Author: Noé van Hulst

Dossier: De opmars van waterstof
Guest Editor: Ad van Wijk

Introduction

Last year was an eventful year for hydrogen. Based on analytical reports from established international energy organisations like IEA (International Energy Agency) and IRENA (International Renewable Energy Agency) a consensus emerged that clean hydrogen is set to play a critical role in the energy transition. If the world wants to achieve the Paris Agreement and net-zero emissions by 2050, then solar and wind power won’t do the trick alone. We will need to decarbonize even the so-called ‘hard-to-abate’ sectors like manufacturing industry and heavy-duty & long-haul transport, while being able to store energy for months of low solar and wind production. Bio-gas can help here, but faces severe volume limitations. One of the few scalable solutions is clean hydrogen, produced from renewable or nuclear power or fossil fuels with carbon capture and storage (CCS). Hence the growing enthusiasm for clean hydrogen around the world. In this contribution I want to focus on the emerging global market for clean hydrogen.

The recent launch of the first liquefied hydrogen carrier vessel in Japan is a historic event that captured headlines in the media. Just like the first LNG tanker more than half a century ago, it marks the beginning of a new era. And, it is again Japan that leads the way in establishing the first international trade routes for shipping clean hydrogen from Australia and Brunei to Japan. Many will be watching these pilot trades closely, eager to benefit from the lessons learned.

Potential exporting countries

Last year was already an eventful hydrogen year and judging from the beginning of 2020 it is becoming very clear that there is a growing interest and action for a global clean hydrogen market. In an increasing number of countries with ample low-cost energy resources, governments and companies are seriously reviewing the possibilities of developing a clean hydrogen export industry. Australia and Brunei have already been mentioned, with Australia explicitly focusing on exports in their recently published hydrogen strategy. But we observe similar trends, to a varying degree, in New Zealand, South Africa, Morocco, Tunisia, Algeria, Portugal, Spain, Scotland, Chile, and Argentina.

Furthermore, there are clear signs that the opportunities for exporting clean hydrogen are under review in Saudi Arabia, United Arab Emirates, Kuwait, Oman, Qatar, Norway, and Russia. Obviously, we need to wait and see how fast this will develop, but in a growing number of cases concrete projects and shipping routes are being considered. In several countries the focus is on green hydrogen from cheap solar or wind-energy (like Portugal, New Zealand, Morocco, Argentina), but in others it’s both green hydrogen and blue hydrogen from fossil fuels with CCUS (Carbon Capture, Utilisation and Storage).

Potential importing countries

As we are getting a sense of which countries are potential next-exporters of clean hydrogen, the same is the case for potential net-importing countries. In Asia, Japan and Korea have already clearly signaled the need for large-scale imports of clean hydrogen. For China and India, the situation is less clear so far. In Europe, Germany, the Netherlands and Belgium are among the countries where most experts think that if the scaling-up in the use of clean hydrogen in the next ten years is successful, the domestic production won’t be sufficient to meet the demand.  Particularly in the manufacturing industry, the potential demand for clean hydrogen resulting from a hydrogen-focused decarbonisation pathway will be so big that it will outpace supply growth. Just to mention one striking number: only replacing the current grey hydrogen use in European industry by green hydrogen would already require a doubling of the entire European electricity production.

When it comes to clean hydrogen trade within Europe and between Europe and North-Africa, a dedicated hydrogen pipeline-infrastructure, on the basis of re-purposed gas pipelines, may well become the preferred cross-border transport mode. Some experts see clean hydrogen as the new ‘bridge’ between Europe and North Africa. For the US, the IEA also expects a net-import demand if clean hydrogen use takes off. The IEA graph below provides a good overview of the global hydrogen trade landscape that may emerge from these trends.

Scaling up

It is very hard to predict how long it will take before we see a robust global clean hydrogen market emerge. In the case of LNG, it took about half a century. Much will depend on whether the world will be successful in scaling up cost-competitive production and use in the next ten years. In addition, key questions will be whether a clear winner will emerge from the currently considered transport modes (i.e., liquefied, ammonia, or liquid organic hydrogen carrier), and how fast the cost of shipping will come down. The very recent McKinsey report, produced for the Hydrogen Council and based on a wealth of company data, suggests a significant potential for intercontinental clean hydrogen trade already in 2030.

Governments need to play a key role in setting the right framework conditions and stimulate common standards and guarantees of origin. International organisations like IEA and IPHE (International Partnership for Hydrogen and Fuel Cells in the Economy) can help to pave the way.

My sense is that hydrogen trade developments are moving faster than we thought just one year ago. This observation is mainly based on the concrete projects for clean hydrogen imports we are already discussing in the Netherlands, e.g. from Portugal. It will be exciting to track how this new global market will shape up in the years to come.

Geopolitics

There is a debate on the geopolitics of the clean hydrogen revolution. One school is stressing the point that in particular green hydrogen not only provides the potential of new growth perspectives for developing countries, but also a channel to replace fossil fuel imports from relatively unstable regions in the world. The other school actually considers this more as a potential risk for geopolitical stability. If green and blue hydrogen could open up new business models for current fossil fuel producers, this may actually help geopolitical stability in the world and perhaps even make international climate negotiations less contentious. Personally, I am more drawn to the second camp.

Noé van Hulst is Hydrogen Envoy at the Ministry of Economic Affairs & Climate Policy in the Netherlands. Prior to that, Mr van Hulst was the Dutch Ambassador to the OECD from September 2013 to September 2018 and Chairman of the IEA Governing Board.

From 2003 to 2007, he worked at the International Energy Agency (IEA) in Paris as Director of Long-Term Co-operation and Policy Analysis. He then became Secretary-General of the International Energy Forum (IEF) in Riyadh, Saudi Arabia from 2008 to 2011. He was Director of the Energy Academy Europe in 2012-2013.

Before that, Mr van Hulst worked at the Ministry of Economic Affairs from 1988, lastly as Director-General for Energy. Mr van Hulst has a PhD in economics from the VU Amsterdam.