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Commodities 2022: Outlines of a global hydrogen market emerge around hubs, large exporters


Europe hydrogen policy leader, targets 6 GW by 2024

Australia, Middle East, Chile potential exporters

4.4 mil mt/yr electrolysis by 2025: Platts Analytics

The outlines of a global hydrogen market are starting to emerge around industrial clusters and large-scale exporters, as a raft of national and international policies pave the way for the mass rollout of the carbon-free energy carrier.

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S&P Global Platts Analytics identifies 4.4 million mt/year of hydrogen electrolyzer capacity set to come online by 2025, in its Hydrogen Production Asset Database.

The database charts electrolyzer deployment advancing rapidly after 2025, reaching a total of 16.7 million mt/year in 2030, driven by large projects in Australia, the Middle East, Western Asia and Europe.

Europe leads the way globally in developing hydrogen policies and strategies, and has ambitious targets for renewable and low-carbon hydrogen production.

The EU is aiming for 6 GW of installed renewable hydrogen production capacity by 2024, rising to 40 GW by 2030, and the UK is pledging an additional 5 GW by 2030.

Platts Analytics database also identifies 2.55 million mt/year of blue hydrogen capacity, produced from fossil fuels with carbon capture and storage, with target start dates by 2025, and 7.5 million mt/year by 2030, centered in North America and Europe, particularly the UK.

Industrial clusters

The UK government is pushing the concept of industrial decarbonization clusters, where hydrogen and carbon capture and storage hubs will transform heavy industrial centers, starting with HyNet North West and the East Coast Cluster in the north of England.

HyNet, centered around the Stanlow refinery in the northwest of England, aims to produce 200 mt/day (around 350 MW) of hydrogen by 2025, with a final investment decision expected in 2022 and dependent on the government's forthcoming hydrogen business plan. HyNet could produce 3.8 GW of hydrogen by 2030, it said.

The East Coast Cluster includes BP's Teesside blue hydrogen project, targeting 500 MW of production by 2027, rising to 1 GW by 2030 and with FID expected in 2024.

Also in the cluster is Equinor's Humberside blue hydrogen plans, totaling 1.8 GW of output. FID is expected in 2023, for first hydrogen production in 2026-27.

Other North Sea countries with oil and gas infrastructure such as the Netherlands and Norway are also pursuing blue hydrogen with plans for the large-scale storage of CO2 in depleted offshore reservoirs.

Elsewhere in Europe, the focus is more on interconnected hydrogen "valleys" and "corridors" linking industrial centers, pipelines and transport routes in a similar fashion, but often focused on more dispersed renewables-based hydrogen generation.

Germany and Spain have several such projects in the pipeline.

Global trade potential

However, Europe and other key demand centers such as Japan and South Korea are likely to also import a large share of the hydrogen they consume in the future, and large disparities in input gas and power costs globally are likely to create significant arbitrage opportunities, S&P Global Platts Analytics said.

Key global export hubs are emerging in locations with high renewable generation potential, such as Australia, the Middle East and Chile, which have favorable wind and solar profiles, large areas of unoccupied land, and access to the sea for shipping and as a water source for electrolysis.

Germany has outlined import agreements with Saudi Arabia, Chile and Australia, and plans to receive a first cargo of hydrogen or a hydrogen derivative such as ammonia in 2024.

Early price indications show the opportunity for would-be exporters, with S&P Global Platts assessing carbon-accounted hydrogen production in Australia at $3.30/kg and Saudi Arabia at $4.30/kg Dec. 22, compared with $9.65/kg in Japan and Eur12.15/kg ($13.72/kg) in the Netherlands.

Early in 2022, the first shipment of liquid hydrogen will move from Australia to Japan. Japan is targeting the co-firing of hydrogen for power generation, among other applications.

And ammonia, derived from renewable hydrogen, is the front runner as a carrier for international hydrogen shipments, becoming liquid at just minus 33 C, compared with the minus 253 C needed to liquify hydrogen.

The ammonia could then be "cracked" back into hydrogen, or used directly in applications including fertilizer production, co-firing in power generation as is planned in Japan and South Korea, or directly as a fossil fuel replacement in marine fuels.

Over 20 countries signed the Clydebank Declaration at the UN Climate Change Conference in Glasgow, pledging to develop green shipping corridors by 2025.

But some of the large planned renewable hydrogen projects in potential export hubs such as Australia and the Middle East will not be online for some time, highlighting the need for other sources in the short term.

Initial trade and market price discovery this decade is therefore likely to come first on a more regional and local basis around hubs, before shifting to more globally-focused pricing in the future.