01 POWER ISLAND / 02 H2+NH3 / The_Future_of_Hydrogen-IEA-2020

Total cost of delivering and storing hydrogen

The full cost of hydrogen delivery to end users must take into account all possible stages of the supply chain. The different hydrogen carriers and modes of transport have very different conversion, transmission, distribution, storage and reconversion costs. While one option may be cheaper for a specific part of the value chain, this may be offset by higher costs in another part of the chain. The various technologies involved are also at different degrees of maturity and so have very different future cost reduction potentials. There may be scope for synergies between energy, heat and storage requirements. For example, if the specific value chain in question has higher energy requirements at the export terminal than at the import terminal (e.g. liquid hydrogen), this could improve the relative cost and emission dynamics compared with the reverse case (e.g. LOHCs).

The overall cost of delivering hydrogen will vary according to the infrastructure available in the exporting and importing countries, transmission and distribution distances, the method of transport, and end-use demand. Despite the many uncertainties around most of these cost components, IEA analysis suggests that for inland transmission and distribution, hydrogen gas is the cheaper option for distances below around 3 500 km (Figure 29). Above this distance, ammonia pipelines would be the cheaper option. Comparing transport using pipelines and ships, transmission and distribution of hydrogen gas by pipeline is cheaper for distances below around 1 500 km. Above this distance, LOHC and ammonia transport by ship, which are broadly similar in terms of their full costs, become the cheaper delivery options. The transport and use of ammonia or some LOHCs may, however, give rise to potential safety and public acceptance issues, which could limit their application in some situations.

Figure 29. Full cost of hydrogen delivery to the industrial sector by pipeline or by ship in 2030 for different transmission distances

Notes: Hydrogen production cost = USD 3/kgH2; assumes distribution of 100 tpd in a pipeline to an end-use site 50 km from the receiving terminal. More information on the assumptions is available at www.iea.org/hydrogen2019.

Source: IEA 2019. All rights reserved.

Delivering hydrogen to the industrial sector is cheaper by pipeline for transmission distances below 1 500 km; above this distance LOHC and ammonia are cheaper options.

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Chapter 4: Present and potential industrial uses of hydrogen

•Hydrogen use today is dominated by industrial applications. The top four single uses of hydrogen today (in both pure and mixed forms) are: oil refining (33%), ammonia production (27%), methanol production (11%) and steel production via the direct reduction of iron ore (3%). Virtually all of this hydrogen is supplied using fossil fuels. These existing uses of hydrogen underpin many aspects of the global economy and our daily lives. Their future growth depends on the evolution of demand for downstream products, notably refined fuels for transport, fertilisers for food production, and construction materials for buildings.

•More than 60% of hydrogen used in refineries today is produced using natural gas. Tougher

air pollutant standards could increase the use of hydrogen in refining by 7% to 41 MtH2/yr by 2030, although further policy changes to curb increases in oil demand could dampen the pace of growth. Current global refining capacity is generally thought sufficient to meet rising oil demand, which implies that the majority of future hydrogen demand is likely to arise from existing facilities already equipped with hydrogen production units. This suggests an opportunity for retrofitting CCUS as a suitable option to reduce related emissions.

•Demand for ammonia and methanol is expected to increase over the short to medium term, with new capacity additions offering an important opportunity to scale up low-emissions hydrogen pathways. Greater efficiency can reduce overall levels of demand, but this will only partially offset demand growth. Whether via natural gas with CCUS or electrolysis, the technology is available to provide the additional hydrogen demand growth projected for

ammonia and methanol (up 14 MtH2/yr by 2030) in a low-carbon manner. As a priority, substituting low-emissions pathways for any further coal-based production without CCUS would significantly help cut emissions.

•In the longer term, steel and high-temperature heat production offer vast potential for lowemissions hydrogen demand growth. Assuming that the technological challenges that currently inhibit the widespread adoption of hydrogen in these areas can be overcome, the key challenges will be reducing costs and scaling up. In the long term it should be technically possible to produce all primary steel with hydrogen, but this would require vast amounts of lowcarbon electricity (around 2 500 TWh/yr, or around 10% of global electricity generation today) and would only be economic without policy support at very low electricity prices.

Most hydrogen today is used in three industrial sectors: oil refining, chemicals and iron and steel. Production of hydrogen to meet the needs of these sectors is at a commercial scale and is almost entirely from natural gas, coal and oil today, with associated environmental impacts. However, the technologies are available to avoid the emissions from this fossil fuel use by producing and supplying low-carbon hydrogen. In some cases these alternatives are already deployed where policy and economics are supportive. Table 4 provides an overview of the current and likely future industrial uses of hydrogen.

This chapter explores how hydrogen is currently used in the refining, chemicals and iron and steel sectors. It reviews the current trends for hydrogen demand in these sectors and the options for addressing the emissions related to supplying hydrogen for these existing uses. It concludes with a discussion of the ways in which significant new markets for hydrogen in industrial applications could emerge if hydrogen were used to satisfy a much higher share of the inputs to steelmaking globally or as a source of high-temperature heat with no direct emissions.