Clean hydrogen is one of the buzzwords of the decade. It will no doubt become a much larger part of our lives in the near future than it is today – but perhaps not in the way everyone is talking about it.
Will hydrogen have a key impact in fighting climate change or is it a hype? It is both
We are here to discern real from hype.
Over the past months, talking with dozens of experts has helped us to separate signal from noise. We used data from some of the world’s most respected institutions and created bottom-up models to build predictions where there were none. Some of the findings surprised us and others didn’t.
Fuel cell cars are dead. Long live the fuel cell truck.
Trains will become one of the biggest use cases for clean hydrogen
100 million tons of grey hydrogen will turn blue before green
How hydrogen will use the summer sun to keep the lights on in the winter
Hydrogen is going to recycle your coke cans
Scroll down to the end to see our forecast for clean hydrogen demand by industry sector in 2030.
First – Fuel cell cars are dead. Long live the fuel cell truck.
For decades governments, companies, and the media have been portraying a future of fuel cell cars (fuel cell electric vehicle or FCEV) with the only drops of water coming from the exhaust.
By now, most of the world agrees that there is no future for FCEV. At the very latest, last year’s announcement by the Volkswagen group, the largest car manufacturer in the world, to stop all fuel cell development efforts should have been the death knell for FCEVs. The well-to-wheels efficiency of battery electric vehicles (BEV) of over 80% beats the 40 to 50-odd % achievable with fuel-cell vehicles any day, making BEVs win on operating costs by far. At the same time, range is increasingly not a concern for BEVs.
If this is so obvious, why is California in the process of more than tripling the number of hydrogen refuelling stations from 49 to over 170?
Long haul trucking. Class 8 trucks are the heavy-duty trucks that are the backbone of most in-land supply chains. 70% of all energy used in trucking is by class 8 and above trucks with many long routes.
For shorter routes, trucks powered by batteries will win purely based on economics. However, for long routes, this is unrealistic. In order to achieve a 500-mile range with a Class 8 truck, 20% of the payload would be used for batteries, meaning that 20% less mass can be carried. If this wasn’t bad enough, building out the immense infrastructure required to charge dozens of trucks at their overnight stops at the same time is cost-prohibitive.
We expect trucks powered by fuel cells to dominate long-haul trucking in the future. Companies like Volvo, Daimler and Hyzon are leading the charge and governments from California to the EU and India will incentivise their adoption.
We estimate that by 2030, global long haul trucking could consume 2.7 million tons of clean hydrogen globally a year in our base case model, with an upper range of 4.7 million tons.
Second – Rail might be one of the biggest transportation use-cases for green hydrogen in 2030
Trains are often thought of as a green transportation alternative. However, while they represent a small share of overall greenhouse gas emissions, they are far from insignificant. Under 30% of worldwide rail has been electrified and the investment required to upgrade lines can not only be prohibitive but also often doesn’t make economic sense given low utilization and vast distances.
In Germany, a hydrogen fuel cell train built by Alstom has successfully completed its trial period and will start commercial operations in March this year. Meanwhile, Caltrans’ recent study of zero-emission options showed that hydrogen fuel cell trains are the preferred option to reach their 100% GHG emission reduction target by 2035.
Battery-electric trains have been proposed as an alternative with trials underway across the world. However, fuel cell trains have a key advantage over battery-electric ones: the range of battery electric trains is limited to roughly 300km – far too little for long-distance transportation – and on top of that requires long recharge times. Fuel cell trains can operate in the same patterns as today while requiring little investment in new infrastructure. In the US, an additional driver is the need for interoperability of the largely privately owned train lines.
We believe that operational considerations will drive adoption of fuel cell trains on both regional and long-haul routes which lack electrification. While Liebreich might put rural trains almost on the bottom of this hydrogen ladder, we see both long-distance and regional trains right up there for new clean hydrogen use cases.
Our modeling suggests that fuel cell trains globally will use 2.1 million tons of clean hydrogen in 2030, with an aggressive upper bound of 5 million tons.
Third – 100 million tons of grey hydrogen will turn blue before green
Hydrogen is a colorful commodity, from green to purple, yellow, turquoise, and blue, the hydrogen rainbow keeps expanding. Unfortunately, reality is slightly less colourful as roughly 95% of today’s hydrogen is grey or fossil-based.
Today’s hydrogen industry (also referred to as the old hydrogen industry) consists primarily of big industrial use-cases such as fertiliser production, oil refining and methanol production.
The speed at which we will see the transition to clean hydrogen in the industry will be very dependent on regulatory push and customer pull. The fertiliser industry is an example where there are neither significant incentives nor customer demand driving decarbonization. On the other end of the spectrum, steel is a great example where car OEMs and their customers are pushing for green steel in their transition towards low-carbon supply chains – for example, Volvo recently started sourcing green steel from SSAB. While the latter players ultimately aim to switch to 100% green hydrogen (hydrogen produced through water-splitting in an electrolyzer powered by renewable electricity), we believe the short-term future will look different.
Given the high capital cost of existing hydrogen production infrastructure (typically steam methane reformers), the more economic solution today is to retrofit existing hydrogen production equipment with concentrated carbon capture, so-called blue hydrogen. Talking about blue hydrogen, it is important to realise how dependent the cost of carbon capture is on the concentration of CO2. The concentration of CO2 in an SMR exhaust gas is 50%, making the CO2 very easy to capture and adding only about $0.19 per kilogram. Flue (exhaust) gasses post-fossil fuel combustion typically consist of ~10% CO2, which makes the CO2 capture significantly more challenging and hence expensive. Both fit in the point source capture category and are significantly easier and cheaper than capturing CO2 from atmospheric air (so-called direct air capture).
In the longer term, when existing SMR plants will be fully depreciated and will need to be replaced, electrolysers will take their spot in most regions in the world. In regions with decent conditions for renewables deployment, the price of 100% clean electricity will have dropped below 2-3 cents per kWh, which will likely push the cost of green hydrogen below that of grey hydrogen.
In other regions with lower availability of renewable energy sources (such as Poland) or very low natural gas prices (such as Russia), blue hydrogen might remain the most viable option to decarbonise for the next decade or two.
Fourth – How hydrogen will use the summer sun to keep the lights on in the winter
Recent analysis from the National Renewable Energy Laboratory (NREL) has proven that hydrogen has the greatest potential amongst existing alternatives for seasonal energy storage.
Batteries are far more efficient and hence economically viable than hydrogen-based options when it comes to short-term storage. However, hydrogen becomes an attractive solution for discharge durations beyond 20-45 hours.
As an example, excess solar electricity during summer can be used to produce green hydrogen, which can be stored in the form of hydrogen, ammonia, or other derivates for multiple months, to be used as an energy source in winter. In this way, hydrogen will be an effective way to mitigate seasonal demand-supply imbalances, an indispensable component to enable high to very high shares of intermittent renewable energy including solar and wind.
Hydrogen can be reconverted back into electricity through a fuel cell or used directly as a fuel. While we disagree with Elon Musk’s statement that fuel cells are “extremely silly”, we acknowledge that the 60% full-cycle losses (electricity – H2 – electricity) versus 15% for battery storage remain a challenge. This is why we don’t expect green hydrogen will be used for electricity generation until renewable prices fall significantly and technology advances further. In the meantime, combusting hydrogen (incl. derivatives) for heat or using it is a fuel (precursor) will dominate.
Besides seasonal storage, hydrogen is expected to play a big role in multi-day storage too. This will become increasingly crucial in regions such as Sweden with a high share of wind energy. While hydrogen can be produced during periods of strong winds, the hydrogen can be used in the industry or potentially reconverted to electricity when winds are low.
All of this leads us to believe that a yearly ~10 million tons of clean hydrogen will be produced for long-term storage by 2030, and that will only be the tip of the iceberg.
Fifth – Hydrogen is going to recycle your coke cans
There are many industrial applications where clean hydrogen could be used to decarbonise processes, but only a few where it will likely proliferate. The most suitable use case is high-temperature heat (>400 degrees C or >750 degrees F). Roughly 9% of global emissions come from industrial heat and circa half the global industrial heat demand is for high-temperature heat, predominantly from metals processing, chemicals, and cement. Potential applications in iron/steel have been covered widely, but many others are often overlooked.
Coke cans: 80% of Aluminum production in the US is so-called secondary production – recycling. Secondary production is typically done in natural gas-fired furnaces at temperatures of ca 750 degrees C. These furnaces could be modified to use clean hydrogen instead at relatively little cost.
Other significant applications for hydrogen in industrial heat include cement production (8% of global heat today), glass production, and specialty paper production.
Competing technologies include biofuels, electric heating, and carbon capture and utilisation/storage (CCUS). CCUS may be the only solution for some processes ill-suited to fuel switching and electric will likely win for many new builds. Biofuels can be effective in replacing fuels in existing plants but may incur high additional costs and the 2nd order emissions from biofuels are questionable. This leaves clean hydrogen as the fuel of choice for converting existing plants – particularly for applications burning natural gas today where switching costs are comparatively low.
We estimate that a base case of 4.4 million tons clean hydrogen will be used in industrial processes in 2030, with an aggressive upper bound of 9.9 million tons.
Global Hydrogen Demand Outlook
Taking all the considerations into account, we mapped out an estimate of how hydrogen volumes could look like in 2030, split by both use-case and hydrogen type. While the shades of brown represent the “old” hydrogen use-cases, the shades of gray represent the “new” ones. The dashed areas represent indirect use-cases of hydrogen, e.g. through e-methanol or e-fuels. We expect these new use-cases and clean hydrogen types to gradually take over the industry. We expect governments, companies and others to seize their chance to enable clean hydrogen to fulfill its long-term potential.
Be on the lookout for our next post shedding light on hydrogen production.