Global hydrogen demand grew by 5% in 2021, recovering to above pre-pandemic 2019 levels, according to the International Energy Agency (IEA). “Most of the increase came from traditional use in refining and industry, though demand for new applications grew,” the IEA said in its Global Hydrogen Review 2022, published last month. Some of these new applications are steel projects, hydrogen fuel cell-powered trains and the use of hydrogen-based fuels in shipping.
However, demand was almost entirely met by hydrogen from unabated fossil fuels, meaning little benefit for the environment. In total, global production was 94 million tonnes (mt) of hydrogen, with less than 1mt of that ‘low-emission’ hydrogen, according to the IEA. The three main feedstocks for hydrogen production were natural gas (62%), coal (19%) and as a by-product from naphtha reforming (18%).
Nevertheless, the IEA is hopeful about the prospect of more low-emission hydrogen projects. If all projects currently in the pipeline are realised, low-emission hydrogen production could reach 16–24mt per year by 2030, the agency estimates, with 9–14mt based on electrolysis and 7–10mt on fossil fuels with carbon capture, use and storage (CCUS).
While the project pipeline is expected to grow over the next few years, there is still a need to scale up. The 2021 low-carbon hydrogen pipeline contains more than half of the production needed for governments to meet their climate targets (34mt), the IEA calculates. However, a pathway compatible with net zero by 2050 would require around 100mt by 2030.
With high gas prices, hydrogen produced from fossil fuels with CCUS becomes more expensive, while renewable hydrogen is set to become ever cheaper in line with the falling costs of wind and solar power, making it an attractive option for investors. Renewable hydrogen projects are currently already more competitive than fossil fuel-based projects. As countries scramble for alternatives to oil and gas, the fact that renewable hydrogen can be produced anywhere adds benefits for energy security.
“Our analysis suggests that with today’s fossil energy prices, renewable hydrogen could already compete with hydrogen from fossil fuels in many regions, especially those with good renewable resources and that must import fossil fuels to meet demand for hydrogen production,” writes the IEA in its report.
To enable the hydrogen pipeline to scale up to the level needed for net zero, however, some hurdles must be overcome. According to the report, uncertainties about demand, a lack of regulatory frameworks and a lack of available infrastructure to deliver hydrogen to end users have hindered projects in 2021. In particular, investments in the international trade of renewable hydrogen will play an important role in providing countries with energy as they move away from fossil fuels. The report states: “In this respect in March 2022, the European Commission launched the strongest signal [yet] as part of its REPowerEU Plan to make Europe independent from Russian fossil fuel imports before 2030 with a target to import 10 Mt of renewable hydrogen by 2030.”