This blog is part of The Great Hydrogen Debate, a five-part series to better understand what a hydrogen economy would look like, and the effort required to achieve it. This is our third piece of the series, read our first blog, "The Great Hydrogen Debate: Key questions about the hydrogen economy" and our second, "The Great Hydrogen Debate: Will Hydrogen Become The Bulk Energy Carrier Of The Future?" On Wednesdays we will be publishing blogs for this series.
The growth of the global economy has also resulted in a greater demand for energy. However, not every country can meet its own energy demands through domestic production, and the global energy trade – notably coal, oil, and natural gas – is crucial for many countries to maintain a growing economy due to their limited domestic energy resources. In a global push toward decarbonization, many countries are finding it difficult to replace their hydrocarbon-based energy imports with domestic renewables – harnessing the “unlimited” power of sun and wind has similar constraints. Hydrogen is one of the many renewable energy carriers being evaluated today. In this week’s debate, we discuss if hydrogen will be the key in a renewable energy proxy of today’s global fossil fuel trade.
To recap the debate format, we broke down each question into three clear hypotheses to reflect what we felt were the key points of contention most important to you. In preparation for the session, each member had the option to present a figure to support their positions, though some opted to “let their skills do the talking.” The figures consist of topics you asked about, internal cost analyses, and third-party data – presented here for your reference.
The hydrogen economy is really an ammonia economy.
Support for the idea of an ammonia economy was largely tied to where the team member was based and how much they interacted with that region’s clients, reflective of how much the team has been asked about ammonia over the last three years (left figure). One team member highlighted the activity in recent years by major players increasing their research and development in ammonia-based technologies, whether that’s co-firing ammonia with coal for power generation or ammonia-based fuel cells – all of which are by European or Japanese organizations. The argument by the team for an ammonia started to look strong. However, the conversation evolved with a team member asking if ammonia is truly the best solution for transporting and consuming hydrogen or did it just enjoy a first mover advantage due to its existing infrastructure? In terms of storage and transport, ammonia tankers already exist, which cannot be said for other energy carriers under investigation today. In addition, even beyond the physical assets, the team member highlighted that the industry already knows how to handle ammonia, which is critical from a safety and risk management perspective.
The debate moved beyond focusing on transporting ammonia and the other key considerations, such as cost and the need for ammonia cracking for downstream usage. In terms of cost, our in-house power-to-chemicals expert alluded to the recent cost analysis showing that power-to-ammonia is actually the “lowest cost” solution compared to other potential green molecules (right figure). With both a cost advantage and existing infrastructure highlighted at the start of the debate, the group was nearing a consensus on the ammonia economy. However, as the team mapped out a hypothetical ammonia supply chain even more questions were raised. One team member pointed out that due to ammonia’s toxicity it would likely need to be cracked – inefficient – at the port to release the hydrogen gas. Then, the hydrogen will probably need to be liquefied again for transport in pipes, barges, or trucks inland – why not just simply use liquefied hydrogen from the start?
Quickly the team ended up having more questions than answers, but did come to an agreement on one point – multiple technology pathways will emerge during the energy transition in the coming years and we are likely never to see a single commodity energy carrier like we did with oil and gas. A team member began rattling off various ways of transporting renewable energy – transmission lines, synthetic methane, gaseous and liquefiend hydrogen, and liquid organic hydrogen carriers – the latter serving as the perfect transition into the second debate.
Liquid organic hydrogen carriers will be dominant hydrogen transport method.
The second debate kicked off with the above figure for all the members to see – our analysis showing liquid organic hydrogen carriers (LOHC) as the lowest cost energy carrier for distances 10 kilometers to 10,000 kilometers for the entire delivered power range (1 MW up to 100.000 MW). While the figure alone could have easily settled the debate, the team member that led the effort in developing the analysis provided the caveat that while the model highlights the lowest cost carrier from point-to-point, it does not take into consideration of hundreds of thousands of tons of toluene, or any chemical carrier, that would need to be purchased by asset owners. Another member followed, adding that in terms of LOHC, there are only a handful of companies around the world that are aggressively developing the technology and the scale up of it to be considered the dominant hydrogen carrier will likely take decades to accomplish, if ever. The example provided was that any industry player can build a massive ammonia plant today while a LOHC plant of the same scale would be a first-of-a-kind project – the group agreed that there is a mismatch between scale and the optimism around LOHC’s timeline at this point.
At this point, the team considered a hypothetical scenario that most of the world would adopt ammonia as the energy carrier of choice, building on the first debate of the day. The first assumption was made – if major players in a region gets behind a technology like LOHC, it could push suppliers to move away from ammonia. This situation was not hard to imagine coming to fruition for Japan in ten years as all team members agreed on the possibility. But a counterpoint was made that users would not dictate the energy carrier choice but would instead be the suppliers. One team member stated that if Japan wanted to buy LOHC from Australia and Australia was mostly supply ammonia to the rest of the world, would it really have the leverage to demand a certain carrier or be forced to adapt to ammonia? The team agreed that the vital question for the future global energy trade is who would be in the position of power – users or suppliers – but was unable to come to a clear answer.
To wrap up the second debate, the team did agree that LOHC could theoretically fill a niche role in solving a “last mile” delivery problem for ammonia – where toxicity may push governments to strongly regulate its transportation in and out of heavily populated port regions.
Hydrogen is bound to be limited to local production and consumption.
An emphatic “No!” rang out as the entire team strongly disagreed with the hypothesis presented in the third debate of the day. The adapted figure from David MacKay’s analysis of global energy production and demand was used to illustrate the challenges of meeting energy demand solely through domestic renewable energy with countries representing $9 trillion of global GDP requiring the import of energy. One team member – the pro-natural gas one – made the point that while this analysis is true for renewable energy and green hydrogen, it does not take into consideration that hydrogen can also be produced from natural gas. Another quickly shot the idea down stating that in the previous day’s debate everyone agreed that renewable energy prices would drop far enough where green hydrogen would actually be the lower cost choice and it was unlikely a country would opt for a “dirtier” and more expensive form of hydrogen in the future. To keep the lively debate going, the team attempted to tackle a much larger question – what is hydrogen’s role in the future of energy security for countries across the world?
Immediately you can see everyone sit up in their seat on the Zoom video window. One team member opened the discussion by stating that assuming there is no longer an oil and gas industry in 50 years, there will still be a need for strategic energy reserves – whatever that energy source may be. Another added that in a shift towards a hydrogen economy, we may not only see a change of who the key global energy producers are, but also an expansion of the number of countries. “New players do not really mean more stability in the energy sector – it might actually lead to even more conflict than before” said one team member as the team start to recognize the discussion was becoming more political, rather than technological.
Moving back to considering the techno-economic factors of new energy producers the discussion centered around who would be responsible for building out a hydrogen supply chain? The example was that North Africa will emerge as a key hub for green hydrogen production, but would the nations in Europe likely to consume the green hydrogen build the infrastructure? However, before an answer was provided, a more interesting question popped up, “why would industry players even stay in Europe when they can just simply move to North Africa, where energy costs would be cheaper?” The team noted that energy security really meant economic security, a larger question than anyone signed up to answer that day.
From the debate on the three hypotheses, a dominant energy carrier for the future hydrogen industry was unlikely to emerge. While the economies of scale of chemical production could potentially drive down costs and pick up traction for one particular energy carrier, the new global energy trade will likely first be dictated by regional demand, availability of transportation assets, industry know how, risk management, and, of course, local and global politics. More importantly, while the team ended up with more new questions than answers for the original ones, it became clear that scale required for any future hydrogen energy carrier would need to match that of the current oil and gas trade is not insignificant. Therefore, any technology pathway being pursued today has an opportunity to carve out its own share in a multi-trillion-dollar market – and the winning technology may come down just to who can scale the fastest, not who is cheaper or better.
We continue The Great Hydrogen Debate next Wednesday, focusing on “What industry will be the driver for a widespread hydrogen economy?" and will be publishing the last two debates over the following weeks. Please make sure to subscribe to our energy newsletter for our latest energy news.