Irena: 25% of global hydrogen demand to be met through international trade by 2050

Satisfying global hydrogen demand is expected to require an investment of almost $4 trillion by then

Paris-based Air Liquide opened its North Las Vegas hydrogen production facility, supplying California's mobility market, earlier this year. Reuters
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Almost one quarter of global hydrogen demand — about 150 megatonnes of hydrogen per year — will be met through international trade by 2050, while the remaining 75 per cent will be domestically produced and consumed, according to the International Renewable Energy Agency (Irena).

The hydrogen trade scenario will be a significant change from today’s oil market, where the bulk — nearly three quarters — is internationally traded, Irena said in a report on Thursday.

However, it will be similar to the current gas market, in which just 33 per cent is traded across borders.

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

Whether trade potentials can be realised will strongly depend on countries’ policies and investment priorities and the ability to decarbonise their own energy system
Francesco La Camera, Irena’s director general

“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.

“It is true that hydrogen trade can offer multiple opportunities for countries from decarbonising 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.”

Hydrogen comes in various forms, including blue, green and grey. Blue and grey hydrogen are produced from natural gas, while green is derived from splitting water by electrolysis.

Globally, the hydrogen industry is expected to be worth $183 billion by 2023, up from $129bn in 2017, according to Fitch Solutions. French investment bank Natixis estimates that investment in hydrogen will exceed $300bn by 2030.

Hydrogen has the potential to cover 12 per cent of global energy demand and cut 10 per cent of the carbon dioxide emissions by 2050, Irena said in a March report.

As hydrogen becomes an increasingly internationally traded commodity, the hydrogen sector will attract more global investment. Satisfying global hydrogen demand requires an investment of almost $4 trillion by 2050, Irena said.

Abu Dhabi-headquartered Irena’s latest report examined the conditions that would need to be in place to make hydrogen trade economically viable. It explored a 1.5°C scenario in 2050, in which 12 per cent of the final energy demand is supplied by hydrogen.

Pipes carrying a variety of substances, including hydrogen, steam, nitrogen and others, at the Leuna refinery and chemical park in Germany. Getty

There are many “milestones” to achieve before global hydrogen trade becomes a “viable, cost-effective option at scale”, the agency said.

To make hydrogen trade cost-effective, the costs of producing and trading green hydrogen must be lower than domestic production to offset higher transport cost, it 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 realised will strongly depend on countries’ policies and investment priorities and the ability to decarbonise their own energy systems,” Mr La Camera said.

Of the hydrogen that would be globally traded by 2050 in the 1.5°C scenario, about 55 per cent would travel by pipeline. The remaining 45 per cent would be shipped, predominantly as ammonia, which would mostly be used without being reconverted to hydrogen.

Most of the hydrogen network would be based on existing natural gas pipelines that would be retrofitted to transport pure hydrogen, reducing the overall transport costs, the report said.

This future pipeline-enabled trade would be concentrated in two regional markets — Europe with the vast majority of 85 per cent of the hydrogen trade, and Latin America with 15 per cent, according to Irena.

Some of the largest potential exporters of hydrogen by pipeline in 2050 will be Chile, North Africa and Spain, representing almost three quarters of the pipeline trade market. Major consumers such as China and the US will able to produce most of their hydrogen domestically.

Updated: July 07, 2022, 4:20 PM