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    Global hydrogen trade to meet the 1.5°C climate goal: Part I – Trade outlook for 2050 and way forward
    Global hydrogen trade to meet the 1.5°C climate goal: Part I – Trade outlook for 2050 and way forward
    Global hydrogen trade to meet the 1.5°C climate goal: Part I – Trade outlook for 2050 and way forward
    Ebook221 pages2 hours

    Global hydrogen trade to meet the 1.5°C climate goal: Part I – Trade outlook for 2050 and way forward

    By International Renewable Energy Agency IRENA

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    About this ebook

    This report explores key actions and milestones in relation to market creation, infrastructure and regulation, certification, technology, cost gaps and financing.
    LanguageEnglish
    PublisherIRENA
    Release dateJul 1, 2022
    ISBN9789292604998
    Global hydrogen trade to meet the 1.5°C climate goal: Part I – Trade outlook for 2050 and way forward

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      Book preview

      Global hydrogen trade to meet the 1.5°C climate goal - International Renewable Energy Agency IRENA

      © IRENA 2022

      Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced, printed and/or stored, provided that appropriate acknowledgement is given of IRENA as the source and copyright holder. Material in this publication that is attributed to third parties may be subject to separate terms of use and restrictions, and appropriate permissions from these third parties may need to be secured before any use of such material.

      ISBN: 978-92-9260-430-1

      eBook ISBN: 978-92-9260-499-8

      Citation: IRENA (2022), Global hydrogen trade to meet the 1.5°C climate goal: Part I – Trade outlook for 2050 and way forward, International Renewable Energy Agency, Abu Dhabi.

      Acknowledgements

      Report was authored by Herib Blanco and Emanuele Taibi under the guidance of Dolf Gielen (Director, IRENA Innovation and Technology Centre) and Roland Roesch. Carlos Fernandez supported the modelling exercise.

      This report benefited from the input and review of the following experts: Matthias Deutsch and Paul Münnich (Agora Energiewende); Prerna Bhargava, Chase Fiori, James Hetherington, Gwenyth Macnamara (Australian Government); Alejandro Nuñez-Jimenez (ETH Zurich); Ruud Kempener (European Commission); Ilaria Conti and Andris Pielbags (Florence School of Regulation); Gas Infrastructure Europe; Thijs Van de Graaf (Ghent University); Roberto Aiello (Inter-American Development Bank); José Miguel Bermudez (International Energy Agency); Tim Karlsson (International Partnership for Hydrogen and Fuel Cells in the Economy); Emanuele Bianco and Paul Komor (IRENA); Carmine Iarossi, Vieri Maestrini, Fabrizio De Nigris, and Tatiana Ulkina (Snam); Ad van Wijk (TU Delft); and Octavian Partenie (Vattenfall).

      The report was edited by Emily Youers.

      Report available online: www.irena.org/publications

      For questions or to provide feedback: publications@irena.org

      IRENA is grateful for the scientific support from the Fondazione Bruno Kessler in producing this publication.

      IRENA is grateful for the voluntary contribution of the Ministry of Economy, Trade and Industry of Japan in support of IRENA’s hydrogen work.

      Disclaimer

      This publication and the material herein are provided as is. All reasonable precautions have been taken by IRENA to verify the reliability of the material in this publication. However, neither IRENA nor any of its officials, agents, data or other third-party content providers provides a warranty of any kind, either expressed or implied, and they accept no responsibility or liability for any consequence of use of the publication or material herein.

      The information contained herein does not necessarily represent the views of all Members of IRENA. The mention of specific companies or certain projects or products does not imply that they are endorsed or recommended by IRENA in preference to others of a similar nature that are not mentioned. The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region, country, territory, city or area or of its authorities, or concerning the delimitation of frontiers or boundaries.

      TABLE OF CONTENTS

      EXECUTIVE SUMMARY CONTEXT OF THIS REPORT AND WHAT TO EXPECT

      1INTRODUCTION

      1.1 The role of hydrogen in a 1.5°C scenario

      1.2 Hydrogen as an opportunity to connect renewables-rich regions with demand centres

      1.3 Early signs of global trade

      1.4 Soft factors influencing global trade

      2REGIONAL OUTLOOK FOR HYDROGEN DEMAND AND TRADE OF COMMODITIES

      3GLOBAL HYDROGEN TRADE OUTLOOK

      3.1 Main drivers of global trade

      3.2 Introduction to modelling results

      3.3 Green hydrogen production

      3.4 Estimated trade volumes of hydrogen and derivatives

      3.5 Identifying import and export markets

      3.6 Cost impact of diversifying import mix

      3.7 Investment needs to develop hydrogen infrastructure

      3.8 Alternative scenarios and sensitivity of results to pessimistic assumptions

      4NEAR-TERM ROADMAP TO ENABLE GLOBAL TRADE

      4.1 Market creation

      4.2 Certification

      4.3 Technology

      4.4 Cost gap

      4.5 Financing

      4.6 Pace of deployment

      4.7 Infrastructure and regulation

      REFERENCES

      FIGURES

      FIGURE 0.1. Global hydrogen trade flows under Optimistic technology assumptions in 2050

      FIGURE 0.2. Scope of this report series in the broader context of IRENA publications

      FIGURE 1.1. Carbon emission abatements under the 1.5°C scenario

      FIGURE 1.2. Priority settings for hydrogen applications across the energy system

      FIGURE 1.3. Global levelised cost of hydrogen (LCOH) in 2030 (top) and 2050 (bottom)

      FIGURE 1.4. Economic benefit of relocating production of various fuels and commodities to places with low renewable energy cost compared with shipping cost by 2030

      FIGURE 1.5. Cumulative number of announcements of agreements for hydrogen trade since the beginning of 2018

      FIGURE 1.6. Bilateral trade announcements for global hydrogen trade until March 2022

      FIGURE 1.7. Areas of activity for hydrogen in the Port of Rotterdam and milestones until 2030

      FIGURE 1.8. Overview of factors for identifying potential trading partners of hydrogen and its derivatives

      FIGURE 2.1. Hydrogen demand by application in 2020 and 2050

      FIGURE 2.2. Hydrogen demand by country in 2050 in a 1.5°C scenario

      FIGURE 2.3. Top nine regions with largest demand for ammonia, methanol, steel and long-haul transport in 2050 (PJ/year)

      FIGURE 2.4. Energy price differential to justify production relocation

      FIGURE 3.1. Economic factors to consider in the trade-off between domestic production and import of hydrogen

      FIGURE 3.2. Electricity price (expressed in USD/kgH 2 equivalent) as a function of CAPEX for renewable generation, WACC and capacity factor

      FIGURE 3.3. Electricity, hydrogen and ammonia demand in 2050 in comparison with the technical renewable potential for solar PV, onshore wind and offshore wind in selected countries

      FIGURE 3.4. Levelised cost of green hydrogen map for China in 2050 for an optimistic cost scenario with water stress considerations

      FIGURE 3.5. Factors contributing to the reduction of ammonia transport cost

      FIGURE 3.6. Scope of modelling framework (blue boxes) used for global hydrogen and ammonia trade

      FIGURE 3.7. Country aggregation into regions in the global hydrogen trade model

      FIGURE 3.8. Installed renewable generation capacity for hydrogen production and associated electrolyser capacity by region in 2050 for optimistic and pessimistic scenarios

      FIGURE 3.9. Electricity generation for hydrogen production and curtailment by region in 2050 for optimistic and pessimistic scenarios

      FIGURE 3.10. Levelised cost of hydrogen by region in 2050 for an optimistic and pessimistic scenario

      FIGURE 3.11. Cost reduction potential for green hydrogen until 2050 for various scenarios and conditions

      FIGURE 3.12. Electrolyser capacity factor by region in 2050 for the optimistic scenario

      FIGURE 3.13. Global hydrogen trade map under optimistic technology assumptions in 2050

      FIGURE 3.14. Global energy balance for ammonia in an optimistic technology scenario in 2050

      FIGURE 3.15. Export (left) and import (right) markets are relatively concentrated, with the top seven countries representing 96% and 86% of the market, respectively

      FIGURE 3.16. Volumes of hydrogen supply and demand for regions around the world in 2050 with optimistic technology assumptions

      FIGURE 3.17. Volumes of hydrogen export and import for regions around the world in 2050 with optimistic technology assumptions

      FIGURE 3.18. Landed cost breakdown for regions exporting to China, Germany and Japan

      FIGURE 3.19. Investment needs for global hydrogen production and trade infrastructure to reach almost USD 4 trillion between 2020 and 2050

      FIGURE 3.20. Global hydrogen trade in 2050 by technology pathway and total investment for various sensitivities

      FIGURE 3.21. Commodity price trends from beginning of 2020 until Q1 2022

      FIGURE 3.22. Global hydrogen trade in 2050 by technology pathway and total investment for scenarios with higher CAPEX for PV and the electrolyser

      FIGURE 3.23. Green hydrogen supply cost curve for the optimistic and pessimistic scenarios in 2050

      FIGURE 3.24. Hydrogen production by country across scenarios expressed relative to the scenario with the highest production

      FIGURE 3.25. WACC effect on hydrogen production for selected export-oriented countries

      FIGURE 4.1. Main barriers for infrastructure and trade development and relationships between them

      FIGURE 4.2. Milestones and developments for market-related aspects in the short term

      FIGURE 4.3. Trade-related milestones for hydrogen certification in the coming decade

      FIGURE 4.4. Environmental, economic, social and governance framework for Power-to-X sustainability dimensions

      FIGURE 4.5. Milestones and developments for market-related aspects in the coming decade

      FIGURE 4.6. Policies to address the high capital and operational cost across the hydrogen value chain

      FIGURE 4.7. Historical growth for various technologies and energy carriers in comparison with low-carbon hydrogen

      TABLES

      TABLE 4.1. Standards and regulations defining low-carbon hydrogen or its derivatives

      BOXES

      BOX 1.1. Methane pyrolysis as alternative route for low-carbon hydrogen production

      BOX 1.2. Hydrogen imports to Europe through the Port of Rotterdam

      BOX 1.3. Double auction model for global hydrogen production for use in German industry

      BOX 2.1. Trade of commodities and hydrogen-derived products

      BOX 3.1. Effect of higher capital costs for renewables and electrolysers on hydrogen trade in 2050

      EXECUTIVE SUMMARY

      Unlike fossil fuels, for which large reserves are concentrated in certain countries and regions, renewable energy resources (solar, wind, geothermal, etc.) are available at a viable scale in every country. The geographical concentration of fossil fuel reserves has made some countries into major producers, while most countries are predominantly importers. Renewable energy, in contrast, can be produced everywhere (although the cost-effectiveness varies by location) and therefore has the potential to dramatically change how and between whom energy is traded. However, until recently there has been no cost-effective way to transport renewable electricity over long distances to link low-cost production sites with demand centres. Suitable transmission lines are rare and costly to construct. The use of hydrogen as an energy carrier could be an answer, enabling renewable energy to be traded across borders in the form of molecules or commodities (such as ammonia).

      The critical factor that will determine the cost-effectiveness of trade in hydrogen will be whether scale, technologies and other efficiencies can offset the cost of transporting the hydrogen from low-cost production areas to high-demand areas. To produce green hydrogen, renewable energy is converted to hydrogen through electrolysis, and this hydrogen is further processed to increase its energy density. The further processing may take the form of liquefaction, use of liquid organic hydrogen carriers, or conversion to ammonia, methanol, steel or synthetic fuels. The additional conversion steps translate into energy losses and therefore an increase in the cost per unit of energy delivered. These losses will be the same regardless of whether the conversion is done in an importing or an exporting region and thus will not be a differentiator when the final commodity is directly used without reconversion to hydrogen. Thus, to make trade cost-effective, the cost of producing green hydrogen must be sufficiently less expensive in the exporting region than in the importing region to compensate for the transport cost. This cost differential will become larger as the scale of projects increases and technology develops to reduce transport costs. Hydrogen trade can lead to a lower cost energy supply since cheaper (imported) energy is tapped into. It can also lead to a more robust energy system with more alternatives to cope with unexpected events.

      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.

      It explores a 1.5°C scenario in 2050, as laid out in IRENA’s World Energy Transitions Outlook (IRENA, 2022a), in which 12% of the final energy demand is supplied by hydrogen. The techno-economic analysis of the various technological pathways available for hydrogen transport (Part II of this report series [IRENA, 2022b]) is combined with a spatial analysis (Part III of this report series [IRENA, 2022c]) that estimates the technical potential of hydrogen produced using renewables (green hydrogen) and the cost this would entail for the entire world. The analysis is based entirely on cost optimisation and does not consider such factors as energy security, political stability or economic development, among others, that may also impact the trade outlook. Most of these additional factors are explored in a parallel IRENA report on hydrogen geopolitics (IRENA, 2022d). The analysis focuses on two commodities – green hydrogen and ammonia – and will be extended to other commodities in the future.

      By 2050 in this 1.5°C scenario, about one quarter of the total global hydrogen demand¹ (equivalent to 18.4 exajoules [EJ] per year or about 150 megatonnes [Mt] 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 (IRENA, 2022b). This pipeline-enabled trade would be concentrated in two regional markets: Europe (85%) and Latin America (see FIGURE 0.2). The remaining 45% of the internationally traded hydrogen would be shipped, predominantly as ammonia, which would mostly

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