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 second piece of the series, to read our first blog, "The Great Hydrogen Debate: Key questions about the hydrogen economy," click here. On Wednesdays we will be publishing blogs for this series.
The question around hydrogen becoming a bulk energy carrier is largely a question about its potential to replace oil and gas across numerous use cases as well as compete head-to-head against electrification. With nearly 90% of hydrogen consumed today concentrated in refining and ammonia production, there is a long road ahead for hydrogen to become a bulk energy carrier in the future. In our first debate, we discuss the prospects of hydrogen consumption beyond the two core use cases today and what other industries has the potential to elevate hydrogen in the energy system pecking order.
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 content knowledge do the talking.” The figures consist of topics you asked about, internal cost analyses, and third-party data – presented here for your reference.
Hydrocarbon production, processing, and refining will continue to be the primary consumer of hydrogen.
The first debate kicked off with one member of the team asking why this is even a question – hydrocarbon production, processing, and refining is already the primary consumer of hydrogen by a long stretch, how could any other industry ramp up usage to push it down to second place? The team member emphasized his stance by pointing out the lack of questions on the topic over the last three years (right figure). But the statement was quickly shot down, stating that while the use of hydrogen as a feedstock in the industrial sector is clearly the only market today, it is not limited to just refining. Ammonia production makes up half of that and if the road transportation sector continues to electrify, the demand for refined fuels will eventually peak and hydrogen consumption for ammonia production could potentially take the top spot. A supporting member chimed in, citing the Shell Sky Scenario (left figure), where total industry use of hydrogen – both feedstock and energy – loses its top position as transportation ramps up. “But that’s like 50 years from now” chided the member that opened up the debate, realizing he was quickly losing his argument to the group. In attempt to salvage his pride, the member quickly deflected, asking the the following question to the group – could this be less about will hydrogen adoption pick up in other industries and more about the potential to electrify industrial processes?
At this point the debate began to shift focus towards potential emerging technologies within the industrial sector – electric cracking, bio-based materials, and plastics recycling all were thrown out as possibilities. Our Europe-based team member brought up that bio-based chemicals continue to be an area of interest in the region and a growing focus on the circular economy has put plastics recycling, especially as a potential feedstock, top of mind for several players. “Maybe for Europe that works” countered our Asia-based team member. The planned integrated petrochemical complexes and refinery capacity expansion in Asia was used as an example of why hydrogen consumption will continue to grow faster than other industries, stating there will unlikely be an established plastic recycling or biomass infrastructure – despite an abundance of both in terms of volume – in the region to make such a shift feasible.
The debate came to close with the group agreeing that with the current landscape, hydrocarbon production, processing, and refining will continue to be the primary consumer of hydrogen, however with the caveat that breakthroughs in technology development – especially those focused on electrification – can drastically alter the long-term outlook beyond 2050.
Trucking and long-haul transportation will see an uptick of hydrogen adoption.
Our in-house mobility expert jumped straight in, stating that the simple answer is “yes” because regulations are pushing light-duty and heavy-duty vehicles towards zero-emission vehicles. The real questions are when and to what extent for trucking. Citing that programs such as the U.S. Department of Energy’s SuperTruck will continue to improve efficiencies of internal combustion engines and new operating models where short and medium trips are passed onto electric vehicles, hydrogen could see less adoption than many believe. Another team member added that this was a good point, but if looking at long-haul specifically the only metric that matters is range. For ranges above 300 km, fuel cells are a much superior technology to battery electric when looking at truck payload capacity compared to incumbent diesel trucks, in some cases even slightly better than the incumbent. Cost was quickly brought up as why light-duty vehicles struggled to gain traction, but with substantial cost reductions to meet the U.S. Department of Energy’s targets by 2040 (right figure), Class 8 fuel cell vehicles costs could potentially fall enough that they become the lowest-cost powertrain option as early as 2030. “You must work for Nikola” one of the members snarked as the discussion around trucking wound down.
The debate shifted towards non-road transportation with one team member calling out that he is witnessing an increasing number of questions around hydrogen for aviation and shipping (left figure), though it remains a very minor interest area across the client base. One team member proclaimed that we are very unlikely to see hydrogen gain traction as a fuel source in either sector and liquid fuels – bio-based and synthetic fuels – are the only viable option for decarbonization. “But what about Airbus’ recent hydrogen plane concepts?” asked a team member. The subject was quickly pounced on by all members, calling it exactly what it was – a concept – and that we would unlikely see it become the primary fuel for aviation in our lifetimes. Two interesting points were brought up about the aviation industry. One, there are trillions of dollars of airport infrastructure currently under construction or planned that will lead to liquid fuels lock-in for the industry. Two, it takes up to ten years just to change one small part in an airplane due to the numerous standards – how could we possibly believe a complete overhaul of the existing aviation sector can happen within this industry?
There was less of a consensus this time around, but the group did agree that hydrogen – or any other new energy source – was unlikely to dominate the industry like oil has done so far. Fragmentation will be inevitable and likely will result in various hubs with a preference of one fuel over another.
High-temperature process heat or heating in atypical contexts will shift towards hydrogen.
Immediately, one team member blurted out that as long as hydrogen is cheaper than natural gas this hypothesis could be true – so no. Another team member provided a more eloquent take, explaining that the majority of industrial processes today have a stream methane reformer on-site for the production of hydrogen as a feedstock, but not for energy use. But since there is already natural gas being piped into the facility for hydrogen production, it is also used for high temperature heat. Unless the industry shifts completely towards green hydrogen via electrolysis and detaches itself from natural gas, it would be tough to see hydrogen replace natural gas for heat and steam generation. With the discussion looking to go down a path of little resistance or debate, a team member asked, “what if there are existing hydrogen production plants and an elaborate hydrogen pipeline infrastructure already in place?” The proposal was intriguing with each member of the team calling out various advantages of this type of set up – consistent hydrogen supply, no need to retrofit or upgrade natural gas pipelines to handle higher concentrations of hydrogen, and heat could be sourced from electrification.
Consensus quickly fell apart with the pro-natural gas team member calling out that such a setup would require you to build out three brand new systems – electrolyzers, pipelines, and electric boilers. He then went on to add that not all heat requirements are the same (right figure), with temperature demands for chemicals, fertilizer, steel, and cement exceeding 500 °C – not to mention overall cost. The member that the hydrogen set-up called out that Lux’s argument is always cost, but that may not be valid in today’s world where companies are already paying more for low-carbon options – not because of marketing or regulations, but because executive teams genuinely care about carbon emission targets. Another member added that even if costs are not competitive today, that is likely to change in the future, citing Lux’s model showing that with an approximate $0.02/kWh renewable electricity price, green hydrogen breaks the cost threshold against natural gas. With the way solar and wind auction prices are going lately, that price may come sooner than we think.
Either due to fatigue or the team had exhausted its arguments, but the third and last debate of the day came to an end. The industrial revolution started with the availability of affordable and powerful steam engines. Ever since, steam has been the lifeblood of the industrial sector serving as the main carrier for heating in industry though it is still unclear what technology will provide the carbon-free version in the future.
From the debate on the three hypotheses, it became clear that hydrogen will likely be one of several energy sources in the future energy mix. Hydrogen as an industry feedstock has the clearest roadmap, remaining the primary consumer of hydrogen and eventually shifting from grey hydrogen to green hydrogen in the process. Interest in hydrogen for trucking is well warranted and likely the future of the heavy-duty vehicle space, but goals for hydrogen-powered aviation and shipping are likely to be unachieved. And while less discussed in the general public, the group discovered that figuring out how to utilize hydrogen for heat and steam may be the key that unlocks the hydrogen economy.
We continue The Great Hydrogen Debate next Wednesday, focusing on “How will hydrogen be transported in a new global energy trade?” 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.