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Released September 22, 2023 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The hydrogen industry continues to struggle with the familiar chicken-and-egg challenges of many emerging industries: Will future demand be enough to convince manufacturers to commit to making new supply, and will there be enough future supply to meet projected demand?
It's a challenge explored in depth in a new report from the International Energy Agency (IEA) (Paris, France), Global Hydrogen Review 2023, which was released today. Overhanging all the numerous supply-and-demand questions is the nascent state of the electrolyzer supply chain. Electrolyzers are expensive pieces of equipment that split water into its constituent elements, hydrogen and oxygen. Hydrogen produced using renewable energy is termed "green" hydrogen, while hydrogen produced with electricity generated from fossil fuel with carbon capture, utilization and storage (CCUS) is called "blue" hydrogen.
Industrial Info is tracking more than 1,500 active hydrogen projects under development globally, with aggregate value exceeding $370 billion. But when focusing exclusively on projects with a medium-to-high likelihood of kicking off construction according to their initial schedule, that list winnows to about 980 projects valued at approximately $187 billion.
Industrial Info defines "medium" probability projects as having a 70% to 80% probability of maintaining their schedules while "high" projects are defined as having an 81% to 99% chance of holding to their original construction schedules.
The world regions with the greatest dollar value of "medium" and "high" probability hydrogen projects include North America, Europe, Asia and South America.
And while the IEA prefers hydrogen produced by renewable electric generation, hydrogen produced using fossil fueled power plants equipped with CCUS is better for the environment than hydrogen produced using electricity from power plants not equipped with CCUS.
Worldwide, hydrogen production grew 3% in 2022, to about 95 million tonnes, the report said. Unfortunately, about 21% of the hydrogen produced in 2022 relied on coal-fired generation without CCUS, mainly in China. Slightly more than 60% of hydrogen produced in 2022 relied on electricity produced by gas-fired power plants lacking CCUS, the agency said. Coal-fired generators with CCUS accounted for less than 1% of hydrogen produced last year, the IEA report said.
Producing so much hydrogen using natural gas meant that hydrogen production released about 900 million tonnes of carbon dioxide (CO2) into the atmosphere last year, the report estimated.
To rapidly nurture the growth of the low-carbon (i.e., "green") hydrogen industry, an important front in the battle to contain climate change, the IEA urged governments to more actively intervene in markets to provide greater certainty, leading to an expansion of demand and supply.
"We have seen incredible momentum behind low-emissions hydrogen projects in recent years, which could have an important role to play in energy-intensive sectors such as chemicals, refining and steel," IEA Executive Director Fatih Birol said in a statement accompanying the release of Global Hydrogen Review 2023. "But a challenging economic environment will now test the resolve of hydrogen developers and policymakers to follow through on planned projects. Greater progress is needed on technology, regulation and demand creation to ensure low-emissions hydrogen can realize its full potential."
The agency noted that "transforming momentum around hydrogen into deployment remains a struggle."
It details some of the added challenges facing the hydrogen industry since Russia's invasion of the Ukraine in February 2022 led to a worldwide energy crisis: "Against the backdrop of a global energy crisis, high inflation and supply-chain disruptions, new projects face rising costs, at least temporarily, that threaten long-term profitability. Inflation and more expensive borrowing costs are affecting the entire hydrogen value chain, driving up financing costs for developers and reducing the impact of government support. This confluence of factors is particularly detrimental for an industry that faces high upfront costs related to equipment manufacturing, construction and installation."
The report suggests several steps for governments to reduce risk and improve the economic feasibility of low-emissions hydrogen, such as effective delivery of support schemes; bolder action to stimulate demand; and addressing market barriers such as licensing and permitting. Moreover, establishing international markets in hydrogen requires cooperation to develop common standards, regulations and certifications.
Specifically, the IEA report recommended governments:
In the near term, the report said the best prospects for low-emissions hydrogen use are in hard-to-abate industrial sectors, by replacing hydrogen produced from unabated fossil fuels. Unfortunately, progress there has been slow, the energy agency observed. The lack of attention to hydrogen demand creation is illustrated in existing country commitments.
The sum of all government targets for low-emissions hydrogen production accounts for up to 35 million tonnes today, but targets for creating demand account for just 14 million tonnes, only half of which is focused on existing hydrogen uses. Direct purchase agreements with private sector consumers are beginning to emerge but remain at a very small scale.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
It's a challenge explored in depth in a new report from the International Energy Agency (IEA) (Paris, France), Global Hydrogen Review 2023, which was released today. Overhanging all the numerous supply-and-demand questions is the nascent state of the electrolyzer supply chain. Electrolyzers are expensive pieces of equipment that split water into its constituent elements, hydrogen and oxygen. Hydrogen produced using renewable energy is termed "green" hydrogen, while hydrogen produced with electricity generated from fossil fuel with carbon capture, utilization and storage (CCUS) is called "blue" hydrogen.
Industrial Info is tracking more than 1,500 active hydrogen projects under development globally, with aggregate value exceeding $370 billion. But when focusing exclusively on projects with a medium-to-high likelihood of kicking off construction according to their initial schedule, that list winnows to about 980 projects valued at approximately $187 billion.
Industrial Info defines "medium" probability projects as having a 70% to 80% probability of maintaining their schedules while "high" projects are defined as having an 81% to 99% chance of holding to their original construction schedules.
The world regions with the greatest dollar value of "medium" and "high" probability hydrogen projects include North America, Europe, Asia and South America.
And while the IEA prefers hydrogen produced by renewable electric generation, hydrogen produced using fossil fueled power plants equipped with CCUS is better for the environment than hydrogen produced using electricity from power plants not equipped with CCUS.
Worldwide, hydrogen production grew 3% in 2022, to about 95 million tonnes, the report said. Unfortunately, about 21% of the hydrogen produced in 2022 relied on coal-fired generation without CCUS, mainly in China. Slightly more than 60% of hydrogen produced in 2022 relied on electricity produced by gas-fired power plants lacking CCUS, the agency said. Coal-fired generators with CCUS accounted for less than 1% of hydrogen produced last year, the IEA report said.
Producing so much hydrogen using natural gas meant that hydrogen production released about 900 million tonnes of carbon dioxide (CO2) into the atmosphere last year, the report estimated.
To rapidly nurture the growth of the low-carbon (i.e., "green") hydrogen industry, an important front in the battle to contain climate change, the IEA urged governments to more actively intervene in markets to provide greater certainty, leading to an expansion of demand and supply.
"We have seen incredible momentum behind low-emissions hydrogen projects in recent years, which could have an important role to play in energy-intensive sectors such as chemicals, refining and steel," IEA Executive Director Fatih Birol said in a statement accompanying the release of Global Hydrogen Review 2023. "But a challenging economic environment will now test the resolve of hydrogen developers and policymakers to follow through on planned projects. Greater progress is needed on technology, regulation and demand creation to ensure low-emissions hydrogen can realize its full potential."
The agency noted that "transforming momentum around hydrogen into deployment remains a struggle."
It details some of the added challenges facing the hydrogen industry since Russia's invasion of the Ukraine in February 2022 led to a worldwide energy crisis: "Against the backdrop of a global energy crisis, high inflation and supply-chain disruptions, new projects face rising costs, at least temporarily, that threaten long-term profitability. Inflation and more expensive borrowing costs are affecting the entire hydrogen value chain, driving up financing costs for developers and reducing the impact of government support. This confluence of factors is particularly detrimental for an industry that faces high upfront costs related to equipment manufacturing, construction and installation."
The report suggests several steps for governments to reduce risk and improve the economic feasibility of low-emissions hydrogen, such as effective delivery of support schemes; bolder action to stimulate demand; and addressing market barriers such as licensing and permitting. Moreover, establishing international markets in hydrogen requires cooperation to develop common standards, regulations and certifications.
Specifically, the IEA report recommended governments:
- Urgently implement support schemes for low-emission hydrogen production and use
- Take bolder action to stimulate demand creation for low-emission hydrogen, particularly in existing hydrogen uses
- Foster international co-operation to accelerate solutions for hydrogen certification and mutual recognition of certificates
- Quickly ease regulatory barriers, particularly for project licensing and permitting
- Support project developers to maintain momentum during the inflationary period and to extend regional reach
In the near term, the report said the best prospects for low-emissions hydrogen use are in hard-to-abate industrial sectors, by replacing hydrogen produced from unabated fossil fuels. Unfortunately, progress there has been slow, the energy agency observed. The lack of attention to hydrogen demand creation is illustrated in existing country commitments.
The sum of all government targets for low-emissions hydrogen production accounts for up to 35 million tonnes today, but targets for creating demand account for just 14 million tonnes, only half of which is focused on existing hydrogen uses. Direct purchase agreements with private sector consumers are beginning to emerge but remain at a very small scale.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
