Utilities

Hydrogen Potential In International Trade

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<p style="text-align: justify;">The scenario of limiting temperature increase to 1.5C cannot be met realistically without tackling the limitation of intermittency of renewables and the absence of flexible, economical, and scalable energy storage and transportation medium.</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Green Hydrogen for International Trade</span></h2><p style="text-align: justify;">Hydrogen, a molecule that can be easily relative to electrons, stored and transported in various forms, can fill this gap.&nbsp;</p><p style="text-align: justify;">IRENA expects international hydrogen trade to account for 25% of the total supply by 2050, a size comparable to LNG trade. Green hydrogen and its derivatives, ammonia, methanol, liquified organic hydrogen carriers and others, position and scale in international trade will be tightly connected to the availability of cheap renewable resources.</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Ideal Factors for Green Hydrogen Production&nbsp;</span></h2><p style="text-align: justify;">As the highest cost of green hydrogen production is attributed to the price of electricity, accounting for 40% to 75% of the total cost, cheap renewable electricity will be the defining factor in locating production facilities and the direction of imports and exports. North Africa, the Middle East, Australia, Chile, and the USA will be green hydrogen generation and export champions.&nbsp;</p><p style="text-align: justify;">The record low prices of solar electricity at $13 MWh for solar PV and $23 MWh for onshore wind have recently promised to bring the cost of green hydrogen below the $2 KgH2 threshold. Although this isn&rsquo;t the average generation price, solar and wind electricity's constant decline is expected to continue.</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Limiting Factors for Green Hydrogen Trade &nbsp;</span></h2><p style="text-align: justify;">Significant barriers to the evolution of this international trade include a lack of adequate infrastructure for compression, recompression, storage, port handling facilities and dedicated ships and pipelines.&nbsp;</p><p style="text-align: justify;">However, existing natural gas pipelines can repurpose to accommodate up to 20% of H2 blended to NG with a minimal technical upgrade.&nbsp;</p><p style="text-align: justify;">Ammonia trade and infrastructure are already established and can be leveraged to accommodate green ammonia from hydrogen produced by electrolysis rather than SMR of natural gas or coal gasification.</p><p style="text-align: justify;">A substantial upgrade and scale-up must take place to accommodate the scale and growth of green ammonia.&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Scope of Green Hydrogen Projects</span></h2><p style="text-align: justify;">We have seen significant interest from governments toward green hydrogen represented in hydrogen national strategies and roadmaps.</p><p style="text-align: justify;">An additional key factor in accelerating this movement and achieving price reduction would be the availability of cheap finance. Discrepancies in the weighted average cost of capital WACC between countries like Germany with limited renewables resources compared to Egypt with very high renewables potential can result in higher costs attributed to higher cost of capital of renewable projects.</p><p style="text-align: justify;"><span style="font-size: 10pt;"><em>This article was contributed by our expert <a href="https://www.linkedin.com/in/ahmedabbas2030/">Ahmed Abbas</a></em></span></p><p style="text-align: justify;">&nbsp;</p><h3 style="text-align: justify;"><span style="font-size: 18pt;">Frequently Asked Questions Answered by Ahmed Abbas&nbsp;</span></h3><h2 style="text-align: justify;"><span style="font-size: 12pt;">1. What is the global demand for green hydrogen?</span></h2><p style="text-align: justify;">The global market size of green hydrogen was about USD 1 billion in 2021 and is expected to reach USD 72 billion by 2030, with a CAGR of 55%.</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">2. What companies are in green hydrogen?</span></h2><p style="text-align: justify;">Some companies such as Reliance Industries (RIL), Larsen &amp; Toubro, JSW Steel, Jindal Steel, NTPC, BPCL and Indian Oil Corp have shown interest in setting up green hydrogen units.</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">3. Can green hydrogen replace fossil fuels?</span></h2><p style="text-align: justify;">Hydrogen does hold the potential to replace fossil fuels as a carbon-free source of energy.</p><p style="text-align: justify;">&nbsp;</p>
KR Expert - Ahmed Abbas