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The Making Mission Possible Series Making the Hydrogen Economy Possible: Accelerating Clean Hydrogen in an Electrified Economy April 2021 Version 1.2
Making Clean Electrification Possible
Accelerating Clean Hydrogen in an Electrified Economy
The Energy Transitions Commission (ETC) is a global coalition of
leaders from across the energy landscape committed to achieving net-
zero emissions by mid-century, in line with the Paris climate objective of
limiting global warming to well below 2°C and ideally to 1.5°C.
Our Commissioners come from a range of organisations – This report constitutes a collective view of the Energy
energy producers, energy-intensive industries, technology Transitions Commission. Members of the ETC endorse
providers, finance players and environmental NGOs – which the general thrust of the arguments made in this report
operate across developed and developing countries and but should not be taken as agreeing with every finding
play different roles in the energy transition. This diversity or recommendation. The institutions with which the
of viewpoints informs our work: our analyses are developed Commissioners are affiliated have not been asked to
with a systems perspective through extensive exchanges formally endorse the report.
with experts and practitioners. The ETC is chaired by Lord
Adair Turner who works with the ETC team, led by Faustine The ETC Commissioners not only agree on the importance
Delasalle. Our Commissioners are listed on the next page. of reaching net-zero carbon emissions from the energy
and industrial systems by mid-century, but also share a
Making Clean Electrification Possible: 30 Years to broad vision of how the transition can be achieved. The
Electrify the Global Economy and Making the Hydrogen fact that this agreement is possible between leaders from
Economy Possible: Accelerating Clean Hydrogen companies and organisations with different perspectives
in an Electrified Economy were developed by the on and interests in the energy system should give decision
Commissioners with the support of the ETC Secretariat, makers across the world confidence that it is possible
provided by SYSTEMIQ. They bring together and build on simultaneously to grow the global economy and to limit
past ETC publications, developed in close consultation global warming to well below 2˚C, and that many of the
with hundreds of experts from companies, industry key actions to achieve these goals are clear and can be
initiatives, international organisations, non-governmental pursued without delay.
organisations and academia.
The reports draw upon analyses carried out by ETC
knowledge partners SYSTEMIQ and BloombergNEF,
alongside analyses developed by Climate Policy Initiative,
Material Economics, McKinsey & Company, Rocky Mountain
Institute, The Energy and Resources Institute, and Vivid
Economics for and in partnership with the ETC in the past. Learn more at:
We also reference analyses from the International Energy www.energy-transitions.org
Agency and IRENA. We warmly thank our knowledge www.linkedin.com/company/energy-transitionscommission
partners and contributors for their inputs. www.twitter.com/ETC_energy
2 Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy
Our Commissioners
Mr. Marco Alvera, Mr. Mark Laabs, Mr. Andreas Regnell,
Chief Executive Officer – SNAM Managing Director – Modern Energy Senior Vice President Strategic
Development – Vattenfall
Mr. Thomas Thune Anderson, Mr. Richard Lancaster,
Chairman of the Board – Ørsted Chief Executive Officer – CLP Mr. Siddharth Sharma,
Group Chief Sustainability Officer
Mr. Manish Bapna, Mr. Colin Le Duc, – Tata Sons Private Limited
Interim CEO & President - WRI Founding Partner – Generation IM
Mr. Mahendra Singhi,
Mr. Spencer Dale, Mr. Li Zheng, Managing Director and CEO – Dalmia
Group Chief Economist – BP Executive Vice President – Institute Cement (Bharat) Limited
of Climate Change and Sustainable
Mr. Bradley Davey, Development, Tsinghua University Mr. Sumant Sinha,
Chief Commercial Officer Chairman and Managing Director
– ArcelorMittal Mr. Li Zhenguo, – Renew Power
President – LONGi Solar
Mr. Pierre-André de Chalendar, Mr. Ian Simm,
Chairman and Chief Executive Officer Mr. Martin Lindqvist, Founder and Chief Executive Officer
– Saint Gobain Chief Executive Officer and President – Impax
– SSAB
Dr. Vibha Dhawan, Lord Nicholas Stern,
Director-General, The Energy and Mr. Auke Lont, IG Patel Professor of Economics and
Resources Institute Chief Executive Officer and President Government - Grantham Institute
– Statnett - LSE
Mr. Agustin Delgado,
Chief Innovation and Sustainability Mr. Johan Lundén, Dr. Günther Thallinger,
Officer – Iberdrola SVP Head of Project and Product Member of the Board of Management
Strategy Office – Volvo Group – Allianz
Ms. Marisa Drew,
Chief Sustainability Officer & Global Dr. María Mendiluce, Mr. Simon Thompson,
Head Sustainability Strategy, Advisory Chief Executive Officer – We Mean Chairman – Rio Tinto
and Finance – Credit Suisse Business
Dr. Robert Trezona,
Mr. Will Gardiner, Mr. Jon Moore, Head of Cleantech – IP Group
Chief Executive Officer – DRAX Chief Executive Officer –
BloombergNEF Mr. Jean-Pascal Tricoire,
Mr. John Holland-Kaye, Chairman and Chief Executive Officer
Chief Executive Officer Mr. Julian Mylchreest, – Schneider Electric
- Heathrow Airport Managing Director, Global Co-Head of
Natural Resources (Energy, Power & Ms. Laurence Tubiana,
Mr. Chad Holliday, Mining) – Bank of America Chief Executive Officer - European
Chairman – Royal Dutch Shell Climate Foundation
Ms. Damilola Ogunbiyi,
Mr. Fred Hu, Chief Executive Officer Lord Adair Turner,
Founder and Chairman – Sustainable Energy For All Co-Chair – Energy Transitions
– Primavera Capital Commission
Mr. Paddy Padmanathan,
Dr. Timothy Jarratt, President and CEO – ACWA Power Senator Timothy E. Wirth,
Chief of Staff - National Grid President Emeritus – United Nations
Mr. Vinayak Pai, Foundation
Mr. Hubert Keller, Group President EMEA & APAC
Managing Partner – Lombard Odier – Worley Mr. Zhang Lei,
Chief Executive Officer
Ms. Zoe Knight, Ms. Nandita Parshad, – Envision Group
Managing Director and Group Head Managing Director,
of the HSBC Centre of Sustainable Sustainable Infrastructure Group Dr. Zhao Changwen,
Finance – HSBC – EBRD Director General Industrial Economy
– Development Research Center of
Mr. Jules Kortenhorst, Mr. Sanjiv Paul, the State Council
Chief Executive Officer Vice President Safety Health and
– Rocky Mountain Institute Sustainability – Tata Steel Ms. Cathy Zoi,
President – EVgo
Mr. Alistair Phillips-Davies,
CEO – SSE
Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy 3
Contents
2
The Energy Transitions Commission
3
Our Commissioners
6
Glossary
10
Introduction
Chapter 1 12
A vision for 2050: Hydrogen’s role in a zero-carbon, deeply electrified economy
I. Potential demand growth 14
Hydrogen’s advantages and disadvantages 16
Likely applications by sector 17
An illustrative scenario for hydrogen use by mid-century 22
II. Falling production costs and implications for the cost of decarbonisation 23
Options for zero-carbon hydrogen production 20
Potential for cost reductions: very large for green, more limited for blue 23
The long-term balance – green dominates except where gas prices are very low 26
The green cost premium in end use application – large at product level, but small for consumers 28
III. Transport, storage and international trade of hydrogen 36
Hydrogen transport options and costs 33
Alternatives to hydrogen transport 34
Storage options and costs 37
All-in costs, including conversion, transport and storag 44
International trade in 2050 – opportunities and choices: hydrogen, natural gas or electrons 45
4 Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy
Chapter 2 48
Scale-up challenges, required actions and investments
I. Critical scale and pace of cost declines 50
Electrolyser costs 50
Electricity prices – in part a function of electrolyser costs 54
II. Feasible paths to 2050 – the need to accelerate demand growth 58
Credible scale-up pathways to 2050 targets 58
Driving early demand 59
III. Key actions to enable production ramp-up 59
Green hydrogen production growth 59
Blue hydrogen ramp-up 62
Illustrative scenario for green versus blue hydrogen 63
IV. Developing hydrogen clusters 66
Hydrogen cluster archetypes 66
Factors determining optimal cluster development 69
V. Developing transportation and storage infrastructure 70
VI. Safety, quality and low-carbon standards 71
VII. Total investment needs 72
Chapter 3 74
Critical policy and industry actions in the 2020s
I. Critical targets for 2025 and 2030 76
II. Carbon pricing – an essential and powerful lever 77
III. Demand-side support – compensating the green premium sector by sector 77
IV Supply-side support – national targets and investment support for electrolyser capacity growth 80
V. R&D and deployment support for new technologies 80
VI. Hydrogen clusters development 83
VII Standards and Certifications 85
VIII. Summary of critical actions for policymakers, industry, finance, innovators and consumers 87
Concluding remarks 89
Acknowledgements 90
Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy 5
Glossary
Abatement cost: The cost of reducing CO2 Carbon emissions / CO2 emissions: We use including storage, distributed generation,
emissions, usually expressed in US$ per these terms interchangeably to describe demand response, EVs and their charging
tonne of CO2. anthropogenic emissions of carbon dioxide in equipment.
the atmosphere.
Aggregators: New market players that can Distribution System Operator (DSO):
bundle the energy consumption or generation Carbon offsets: Reductions in emissions of Emerging system operator capability
of several consumer-level electricity market carbon dioxide (CO2) or greenhouse gases to manage and optimise the transport
actors (i.e. Distributed Energy Resources) made by a company, sector or economy to of electrical power through the fixed
to engage as a single entity – a virtual compensate for emissions made elsewhere in infrastructure of a local distribution network.
power plant (VPP) – and sell this flexibility the economy. This includes procuring flexibility services
(i.e. ‘avoided’ electricity consumption from network users, managing local
through temporary reduction in electricity Carbon price: A government-imposed pricing generation and network congestion, and
consumption when there is high demand for mechanism, the two main types being either managing flows of energy from and to the
electricity) or electricity (e.g. from behind- a tax on products and services based on their wider electricity grid, coordinating with the
the-meter storage or distributed generation) carbon intensity, or a quota system setting a Transmission System Operator (TSO).
in power or ancillary service markets. cap on permissible emissions in the country
or region and allowing companies to trade Decarbonisation solutions: We use the
Autothermal Reforming (ATR): A catalytic the right to emit carbon (i.e. as allowances). term “decarbonisation solutions” to describe
process in which natural gas reacts with This should be distinguished from some technologies or business models that reduce
oxygen to produce hydrogen and CO2. companies’ use of what are sometimes called anthropogenic carbon emissions by unit of
“internal” or “shadow” carbon prices, which product or service delivered though energy
BECCS: A technology that combines are not prices or levies, but individual project productivity improvement, fuel/feedstock
bioenergy with carbon capture and storage to screening values. switch, process change or carbon capture.
produce energy and net negative greenhouse This does not necessarily entail a complete
gas emissions, i.e., removal of carbon dioxide Circular economy models: Economic models elimination of CO2 use, since (i) fossil fuels
from the atmosphere. that ensure the recirculation of resources might still be used combined with CCS/U,
and materials in the economy, by recycling (ii) the use of biomass or synthetic fuels can
Behind-the-meter: A generation or storage a larger share of materials, reducing waste result in the release of CO2, which would
system (e.g., rooftop solar PV, home in production, light-weighting products have been previously sequestered from
batteries) which produces power on site at and structures, extending the lifetimes the atmosphere though biomass growth or
a commercial, residential, or industrial site, of products, and deploying new business direct air capture, and (iii) CO2 might still be
behind the utility meter. models based around sharing of cars, embedded in the materials (eg, in plastics).
buildings, and more.
BEV: Battery-electric vehicle. Direct air capture (DAC): The extraction of
Combined cycle gas turbine (CCGT): An carbon dioxide from atmospheric air.
Biomass or bio-feedstock: Organic matter, assembly of heat engines that work in tandem
i.e. biological material, available on a from the same source of heat to convert it into Direct reduced iron (DRI): Iron (so called
renewable basis. Includes feedstock derived mechanical energy driving electric generators. “sponge iron”) produced from iron ore utilising
from animals or plants, such as wood and Newer CCGT models can be compatible with either natural gas or hydrogen. This DRI is
agricultural crops, organic waste from a retrofitting process to enable the plant then converted to steel in a second step
municipal and industrial sources, or algae. to switch from burning methane to burning called electric arc furnace (EAF). The DRI-
hydrogen for power generation. EAF is an alternative primary steel production
Bioenergy: Renewable energy derived
process enabling decarbonisation of the
from biological sources, in the form of solid Contract for difference (CfD): A contract traditional coke-fired blast furnace/basic
biomass, biogas or biofuels. between a buyer and seller that stipulates that oxygen furnace (BF-BOF).
the buyer must pay the seller the difference
Capital expenditure (CAPEX): Monetary
between the current value of an asset (spot Electrolysis: A technique that uses electric
investments into physical assets (e.g.,
price) and a pre-determined fixed contract current to drive an otherwise non-
equipment, plants).
value (strike price). Where public actors act spontaneous chemical reaction. One form of
as the buyer this model can be used to cover electrolysis is the process that decomposes
Carbon capture and storage or use (CCS/U):
the cost premium faced by green commodity water into hydrogen and oxygen, taking
We use the term “carbon capture” to refer
producers deploying low-carbon technologies place in an electrolyser and producing “green
to the process of capturing CO2 on the back
that are higher cost than traditional fossil hydrogen”. It can be zero-carbon if the
of energy and industrial processes. Unless
technology. For example, CfDs have been electricity used is zero-carbon.
specified otherwise, we do not include direct
used in the offshore wind industry where
air capture (DAC) when using this term. The
generators are reimbursed the difference Embedded carbon emissions: Lifecycle
term “carbon capture and storage” refers
between the fluctuating wholesale electricity carbon emissions from a product, including
to the combination of carbon capture with
prices and a fixed strike price, typically carbon emissions from the materials input
underground carbon storage; while “carbon
determined via a public auction. Under a ‘two- production and manufacturing process.
capture and use” refers to the use of carbon
way’ CfD design, where the spot price rises
in carbon-based products in which CO2 is Emissions from the energy and industrial
above the strike price the winning bidder must
sequestered over the long term (e.g., in system: All emissions arising either from the
pay back the differential.
concrete, aggregates, carbon fibre). Carbon- use of energy or from chemical reactions
based products that only delay emissions in in industrial processes across the energy,
Distributed Energy Resource (DER):
the short term (e.g., synfuels) are excluded industry, transport and buildings sectors.
Small and medium-sized power resources
when using this terminology. It excludes emissions from the agriculture
connected to the distribution network,
sector and from land use changes.
6 Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy
Emissions from land use: All emissions Liquified Natural Gas (LNG): LNG is the Primary energy consumption: Crude energy
arising from land use change, in particular clear and non-toxic liquid state of natural gas directly used at the source or supplied to
deforestation, and from the management of at temperatures below -162ºC. It enables users without transformation – that is, energy
forest, cropland and grazing land. The global the transport and storage of natural gas that has not been subjected to a conversion
land use system is currently emitting CO2 as without pressurisation, especially over longer or transformation process.
well as other greenhouse gases, but may in distances via ships.
the future absorb more CO2 than it emits. Steam methane reforming (SMR): A process
Natural carbon sinks: Natural reservoirs in which methane from natural gas is heated
Energy productivity: Energy use per unit of storing more CO2 than they emit. Forests, and reacts with steam to produce hydrogen.
GDP. plants, soils and oceans are natural carbon
sinks. SMR/ATR/POX with carbon capture and
Final energy consumption: All energy supplied storage (SMR/ATR/POX + CCS): Hydrogen
to the final consumer for all energy uses. Nature-based solutions: Actions to protect, production from SMR/ATR/POX, where the
sustainably manage and restore natural or carbon emitted from the combustion of
Fuel cell electric vehicle (FCEV): Electric modified ecosystems which constitute natural natural gas is captured to be stored.
vehicle using a fuel cell generating electricity carbon sinks, while simultaneously providing
to power the motor, generally using oxygen human, societal and biodiversity benefits. Sustainable biomass / bio-feedstock
from the air and compressed hydrogen. / bioenergy: In this report, the term
Near-total-variable-renewable power ‘sustainable biomass’ is used to describe
Greenhouse gases (GHGs): Gases that trap system: We use this term to refer to a power biomass that is produced without triggering
heat in the atmosphere. Global GHG emission system where 85-90% of power supply is any destructive land use change (in particular
contributions by gas – CO2 (76%), methane provided by variable renewable energies deforestation), is grown and harvested
(16%), nitrous oxide (6%) and fluorinated (solar and wind), while 10-15% is provided by in a way that is mindful of ecological
gases (2%). dispatchable/peaking capacity, which can be considerations (such as biodiversity and soil
hydro, biomass plants or fossil fuels plants health), and has a lifecycle carbon footprint
Heavy Goods Vehicles (HGV) or Heavy (combined with carbon capture to reach a at least 50% lower than the fossil fuels
Duty Vehicle (HDV): Both terms are used zero-carbon power system). alternative (considering the opportunity cost
interchangeably and refer to trucks ranging of the land, as well as the timing of carbon
from 3.5 tonnes to over 50 tonnes. Net-zero-carbon-emissions / Net-zero- sequestration and carbon release specific to
carbon / Net-zero: We use these terms each form of bio-feedstock and use).
High Voltage Direct Current (HVDC) interchangeably to describe the situation in
transmission: A power transmission which the energy and industrial system as a Synfuels: Hydrocarbon liquid fuels produced
technology utilising direct current for the whole or a specific economic sector releases from hydrogen, carbon dioxide and electricity.
bulk transmission of electrical power. It is no CO2 emissions – either because it doesn’t They can be zero-carbon if the electricity
particularly useful for high capacities and produce any or because it captures the CO2 input is zero-carbon and the CO2 is from
longer distances due to minimal energy it produces to use or store. In this situation, direct air capture. Also known as “synthetic
transmission losses compared to classical AC the use of offsets from other sectors (“real fuels”, “power-to-fuels” or “electro-fuels”.
technology. net-zero”) should be extremely limited
and used only to compensate for residual Technology Readiness Level (TRL):
Hydrocarbons: An organic chemical Describes the level of matureness a certain
emissions from imperfect levels of carbon
compound composed exclusively of hydrogen technology has reached from initial idea to
capture, unavoidable end-of-life emissions,
and carbon atoms. Hydrocarbons are naturally large-scale, stable commercial operation. The
or remaining emissions from the agriculture
occurring compounds and form the basis IEA reference scale is used.
sector.
of crude oil, natural gas, coal and other
important energy sources. Operating Expenditures (OPEX): Expenses Transmission System Operator: Existing
incurred through normal business operations system operator capability responsible for
Internal combustion engine (ICE): A managing flow of electricity through the
to ensure the day-to-day functioning of a
traditional engine, powered by gasoline, diesel, electricity transmission system, ensuring its
business (e.g., labour costs, administrative
biofuels or natural gas. It is also possible to stable and secure operation and matching
expenses, utilities).
burn ammonia or hydrogen in an ICE. demand and supply in time and space.
Partial Oxidation (POX): A non-catalytic
Learning rate: The learning rate describes the Virtual Power Plants (VPP): Aggregation of
chemical process to convert hydrocarbon
cost decline for one unit (e.g., electrolyser) for many disperse Distributed Energy Resources
residues or natural gas with oxygen to
each doubling of the total cumulative number (DERs) with the aim of enabling DERs to
hydrogen and carbon dioxide.
of previously produced units. provide services to the grid. VPP operators
Power Purchase Agreement (PPA): A PPA aggregate DERs to behave similar to a
Levelised cost of electricity (LCOE): A
describes the contractual obligations between conventional power plant, with features such
measure of the average net present cost of
an electricity generator and buyer. Typically, as minimum / maximum capacity, ramp-up,
electricity generation for a generating plant
these contracts are used to guarantee long- ramp-down, etc. and to participate in markets
over its lifetime. The LCOE is calculated as the
term offtake security for the supplier prior to to sell electricity or ancillary services.
ratio between all the discounted costs over
the construction of a new generation asset.
the lifetime of an electricity-generating plant Zero-carbon energy sources: Term used to
divided by a discounted sum of the actual Proton Exchange or Polymer Electrolyte refer to renewables (including solar, wind,
energy amounts delivered. Membrane (PEM) electrolyser: A specific hydro, geothermal energy), sustainable
water electrolysis technology which operates biomass, nuclear and fossil fuels if and when
under acidic conditions using a polymer to their use can be decarbonised through
separate the electrodes. carbon capture.
Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy 7
8 Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy
Major ETC reports and working papers
Major ETC reports and working papers
Global reports Better Energy, Greater Mission Possible (2018) Making Mission Possible
Prosperity(2017) outlined four outlined pathways to reach (2020) showed that a
complementary net-zero emissions from the net-zero global economy is
decarbonisation strategies, harder-to-abate sectors in technically and economically
positioning power heavy industry (cement, possible by mid-century and
decarbonisation and clean steel, plastics) and will require a profound
electrification as major heavy-duty transport transformation of the global
complementary progress levers. (trucking, shipping, aviation). energy system.
Sectoral focuses provided detailed decarbonisation analyses on each on the
six harder-to-abate sectors after the publication of the Mission Possible
report (2019). Our latest focus on building heating (2020) details
decarbonisation pathways and costs for building heating, and implications
for energy systems.
As a core partner of the Mission Possible Partnership, the ETC also
completes analysis to support a range of sectoral decarbonisation initiatives:
Sectoral and
cross-sectoral In October 2020, the corporate Produced for the Getting to Zero
focuses members of the Clean Skies for Coalition, “The First Wave – A
Tomorrow initiative (CST) blueprint for commercial-scale
developed a Joint Policy Proposal zero-emission shipping pilots”
to Accelerate the Deployment of highlights five key actions that first
Sustainable Aviation Fuels in movers can take to make tangible
Europe progress towards zero emission pilots
over the next three to four years.
A series of reports on the Indian power system and outlining
decarbonisation roadmaps for Indian industry (2019-2020)
described how India could rapidly expand electricity supply
without building more coal-fired power stations, and how India
can industrialise whilst decarbonising heavy industry sectors.
China 2050: A Fully China Zero Carbon Electricity
Developed Rich Growth in the 2020s: A Vital
Geographical Zero-carbon Economy Step Toward Carbon Neutrality
focuses described the possible (January 2021). Following the
evolution of China’s energy announcement of China’s aim to
demand sector by sector, achieve carbon neutrality before
analysing energy sources, 2060 and peak emissions
technologies and policy before 2030. This report
interventions required to examines what action is
reach net-zero carbon required by 2030 aligned with
emissions by 2050. what is needed to fully
decarbonise China’s power
sector by 2050.
Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy 9
Introduction
Clean electrification must be at the heart of all strategies to achieve a zero-carbon economy, with electricity applied
to a far wider range of end applications than today and all electricity produced in a zero-carbon fashion. Electrification
is indeed the most efficient way to meet most energy needs. Thanks to both decreasing all-in generation cost and the
inherent efficiency gain associated with a switch to electricity, clean electrification can lower total energy system costs,
while also delivering major local environmental benefits. As the ETC’s latest report on the global power system describes,
direct electricity use could and should grow from today’s 20% of total final energy demand to reach close to 70% by 2050,
with electricity generation to support direct electrification growing from 27,000 TWh to around 90,000 TWh.1
However, in some sectors, direct electrification will likely remain impossible or uneconomic for many decades. In many
of these, hydrogen can play a major role in decarbonisation whether used directly or in the form of derived fuels such
as ammonia and synthetic fuels (synfuels). In steel and long-distance shipping, for instance, hydrogen’s vital new role is
increasingly certain; in fertiliser production, it will continue to be essential; and in multiple other sectors, it is among the
leading decarbonisation options. Hydrogen will also almost certainly play a major energy storage role in future electricity
systems, helping to balance supply and demand in systems where most electricity is supplied from variable renewable
sources.
Total global hydrogen use could therefore grow 5-7-fold from today’s 115 Mt per annum to reach 500 to 800 Mt by mid-
century,2 with hydrogen (and its derivatives) accounting for 15-20%3 of final energy demand, on top of the close to 70%
provided by direct electricity.
All of this hydrogen must be produced in a zero-carbon fashion via electrolysis using zero-carbon electricity (“green
hydrogen”) or in a low-carbon fashion using natural gas reforming plus CCS (“blue hydrogen”) if deployed in a manner
that achieves near-total CO2 capture and very low methane leakage. Blue hydrogen will often be cost-effective during the
transition, particularly via retrofit of existing grey hydrogen, and in the long term in locations with very low gas prices. But C
green hydrogen will be lower cost in most locations over the long term, with dramatic production cost reductions to below M
$2/kg possible during the 2020s, and further falls thereafter. Hydrogen production will therefore be predominantly via
Y
a green route (ca. 85%) and generate very large electricity demand, increasing the total required supply of zero-carbon
electricity by 30,000 TWh or more on top of the 90,000 TWh potentially needed for direct electrification. CM
MY
Strategies to achieve net-zero emissions by mid-century in both developed and developing countries must therefore CY
recognise the major role of green hydrogen and the implications for required clean electricity supply – which, although very
CMY
significant, is physically and financially feasible.4
K
They must also ensure a sufficiently rapid take-off of hydrogen production and use during the 2020s to make it feasible to
reach 2050 targets. Achieving this will require policy support because using hydrogen in end applications often imposes
a green premium (versus fossil fuel technologies) even if clean hydrogen production costs fall dramatically. Those policies
must combine broad policy instruments such as carbon prices, with support focused on specific sector applications and on
the development of geographically-focused clusters of clean hydrogen production and use.
This report therefore sets out:
• The role of clean hydrogen in a zero-carbon deeply electrified economy;
• How to scale-up the hydrogen value chain, potential barriers, and the investments and policies required to
overcome them;
• Critical industry and policy actions required during the 2020s.
1 Energy Transitions Commission (2021), Making Clean Electrification Possible: 30 years to electrify the global economy.
2 The lower/upper boundaries depend on the level of energy productivity improvement in the global economy.
3 The ETC scenarios illustrated in Exhibit 1.1 show 15-17% final energy demand for hydrogen and its derived fuels (ammonia, synfuels).
4 The feasible scale-up of zero-carbon power is explored in depth in the ETC’s parallel report on clean electrification. Source: ETC (2021), Making Clean Electrification
Possible: 30 years to electrify the global economy.
10 Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified EconomyChapter 1 A vision for 2050: Hydrogen’s role in a zero-carbon, deeply electrified economy 12 Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy
Hydrogen is almost certain to play a very major role in achieving a zero-carbon economy. It can be used to decarbonise
important processes in harder-to-abate transport and heavy industry sectors where direct electrification is difficult,
expensive or impossible. It can also play a role as an energy storage mechanism within the power system. As the cost
of producing clean hydrogen falls drastically, it will be increasingly cost-advantaged versus carbon capture and storage
(CCS) or bioenergy-based routes to decarbonisation.
In the ETC’s Making Mission Possible report,5 two illustrative mid-century net-zero pathways were described (Exhibit
1.1): (i) one considering supply-side decarbonisation plus maximum energy productivity improvements, lowering the final
energy demand by 17% compared to 2019 and (ii) another relying on supply-side decarbonisation pathway only and not
considering significant energy productivity improvements leading to a 15% rise in final energy demand compared to 2019.
In both scenarios, hydrogen and hydrogen-based fuels represented the second largest final energy use in the economy by
2050 (15-17%), after direct use of clean electricity.
Through the transition, government policy and company strategies will be most effective if informed by a clear vision of the
likely scale and nature of hydrogen opportunities over the next 30 years. This Chapter therefore sets out a vision of what
the hydrogen economy6 is likely to entail covering in turn:
• The potential growth of hydrogen demand;
• How fast production costs could decline and the implications for the cost of decarbonisation;
• Hydrogen transport and storage technologies and costs of this infrastructure;
• The role and long-term limitations of long-distance hydrogen transport.
Final energy mix in a zero-carbon economy: electricity will become
the dominant energy vector, complemented by hydrogen and fuels
derived from it
Final energy demand
EJ/year
Illustrative scenario
2019 ETC 2050 net-zero pathways
-17% +15%
Other
493 Natural gas
430 Oil
Coal
356 Fossil fuels + CCS
17%
Bioenergy
and biomass
15% Synfuels
Ammonia
335 Hydrogen
262 (68%) Electricity
(74%)
81 (19%) X% Difference vs. 2019
IEA 2019 Supply-side decarbonisation Supply-side
Exhibit 1.1
plus maximum energy decarbonisation only
productivity improvement
SOURCE: SYSTEMIQ analysis for the Energy Transitions Commission (2021); IEA (2020), World Energy Outlook
5 ETC (2020), Making Mission Possible.
6 The term hydrogen economy is used as a shorthand to describe a whole set of activities from production to use of clean hydrogen. However, it does not refer to clean
hydrogen as an all-encompassing solution for the entire energy system as we envision hydrogen as one pillar of decarbonisation alongside mass electrification, and
important but constrained complementary roles for sustainable, low-carbon bio-energy and the use of fossil fuels combined with CCS/U.
Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy 13I. Potential demand growth
In 2018, about 115 Mt of hydrogen was used globally of which 70 Mt was produced via dedicated production predominantly
from natural gas (71%) and coal (27%).7 This production resulted in about 830 Mt of CO2 emissions, around 2.2% of the
global energy-related total. The main uses of this hydrogen were in refining (38 Mt), ammonia production (31 Mt, used
in particular for fertilisers production) and methanol (12 Mt, used mostly as a fuel additive and for plastics production)
(Exhibit 1.2).
Over the next 30 years, hydrogen use is set to increase dramatically, with clean hydrogen replacing hydrogen derived
from unabated fossil fuels in existing applications as well as being deployed in multiple new end uses. In some sectors,
its precise role versus other decarbonisation options (in particular direct electrification) is inherently uncertain. However,
reasonable scenarios suggest that a 2050 zero-carbon economy will need to use about 500 to 800 Mt of hydrogen per
annum (see Exhibit 1.4, at the end of Section 1.1).
Today’s production of hydrogen is via carbon-intensive processes,
with use of hydrogen concentrated in the refining, ammonia, and
methanol sectors
Dedicated hydrogen production pathways used (2018) Hydrogen use sectors (2018)
% of dedicated production Mt H₂
69 Mt 115 Mt
SMR + CCS Refining
Electricity / other Ammonia
27% Gasification of oil 38 Methanol
Gasification of coal Other (e.g. heat)
SMR of natural gas
> 99% current production 31
carbon intensive
71% 12
34
Exhibit 1.2
SOURCE: IEA (2019), The Future of Hydrogen
7 The 45 Mt tonnes difference stems from hydrogen produced as a by-product in a number of industrial processes such as catalytic naphtha reforming, chlor-alkali
.
electrolysis and steam cracking of propane. Source: IEA (2019), The Future of Hydrogen
14 Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified EconomyThe role of hydrogen by sector – relative to other decarbonisation options – will reflect its inherent chemical
characteristics, advantages, and disadvantages (Box A).
CHEMICALS AND PETROCHEMICALS
ELECTRIFICATION
As an energy source compared with direct As a chemical agent or feedstock, hydrogen
electrification, the use of hydrogen is generally has an indispensable role in the production of
less efficient due to energy conversion losses. ammonia and methanol, as well as a potential role
Nevertheless, the higher energy density per mass in the production of plastics9 and steel due to its
of hydrogen and hydrogen-derived fuels such as chemical properties and reactivity.
ammonia or synthetic fuels, relative to batteries,
will outweigh that disadvantage in long-distance
transport applications. In addition, while the
conversion/reconversion between electricity and
hydrogen entails significant losses, hydrogen
offers an economic and practical way to store
large amounts of energy over the long term
(weeks, months, especially to address seasonal
variations).8
• Safety and leakage issues, while hydrogen is a stable non-toxic molecule which can be safely stored at room
temperature and has been used in industry for many years, it poses significant storage and transport challenges due
to its small molecule size, its low volumetric density (relative to methane), and its extreme flammability.10 While many
of the safety considerations can be overcome, these characteristics may reduce its relative attractiveness in dispersed
applications (such as residential heating) which require widespread distribution. While ammonia, as hydrogen-derived
fuel, does not face the same transport and storage challenge, it is toxic and requires stringent safety procedures.
8 As outlined in the parallel ETC report on clean electrification, batteries are well suited to store electricity for shorter timeframes
9 Plastics are produced from a wide variety of feedstock (e.g., ethylene, benzene) currently produced from oil and natural gas, that can be synthesised from methanol, itself
produced from hydrogen and CO2, see page 14.
10 In comparison to natural gas, hydrogen has the advantage that it disperses very quickly and does not sink to the ground, reducing the danger associated with low level
leakage.
Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy 15Hydrogen as an energy source:
Technical advantages & disadvantages
Hydrogen effectively extends the reach of renewables to the decarbonisation of harder-to-abate sectors. It has
many advantages including producing no emissions upon combustion and a very high energy density per kg.
However, its production and conversion entail energy losses, and its end-use efficiency is generally lower than
direct electrification.
Energy efficiency Energy storage
Direct electrification is generally more efficient than Large-scale long-duration energy storage with batteries is
hydrogen applications due to hydrogen production losses difficult due to the high mass and volume required (see
(ca. 20-40%¹) and lower efficiency of end-use applications: energy density box).
Heat pumps offer ca. 5-6x more heat energy per energy Hydrogen can be safely stored, without energy losses, in
input compared to hydrogen large quantities in geological hydrogen storage. While energy
losses in power-hydrogen-power re-conversion are
Fuel cell vehicles are lower efficiency due to
significant, the need for long-duration energy storage for grid
Power-Hydrogen-Power reconversion losses
balancing in renewables dominated systems means
Relative competitiveness for high temp. heat remains hydrogen is likely to be crucial.⁶
unclear, however superior energy efficiency of direct
electrification likely to make hydrogen less attractive Conversion efficiency of energy storage for power
%
Energy Efficiency losses
Sector Technology option Efficiency⁵ through process
Input energy
(electricity) 100 100
Building Hydrogen boiler 46%
heating² Electric heat pump 26 26 Electrolysis
270%
4 Haber-Bosch⁷
Road Fuel Cell Electric Vehicle 26% 37 35 CCGT
Transport³ Battery Electric Vehicle 70%
37 35 Output energy
High temp. Hydrogen tech. 55-80%
(electricity)
heat⁴ Direct electrification tech. 50-90% Hydrogen Ammonia
CCGT CCGT
Energy density
Hydrogen has a much higher energy density per mass⁸ than However, hydrogen’s energy density per volume is very low,
batteries and is therefore attractive in transport applications even in compressed or liquified form which makes ammonia and
where large amounts of energy are required at minimal weight synfuels more attractive for longer distances (long distance
(aviation, shipping, long distance trucking). aviation & shipping).
Gravimetric energy density Volumetric energy density
MJ/kg MJ/m³
-100%
142 37440
+55%
52 15600
47
10039
23 5600
2880
1 13
H₂ Ammonia Li-Ion Natural Gasoline H₂ H₂ H₂ Li-Ion Ammonia Jet fuel
(ambient)⁸ Batteries gas (ambient) (700 bar) (liquid) Batteries (liquid)
NOTES: ¹ Approximate efficiency range for green and blue production between now and 2050; ² Further considerations include: quality of grid and pipeline infrastructure, peak load demand
on electricity grid; ³ Other considerations beyond energy efficiency include (not exhaustive): vehicle range & cost, refueling / charging infrastructure, fuel cost; ⁴ Range illustrates different
technologies for both hydrogen and direct electrification of high temperature heat; ⁵ Energy efficiency describes the ratio of final output energy to input energy. It includes losses from
Box A
hydrogen production, electricity & hydrogen transmission, reconversion processes and end-use. ⁶ See parallel ETC Clean Electrification Report; ⁷ Haber-Bosch process assumes use
of by-product heat in adjacent processes. ⁸ Excluding weight of storage tanks;
SOURCE: SYSTEMIQ analysis for the Energy Transitions Commission (2021), see Annex for literature review used for this figure.
16 Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified EconomyLikely applications by sector
The potential uses of hydrogen in a zero-carbon economy can be usefully categorised into four groups (Exhibit 1.3):
• Existing uses of hydrogen offering clear short-term opportunities for a switch to clean hydrogen, with high certainty of
long-term demand;
• Uses which will take time to develop, but where demand is certain to be large in the long-term;
• Potential short-term, but transitional opportunities;
• Possible future uses where the relative costs and advantages versus direct electrification and other decarbonisation
options remain unclear.
Multiple potential uses of hydrogen in a low carbon economy, some
of which can provide early ‘off-take’ for clean hydrogen
Higher
Fertiliser
Refining⁴ Highly likely and large
long-term demand
Co-firing of ammonia Forklifts Methanol
or hydrogen
Existing uses
– aligned with long
Readiness¹ term decarbonisation
Rail
Power Potential role
Plastics storage⁵ – technology option
Gas grid
blending (Existing uses of hydrogen where clean hydrogen can substitute grey hydrogen production in the short term, often with
minimal retrofitting, thus eliminating the 830 Mt of CO2 currently being released,11 include:
SYNFUELS
OIL
CHEMICALS AND PETROCHEMICALS
Crude oil refining, where Ammonia, where hydrogen Methanol, of which 100 Mt
hydrogen is used in is an essential input to the per annum is currently
desulphurisation and in Haber-Bosch process used to produced from natural gas
hydrocracking to upgrade produce 180 Mt of ammonia per or coal-derived hydrogen,
heavy residual oils. In the long annum, of which 80% is used for carbon dioxide and carbon
term, this use will decline as fertiliser production. Ammonia monoxide. It is used in a
demand for oil-based fuels demand for existing uses is variety of products including
falls, especially in the mobility likely to continue to remain paints, plastics, and
sectors. Oil inputs to plastics stable or grow slightly with explosives. This demand
production will also reduce additional demand as a result of will likely increase as plastic
through recycling and potential the new applications considered production shifts from oil
use of bio-feedstocks.12 below. or gas-based production
processes.13
11 Typically, the hydrogen use case assets do not need to be replaced. However, the grey hydrogen production assets are generally very large and depending on their age and
the ability to retrofit CCS (discussed in section 1.2) may have to be written off upon conversion to clean hydrogen.
12 Use of bio-feedstocks will likely be limited by constraints on global sustainable supply of bio-feedstocks and multiple competing demands from different sectors of the
economy.
13 Production of methanol via clean hydrogen requires a CO2 source which may stem for refinery emissions in the short term and transitions to sustainable CO2 sources (e.g.,
direct air capture) in the long-term.
18 Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified EconomyLarge long-term uses with significant lead times, due to lower technological readiness, long asset lifecycles and higher
abatements costs, include:
• Primary steel production, which currently accounts for 7% (3 Gt) of global CO2 emissions from the energy and
industry system, and where hydrogen can replace coking coal as the reducing agent. Alternative pathways for
deep decarbonisation include CCU/S and direct electrolysis of iron ore, which is currently at a pre-commercial scale
technology readiness level). A number of major steel producers have set net-zero 2050 emissions targets (including
Arcelor Mittal, BaoWu Steel, SSAB, and ThyssenKrupp), for which hydrogen technologies are cited as a critical
technology.14 In addition, several pilot projects are exploring the potential to co-fire hydrogen in existing blast furnaces
to provideSTEEL an incremental GHG performance SHIPPING improvement during theAVIATION transition period (see below).
ELECTRIFICATION
Primary steel Long-distance Long-distance Power system
• production,
Long-distance whichshipping, where the path towhere
shipping, decarbonisation isaviation, where limits
almost certain balancing, where
to involve hydrogen-based fuels –
whether accounts
currently ammonia or methanol –the 15
burnt
pathinto to battery energy
adapted versions of existing marine engines as laid hydrogen is likely
out in a recent ETC
report
for 7% (316
. Gt)
In addition,
of short distance ferries and cruise
decarbonisation is ships may density currently directly
use hydrogen make as a fueltoalongside
play a significant
direct
electrification.
global CO2 emissions almost certain to direct electrification role in providing
from the energy and involve hydrogen- impossible, and seasonal balance
• industry
Long-distance
system, aviation, where limits basedtofuels battery
– where cost-effective
energy density currently make direct electrification and dispatchable
impossible, and
where
and wherecost-effective
hydrogen decarbonisation whether is likely
ammonia decarbonisation is
to entail the use of a zero-carbon equivalent of generation
existing jet within
fuel. With
sustainable
can replace coking biofuel volumes constrained
or methanol (the issue
15
– likely to entail the power systems
of bio-feedstock availability and use will be explored in detail in
the as
coal upcoming
the reducing ETC report on sustainable biomass17), synthetic
burnt in adapted use of a zero-carbon
“power to liquid” jet fuel may be dominated
requiredby tovariable
meet the
needsAlternative
agent. of the global aviation industry. versions
18
A ofrecent
existing equivalent of existing jet
report from ATAG (the Air Transport Action Group) suggests ETC
renewables (see that
syntheticfor
pathways fuels
deepwill develop significantly over the
marine engines fuel.the
aslong term, and WithEUsustainable
is considering a fuel clean electrification
mandate to drive the
development ofinclude
decarbonisation various Sustainable Aviation
laid out biofuel
Fuels (SAF) routes.
in a recent 19
Involumes
addition, as for shipping,report for further
hydrogen may be used
directly
CCU/S and at direct
shorter distances withETC new aircrafts.
report 16
. In constrained (the issue details 20
). This will
electrolysis of iron ore, addition, short of bio-feedstock entail hydrogen
• which
Powerissystem
currently balancing,
at a wheredistance
hydrogen availability and use will
is likely to play a significant role in providing seasonal
ferries being balance
produced and
dispatchable generation
pre-commercial scale within power systems
and cruise be explored in detail via
shipsdominated by variable renewables (see ETC clean electrification electrolysis
report for further
technology readiness details20). This may
will entail in the upcoming
hydrogen being produced
use hydrogen ETC
via electrolysis when supply
when power power supplyexceeds
demand
level). and reconverted
A number of to electricity
directly(most
as a fuel report on sustainable
likely via combustion in gas turbines ) when demand exceeds
21 exceeds demand
potential
major steelsupply.
producers
22
alongside direct biomass17), synthetic and reconverted to
have set net-zero electrification. “power to liquid” jet electricity (most likely
2050 emissions fuel may be required to via combustion in
targets (including meet the needs of the gas turbines21) when
Arcelor Mittal, BaoWu global aviation industry. 18
demand exceeds
Steel, SSAB, and A recent report from potential supply.22
ThyssenKrupp), for ATAG (the Air Transport
which hydrogen Action Group) suggests
technologies are that synthetic fuels will
cited as a critical develop significantly
technology. In 14 over the long term, and
addition, several pilot the EU is considering a
projects are exploring fuel mandate to drive the
the potential to co-feed development of various
hydrogen in existing Sustainable Aviation
blast furnaces to Fuels (SAF) routes.19 In
provide an incremental addition, as for shipping,
GHG performance hydrogen may be used
improvement during directly at shorter
the transition period distances with new
(see below). aircrafts.
14 Hydrogen-based direct reduced iron (DRI) is a different plant type that enables the use of hydrogen instead of coke in a traditional steel blast furnace. In addition, electric
arc furnaces and the recycling of steel scrap will likely play an increasing role in the future.
15 Ammonia has the advantage of not requiring a sustainable CO2 input for its production.
16 ETC for the Getting to Zero Coalition (2020), The First Wave – A blueprint for commercial-scale zero-emission shipping pilots.
17 ETC (Upcoming, 2021), Making a Sustainable Bio-Economy Possible.
18 Non-GHG emissions (e.g., water vapour) from synfuels will have some residual global warming effect that needs to be compensated via negative emissions.
19 The fuel mandate will likely include biofuels and synthetic aviation fuels derived from hydrogen.
20 ETC (2021), Making Clean Electrification Possible: 30 years to electrify the global economy.
21 Fuel Cells may offer an alternative technology to CCGTs in particular at smaller scales (e.g. 50 MW hydrogen fuel cell plant in South Korea; Source: JRC Technical Report
(2019), Global deployment of large capacity stationary fuel cells.
22 Hydrogen can help two-fold: i) use of excess electricity on the grid and thereby help to lower power cost fluctuations in which case the hydrogen may be used in other
sectors, ii) convert electricity into hydrogen at favourable times (e.g., summer in high latitudes in northern hemisphere) to store energy and reconvert to power when
variable renewable energy supply is low compared to demand (e.g., winter in high latitudes in northern hemisphere).
Making the Hydrogen Economy Possible – Accelerating Clean Hydrogen in an Electrified Economy 19Potential short-term but transitional applications, that enable partial, near-term emissions reduction of existing high-
carbon assets that will eventually need to be phased out in a net-zero economy, could include:
• Co-firing ammonia in coal power plants, which is being trialled in Japan, but which is unlikely to prove a path to
100% ammonia power plants except in countries facing severe constraints on the supply of renewable electricity.
Co-firing ammonia should not slow down efforts to retire coal generation assets.
• Co-firing hydrogen in gas power plants, which may be used as transitionary pathway with some current power
turbines able to use as much as 30% hydrogen potentially moving up to 50% with minimal capital investment for
newer turbines.23 Ultimately, either new turbines capable of using 100 % hydrogen or CCS infrastructure will need to
be installed to enable full power sector decarbonisation (see ETC clean electrification report for further details24).
• Co-feeding hydrogen in steel blast furnaces, ammonia plants and refineries can help to accelerate the initial
development of clean hydrogen. However, only small percentages of clean hydrogen can be co-fed before larger
changes on the asset are required.25
• Blending low levels of hydrogen into an existing natural gas grid, to generate initial demand for zero-carbon
hydrogen, alongside a small reduction in the carbon intensity of methane use (see Box B). Concerns about steel
pipe embrittlement for parts of the grid26 and the need to retrofit or replace appliances are, however, likely to limit
Low level blending of hydrogen into the existing natural gas grid
A potential transitional use for clean hydrogen in the 2020s and early 2030s
Today, the natural gas grid delivers energy to industrial (e.g. power plants, high temperature heat) and residential users (space and water
heating). Taking an approach to blend low levels of hydrogen into the natural gas grid requires careful consideration and can only be
transitional – applicable only prior to the implementation of full decarbonisation options – e.g., direct electrification or switch to equipment
which allows for 100% hydrogen use.
Key considerations for transitional use of natural gas blending include:
Opportunities Challenges
Rapid scaling of green hydrogen Carbon emissions: Low level hydrogen blending has a small impact on reducing CO₂
demand: Potentially relatively rapid emissions in the short term due to lower energy density of hydrogen compared to
scaling of large, early hydrogen natural gas.¹
off-taker during the 2020s when clean
International collaboration bottlenecks: International coordination will sometimes be
hydrogen off-take is needed to develop
required due to cross-border natural gas grids. For example, implementation of EU
the clean hydrogen economy.
wide regulation would require alignment member countries.²
Speed of implementation: Small
Lock-in effect: Risk that blending could in effect extend lifetimes of existing gas
number of decision makers required to
grids, preventing shifts towards full building heating decarbonisation solutions
deliver significant early off-take
(either electrification or non-trivial switch to 100% hydrogen distribution grid,
volumes.
requiring conversion of all assets connected to the natural gas grid – incl. home
Flexible: Hydrogen can be blended into boilers, industrial applications).
the natural gas grid at many locations,
Potentially sub-optimal use of renewable energy: In the 2020s, when low level gas
allowing production to be sited
blending feasible, optimal use of scarce renewable power likely 1) decarbonising grid
alongside other hydrogen off-takers.
electricity, 2) supplying hydrogen for end-uses which are likely to be permanent.
Off-take can be varied, with no
requirement for steady-supply. Gas quality: Some industrial gas end-use applications require high gas quality,
blending hydrogen into the grid could disrupt these industrial processes.
Consumer costs: Given hydrogen’s higher production cost in the short term blending
could result in an increase of consumer costs.³
NOTES: ¹ 5-20% blending of hydrogen into the grid reduces CO₂ emissions from combustion of the gas blend by less than a third (ca. 2-7%). ² Different nations currently have maximum
hydrogen blending limits. ³ Impact on end-consumer prices will vary according to the relative prices of natural gas and hydrogen and level of pass through to end-consumers, for example:
i) blending 5% hydrogen (by volume) at a hydrogen price of $2/kg and natural gas price of $6.5/MMBtu (e.g., UK) increases the costs by ca. 3% (assuming direct pass-through of cost premium
Box B
from producer to consumer), ii) at a higher hydrogen price ($3/kg) and lower natural gas price $3/MMBtu (e.g., USA) the cost of blending increases by ca. 13%.
SOURCES: BloombergNEF (2019), Hydrogen – the economics of space and water heating; Industry interviews.
23 Siemens (2021), Power-to-X: the crucial business on the way to a carbon-free world.
24 ETC (2021), Making Clean Electrification Possible: 30 years to electrify the global economy
25 Blast furnaces can use up to 20% clean hydrogen, above which a DRI facility is required. The grey hydrogen production of ammonia plants and refineries needs to be
retrofitted with CCS or fully exchanged with green hydrogen to enable full decarbonisation.
26 Embrittlement concerns are relevant for specific types of steel pipelines and a range of solutions are being explored to overcome this issue (e.g., applying an inner coating
to protect the steel), alongside research to assess the long-term material stability of all types of pipeline materials (e.g., NREL HyBlend project). Solutions to overcome
embrittlement challenges will vary according to capacity requirements, status of existing pipelines and cost trade-offs. Early conversion pilot projects in Germany and
the Netherlands have shown that existing pipelines do not require internal coatings, while studies suggest that this will likely be required in France. Source: NREL (2013),
Blending Hydrogen into Natural Gas Pipeline Networks: A Review of Key Issues; Guidehouse (2020), European Hydrogen Backbone.
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