The Global Hydrogen Flows report, co-authored by McKinsey, identified more than 40 prospected trade routes of hydrogen or hydrogen equivalent derivatives with the capacity to transport more than one million tonnes per year by ship or pipeline.
It estimated that 400 out of the 660 million tonnes of hydrogen and its derivatives needed for carbon neutrality by 2050 will be transported over long-distances, with 190 million tonnes crossing international borders.
The study predicts that $150bn in investments will be needed by 2030, scaling to $1.5 trillion by 2050 on a cumulative basis to enable the required scale of trade, compared to the current global energy infrastructure investments of $500bn annually.
The report estimates that in a ‘cost-optimal’ world, around 50% of hydrogen trade would use pipelines, while synthetic fuels, ammonia, and sponge iron, transported on ships will account for approximately 45%.
Bernd Heid, Senior Partner at McKinsey & Company, commented, Hydrogen and its derivatives will become widely traded, reducing supply costs by as much as 25%. This means we now need to develop the pipeline, shipping, and conversion infrastructure for a renewable energy system – by 2040 more than 100 million tonnes of hydrogen can be transported through pipelines, and by 2050 shipping of hydrogen and derivatives will be similar in size to LNG today.”
Despite pure hydrogen expected to be a localised business, primarily sourced domestically, or piped from nearby regions, the report suggests that hydrogen derivatives such as ammonia, methanol, synthetic kerosene, and direct reduced iron will be shipped around the world given relatively low transportation costs compared to production costs.
The expected trade flows could accelerate the hydrogen transition which the Hydrogen Council says can abate 80 gigatonnes of carbon dioxide until 2050, which Yoshi Kanehana, Chairman of Kawasaki Havey Industries and Co-Chair of the Hydrogen Council, said reinforces the need to advance the tradeable certification of hydrogen.
Kanehana, said, “The study shows that some 60% of the total volumes of clean hydrogen needed to support our global Net Zero targets will have to be transported over long distances. This reinforces the urgent need for advancing the development of mutually recognised robust and tradeable certification schemes for hydrogen – an issue we are actively working on in the Hydrogen Council together with our international partners.”
According to the Hydrogen Council, the evolution of hydrogen trade flows is expected to take place in four distinct stages, beginning with shipping by 2025, followed by long-distance pipelines by 2030, shipping and pipeline reaching scale by 2040, and a fully matured market by 2050.
Tom Linebarger, Executive Chairman, and Chairman of the Board of Cummins, and Co-Chair of the Hydrogen Council, said,” This report is part of the Hydrogen Council’s continued efforts to progress the conversation and policy impacting deployment of hydrogen solutions around the world. In particular, this report highlights the importance of trade and the role that hydrogen will play to decarbonise energy systems globally at a massive scale and proposes some promising solutions to do just that.”