The world’s five largest energy exporters – Saudi Arabia, Russia, Australia, the US and Indonesia – could accelerate their transitions toward net zero by shifting to industrial-scale hydrogen production with built-in carbon capture and storage (CCS) technologies and quickly on to renewables-powered H2 plants, to meet global market demand forecast to grow as much as six-fold by 2050, according to latest calculus from Wood Mackenzie.
Figuring by the research group in its ‘energy transition outlook’ and ‘accelerated energy transition’ scenarios suggest low-carbon hydrogen demand will reach as much as 530 million tonnes by mid-century, with almost 150 million tonnes of that traded on the seaborne market.
“The time is ripe for the world's major energy exporters to accelerate the energy transition, and mastering the hydrogen trade could make a difference,” said WoodMac research director Prakash Sharma.
“The global energy trade is set to see its largest disruption since the 1970s and the rise of the Opec [Organization of the Petroleum Exporting Countries]. In addition to investing in renewables to slash emissions and enhance energy security, countries and industries are now looking to electricity-based fuels and feedstocks, and hydrogen could be the gamechanger.
“A key differentiator is hydrogen’s massive potential in traded energy markets. Low-carbon hydrogen and its derivatives could account for around a third of the seaborne energy trade in a net zero 2050 world.”
WoodMac cites a clutch of recently announced blue and green hydrogen projects in Russia, Canada, Australia and the Middle East, as representative of the early market direction. The report notes that in the “burgeoning” green hydrogen space, nearly 60% of proposed export projects are located in the Middle East and Australia, chiefly targeting markets in Europe and north-east Asia expected to account for 55% and 16% of seaborne hydrogen trade
“Over the last 12 months, there has been a 50-fold increase in announced green hydrogen projects alone,” said Sharma.
WoodMac vice chairman Gavin Thompson stated: “Green hydrogen costs are expected to fall as electrolyser manufacturing technology improves and renewable electricity costs decline. An expected drop in costs will support a longer-term pivot from blue to green hydrogen. However, each market has unique characteristics and cost declines will not be uniform.
“The reality is that the world needs both to achieve the required pace of global decarbonisation. Blue hydrogen production has a scalability advantage over green hydrogen at present and can already be developed in the requisite volumes, though lead times are longer. Most proposed projects are currently a combination of the two.”
Energy exporting nations with access to major, low-cost gas resources and CCS, underlines WoodMac have a “natural advantage” for blue hydrogen exports, with regions including Middle East, Russia, the US and Canada, with competitive onshore drilling costs, “appearing best placed to develop an interregional export position”.
Similarly, countries with access to low-cost renewables “will tip the scales” in green hydrogen production. “Australia and the Middle East sit in the top echelons for solar irradiance and offer massive green hydrogen potential,” said Sharma.
“A one-size-fits-all approach will not work. In a nascent market, hydrogen participants will need to adopt robust but flexible strategies and business models that support a potentially transformative development in the global energy transition,” he said.
“Today, a number of countries have the opportunity to harness their resources and, through hydrogen, become dominant exporters and players in low-carbon energy trading.
Conversion and transport costs making up as much as two-thirds of the delivered cost of the interregional hydrogen seaborne trade, Sharma noted, means “proximity to market will also be important,” adding that for supply to northeast Asia, for instance, hydrogen producers int Australia “would appear to be ahead of the pack”.
Sharma said: “Australia, in particular, stands out from the crowd in its track record of exporting a diverse set of natural resources and minerals, sheer physical scale, solar and wind resources and substantial potential for large-scale CCS.”
Thompson added: “While the scale of these countries’ ambition and success will affect global energy systems in an unprecedented way, the irony remains that the dynamics of the future global trade in hydrogen are likely to look similar to those of traditional fossil fuels: north-east Asia and Europe will be the big importers of hydrogen; Australia, the Middle East and, possibly, Russia and the US have the greatest potential to be big exporters.”
