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25% of global hydrogen set for trading by 2050 – IRENA

25% of global hydrogen set for trading by 2050 – IRENA
To make the trade of hydrogen cost-effective, the costs of producing and trading green hydrogen must be lower than domestic production to offset higher transport costs, the International Renewable Energy Agency (IRENA) says in a new report series (image courtesy IRENA).

Green hydrogen trade can provide a low-cost alternative to diversify energy imports and improve energy security, but competitive production and infrastructure are critical to winning the ‘hydrogen race’, according to a new report series published by the International Renewable Energy Agency (IRENA).

Green hydrogen trade can contribute to a more diversified and resilient energy system, allowing countries to decarbonize their economies to the benefit of producers and consumers.

Having access to abundant renewables will not be enough to win the hydrogen race, it’s also necessary to develop hydrogen trade, IRENA’s Director-General Francesco La Camera said.

The report series ‘Global hydrogen trade to meet the 1.5°C climate goal – Part 1  Trade outlook for 2050 and way forward ’ is a three-part report, and finds that future hydrogen trade can be significant. Trade allows tapping into affordable hydrogen as the scale of projects progresses and technology matures.

One-quarter of the global green hydrogen demand could be satisfied with international trade through pipelines and ships, according to the reports.

With the costs of renewables falling and the global hydrogen potential exceeding global energy demand 20-fold times, three-quarters of the global hydrogen would still be produced and used locally in 2050.

This is a significant change from today’s oil market where the bulk is internationally traded, but it is similar to gas where one third is traded across borders.

Hydrogen markets and trade routes are likely to be more diverse, regional, and less lucrative than today’s oil and gas markets.

It is true that hydrogen trade can offer multiple opportunities for countries from decarbonizing industry to diversifying supplies and improving energy security. Today’s energy importers can also become the exporters of the future. But governments must make significant efforts to turn trade aspirations into reality, Francesco La Camera added.

A mix of innovation, policy support, and scaling up can bring the necessary cost reduction and create a global hydrogen market. Whether trade potentials can be realized will strongly depend on countries’ policies and investment priorities and the ability to decarbonize their own energy systems, Francesco La Camera said.

12% of global energy demand by 2050

IRENA’s World Energy Transitions Outlook 2022 sees hydrogen covering 12 percent of global energy demand and cutting 10 percent of carbon dioxide (CO2) emissions by 2050.

Yet, hydrogen can only be a viable climate solution if the power needed to produce it comes in addition to the electrification of the energy system, placing an even greater uptake of renewable power at the heart of the transition.

If costs come down, green hydrogen below US$1 per kilogram (kg) would be available to meet ten times the world’s energy demand in 2050.

Repurposed infrastructure

The new reports see half of the hydrogen in 2050 being traded through largely existing, repurposed gas pipelines drastically reducing the costs of transport.

With costs of around US$0.10/kg per 1 000 kilometres (km) in 2050, it would be the most cost-effective option for less than 3000 km distances.

By contrast, transportation through new pipelines would cost twice as much. This is still less than shipping it in the form of green ammonia over 3 000–5 000 km, the other half of the global hydrogen trade.

Ammonia shipping will become the dominant form of intercontinental hydrogen trade, according to the analysis.

IRENA FIGURE 2.3. Top nine regions with largest demand for ammonia, methanol, steel and long-haul transport in 2050 (PJ/year)
Depending on the end-use of the hydrogen, it might be more cost-effective to first transform it into a commodity and then ship the commodity instead of the hydrogen itself. This might be attractive for ammonia (both as a chemical feedstock and a fuel), methanol, steel, and synthetic fuels. For the latter three, reconversion to hydrogen would not take place and the commodity would be used as transported (graphic courtesy IRENA).

This future pipeline-enabled trade would be concentrated in two regional markets namely Europe with the vast majority of 85 percent of the hydrogen trade and Latin America with 15 percent.

Europe’s main trading partners would be North Africa and the Middle East while Australia could mainly supply Asia.

New trade markets would lead to different roles for energy players. Some of the largest potential exporters of hydrogen by pipeline in 2050 are Chile, North Africa, and Spain, representing almost three-quarters of the pipeline trade market.

Major consumers like China and USA are able to produce most of their hydrogen domestically. Africa, Australia, and North America account for three-quarters of the global exports.

On the importing side, Japan, South Korea, and the European Union are expected to satisfy a large share of their hydrogen demand through imports.

As hydrogen becomes an increasingly internationally traded commodity, the hydrogen sector will attract growing sums of international investment. Satisfying the global hydrogen demand requires an investment of almost US$4 trillion by 2050.

However, it will be critical to ensure that large hydrogen projects can be financed affordably.

Net zero-aligned finance instruments must leverage the investment needed by the energy transition including ramping up green hydrogen in regions with good renewable potential but the traditionally high cost of capital, fostering hydrogen trade further.

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