Market Snapshot: Hydrogen could be part of the global path to net-zero
Release date: 2021-06-16
What is hydrogen?
In 1969, hydrogen helped fuel the rocket that put a human on the moon. This same fuel may now help the world accomplish its climate goals. The feasibility of wider hydrogen adoption is the subject of an increasing number of studies, and many initiatives are underway to expand hydrogen in our energy mix.
What is hydrogen? Hydrogen (H) is a colourless, odourless, flammable gas. It is also the most plentiful element in the universe. Hydrogen occurs naturally on earth, but mostly only in combination with other elements, such as with oxygen in water (H2O). Hydrogen molecules can be separated from water, fossil fuels, or biomass and used as an energy carrier, or fuel.
Hydrogen is a useful energy carrier because it has the highest energy content of any chemical fuel by weight: about three times more than gasoline.Footnote 1 This is why it has historically been used as a component of rocket fuel. Hydrogen is also used for other things such as making ammonia for fertilizer, manufacturing glass, treating metals, and refining petroleum. Hydrogen can be produced from fossil fuels, biomass, or by splitting it from water using electricity, a process called electrolysis. Canada is currently one of the top ten global producers of hydrogen, producing about three million tonnes (Mt) annually, largely from natural gas.
Studies sometimes use colours to refer to the different ways to produce hydrogen. Figure 1 below describes the production methods associated with the three most common colours.Footnote 2
Figure 1. Hydrogen production methods
Source and Description
Source: Canada Energy Regulator
Description: This figure shows that grey hydrogen uses a process called steam methane reforming to separate hydrogen from methane, the main component of natural gas, and emits carbon dioxide. Low-carbon hydrogen consists of blue and green hydrogen production methods. Blue is the same process as grey but captures the emitted carbon dioxide for storage or use. Green uses renewable electricity in a process called electrolysis to separate hydrogen molecules from water.
The International Energy Agency (IEA) does not distinguish between colours of hydrogen, but focuses on hydrogen production with low carbon intensity, sometimes called clean hydrogen. The IEA considers low-carbon hydrogen to include hydrogen produced from biomass, renewable, and nuclear electricity, as well as fossil fuels when carbon capture, utilization, and storage (CCUS) is used and emissions from fossil fuel extraction and supply are mitigated. Figure 2 shows that, according to the IEA’s Hydrogen Projects Database, Canada currently has 10 low-carbon hydrogen projects, many at the pilot stage.
Figure 2. Number of proposed or operating low-carbon hydrogen projects by country
Source and Description
Source: IEA (2020), Hydrogen Projects Database
Description: The map shows the number of proposed or operating projects by country from January 2000 to June 2020. Categorization of projects into blue and green categories are based on definitions from the Hydrogen Strategy for Canada Report.
Uses of Hydrogen
In order to reduce carbon emissions, many sectors may need to switch to electric technologies that source low-carbon electricity. Hydrogen’s high energy content means it could be particularly useful in sectors where other low-carbon options like electrification are likely to be too expensive or have technical drawbacks. These sectors are often called ‘hard to abate’ sectors and include heavy industry (cement, steel, and plastics manufacturing) and heavy-duty transport (aviation, shipping, and long-haul road transport), which together account for over 30% of global emissions (Figure 3). Heavy industry processes often need very high temperatures (for example, blast furnaces used to produce iron operate at temperatures above 1 500 °C) which can be challenging to achieve without energy-dense fuels. Meanwhile, hydrogen could also be an attractive fuel for long-distance trucking where the heavy weight and shorter ranges of battery-operated vehicles is more of a challenge than for light duty passenger transportation.
Figure 3. Global CO2 emissions by sector grouping, 2019
Source and Description
Source: International Energy Agency Energy Technology Perspectives 2020
Description: This graph shows that heavy industry accounts for 26.4% of global carbon dioxide equivalent emissions and heavy-duty transportation accounts for 7.4%.
Hydrogen’s potential to decarbonize hard-to-abate sectors has been a key reason that many countries have announced strategies to include more low-carbon hydrogen into their energy mix to reach net-zero emission goals. In total, more than 120 countries have announced net-zero goals, including Canada. Over 30 countries had announced national hydrogen strategies by early 2021, pledging almost US$70 billion in government support. In December 2020, the Government of Canada released its Hydrogen Strategy for Canada Report. Like the IEA, Canada’s hydrogen strategy does not differentiate between colours of hydrogen, but focuses on hydrogen with low carbon intensity.
Globally, hydrogen strategies tend to reflect the unique energy circumstance of each region. Canada, Australia and Chile, for example, aim to become global producers and exporters of low-carbon hydrogen. Japan, which has limited ability to produce its own hydrogen, plans to import it, so its strategy focuses on developing required infrastructure. The European Union is focused on developing domestic green hydrogen production. China and South Korea are both focused on developing hydrogen fuel cell electric vehicle (FCEV) technology and public deployment. The Chinese government set a goal of having one million FCEVs on the road and 1 000 hydrogen refueling stations by 2030. California is also creating public hydrogen fueling stations to provide zero-emission transportation fuel.
Various forecasts and energy scenarios have global hydrogen demand increasing. Figure 4 shows the production of low-carbon hydrogen in the near term will be concentrated in Europe and Australia, based on currently proposed and operating projects.
Figure 4. Capacity of proposed and operating low-carbon hydrogen projects by country
Source and Description
Source: International Energy Agency’s Hydrogen Projects Database
Description: This map displays the distribution and concentration of hydrogen projects globally. It displays proposed and operating projects by country and displays the combined capacity and the number of projects. Europe and Australia have the highest concentration of capacity.
Global investment in low-carbon hydrogen has been steadily increasing and the size of projects is increasing as well. There are roughly 228 large-scale proposed hydrogen projects worldwide worth US$300 billion of investment through to 2030. Figure 5 shows the announced start date and estimated capacity of proposed projects, showing an anticipated increase in low-carbon hydrogen production over the next decade.
Figure 5. Global cumulative capacity of existing and proposed low-carbon hydrogen production by year
Source and Description
Source: IEA (2020), Hydrogen Projects Database, IEA, Paris
Description: This graph displays the estimated capacity of projects (operating and proposed) at each anticipated start date from 2000 – 2030. This includes new capacity added that year and the capacity from previous years cumulatively. The normal cubic metres of gas unit is based on conditions at 1 bar pressure and 0 degrees Celsius and weight calculations were calculated based on the density of hydrogen at 1 bar pressure and 0 degrees (0.089 kg/normal cubic metres). The estimated capacity increases in the next decade, and even more significantly after 2025.
Among the notable global projects is the Hydrogen Energy Supply Chain (HESC) pilot project that is being delivered by a partnership between Japanese and Australian industry partners and supported by the Victorian, Australian, and Japanese governments. HESC, parts of which are already operational, would be the world's first fully-integrated hydrogen supply chain with hydrogen production from coal in Victoria, Australia, being delivered to Kobe, Japan.
US-based Air Products and Acwa Power, a Saudi Arabia-based power developer partly owned by the kingdom’s sovereign wealth fund, are planning on building the US$5 billion Helios Green Fuels project in Neom, Saudi Arabia. The project would be the world’s biggest green hydrogen production facility. It will be powered by wind and solar energy, and will produce 650 tonnes of green hydrogen daily, enough to run around 20 000 hydrogen-fueled buses.
Early success in small hydrogen projects has led to larger, more integrated projects in Canada.
- Notable early projects such as the Raglan Mine and Bella Coola HARP project have reduced reliance on diesel in remote locations.
- In Alberta, carbon is captured during hydrogen production at the North West Sturgeon Refinery, and Suncor Energy has partnered with ATCO to produce more than 300 000 tonnes per year of low-carbon hydrogen by as early as 2028.
- Fort Saskatchewan is also home to a blending pilot project by ATCO. Construction is planned to commence in 2021 and once complete it will inject up to 5% hydrogen into part of Fort Saskatchewan's residential natural gas distribution network.
- Air Products has announced that it plans to build a $1.3 billion facility in Edmonton that will produce hydrogen derived from natural gas, with operations starting in 2024.Footnote 3
- In Ontario, the Enbridge-Cummins energy storage facility is in its second year of operation, storing excess renewable energy as hydrogen.
- Enbridge Gas and Cummins have also announced a pilot project to blend low-carbon hydrogen into the existing Enbridge Gas natural gas network.
- In Quebec, construction has been completed on the world’s largest PEM (Proton Exchange Membrane) electrolyzer for green hydrogen production.
Transporting and storing hydrogen may present challenges as it is increasingly adopted. Blending hydrogen into natural gas and using existing pipeline infrastructure, or transporting pure hydrogen by a dedicated pipeline, is being researched globally. The IEA found that blending hydrogen up to 20% on a volumetric basis into the gas grid requires minimal or potentially no modifications to grid infrastructure or to domestic end-user appliances. Delivering higher hydrogen blends in the natural gas system could affect pipeline materials, gas properties, safety systems, metering equipment, and end-use equipment. Storing hydrogen will also be a challenge for using more hydrogen in energy systems. Issues include operating pressures and temperatures required to store hydrogen, the life spans and stability of storage materials, and requirements for hydrogen purity.
Hydrogen has the potential to play a key role in the transition to a low-carbon economy and net-zero emissions. It may provide a way to leverage some existing energy and infrastructure, including fossil fuel resources and natural gas pipelines. Yet, work is still needed for hydrogen to be deployed at mass scale, including to increase cost-competitiveness with other fuels. Globally, efforts are focused on developing and harmonizing regulations, standards, and codes and addressing hydrogen storage and transportation challenges.
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