A vast network of long-distance shipping and pipeline routes will be built by 2050 for the trading of just over 60% of the world’s hydrogen supply, according to a new report by Hydrogen Council and the consulting firm McKinsey.

Hydrogen: hype, hope and the hard truths around its role in the energy transition
Will hydrogen be the skeleton key to unlock a carbon-neutral world? Subscribe to Accelerate Hydrogen, powered by Recharge and Upstream, and get the market insight you need for this rapidly evolving global market.

In a “cost-optimal world”, half of the 400 million tonnes of H2 they expect to be traded annually by mid-century will be sent to end users via pipeline, with 45% being transported on ships in the form of synthetic fuels, ammonia and sponge iron (extracted from iron ore using hydrogen).

About 190 million tonnes — 29% of the 660 million tonnes of hydrogen needed annually around the world to reach net-zero emissions — will cross international borders by mid-century, it adds.

In total, 230 million tonnes of pure hydrogen will be transported long distances (more than 1,000km) by 2050 — 50% of the global total, the report says, while a further 170 million tonnes of H2 in the form of derivatives, (amounting to 75% of global derivatives production) will also be transported over long distances by 2050.

The infrastructure and transportation investments required to enable this network will cost $1.5trn by 2050, says the report, entitled Global Hydrogen Flows: Hydrogen trade as a key enabler for efficient decarbonization.

But it adds that this infrastructure will save end users a combined $460bn a year because the H2 (and derivatives) will be made in parts of the world with strong winds and sunshine, and therefore use cheaper renewable energy, lowering hydrogen prices globally.

In total, the international trading of hydrogen and its derivatives will reduce the cost of the global energy transition by $6bn, it says.

The US, the Middle East, Africa, Australia, Chile and Norway will largely become clean-hydrogen exporters, while the rest of Europe, India, China, South Korea, and Japan will mainly be importers.

Green hydrogen will be able to be produced at under $1.15/kg in the US, China, the Middle East, South America, Namibia and South Africa, while hydrogen produced in places with limited available land for renewables projects, such as Europe, Japan and South Korea, would exceed $1.80/kg and sometimes more than $2.50/kg in 2050.

“Consequently, decarbonization of existing power is likely to be prioritized over new renewable-hydrogen production, except where hydrogen is used as a [grid] balancing tool,” the report explains.

“Pure hydrogen is expected to be a ‘regional’ business and will be predominantly sourced domestically or piped from nearby regions, and only shipped via a carrier (ammonia, liquid hydrogen or LOHC [liquid organic hydrogen carrier]) if the prior options are not available,” said the Hydrogen Council.

“However, hydrogen derivatives including ammonia for end use, methanol, synthetic kerosene and direct reduced iron [ie, sponge iron] will be shipped around the world given relatively low transportation costs, compared to production costs.”

It adds: “The evolution of hydrogen trade flows is expected to take place in four distinct phases, beginning with hydrogen derivative shipping by 2025, followed by the emergence of long-distance hydrogen pipelines by 2030, shipping and pipeline reaching scale by 2040, and a fully mature traded market by 2050.”

The Hydrogen Council/McKinsey report barely distinguishes between green and blue or any other types of hydrogen in their trading figures, but it states that 71% of all hydrogen will be produced from renewable energy in 2050, with the remaining 29% being blue.

More than half of the H2 manufactured in North America, the Middle East and former Soviet states will be blue by mid-century, it adds.

How do the figures compare to Irena’s forecasts?

The International Renewable Energy Agency (Irena) released their own predictions about the global hydrogen trade in its World Energy Transitions Outlook 2022 report in March this year, saying that only a quarter of the world’s hydrogen would be traded annually — 100 million tonnes of green H2 and 50 million tonnes of blue — with half of those volumes being transported via pipeline and half by ammonia ships.

“Pure hydrogen is expected to be transported mainly using existing natural gas networks that are repurposed to carry hydrogen,” said the Irena report. “They represent the cheapest option for transporting pure hydrogen, at costs of $0.08-0.12/kg per 1,000km in 2050.”

The costs of transporting hydrogen through new pipelines would be twice as high, at $0.16-0.24/kg for every 1,000km, but it would still be lower than shipping options for distances of 3,000-5,000km, it added.

“For longer distances or places without existing natural gas infrastructure, ammonia ships become the most attractive option.”

Irena predicts a global hydrogen demand of 614 million tonnes by 2050, while the International Energy Agency forecasts 520 million tonnes. The world currently produces 70-75 million tonnes of mainly grey hydrogen (from unabated fossil fuels), with another 20 million tonnes mixed with other gases.

The Hydrogen Council — a lobby group that describes itself as a “global CEO-led initiative of leading companies” — tends to produce the most bullish forecasts on green and blue hydrogen demand, partly due to its belief that H2 will be widely used in everything from heating to cars and dispatchable power generation.

Its steering members include a host of fossil-fuel companies, including Saudi Aramco, BP, Shell, TotalEnergies and Equinor, and vehicle manufacturers GM, Honda, Hyundai, BMW, Daimler and Toyota.