To make hydrogen trade cost-effective, the costs of producing and trading green hydrogen must be lower than domestic production to offset higher transport costs, says a new report by the International Renewable Energy Agency (IRENA).
ccording to the report, there are many milestones to achieve before global hydrogen trade becomes a viable, cost-effective option at scale. This study uses techno-economic analysis to explore the conditions that would need to be in place to make such trade economically viable.
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Namely, in a 1.5°C scenario by 2050, about one quarter of the total global hydrogen demand (equivalent to 18.4 exajoules per year or about 150 megatonnes of hydrogen per year) could be satisfied through international trade.
The other three quarters would be domestically produced and consumed. This is a significant change from today’s oil market, where the bulk (about 74%) is internationally traded, but it is similar to today’s gas market, of which just 33% is traded across borders.
Of the hydrogen that would be internationally traded by 2050 in the 1.5°C scenario, around 55% would travel by pipeline, and most of the hydrogen network would be based on existing natural gas pipelines that would be retrofitted to transport pure hydrogen, drastically reducing the transport costs.
This pipeline-enabled trade would be concentrated in two regional markets: Europe (85%) and Latin America. The remaining 45% of the internationally traded hydrogen would be shipped, predominantly as ammonia, which would mostly be used without being reconverted to hydrogen
As for the conversion of hydrogen to ammonia, this is already commercially viable and applied at large scale. In fact, ammonia is widely traded today (about 10% of the global production) and has a developed transportation infrastructure (ports, vessels, storage).
Ammonia can also be directly used as feedstock and fuels and does not necessarily need to be reconverted to hydrogen. However, the existing, growing market for ammonia needs to be decarbonised to reach the 1.5°C scenario.
By 2050, global ammonia demand could reach 690 Mt/year. Almost 80% of this (561 Mt/year) would be used as chemical feedstock and as fuel for shipping and power, and only 20% would be used as a hydrogen carrier.
As the operating costs of renewables are very low, having a low weighted average cost of capital (WACC) is critical to the cost-effectiveness of trade. In one of the alternative futures where the difference in WACC between countries slowly became smaller, global trade volumes as a whole would become slightly lower (15.5 EJ/ year) but would otherwise not be greatly affected.
However, the outlook for specific countries would be drastically different. The trade volumes and patterns are dependent on the geographical resolution used in the model. As regions are disaggregated into individual countries, more extreme hydrogen production cost values are possible, potentially leading to new trading countries.
Continuing, for large-scale hydrogen production and trade to be a viable component of the 1.5°C scenario, the electricity used to produce the hydrogen must not detract from the availability of electricity for other essential and more effective uses – it must be additional.
This places the upscaling and acceleration of renewable energy generation at the heart of the transition to green hydrogen. The production of renewable energy needs to at least triple from today’s 290 gigawatts (GW) per year to more than 1 terawatt (TW) per year by the mid-2030s. Over 10 000 GW of wind and solar power would be needed by 2050, just for green hydrogen production and trade.
“Today, only very limited amounts of (grey) hydrogen are transported in pure hydrogen form. Even in the 1.5°C scenario, almost three-quarters of the hydrogen produced would be used as methanol, steel, ammonia (for fuel and feedstock), and synthetic fuels for aviation. Most of the ammonia trade would be for direct
consumption as ammonia, instead of being converted back into hydrogen. Hydrogen conversion into iron and synthetic fuels would be even more attractive as both have lower transportation costs than hydrogen or ammonia,” the report concludes.