Early renewable hydrogen advantage for industrial gas producers: S&P Global Ratings

The world's top three industrial gas companies stand to benefit the most in the early stages of the renewable hydrogen race as demand scales up, S&P Global Ratings said in a report published April 22.

Large industrial gas producers Linde, Air Liquide and Air Products could be set to increase hydrogen supply on higher demand from industrial users as they switch to renewable or low-carbon gas feedstock, the report said.

The suppliers "stand to benefit from their established presence in the traditional hydrogen market, technological expertise, and early participation in some of the most advanced pilot projects across the blue and green hydrogen value chains," it said.

The companies had been producing conventional hydrogen for industrial uses for decades, but the energy carrier brought in less than 10% of Linde's and Air Liquide's total revenue, and about 25% of Air Products', the agency said.

Increased demand from traditional consumers not in a position to invest in cleaner pathways themselves, however, could pave the way for growth. This could be then be augmented with emerging demand from new sectors.

Supply growth

S&P Global Ratings put total global hydrogen production at around 73 million mt/year. It saw a further 20 million/mt coming on stream by 2030. Only around 1% of current production was generated from green energy sources, it said, while the majority was from unabated fossil fuels, resulting in CO2 emissions of 830 million mt/year -- more than the global shipping industry.

S&P Global Platts Analytics anticipated pure hydrogen demand would be near 79 million mt/year by 2025, "on the back of increased refinery runs, a greater call on ammonia, and a budding demand for hydrogen in alternative sectors," it said in a report March 8.

"Platts Analytics' H2 Production Database identifies 1.85 million mt H2/year of announced electrolyzer capacity set to come online by 2025," it said, up 31% on the quarter on increased national commitments.

Platts Analytics estimated low- and zero-carbon hydrogen production assets in the pipeline to 2025 represented a cumulative $29 billion in investments.

Renewable projects

Linde, Air Liquide and Air Products are all developing renewable hydrogen projects.

Air Products last year formed a joint venture project with ACWA Power and Neom to produce green hydrogen in Saudi Arabia. The 4-GW plant, due online in 2025, will produce 650 mt/day of hydrogen by electrolysis powered by solar and wind, and 1.2 million mt/year of green ammonia. Air Products will be the sole offtaker, and intends to export globally.

Linde said in January it planned to build and operate a 24-MW proton exchange membrane electrolyzer through a joint venture with ITM Power. Linde has a global portfolio of 40 MW of electrolysis over 80 sites.

Linde has almost 200 hydrogen refueling stations, and is developing new technology with Daimler Trucks with plans for a prototype vehicle by 2023. In addition, the company will supply liquid green hydrogen to Norwegian ferry operator Norled from the electrolyzer its Leuna chemical plant by 2022. Linde also operates a hydrogen storage cavern.

Air Liquide bought a 40% stake in the 200-MW electrolyzer project H2V Normandy in France in January. Air Liquide plans to reach a total installed electrolyzer capacity of 3 GW globally by 2030.

S&P Global Ratings said that the cash flows these large industrial gas companies have from long-term contracts with customers enabled them to make the capital investments required for blue and green hydrogen projects.

However, the ratings agency warned that "the prospects of a shift to green and blue hydrogen mean that industrial gas companies might not remain dominant in this niche market."

Platts last assessed the cost of producing hydrogen via alkaline electrolysis in the Netherlands (including capex) at Eur3.54/kg April 22.

PEM electrolysis production was assessed at Eur4.52/kg, while blue hydrogen production by steam methane reforming (including carbon, CCS and capex) was Eur1.95/kg.