A profuse literature on hydrogen is coming forth from companies, governments, and energy market analysts. All are seeking the most likely paths forward for what is anticipated to be a key energy intermediary in a future carbon-free economy.
It is all conceptual for now, as hydrogen production for industrial use remains quite carbon-intensive. It looks to later in the 2020s and 2030s, when hydrogen’s importance as an energy store and carrier should emerge. Hydrogen may prove indispensable for energy storage in the power sector, and for the sector coupling that interconnects energy users and power sources.
A widespread view, held by the major energy agencies and others, is that ‘hydrogen hubs’ will play an important role in getting carbon-free hydrogen going. These industrial locales, in which electrolysis facilities are located in close proximity to industrial users, shipping and transport infrastructure, should offer scale efficiencies. Numerous regional plans to achieve such concentrations are now appearing.
Of course growing demand in these hubs in the northern latitudes, combined with growing demand for storage capacity in national power grids, should eventually exceed local capacity to supply carbon-free hydrogen. This likelihood is invoking the other pole of current regional planning for clean hydrogen, which is planning for major global supply areas. It is focused on how to develop source regions of carbon-free hydrogen and its derivatives (ammonia, methanol) in order to generate export income.
Source regions in more southerly latitudes may be able to leverage their bountiful solar and wind resources, achieving a combination of low clean power prices and high electrolyzer utilization rates to produce carbon-free hydrogen at low cost. They may well become “renewable energy superpower regions,” in the words of Michael Liebreich, Chairman & CEO, Liebreich Associates and Founder & Senior Contributor, Bloomberg New Energy Finance.
Assessing superpower regions
The major energy agencies anticipate the emergence of ‘green hydrogen corridors’ and shipping routes that will link hubs to regions rich in renewable energy. The latter naturally include parts of southern Europe, the southern U.S., Brazil, Chile, China, India and Mexico. Regions of apparently great potential include Australia and the Middle East and North Africa (MENA).
The varying cost factors in the production of low cost clean energy would seem to favor these places to produce cheap hydrogen. However they will also rely on their capacity to transport it cheaply, by pipeline or by ships at sea. Transport costs remain a great unknown for now. Related: U.S. Oil Executives Cautiously Optimistic About 2021
The International Renewable Energy Agency (IRENA), in its recently published report Green Hydrogen: A guide to policy making, asserts that much of the infrastructure for transport need not be developed from nothing, but can be built up by repurposing existing natural gas networks and power grids even across international boundaries and waters. These exist notably between North Africa and Europe across the Mediterranean.
Nevertheless, the establishment of the first international trading routes for hydrogen and/or its derived products will await considerable technological innovation. The International Energy Agency (IEA), in its recent investigations of clean energy technologies, identifies hydrogen as one of four critical technology value chains that must be further developed.
In its 2019 report The Future of Hydrogen, the IEA sees plenty of room for optimism. The agency asserts that because the cost of carbon free hydrogen production will likely vary among countries and regions, shipping hydrogen between them could emerge. Europe and Japan, with their strong policy support for hydrogen, and relatively high costs, are likely importers. The report sees opportunity to export to the world’s largest LNG importers: Japan, Korea and China. This offers particular promise for Australia, which is already the largest LNG exporter in the region.
Two regions to watch
In more sunny parts of the earth, countries are advancing beyond planning for hydrogen export to the actual early stages of project development. The most notable characteristic of the projects is their sheer size.
If any country is well positioned it is Australia, with enormous coal and renewable energy resources. Its National Hydrogen Strategy, released in late 2019, prioritizes developing an export market to meet demand in Japan, Korea and Singapore. It is moving forward to support the development of new electrolyzer facilities.
An enormous renewables-to-hydrogen project is now in advanced planning stages for the Pilbara region in Western Australia. Called the Asian Renewable Energy Hub, it encompasses wind and solar energy production on some 2,500 square miles. Large-scale production of carbon-free hydrogen and ammonia for export is a main objective.
Given priority status by the Australian government, the project is led by a consortium that includes the Australian renewables developer CWP Renewables, US-based InterContinental Energy, and turbine manufacturer Vestas.
The first stage of the project, for development of 15GW of renewable power, recently received environmental approval. This includes the installation of solar panels and more than 1,700 wind turbines, and the development of a power transmission network that could include subsea cables to Singapore. The developers, however, are focusing on supplying renewable electricity to the local region, construction of a desalination plant, and production of carbon-free hydrogen for export. The first exports should occur in 2027-08, while the project itself could expand to 26GW of wind and solar capacity.
Another region viewed by many with great export potential is the Middle East and North Africa. Intense sunlight, extensive windy areas, and nearness to major markets in both Asia and Europe should leave MENA well positioned to gain export income from hydrogen. While several countries are undertaking serious planning, Saudi Arabia is the furthest advanced on a major project. Another big project is edging toward actual development in Oman.
The Saudis intend to build an enormous hydrogen production facility at NEOM, the planned city and special economic zone in KSA’s northwest on the Red Sea. NEOM is being developed by a company of the same name, wholly owned by the country’s Public Investment Fund. It is to be powered entirely by renewable energy.
In an agreement announced last summer, NEOM's first major energy project will produce carbon-free hydrogen by electrolysis. Owners include Saudi-based ACWA Power, US-based industrial gases firm Air Products, and NEMO. Air Products will cooperate with Thyssenkrupp Uhde Chlorine Engineers Ltd. Thyssenkrupp, which will supply electrolyzer equipment and technical services. A first phase electrolysis plant will be built and operated by Air Products.
Known as Helios Green Fuels Project, the project will integrate more than 4GW of renewable energy generated from solar and wind energy with storage. It will deliver 650 metric tons of carbon-free hydrogen per day and 1.2 million metric tons of green ammonia annually for export, beginning in 2025. Air Products will supply the green ammonia globally by means not yet identified although possibly by pipeline. Related: OPEC+ Meeting Ends With Major Surprise Cut From Saudi Arabia
Another project now in advanced planning will seek to integrate carbon-free hydrogen into Oman’s petrochemicals sector, employing the country’s sunshine and coastal winds for this. Planning is centered on the growing industrial port city Duqm, a refinery and industrial center with a large special economic zone.
Hyport Duqm Green Hydrogen is a joint project of DEME, a Belgium-based marine engineering and offshore energy developer, and OQ Alternative Energy, a division of Oman’s OQ petrochemicals conglomerate. Launched in December, the project is now in design and engineering although without an announced timeline.
The developers want to supply green hydrogen to the country’s chemical industry, as well as to provide carbon-free hydrogen and derivatives for export to Europe. This may begin with export to industries at the Port of Antwerp, which is a partner with DEME at Duqm. A large part of the Duqm zone will be dedicated to renewable energy production and a hydrogen production plant with up to 500MW electrolyzer capacity in the project’s first phase, which could be scaled up in later phases.
A competitive space
Robin Mills, CEO of Qamar Energy in Dubai, believes these projects are feasible but sees some significant challenges specific to the MENA region.
“The NEOM project has strong backers and plans to start hydrogen production by 2025, which sounds feasible though Saudi renewable projects have not moved very quickly,” he says. “Duqm is clearly at a much earlier stage and with less experienced partners.”
“The challenge is that hydrogen can be an important part of a decarbonized economy, and produce new export products, but it won’t generate the same large rents as oil and gas,” says Mills.
“Australia, Chile, North Africa and other areas, including north-west Europe’s offshore wind, also have good conditions for producing green hydrogen and derivatives, so this will likely be a competitive space.”
By Alan Mammoser for Oilprice.com
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