One quarter of the world’s green hydrogen will be traded internationally in 2050, with three quarters produced and used locally, according to a new report by the International Renewable Energy Agency (Irena).
In its 1.5°C scenario, about 55% of the internationally traded H2 will be transported by pipeline — mostly through existing retrofitted natural-gas pipes — with the majority of the remaining 45% being shipped as ammonia, most of which would be used without being reconverted to hydrogen, says the study, Global Hydrogen Trade to Meet the 1.5C Climate Goal — Part 1: Trade Outlook for 2050 and Way Forward.
“This pipeline enabled trade would be concentrated in two regional markets: Europe (85%) and Latin America,” it explains.
“To make trade cost-effective, the cost of producing green hydrogen must be sufficiently less expensive in the exporting region than in the importing region to compensate for the transport cost. This cost differential will become larger as the scale of projects increases and technology develops to reduce transport costs.
“As the operating costs of renewables are very low, having a low weighted average cost of capital (WACC) is critical to the cost-effectiveness of trade. Absolute levels and country differences in WACC both significantly affect the trade outlook and determine whether a country becomes an exporter or an importer. If WACC remains roughly as it is today, countries that have good-quality [renewable-energy] resources and low WACC would become the largest green hydrogen exporters and would be collectively responsible for almost 40% of the global trade.”
Irena expects the cost of green hydrogen from solar and solar/onshore wind hybrid projects to fall below $1/kg for most regions by 2050 under optimistic scenarios, and to about $1.30/kg under pessimistic assumptions.
And it expects the cost of shipping ammonia to fall to $0.80/kgH2 (over 20,000km) by mid-century.
“At these price levels ($1.5-2/kg for delivered hydrogen), the prices charged by different exporters should be very close to one another, giving most countries multiple potential trading partners at a small switching cost penalty. Thus, trading partners will probably not be defined exclusively by cost, but rather by a combination of cost, energy security and other geopolitical factors.”
The report states that four issues need to be tackled for a global hydrogen trade to take off.
“First, a market needs to be created, which would include generating demand, promoting transparency and bringing suppliers and end users together. Also essential would be a market regulatory framework that is flexible enough to enable growth and be adaptive but that is not so loose that it compromises sustainability or cost-effectiveness.
“Second, a certification scheme is needed that is consistent across borders and has an internationally agreed methodology. Initially, the certification could focus on hydrogen production and emissions reduction, but it would ultimately need to include commodities and social dimensions related to a just energy transition.
“Third, the required technology needs to be developed and improved…. Fourth, financing needs to be deployed to construct the infrastructure required both for global trade and for much larger-scale upstream renewable energy generation; the latter representing the largest share of total investment needs.”
Irena agrees with the European Commission that all renewable energy used to produce green hydrogen “must not detract from the availability of electricity for other essential and more effective uses – it must be additional”.
“This places the upscaling and acceleration of renewable energy generation at the heart of the transition to green hydrogen,” the study explains. “The production of renewable energy needs to at least triple from today’s 290 gigawatts (GW) per year to more than 1 terawatt (TW) per year by the mid-2030s. Over 10,000GW of wind and solar power would be needed by 2050, just for green hydrogen production and trade.
“To give a sense of the scale needed, total wind and solar generation was 1 612 GW in 2021, and none of it was for hydrogen. In addition, installed electrolyser capacity would need to grow from its 2021 level of 700MW to 4-5TW by 2050.”
And the report adds that under its 1.5C scenario, “almost three quarters of green hydrogen would be used as would be used as methanol, steel, ammonia (for fuel and feedstock), and synthetic fuels for aviation”.
“Most of the ammonia trade would be for direct consumption as ammonia, instead of being converted back into hydrogen. Hydrogen conversion into iron and synthetic fuels would be even more attractive as both have lower transportation costs than hydrogen or ammonia.”
The new Irena report is part one of a three-part series on the future global hydrogen trade. Part two — a technology review of hydrogen carriers — was published in early May, and part three, on the cost of green hydrogen and its potential, was released in late May.