Today’s hydrogen production is small and dirty, though its future is bright! The annual production is about 90 million tonnes with global revenues in the region of USD 150 billion. To achieve today’s production, about 6% of annual gas and 2% of annual coal production are being used.
The production of hydrogen is relatively complex and requires some thermodynamics that in essence consume more energy than the actual output when hydrogen is being used. Given this, today hydrogen is only used within some niche or high-value processes or when no other opportunity is available. First and foremost, it is used by refineries to produce methanol that is being implemented by all sorts of polymers. Then, another junk of the hydrogen production is being absorbed for the production of ammonia, which is the world’s most popular artificial fertilizer.
What about tomorrow market opportunity?
According to a research paper from Morgan Stanley, the production has to grow to at least 500 million tonnes—yet, it has to become clean, i.e., green hydrogen. Goldman Sachs estimates that by 2050 the usage will be approximately heating 14%, industrial feedstock 20%, industrial energy 10%, transportation (heavy-duty and rail) 33%, power generation 18%, and existing base demand at 6%.
The move towards clean hydrogen
The European Union’s hydrogen strategy stipulates that “From 2030 onwards and towards 2050, renewable hydrogen technologies should reach maturity and be deployed at large scale to reach all hard-to-decarbonize sectors”. To achieve this, industry conglomerates and public funds will spend on average around USD 15 billion annually until 2030.
The advantage of hydrogen is that it can be stored, unlike electricity which is being used to produce it. Therefore, the electricity generated from renewable resources needs to be sufficient enough to support the electrolysis process which in essence splits water molecules into hydrogen and oxygen. While the upstream process is being put in place (for the production of clean hydrogen), the downstream process needs to be developed too. Producing clean hydrogen is one part, but the main function is affordable hydrogen in bulk used to replace some dirty industry processes, like heating, amongst others.
Pending production procedure, hydrogen is rated black (coal), grey (natural gas), nuclear power (pink), pyrolysis (turquoise), and renewable energy (green). Based on the energy input, the cost to produce one kilogram of hydrogen ranges from USD 1/kg (black) to USD 5/kg (green). Government initiatives aim to slash the production cost by roughly 80%—similar cost reduction ratios were achieved for solar panels and batteries once the processes were standardized and there was some end-market building up.
The addressable market
Since input of energy is greater than the output, its use of hydrogen needs to be well planned and truly integrated into the entire process flow, from A to Z. Hydrogen is not the ideal device to balance out short-term grid imbalances; batteries and smart-grid technologies are cheaper and more efficient for this. The opportune use of hydrogen is when it comes to long-term and intensive usage of energy so that seasonal imbalances can be covered. [Download here the Hydrogen Opportunitis]
Opportune areas for the use of hydron are:
- Steelmaking: Coking coal accounts for about 8% of today’s greenhouse-gas emissions. The process of direct-reduction (using blue and green hydrogen) is expected to reduce this ratio over time. ArcelorMittal, US Steel, Hybrit, and Equinor are moving toward the delivery of green steel. [Download here the Steelmaking Opportunitis]
- Cement ovens and glassmaking: These are two other areas where high temperatures are required to produce the required output. Companies like Holcim, Anhui Conch, China National Building Materials, HeidelbergCement, Cemex, and Italcementi, amongst others, are exposed to the same challenge to achieve zero-carbon emissions. The use of blue and green hydrogen will help reduce their liabilities. [Download here the Cement & Glassmaking Opportunitis]
- Aviation and shipping: ZeroAvia, a startup backed by BA and Amazon, completed the first fuel-cell-powered flight in a commercial-sized aircraft in Britain some time ago. In a similar manner, ferry operations in Norway and America are experimenting with hydrogen-powered engines. The issue here, though, is the density of hydrogen. If hydrogen is not pressurized, aka cooling it down to -253°C, it would mean that for an over-Atlantic flight all cargo and passenger space would be required for the placement of the hydrogen tanks. Hence the challenges for Airbus, Boeing, and the like is to optimize the use of synthetic hydrocarbons. [Download here the Air, See, Landtransport Opportunitis]
- Heavy machinery: America’s Cummins und France’s Alstom are pioneering electrolyzers. fuel cells, and hydrogen tanks. Alstom assumes that by 2023 some 5,000 diesel trains are to be retired and replaced by hydrogen whizzy engines. [Download here the Heavy Machinery Opportunitis]
Graphical representation where hydrogen is most likely succeeding:
