Electricity and Control August 2022

ENGINEERING THE FUTURE

Global trade in hydrogen – most will be used locally

A s the move to accelerate green hydrogen technologies and applications intensifies globally, the International Renewable Energy Agency (IRENA) says some 75% of hydrogen will be produced and used locally. To make hydrogen trade cost-effective, the costs of producing and trading green hydrogen must be lower than domestic production, in order to offset higher transport costs. A series of reports released by IRENA sees hydrogen trade contributing significantly to a more diversified and resilient energy system. In its latest report titled Global hydrogen trade to meet the 1.5°C climate goal , the agency points to the importance of the future hydrogen trade. It says: “By increasing the distance over which it is cost-effective to transport energy, green hydrogen can unlock new possibilities for the energy trade, giving rise to new players and providing opportunities for energy exporters to pivot towards a net zero system.” Trade will allow countries to tap into affordable hydrogen as the scale of projects progresses and technology matures. In the report IRENA indicates that one quarter of the global hydrogen demand could be satisfied by international trade through pipelines and ships. It estimates that with falling costs of renewables and the hydrogen potential exceeding global energy demand by 20-fold, three-quarters – that is 75% – of global hydrogen would still be produced and used locally in 2050. This is a significant change from today’s oil market where most of the fuel is traded internationally. “Having access to abundant renewables will not be enough to win the hydrogen race, it’s also necessary to develop the hydrogen trade,” said Francesco La Camera, Director-General of IRENA. “It is true that hydrogen trade will offer multiple opportunities – from decarbonising industry to diversifying supplies and improving energy security. Energy importers can become the exporters of the future. “However, governments must make significant efforts to turn their trade aspirations into reality,” La Camera added. “A mix of innovation, policy support and scale can

bring the necessary cost reduction and create a global hydrogen market. Whether trade potentials can be realised will depend strongly on countries’ policies and investment priorities and the ability to decarbonise their own energy systems.” IRENA’s World Energy Transitions Outlook sees hydrogen covering 12% of global energy demand and cutting 10% of CO 2 emissions by 2050. Yet, hydrogen can only be a viable climate solution if the power needed to produce it is additional to the electrification of the energy system; this places an even greater uptake of renewable power at the heart of the transition. The latest report sees half of the hydrogen being traded through largely existing, repurposed gas pipelines, significantly reducing the costs of transport. Shipping of green ammonia would account for most of the other half, largely in intercontinental hydrogen trade. As hydrogen becomes increasingly an internationally traded commodity, the hydrogen sector will attract growing sums of investment. According to IRENA, satisfying the global demand will require investment of almost USD 4 trillion by 2050. Net zero-aligned finance instruments will have to leverage the investment needed. The agency’s new modelling framework, which forms part of the report released in early July, can be used to assess critical parameters that will affect future trade flows. The report completes a series with two earlier reports: Part I titled: Trade Outlook for 2050 and the Way Forward , which includes green hydrogen supply cost and potential, and Part II: Technology review of hydrogen carriers . IRENA has been pioneering the work on hydrogen within the wider energy transition in line with a climate-safe 1.5°C pathway. A number of other reports, including Green Hydrogen: A guide to policy making , and Geopolitics of the energy transformation: the hydrogen factor , and more are available on the IRENA website.

For more information visit: www.irena.org

Hydrogen trade will contribute significantly to a more diversified, resilient energy system.

AUGUST 2022 Electricity + Control

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