carbonomicscostcurvetoreflectinnovationacrossc.100differenttechnologiestode-carbonizepower,mobility,buildings,agricultureandindustry.Carbonomics:TheRiseofCleanHydrogen8Jul2020Cleanhydrogenisgainingstrongpoliticalandbusinessmomentum,emergingasamajorcomponentingovernments'netzeroplanssuchastheEuropeanGreenDeal.Thisiswhywebelievethatthehydrogenvaluechaindeservesseriousfocusafterthreefalsestartsinthepast50years.Inthisreportweanalyzethecleanhydrogencompanyecosystem,thecostcompetitivenessofgreenandbluehydrogeninkeyapplicationsanditskeyroleinCarbonomics:thegreenengineofeconomicrecovery.Appendix:NationalhydrogenstrategiesandroadmapsoverviewExhibit214:SummaryofkeyhydrogentargetsacrosshydrogenstrategiesRegion/countryHydrogenStrategyQuantitativedeploymenttargetsProductionroutescoveredAsia&Asia-PacificJapanStrategicRoadmapforHydrogenandFuelCells(2019)GreenGrowthStrategy(2020,2021)Supply:420ktH2by2030Demand:3MtH2paby2030,20MtH2by2050Transport:200,000FCEVs(2025)800,000FCEVs(2030)1,200FCbuses(2030)10,000FCforklifts(2030)320HRSs(2025)900HRSs(2030)3MtNH3pademandGreenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)KoreaHydrogenEconomyRoadmap(2019)Demand:470ktH2(2022),1.94MtH2pa(2030),5.26MtH2pa(2040)8GWFCstationary(2040)50MW,2.1GWFCmicro-generation(2022,2040)1.5GW,15GWFCforpowergen(2022,2040)Transport:1,200HRSs(2040),310HRSs(2022)2.9millionFCcarsdomestic,3.3millionFCcarsexported(2040),100,000unitsby2025,81,000unitsby202280,000FCtaxis(2040)40,000FCbuses(2040)30,000FCtrucks(2040)Greenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)By-productAustraliaNationalHydrogenStrategy(2019)NewSotuhWalesaimsfor700MWelectrolysiscapacityby2030Transport:10,000FCvehicles,100HRSsGreenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)IndiaNationalHydrogenMission(2021)TheNHM,accordingtoadraftpaperpreparedbytheMinistryofNewandRenewableEnergy(MNRE),hasidentifiedpilotprojects,infrastructureandsupplychain,researchanddevelopment,regulationsandpublicoutreachasbroadactivitiesforinvestmentwithaproposedfinancialoutlayofRs800croresforthenextthreeyears.N/AMENA(MiddleEast&NorthAfrica)OmanOmanHydrogenStrategy(2021-22)1GWby202510GWby203030GWby2040CapacitytargetsforgreenenergyproductionGreenhydrogen(electrolysis)MoroccoGreenHyrogenRoadmap(2021)ScenariosbasedoncapacityrequiredtomeetH2demand:Basecase(GW):2.8in2030,13.9in2040,31.4in2050Optimistic(GW):5.2in2030,23in2040,52.8in2050Greenhydrogen(electrolysis)EuropeEuropeanUnionEUHydrogenStrategy(2020)6GWby2024(upto1MtgreenH2)40GWby2030(upto10MtgreenH2)Greenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)transitionalroleFranceHydrogenDeploymentPlan(2018)NationalStrategyforDecarbonisedHydrogenDevelopment(2020)10%cleanhydrogenby2023and20-40%by20306.5GWby2030Transport:100HRSsby2023400-1,000HRSsby20285,000FCEVsby202320,000-50,000FCEVsby2028200FCheavyvehiclesby2023800-2,000FCheavyvehiclesby2028Greenhydrogen(electrolysis)Source:Varioussources;datacompiledbyGoldmanSachsGlobalInvestmentResearch4February2022116GoldmanSachsCarbonomicsNetherlandsNationalClimateAgreement(2019)GovernmentStrategyonHydrogen(2020)500MWby2025,3-4GWby2030Transport:50HRSsby202515,000FCEVsby20253,000heavydutytrucksby2025300,000FCEVsby2030Greenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)SpainNationalHydrogenRoadmap(2020)4GWby2030(25%consumptionofindustrialhydrogentobegreenby2030),300-600MWby2024Transport:5,000-7,500FCvehiclesby2030150-200FCbusesby2030100-150HRSsby2030Greenhydrogen(electrolysis)PortugalNationalHydrogenStrategy(2020)1.5-2.5GWby20305GWby205050-100HRSs10-15%injectioningasnetworks1-5%consumptionofroadtransport3-5%consumptionofshipping2-5%consumptioninindustry1.5%-2%consumptioninfinalenergyGreenhydrogen(electrolysis)GermanyNationalHydrogenStrategy(2020)5GWby2030(14TWh)Another5GWtobeaddedby2035-40Transport:400HRSsby2025Greenhydrogen(electrolysis)CzechRepublicHydrogenStrategy(2021)97ktH2paby2030consumptionoflowcarbonhydrogen2035-273ktH2/yr,2040-857ktH2/yr,2045-1241ktH2/yr,2050-1728ktH2/yrTransport:900FCbusesby203045,000FCcarsby20304,000FCtrucksby2030Greenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)HungaryNationalHydrogenStrategy(2021)36ktH2pa(lowcarbon)by2030ofwhich16ktH2pagreen240MWelectrolysisTransport:4,800FCEVsby203020HRSsby203010ktH2pacarbonfreeMin2%pablendingingassystem60MWcut-offcapacityGreenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)ItalyNationalHydrogenStrategyPreliminaryGuidelines(2021)5GWby20302%hydrogenpenetrationinfinalenergydemandby2030and20%by2050Greenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)UnitedKingdomUKHydrogenStrategy(2021)5GWlowcarbonproductionby2030,1GWby2025Greenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)PolandPolishHydrogenStrategy(2021)2GWby2030Transport:100-250FCbusesby20252,000FCbusesby203032HRSsGreenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)Source:Varioussources;datacompiledbyGoldmanSachsGlobalInvestmentResearch4February2022117GoldmanSachsCarbonomicsNorwayGovernmentHydrogenStrategy(2020)HydrogenRoadmap(2021)naGreenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)RussiaNationalHydrogenRoadmap(2020)Exporttargetsof0.2Mtby2024,2Mtby2030Greenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)FederalHydrogenVisionandStrategy(2021)Capacityof150MWby2026Belgiumdemandtoreach125-175TWh/yrby2050forbothhydrogenanditsderivativesImportrenewablemoleculesof3to6TWhby2030,100to165TWhby2050fromothercountriesRenewablehydrogen(greenhydrogen)Low-carbonhydrogen(fossilfuelwithCCUS)SwedenHydrogenStrategyProposal(2021)Electrolysercapacities:5GWby203015GWby2045Thesecapacitiescouldsupplythepotentialdemandof22-42TWhby2030,increasingto44-84TWhby2045.Greenhydrogen(electrolysis)AmericasCanadaHydrogenStrategyforCanada(2020)4MtH2paproductionby20306.2%oftotalfinalenergyconsumption20MtH2paproductionby205030%oftotalfinalenergyconsumptionGreenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)By-productBiomassChileNationalGreenHydrogenStrategy(2020)5GWelectrolysiscapacityoperatingandunderdevelopmentby202525GWinprojectswithcommittedfundingby2030Greenhydrogen(electrolysis)ColombiaColombiaHydrogenRoadmap(2021)1-3GWinstalledcapacityby2030(green)50ktH2blueDemand:1.5-1.8MtH2by2050,120ktH2by2030Transport:1,500-2,000LDFCEVs1,000-1,500HDFCEVs50-100HRSs40%lowcarbonH2intotalindustryH2consumptionGreenhydrogen(electrolysis)Bluehydrogen(fossilfuelwithCCUS)ParaguayTowardstheGreenHydrogenRoadmapinParaguay(2021)Paperstatesitwillbenecessarytoinstall600MWcapacityor90ktH2/yby2030tomeetgovernmentfossilfuelreductiontargetof20%by2030.Greenhydrogen(electrolysis)UruguayNationalGreenHydrogenStrategy(2021)ST:H2Upilotscheme1.5-5MWMT:Pilotsforotherenergyuses(ammonia,methanol,marinefuel).Morethan10MWLT:Exportation.Morethan150MWLongtermstrategytobedetailedbeginningof2022Greenhydrogen(electrolysis)Source:Varioussources;datacompiledbyGoldmanSachsGlobalInvestmentResearch4February2022118GoldmanSachsCarbonomicsDisclosureAppendixRegACWe,ZoeClarke,MicheleDellaVigna,CFAandGeorginaFraser,Ph.D.,herebycertifythatalloftheviewsexpressedinthisreportaccuratelyreflectourpersonalviewsaboutthesubjectcompanyorcompaniesanditsortheirsecurities.Wealsocertifythatnopartofourcompensationwas,isorwillbe,directlyorindirectly,relatedtothespecificrecommendationsorviewsexpressedinthisreport.Unlessotherwisestated,theindividualslistedonthecoverpageofthisreportareanalystsinGoldmanSachs’GlobalInvestmentResearchdivision.GSFactorProfileTheGoldmanSachsFactorProfileprovidesinvestmentcontextforastockbycomparingkeyattributestothemarket(i.e.ourcoverageuniverse)anditssectorpeers.Thefourkeyattributesdepictedare:Growth,FinancialReturns,Multiple(e.g.valuation)andIntegrated(acompositeofGrowth,FinancialReturnsandMultiple).Growth,FinancialReturnsandMultiplearecalculatedbyusingnormalizedranksforspecificmetricsforeachstock.Thenormalizedranksforthemetricsarethenaveragedandconvertedintopercentilesfortherelevantattribute.Theprecisecalculationofeachmetricmayvarydependingonthefiscalyear,industryandregion,butthestandardapproachisasfollows:Growthisbasedonastock’sforward-lookingsalesgrowth,EBITDAgrowthandEPSgrowth(forfinancialstocks,onlyEPSandsalesgrowth),withahigherpercentileindicatingahighergrowthcompany.FinancialReturnsisbasedonastock’sforward-lookingROE,ROCEandCROCI(forfinancialstocks,onlyROE),withahigherpercentileindicatingacompanywithhigherfinancialreturns.Multipleisbasedonastock’sforward-lookingP/E,P/B,price/dividend(P/D),EV/EBITDA,EV/FCFandEV/DebtAdjustedCashFlow(DACF)(forfinancialstocks,onlyP/E,P/BandP/D),withahigherpercentileindicatingastocktradingatahighermultiple.TheIntegratedpercentileiscalculatedastheaverageoftheGrowthpercentile,FinancialReturnspercentileand(100%-Multiplepercentile).FinancialReturnsandMultipleusetheGoldmanSachsanalystforecastsatthefiscalyear-endatleastthreequartersinthefuture.Growthusesinputsforthefiscalyearatleastsevenquartersinthefuturecomparedwiththeyearatleastthreequartersinthefuture(onaper-sharebasisforallmetrics).ForamoredetaileddescriptionofhowwecalculatetheGSFactorProfile,pleasecontactyourGSrepresentative.M&ARankAcrossourglobalcoverage,weexaminestocksusinganM&Aframework,consideringbothqualitativefactorsandquantitativefactors(whichmayvaryacrosssectorsandregions)toincorporatethepotentialthatcertaincompaniescouldbeacquired.WethenassignaM&Arankasameansofscoringcompaniesunderourratedcoveragefrom1to3,with1representinghigh(30%-50%)probabilityofthecompanybecominganacquisitiontarget,2representingmedium(15%-30%)probabilityand3representinglow(0%-15%)probability.Forcompaniesranked1or2,inlinewithourstandarddepartmentalguidelinesweincorporateanM&Acomponentintoourtargetprice.M&Arankof3isconsideredimmaterialandthereforedoesnotfactorintoourpricetarget,andmayormaynotbediscussedinresearch.QuantumQuantumisGoldmanSachs’proprietarydatabaseprovidingaccesstodetailedfinancialstatementhistories,forecastsandratios.Itcanbeusedforin-depthanalysisofasinglecompany,ortomakecomparisonsbetweencompaniesindifferentsectorsandmarkets.DisclosuresLogodisclosurePleasenote:Thirdpartybrandsusedinthisreportarethepropertyoftheirrespectiveowners,andareusedhereforinformationalpurposesonly.Theuseofsuchbrandsshouldnotbeviewedasanendorsement,affiliationorsponsorshipbyorforGoldmanSachsoranyofitsproducts/services.Distributionofratings/investmentbankingrelationshipsGoldmanSachsInvestmentResearchglobalEquitycoverageuniverseAsofJanuary1,2022,GoldmanSachsGlobalInvestmentResearchhadinvestmentratingson3,096equitysecurities.GoldmanSachsassignsstocksasBuysandSellsonvariousregionalInvestmentLists;stocksnotsoassignedaredeemedNeutral.SuchassignmentsequatetoBuy,HoldandSellforthepurposesoftheabovedisclosurerequiredbytheFINRARules.See‘Ratings,Coverageuniverseandrelateddefinitions’below.TheInvestmentBankingRelationshipschartreflectsthepercentageofsubjectcompanieswithineachratingcategoryforwhomGoldmanSachshasprovidedinvestmentbankingserviceswithintheprevioustwelvemonths.RegulatorydisclosuresDisclosuresrequiredbyUnitedStateslawsandregulationsSeecompany-specificregulatorydisclosuresaboveforanyofthefollowingdisclosuresrequiredastocompaniesreferredtointhisreport:managerorco-managerinapendingtransaction;1%orotherownership;compensationforcertainservices;typesofclientrelationships;managed/co-managedpublicofferingsinpriorperiods;directorships;forequitysecurities,marketmakingand/orspecialistrole.GoldmanSachstradesormaytradeasaprincipalindebtsecurities(orinrelatedderivatives)ofissuersdiscussedinthisreport.Thefollowingareadditionalrequireddisclosures:Ownershipandmaterialconflictsofinterest:GoldmanSachspolicyprohibitsitsanalysts,professionalsreportingtoanalystsandmembersoftheirhouseholdsfromowningsecuritiesofanycompanyintheanalyst’sareaofcoverage.Analystcompensation:AnalystsarepaidinpartbasedontheprofitabilityofGoldmanSachs,whichincludesinvestmentbankingrevenues.AnalystRatingDistributionInvestmentBankingRelationshipsBuyHoldSellBuyHoldSellGlobal50%35%15%65%57%47%4February2022119GoldmanSachsCarbonomicsasofficerordirector:GoldmanSachspolicygenerallyprohibitsitsanalysts,personsreportingtoanalystsormembersoftheirhouseholdsfromservingasanofficer,directororadvisorofanycompanyintheanalyst’sareaofcoverage.Non-U.S.Analysts:Non-U.S.analystsmaynotbeassociatedpersonsofGoldmanSachs&Co.LLCandthereforemaynotbesubjecttoFINRARule2241orFINRARule2242restrictionsoncommunicationswithsubjectcompany,publicappearancesandtradingsecuritiesheldbytheanalysts.Distributionofratings:Seethedistributionofratingsdisclosureabove.Pricechart:Seethepricechart,withchangesofratingsandpricetargetsinpriorperiods,above,or,ifelectronicformatorifwithrespecttomultiplecompanieswhicharethesubjectofthisreport,ontheGoldmanSachswebsiteathttps://www.gs.com/research/hedge.html.AdditionaldisclosuresrequiredunderthelawsandregulationsofjurisdictionsotherthantheUnitedStatesThefollowingdisclosuresarethoserequiredbythejurisdictionindicated,excepttotheextentalreadymadeabovepursuanttoUnitedStateslawsandregulations.Australia:GoldmanSachsAustraliaPtyLtdanditsaffiliatesarenotauthoriseddeposit-takinginstitutions(asthattermisdefinedintheBankingAct1959(Cth))inAustraliaanddonotprovidebankingservices,norcarryonabankingbusiness,inAustralia.Thisresearch,andanyaccesstoit,isintendedonlyfor“wholesaleclients”withinthemeaningoftheAustralianCorporationsAct,unlessotherwiseagreedbyGoldmanSachs.Inproducingresearchreports,membersoftheGlobalInvestmentResearchDivisionofGoldmanSachsAustraliamayattendsitevisitsandothermeetingshostedbythecompaniesandotherentitieswhicharethesubjectofitsresearchreports.InsomeinstancesthecostsofsuchsitevisitsormeetingsmaybemetinpartorinwholebytheissuersconcernedifGoldmanSachsAustraliaconsidersitisappropriateandreasonableinthespecificcircumstancesrelatingtothesitevisitormeeting.Totheextentthatthecontentsofthisdocumentcontainsanyfinancialproductadvice,itisgeneraladviceonlyandhasbeenpreparedbyGoldmanSachswithouttakingintoaccountaclient’sobjectives,financialsituationorneeds.Aclientshould,beforeactingonanysuchadvice,considertheappropriatenessoftheadvicehavingregardtotheclient’sownobjectives,financialsituationandneeds.AcopyofcertainGoldmanSachsAustraliaandNewZealanddisclosureofinterestsandacopyofGoldmanSachs’AustralianSell-SideResearchIndependencePolicyStatementareavailableat:https://www.goldmansachs.com/disclosures/australia-new-zealand/index.html.Brazil:DisclosureinformationinrelationtoCVMResolutionn.20isavailableathttps://www.gs.com/worldwide/brazil/area/gir/index.html.Whereapplicable,theBrazil-registeredanalystprimarilyresponsibleforthecontentofthisresearchreport,asdefinedinArticle20ofCVMResolutionn.20,isthefirstauthornamedatthebeginningofthisreport,unlessindicatedotherwiseattheendofthetext.Canada:GoldmanSachsCanadaInc.isanaffiliateofTheGoldmanSachsGroupInc.andthereforeisincludedinthecompanyspecificdisclosuresrelatingtoGoldmanSachs(asdefinedabove).GoldmanSachsCanadaInc.hasapprovedof,andagreedtotakeresponsibilityfor,thisresearchreportinCanadaifandtotheextentthatGoldmanSachsCanadaInc.disseminatesthisresearchreporttoitsclients.HongKong:FurtherinformationonthesecuritiesofcoveredcompaniesreferredtointhisresearchmaybeobtainedonrequestfromGoldmanSachs(Asia)L.L.C.India:FurtherinformationonthesubjectcompanyorcompaniesreferredtointhisresearchmaybeobtainedfromGoldmanSachs(India)SecuritiesPrivateLimited,ResearchAnalyst-SEBIRegistrationNumberINH000001493,951-A,RationalHouse,AppasahebMaratheMarg,Prabhadevi,Mumbai400025,India,CorporateIdentityNumberU74140MH2006FTC160634,Phone+912266169000,Fax+912266169001.GoldmanSachsmaybeneficiallyown1%ormoreofthesecurities(assuchtermisdefinedinclause2(h)theIndianSecuritiesContracts(Regulation)Act,1956)ofthesubjectcompanyorcompaniesreferredtointhisresearchreport.Japan:Seebelow.Korea:Thisresearch,andanyaccesstoit,isintendedonlyfor“professionalinvestors”withinthemeaningoftheFinancialServicesandCapitalMarketsAct,unlessotherwiseagreedbyGoldmanSachs.FurtherinformationonthesubjectcompanyorcompaniesreferredtointhisresearchmaybeobtainedfromGoldmanSachs(Asia)L.L.C.,SeoulBranch.NewZealand:GoldmanSachsNewZealandLimitedanditsaffiliatesareneither“registeredbanks”nor“deposittakers”(asdefinedintheReserveBankofNewZealandAct1989)inNewZealand.Thisresearch,andanyaccesstoit,isintendedfor“wholesaleclients”(asdefinedintheFinancialAdvisersAct2008)unlessotherwiseagreedbyGoldmanSachs.AcopyofcertainGoldmanSachsAustraliaandNewZealanddisclosureofinterestsisavailableat:https://www.goldmansachs.com/disclosures/australia-new-zealand/index.html.Russia:ResearchreportsdistributedintheRussianFederationarenotadvertisingasdefinedintheRussianlegislation,butareinformationandanalysisnothavingproductpromotionastheirmainpurposeanddonotprovideappraisalwithinthemeaningoftheRussianlegislationonappraisalactivity.ResearchreportsdonotconstituteapersonalizedinvestmentrecommendationasdefinedinRussianlawsandregulations,arenotaddressedtoaspecificclient,andarepreparedwithoutanalyzingthefinancialcircumstances,investmentprofilesorriskprofilesofclients.GoldmanSachsassumesnoresponsibilityforanyinvestmentdecisionsthatmaybetakenbyaclientoranyotherpersonbasedonthisresearchreport.Singapore:GoldmanSachs(Singapore)Pte.(CompanyNumber:198602165W),whichisregulatedbytheMonetaryAuthorityofSingapore,acceptslegalresponsibilityforthisresearch,andshouldbecontactedwithrespecttoanymattersarisingfrom,orinconnectionwith,thisresearch.Taiwan:Thismaterialisforreferenceonlyandmustnotbereprintedwithoutpermission.Investorsshouldcarefullyconsidertheirowninvestmentrisk.Investmentresultsaretheresponsibilityoftheindividualinvestor.UnitedKingdom:PersonswhowouldbecategorizedasretailclientsintheUnitedKingdom,assuchtermisdefinedintherulesoftheFinancialConductAuthority,shouldreadthisresearchinconjunctionwithpriorGoldmanSachsresearchonthecoveredcompaniesreferredtohereinandshouldrefertotheriskwarningsthathavebeensenttothembyGoldmanSachsInternational.Acopyoftheseriskswarnings,andaglossaryofcertainfinancialtermsusedinthisreport,areavailablefromGoldmanSachsInternationalonrequest.EuropeanUnionandUnitedKingdom:DisclosureinformationinrelationtoArticle6(2)oftheEuropeanCommissionDelegatedRegulation(EU)(2016/958)supplementingRegulation(EU)No596/2014oftheEuropeanParliamentandoftheCouncil(includingasthatDelegatedRegulationisimplementedintoUnitedKingdomdomesticlawandregulationfollowingtheUnitedKingdom’sdeparturefromtheEuropeanUnionandtheEuropeanEconomicArea)withregardtoregulatorytechnicalstandardsforthetechnicalarrangementsforobjectivepresentationofinvestmentrecommendationsorotherinformationrecommendingorsuggestinganinvestmentstrategyandfordisclosureofparticularinterestsorindicationsofconflictsofinterestisavailableathttps://www.gs.com/disclosures/europeanpolicy.htmlwhichstatestheEuropeanPolicyforManagingConflictsofInterestinConnectionwithInvestmentResearch.Japan:GoldmanSachsJapanCo.,Ltd.isaFinancialInstrumentDealerregisteredwiththeKantoFinancialBureauunderregistrationnumberKinsho69,andamemberofJapanSecuritiesDealersAssociation,FinancialFuturesAssociationofJapanandTypeIIFinancialInstrumentsFirmsAssociation.Salesandpurchaseofequitiesaresubjecttocommissionpre-determinedwithclientsplusconsumptiontax.Seecompany-specificdisclosuresastoanyapplicabledisclosuresrequiredbyJapanesestockexchanges,theJapaneseSecuritiesDealersAssociationortheJapaneseSecuritiesFinanceCompany.Ratings,coverageuniverseandrelateddefinitionsBuy(B),Neutral(N),Sell(S)AnalystsrecommendstocksasBuysorSellsforinclusiononvariousregionalInvestmentLists.BeingassignedaBuyorSellonanInvestmentListisdeterminedbyastock’stotalreturnpotentialrelativetoitscoverageuniverse.AnystocknotassignedasaBuyoraSellonanInvestmentListwithanactiverating(i.e.,astockthatisnotRatingSuspended,NotRated,CoverageSuspendedorNotCovered),isdeemedNeutral.Eachregion’sInvestmentReviewCommitteemanagesRegionalConvictionlists,whichrepresentinvestmentrecommendationsfocusedonthesizeofthetotalreturnpotentialand/orthelikelihoodoftherealizationofthereturnacrosstheirrespectiveareasofcoverage.TheadditionorremovalofstocksfromsuchConvictionlistsdonotrepresentachangeintheanalysts’investmentratingforsuchstocks.Totalreturnpotentialrepresentstheupsideordownsidedifferentialbetweenthecurrentsharepriceandthepricetarget,includingallpaidoranticipateddividends,expectedduringthetimehorizonassociatedwiththepricetarget.Pricetargetsarerequiredforallcoveredstocks.Thetotalreturnpotential,pricetargetandassociatedtimehorizonarestatedineachreportaddingorreiteratinganInvestmentListmembership.CoverageUniverse:Alistofallstocksineachcoverageuniverseisavailablebyprimaryanalyst,stockandcoverageuniverseathttps://www.gs.com/research/hedge.html.4February2022120GoldmanSachsCarbonomicsNotRated(NR).Theinvestmentrating,targetpriceandearningsestimates(whererelevant)havebeensuspendedpursuanttoGoldmanSachspolicywhenGoldmanSachsisactinginanadvisorycapacityinamergerorinastrategictransactioninvolvingthiscompany,whentherearelegal,regulatoryorpolicyconstraintsduetoGoldmanSachs’involvementinatransaction,andincertainothercircumstances.RatingSuspended(RS).GoldmanSachsResearchhassuspendedtheinvestmentratingandpricetargetforthisstock,becausethereisnotasufficientfundamentalbasisfordetermininganinvestmentratingortargetprice.Thepreviousinvestmentratingandtargetprice,ifany,arenolongerineffectforthisstockandshouldnotbereliedupon.CoverageSuspended(CS).GoldmanSachshassuspendedcoverageofthiscompany.NotCovered(NC).GoldmanSachsdoesnotcoverthiscompany.NotAvailableorNotApplicable(NA).Theinformationisnotavailablefordisplayorisnotapplicable.NotMeaningful(NM).Theinformationisnotmeaningfulandisthereforeexcluded.Globalproduct;distributingentitiesTheGlobalInvestmentResearchDivisionofGoldmanSachsproducesanddistributesresearchproductsforclientsofGoldmanSachsonaglobalbasis.AnalystsbasedinGoldmanSachsofficesaroundtheworldproduceresearchonindustriesandcompanies,andresearchonmacroeconomics,currencies,commoditiesandportfoliostrategy.ThisresearchisdisseminatedinAustraliabyGoldmanSachsAustraliaPtyLtd(ABN21006797897);inBrazilbyGoldmanSachsdoBrasilCorretoradeTítuloseValoresMobiliáriosS.A.;PublicCommunicationChannelGoldmanSachsBrazil:08007275764and/orcontatogoldmanbrasil@gs.com.AvailableWeekdays(exceptholidays),from9amto6pm.CanaldeComunicaçãocomoPúblicoGoldmanSachsBrasil:08007275764e/oucontatogoldmanbrasil@gs.com.Horáriodefuncionamento:segunda-feiraàsexta-feira(excetoferiados),das9hàs18h;inCanadabyeitherGoldmanSachsCanadaInc.orGoldmanSachs&Co.LLC;inHongKongbyGoldmanSachs(Asia)L.L.C.;inIndiabyGoldmanSachs(India)SecuritiesPrivateLtd.;inJapanbyGoldmanSachsJapanCo.,Ltd.;intheRepublicofKoreabyGoldmanSachs(Asia)L.L.C.,SeoulBranch;inNewZealandbyGoldmanSachsNewZealandLimited;inRussiabyOOOGoldmanSachs;inSingaporebyGoldmanSachs(Singapore)Pte.(CompanyNumber:198602165W);andintheUnitedStatesofAmericabyGoldmanSachs&Co.LLC.GoldmanSachsInternationalhasapprovedthisresearchinconnectionwithitsdistributionintheUnitedKingdom.EffectivefromthedateoftheUnitedKingdom’sdeparturefromtheEuropeanUnionandtheEuropeanEconomicArea(“BrexitDay”)thefollowinginformationwithrespecttodistributingentitieswillapply:GoldmanSachsInternational(“GSI”),authorisedbythePrudentialRegulationAuthority(“PRA”)andregulatedbytheFinancialConductAuthority(“FCA”)andthePRA,hasapprovedthisresearchinconnectionwithitsdistributionintheUnitedKingdom.EuropeanEconomicArea:GSI,authorisedbythePRAandregulatedbytheFCAandthePRA,disseminatesresearchinthefollowingjurisdictionswithintheEuropeanEconomicArea:theGrandDuchyofLuxembourg,Italy,theKingdomofBelgium,theKingdomofDenmark,theKingdomofNorway,theRepublicofFinland,Portugal,theRepublicofCyprusandtheRepublicofIreland;GS-SuccursaledeParis(Parisbranch)which,fromBrexitDay,willbeauthorisedbytheFrenchAutoritédecontrôleprudentieletderesolution(“ACPR”)andregulatedbytheAutoritédecontrôleprudentieletderesolutionandtheAutoritédesmarchesfinanciers(“AMF”)disseminatesresearchinFrance;GSI-SucursalenEspaña(Madridbranch)authorizedinSpainbytheComisiónNacionaldelMercadodeValoresdisseminatesresearchintheKingdomofSpain;GSI-SwedenBankfilial(Stockholmbranch)isauthorizedbytheSFSAasa“thirdcountrybranch”inaccordancewithChapter4,Section4oftheSwedishSecuritiesandMarketAct(Sw.lag(2007:528)omvärdepappersmarknaden)disseminatesresearchintheKingdomofSweden;GoldmanSachsBankEuropeSE(“GSBE”)isacreditinstitutionincorporatedinGermanyand,withintheSingleSupervisoryMechanism,subjecttodirectprudentialsupervisionbytheEuropeanCentralBankandinotherrespectssupervisedbyGermanFederalFinancialSupervisoryAuthority(BundesanstaltfürFinanzdienstleistungsaufsicht,BaFin)andDeutscheBundesbankanddisseminatesresearchintheFederalRepublicofGermanyandthosejurisdictionswithintheEuropeanEconomicAreawhereGSIisnotauthorisedtodisseminateresearchandadditionally,GSBE,CopenhagenBranchfilialafGSBE,Tyskland,supervisedbytheDanishFinancialAuthoritydisseminatesresearchintheKingdomofDenmark;GSBE-SucursalenEspaña(Madridbranch)subject(toalimitedextent)tolocalsupervisionbytheBankofSpaindisseminatesresearchintheKingdomofSpain;GSBE-SuccursaleItalia(Milanbranch)totherelevantapplicableextent,subjecttolocalsupervisionbytheBankofItaly(Bancad’Italia)andtheItalianCompaniesandExchangeCommission(CommissioneNazionaleperleSocietàelaBorsa“Consob”)disseminatesresearchinItaly;GSBE-SuccursaledeParis(Parisbranch),supervisedbytheAMFandbytheACPRdisseminatesresearchinFrance;andGSBE-SwedenBankfilial(Stockholmbranch),toalimitedextent,subjecttolocalsupervisionbytheSwedishFinancialSupervisoryAuthority(Finansinpektionen)disseminatesresearchintheKingdomofSweden.GeneraldisclosuresThisresearchisforourclientsonly.OtherthandisclosuresrelatingtoGoldmanSachs,thisresearchisbasedoncurrentpublicinformationthatweconsiderreliable,butwedonotrepresentitisaccurateorcomplete,anditshouldnotbereliedonassuch.Theinformation,opinions,estimatesandforecastscontainedhereinareasofthedatehereofandaresubjecttochangewithoutpriornotification.Weseektoupdateourresearchasappropriate,butvariousregulationsmaypreventusfromdoingso.Otherthancertainindustryreportspublishedonaperiodicbasis,thelargemajorityofreportsarepublishedatirregularintervalsasappropriateintheanalyst’sjudgment.GoldmanSachsconductsaglobalfull-service,integratedinvestmentbanking,investmentmanagement,andbrokeragebusiness.WehaveinvestmentbankingandotherbusinessrelationshipswithasubstantialpercentageofthecompaniescoveredbyourGlobalInvestmentResearchDivision.GoldmanSachs&Co.LLC,theUnitedStatesbrokerdealer,isamemberofSIPC(https://www.sipc.org).Oursalespeople,traders,andotherprofessionalsmayprovideoralorwrittenmarketcommentaryortradingstrategiestoourclientsandprincipaltradingdesksthatreflectopinionsthatarecontrarytotheopinionsexpressedinthisresearch.Ourassetmanagementarea,principaltradingdesksandinvestingbusinessesmaymakeinvestmentdecisionsthatareinconsistentwiththerecommendationsorviewsexpressedinthisresearch.Theanalystsnamedinthisreportmayhavefromtimetotimediscussedwithourclients,includingGoldmanSachssalespersonsandtraders,ormaydiscussinthisreport,tradingstrategiesthatreferencecatalystsoreventsthatmayhaveanear-termimpactonthemarketpriceoftheequitysecuritiesdiscussedinthisreport,whichimpactmaybedirectionallycountertotheanalyst’spublishedpricetargetexpectationsforsuchstocks.Anysuchtradingstrategiesaredistinctfromanddonotaffecttheanalyst’sfundamentalequityratingforsuchstocks,whichratingreflectsastock’sreturnpotentialrelativetoitscoverageuniverseasdescribedherein.Weandouraffiliates,officers,directors,andemployees,excludingequityandcreditanalysts,willfromtimetotimehavelongorshortpositionsin,actasprincipalin,andbuyorsell,thesecuritiesorderivatives,ifany,referredtointhisresearch.TheviewsattributedtothirdpartypresentersatGoldmanSachsarrangedconferences,includingindividualsfromotherpartsofGoldmanSachs,donotnecessarilyreflectthoseofGlobalInvestmentResearchandarenotanofficialviewofGoldmanSachs.Anythirdpartyreferencedherein,includinganysalespeople,tradersandotherprofessionalsormembersoftheirhousehold,mayhavepositionsintheproductsmentionedthatareinconsistentwiththeviewsexpressedbyanalystsnamedinthisreport.Thisresearchisnotanoffertosellorthesolicitationofanoffertobuyanysecurityinanyjurisdictionwheresuchanofferorsolicitationwouldbeillegal.Itdoesnotconstituteapersonalrecommendationortakeintoaccounttheparticularinvestmentobjectives,financialsituations,orneedsofindividualclients.Clientsshouldconsiderwhetheranyadviceorrecommendationinthisresearchissuitablefortheirparticularcircumstancesand,ifappropriate,seekprofessionaladvice,includingtaxadvice.Thepriceandvalueofinvestmentsreferredtointhisresearchandtheincomefromthemmayfluctuate.Pastperformanceisnotaguidetofutureperformance,futurereturnsarenotguaranteed,andalossoforiginalcapitalmayoccur.4February2022121GoldmanSachsCarbonomicsFluctuationsinexchangeratescouldhaveadverseeffectsonthevalueorpriceof,orincomederivedfrom,certaininvestments.Certaintransactions,includingthoseinvolvingfutures,options,andotherderivatives,giverisetosubstantialriskandarenotsuitableforallinvestors.InvestorsshouldreviewcurrentoptionsandfuturesdisclosuredocumentswhichareavailablefromGoldmanSachssalesrepresentativesorathttps://www.theocc.com/about/publications/character-risks.jspandhttps://www.fiadocumentation.org/fia/regulatory-disclosures_1/fia-uniform-futures-and-options-on-futures-risk-disclosures-booklet-pdf-version-2018.Transactioncostsmaybesignificantinoptionstrategiescallingformultiplepurchaseandsalesofoptionssuchasspreads.Supportingdocumentationwillbesupplieduponrequest.DifferingLevelsofServiceprovidedbyGlobalInvestmentResearch:ThelevelandtypesofservicesprovidedtoyoubytheGlobalInvestmentResearchdivisionofGSmayvaryascomparedtothatprovidedtointernalandotherexternalclientsofGS,dependingonvariousfactorsincludingyourindividualpreferencesastothefrequencyandmannerofreceivingcommunication,yourriskprofileandinvestmentfocusandperspective(e.g.,marketwide,sectorspecific,longterm,shortterm),thesizeandscopeofyouroverallclientrelationshipwithGS,andlegalandregulatoryconstraints.Asanexample,certainclientsmayrequesttoreceivenotificationswhenresearchonspecificsecuritiesispublished,andcertainclientsmayrequestthatspecificdataunderlyinganalysts’fundamentalanalysisavailableonourinternalclientwebsitesbedeliveredtothemelectronicallythroughdatafeedsorotherwise.Nochangetoananalyst’sfundamentalresearchviews(e.g.,ratings,pricetargets,ormaterialchangestoearningsestimatesforequitysecurities),willbecommunicatedtoanyclientpriortoinclusionofsuchinformationinaresearchreportbroadlydisseminatedthroughelectronicpublicationtoourinternalclientwebsitesorthroughothermeans,asnecessary,toallclientswhoareentitledtoreceivesuchreports.Allresearchreportsaredisseminatedandavailabletoallclientssimultaneouslythroughelectronicpublicationtoourinternalclientwebsites.Notallresearchcontentisredistributedtoourclientsoravailabletothird-partyaggregators,norisGoldmanSachsresponsiblefortheredistributionofourresearchbythirdpartyaggregators.Forresearch,modelsorotherdatarelatedtooneormoresecurities,marketsorassetclasses(includingrelatedservices)thatmaybeavailabletoyou,pleasecontactyourGSrepresentativeorgotohttps://research.gs.com.Disclosureinformationisalsoavailableathttps://www.gs.com/research/hedge.htmlorfromResearchCompliance,200WestStreet,NewYork,NY10282.©2022GoldmanSachs.Nopartofthismaterialmaybe(i)copied,photocopiedorduplicatedinanyformbyanymeansor(ii)redistributedwithoutthepriorwrittenconsentofTheGoldmanSachsGroup,Inc.4February2022122GoldmanSachsCarbonomicsMINDCRAFT:OURTHEMATICDEEPDIVESTheSurvivor’sGuidetoDisruptionTheGreatResetTheFutureofMobilityArtificialIntelligenceCloudComputingThePost-PandemicCycleGeneediting5G:FromLabtoLaunchpadTheGenomeRevolutionDigitalHealthSustainableESGInvestingFutureofWorkSpaceDronesFactoryoftheFutureeSports:FromWildWesttoMainstreamMusicintheAirEVs:BacktoRealityVentureCapitalHorizonsESGWomenomicsClimateChangeChinade-carbonizationFutureofLearningCarbonomicsCars:theroadaheadESGSectorRoadmapsTheRiseofRenewablesShaleScaletoShaleTailIMO2020NewChina,OldChinaChinaASharesChina’sCreditConundrumTopProjectsMadeinVietnamWhattheMarketPaysForTopofMindTheCompetitiveValueofDataWhatMattersforIPOs...andmore
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