Hydrogen Economy: 2021 Predictions
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Hydrogen Economy: 2021 Predictions
Transcript of Hydrogen Economy: 2021 Predictions
Hydrogen Economy: 2021 Predictions 1
Hydrogen Economy: Understanding the Hype and Hope
The hydrogen economy has become the energy sector’s favorite buzzword.
With questions outnumbering answers, Lux Research energy analysts got together to have extensive internal discussions to better understand what a hydrogen economy would look like and the effort required to achieve it. Our goal was not to provide definitive answers but to present key lines of reasoning, highlight tension points, and outline potential scenarios.
To help untangle what exactly a hydrogen economy will look like, the fundamental enabling technologies (and technology pathways), and, most importantly, the timeline and potential opportunities for industry stakeholders among the hype and hope of hydrogen, this whitepaper highlights:
• The areas that generated the most interest among Lux Research clients in the past five years
• Three key areas to watch in the hydrogen economy
• 2021 predictions for the hydrogen economy
Questions that Lux clients have asked about the hydrogen economy in the past five years
Lux Research works with the most innovative companies in the world, and surely enough, the hydrogen economy is one of the topics that has generated interest among our clients. We first look at the questions you have been asking us about hydrogen. More importantly, we find a way to distill the key questions related to hydrogen into more bite-size pieces. Given that hydrogen has the potential to decarbonize nearly all aspects of the energy system, we analyzed more than three years’ worth of questions to determine where interest is highest. Using nearly 60 different keywords and search strings, we categorized hydrogen-related questions into the following: production, mobility, storage and transport, use in power production, and use in industry (Graphs 1 and 2).
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Graph 1 & 2: Questions that Lux clients asked about the hydrogen economy between 2016 and 2020
Left: Questions by topic Right: Questions by client location
PRODUCTION OF HYDROGEN TOPS THE LIST AS THE MOST ASKED-ABOUT TOPIC IN THE HYDROGEN ECONOMY
Unsurprisingly, hydrogen production is the most asked-about topic within the broader hydrogen economy. More specifically, the production of green hydrogen is the key area of focus and one of the primary reasons that it is on our 2021 top emerging technologies to watch list. Looking a bit closer, questions generally fall into two categories — what are the current and emerging technologies for the production of green hydrogen, and how does the cost production compare to the conventional steam methane reforming process (grey hydrogen) as well as steam methane reforming with carbon capture (blue hydrogen).
HYDROGEN FOR MOBILITY CONTINUES TO BE AN INTEREST AREA DESPITE THE EARLY SHORTCOMINGS OF FUEL CELL VEHICLES
The mobility sector was supposed to be the foundation of a hydrogen economy — at least that is what automakers like Toyota believed. However, the rise of battery electric vehicles has largely shifted automaker strategies toward electrification in the past five years. While light-duty vehicles are on a clear path toward electrification, many questions are now focused on the heavy-duty vehicle sector, especially in determining the competitiveness of battery-powered and fuel cell powertrains. While Nikola Motor is likely a blemish to the industry, we continue to witness growing interest in hydrogen development in this sector.
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THE HYDROGEN ECONOMY IS GARNERING GLOBAL INTEREST ACROSS A WIDE RANGE OF INDUSTRIES
To our surprise, the organizations asking about hydrogen were nearly equally distributed geographically. This is vastly different from other energy technologies we cover, which are often skewed toward one particular region, such as battery recycling (EMEA), CO2 utilization (APAC), or methane detection (Americas). In addition, while organizations in the energy industry were the largest group showing interest in hydrogen, the diversity, including chemicals and materials, aerospace and defense, and even consumer packaged goods, highlights the far-reaching applications of hydrogen.
Hydrogen Economy: Three Key Areas to Watch
Our analysis of client questions highlighted three areas that generated the most interest. To tackle the massive undertaking of understanding what would eventually be a drastic reconfiguring of our energy economy, we broke down our debate into three main questions:
• Will hydrogen become the bulk energy carrier of the future?
• How will hydrogen be transported in a new global energy trade?
• What industry will be the driver for a widespread hydrogen economy?
WILL HYDROGEN BECOME THE BULK ENERGY CARRIER OF THE FUTURE?
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. 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 among the general public, utilizing hydrogen for heat and steam remains an untapped opportunity.
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. Figuring out how to utilize hydrogen for heat and steam may be the key that unlocks the hydrogen economy.
To read the analyst debate on this topic, visit our blog page: “The Great Hydrogen Debate: Will Hydrogen Become the Bulk Energy Carrier of the Future?”
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HOW WILL HYDROGEN BE TRANSPORTED IN A NEW GLOBAL ENERGY TRADE?
The growth of the global economy has also resulted in a greater demand for energy. However, not every country can meet its own energy demands through domestic production, and the global energy trade — notably coal, oil, and natural gas — is crucial for many countries to maintain a growing economy due to their limited domestic energy resources. In a global push toward decarbonization, many countries are finding it difficult to replace their hydrocarbon-based energy imports with domestic renewables — harnessing the “unlimited” power of sun and wind has similar constraints. Hydrogen is one of the many renewable energy carriers being evaluated today.
The scale required for any future hydrogen carrier to match that of the current oil and gas trade is not insignificant. Multiple technologies will emerge, and we are unlikely to see a single commodity energy carrier like we have today. The new global energy trade will likely first be dictated by regional demand, availability of transportation assets, industry know-how, risk management, and, of course, local and global politics. Therefore, any technology pathway being pursued has an opportunity to carve out its own share in a multitrillion-dollar market — and the winning technology may come down to just who can scale the fastest, not who is cheaper or better.
To read the analyst debate on this topic, visit our blog page: “The Great Hydrogen Debate: How Will Hydrogen Be Transported in a New Global Energy Trade?”
WHAT INDUSTRY WILL BE THE DRIVER FOR A WIDESPREAD HYDROGEN ECONOMY?
Identifying which industry will be the catalyst for widespread hydrogen adoption is the holy grail of the hydrogen economy. With nearly 90% of hydrogen consumed today in refining and ammonia production, many are investigating the prospects of other industries — power generation or transportation — in growing overall hydrogen demand. The question also becomes more nuanced because not all hydrogen is created equal — with grey hydrogen being the dominant form today but a significant push for green hydrogen production and consumption in the future.
While from an addressable market perspective, transportation has the potential to boost hydrogen demand, the outlook for fuel cell vehicles is unclear, as electric vehicles have surpassed them as the powertrain of the future. Unfortunately, there is no clear answer to how the hydrogen economy will emerge, but a true hydrogen economy will be a green hydrogen economy — first with on-site generation and self-consumption but eventually leading to widespread adoption in transportation and power generation. What came first, the chicken or the egg? From how things look, the egg must come first.
To read the analyst debate on this topic, visit our blog page: “The Great Hydrogen Debate: What Industry Will Be the Driver for a Widespread Hydrogen Economy?”
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The Great Hydrogen Debate: Key Questions About the Hydrogen Economy
The hydrogen economy is garnering significant global interest across a wide range of industries. The new push is not surprising, considering that hydrogen has the potential to decarbonize nearly all aspects of the energy system. Hydrogen, however, is not without its challenges, and there are many unknowns regarding its future. What exactly will the hydrogen economy look like? What are the fundamental enabling technologies and technology pathways, and most importantly, what are the timelines and potential opportunities for industry stakeholders among the hype and hope of hydrogen?
We gathered our experts to debate all things hydrogen and are bringing our debate to you, presenting our opinions and takes to help you understand what a hydrogen economy would look like and the effort required to achieve it. Our goal is not to present definitive answers but to present key lines of reasoning, highlight tension points, and outline potential scenarios.
In this debate, we focused on the key questions you have been asking about hydrogen. To our surprise, the organizations asking about hydrogen were nearly equally distributed geographically. This is vastly different from other energy technologies we cover that are often skewed toward one particular region. While organizations in the energy industry were the largest group showing interest in hydrogen, the diversity, including chemicals and materials, aerospace and defense, and even consumer packaged goods, highlights hydrogen’s far-reaching applications.
We analyzed your questions to determine where interest is highest and distilled that information into three key questions:
• Will hydrogen become the bulk energy carrier of the future?
• How will hydrogen be transported in a new global energy trade?
• What industry will be the driver for a widespread hydrogen economy?
In our debate format, we further broke down each question into three clear hypotheses to reflect 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 position. The figures consist of topics you asked about, internal cost analyses, and third-party data — presented here for your reference.
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QUESTION #1 WILL HYDROGEN BECOME THE BULK ENERGY CARRIER OF THE FUTURE?
What are the prospects of hydrogen consumption beyond the two core use cases today, and what other industries have the potential to elevate hydrogen in the energy system pecking order?
Hypothesis: 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 and push it into second place? That was quickly shut down by another member who stated that while the use of hydrogen as a feedstock in the industrial sector is clearly the only market today, it is not limited to 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 cited the Shell Sky scenario (left figure above), which shows that the total industry use of hydrogen — both feedstock and energy — loses its top position as transportation ramps up. The member that opened the debate jumped in: “But that’s like 50 years from now.” He asked, “Could this be less about will hydrogen adoption pick up in other industries and more about the potential to electrify industrial processes?”
The debate shifted to the potential emerging technologies within the industrial sector — electric cracking, bio-based materials, and plastics recycling — all possibilities. Our Europe-based team member stated 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 top of mind, especially as a potential feedstock. “Maybe for Europe that works,” countered our Asia-based team member. The planned integrated petrochemical complexes and refinery capacity expansion in Asia were used as examples of why hydrogen consumption will continue to grow faster than other industries, with our team member
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stating that it’s unlikely that an established plastic recycling or biomass infrastructure — despite an abundance of both in terms of volume in the region — would make such a shift feasible.
The debate came to a close with the group agreeing that given the current landscape, hydrocarbon production, processing, and refining will continue to be the primary consumer of hydrogen, with the caveat that breakthroughs in technology development — especially those focused on electrification — could drastically alter the long-term outlook beyond 2050.
Hypothesis: Trucking and long-haul transportation will see an uptick in 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 toward zero emissions. The real questions are when and to what extent this will be true for trucking. Programs like the U.S. Department of Energy’s SuperTruck initiative will continue to improve the efficiencies of internal combustion engines, and new operating models that pass short and medium trips onto electric vehicles could mean that we’d see hydrogen adoption, although less than many believe. Another team member agreed on this point but added that when you’re 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. In some cases, they are even slightly better when looking at incumbent diesel truck capacity. Cost was quickly brought up as the reason that light-duty vehicles have struggled to gain traction. The point was then raised that, with substantial cost reductions to meet the U.S. Department of Energy’s targets by 2040 (right figure above), the cost of Class 8 fuel cell vehicles could potentially fall enough that they would become the lowest-cost powertrain option as early as 2030.
The debate then shifted to nonroad transportation, with one team member stating that there are increasing questions about hydrogen related to aviation and shipping (left figure above), though it remains a very minor interest area across the client base. One team member stated that we are very unlikely to see hydrogen gain traction as a fuel source in either sector, and liquid fuels —
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bio-based and synthetic — are the only viable option for decarbonization. “But what about Airbus’ recent hydrogen plane concepts?” asked a team member. The subject was quickly shut down by all members, calling it exactly what it is, a concept, one that we’re unlikely to see 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 planned or under construction, and that will lead to liquid fuels lock-in for the industry. Two, it takes up to 10 years to change one small part in an airplane due to numerous standards — given that, how could we possibly believe a complete overhaul of the existing aviation sector could 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 as much as oil has. There was agreement that fragmentation is inevitable and will likely result in various hubs with a preference for one fuel over another.
Hypothesis: High-temperature process heat or heating in atypical contexts will shift toward hydrogen
A team member provided their 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. As natural gas is already being piped into the facility for hydrogen production, it is also used for high-temperature heat. Unless the industry shifts completely toward 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 considering the advantages of a consistent hydrogen supply, without the need to retrofit or upgrade natural gas pipelines to handle higher hydrogen concentrations, and heat that could be sourced from electrification.
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The consensus quickly fell apart when one team member, who is pro-natural gas, reminded the team that such a setup would require that you build three new systems: electrolyzers, pipelines, and electric boilers. He added that not all heat requirements are the same (right figure above), with temperature demands for chemicals, fertilizer, steel, and cement exceeding 500 °C — not to mention overall cost. One member said that cost 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. “Considering the way solar and wind auction prices are going lately,” they added, “that price may come sooner than we think.”
And with this, the third and last debate in this category 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 and has served as the main carrier for industry heating. It remains unclear which technology will provide the carbon-free version in the future.
From the debate on Question 1, four things became clear:
• 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 will eventually shift from grey 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 not likely to be achieved.
• While less discussed among the general public, the group concluded that figuring out how to utilize hydrogen for heat and steam may be the key that unlocks the hydrogen economy.
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QUESTION #2 HOW WILL HYDROGEN BE TRANSPORTED IN A NEW GLOBAL ENERGY TRADE?
In this debate, we discuss if hydrogen will be the key in a renewable energy proxy of today’s global fossil fuel trade.
Hypothesis: The hydrogen economy is really an ammonia economy
In our debate, support for the idea of an ammonia economy was largely dependent on where the team member was based and how much they interacted with that region’s clients, reflective of how much the team has been asked about ammonia over the past three years (left figure). One team member highlighted the activity in recent years by major players in Europe and Japan, which have been increasing their research and development in ammonia-based technologies, whether in cofiring ammonia with coal for power generation or ammonia-based fuel cells. The argument for an ammonia economy looked strong, until a team member asked whether ammonia is truly the best solution for transporting and consuming hydrogen or whether it just has a first-mover advantage due to its existing infrastructure. In terms of storage and transport, ammonia tankers already exist, which cannot be said for other energy carriers under investigation today. In addition, even beyond the physical assets, the industry already knows how to handle ammonia, which is critical from a safety and risk management perspective.
The debate moved beyond the transportation of ammonia to other key considerations, such as cost and the need for ammonia cracking for downstream usage. In terms of cost, our in-house power-to-chemicals expert cited a recent cost analysis showing that power-to-ammonia is actually the “lowest-cost” solution compared to other potential green molecules (right figure above). With both a cost advantage and existing infrastructure, as was highlighted at the start of the debate, the team was nearing consensus on an ammonia economy. However, as the team mapped out a hypothetical ammonia supply chain, even more questions were raised. One team member
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pointed out that, due to ammonia’s toxicity, it would likely need to be cracked at the port to release the hydrogen gas. Then, the hydrogen would probably need to be liquefied again for transport in pipes, barges, or trucks inland, raising the question, why not simply use liquefied hydrogen from the start?
Though more questions than answers were generated, the team reached a consensus on one point — that multiple technology pathways will likely emerge during the energy transition in the coming years and that we are unlikely to see a single commodity energy carrier in the future as we did with oil and gas. A team member stated the multiple ways to transport renewable energy — transmission lines, synthetic methane, gaseous and liquefied hydrogen, and liquid organic hydrogen carriers — the last example serving as the perfect transition into the second debate.
Hypothesis: Liquid organic hydrogen carriers will be the dominant hydrogen transport method
The second debate kicked off with our analysis showing that liquid organic hydrogen carriers (LOHCs) are the lowest-cost energy carriers for distances of 10 km to 10,000 km for the entire delivered power range (1 MW up to 100,000 MW). While that figure alone could have easily settled the debate, the team member that led the effort in developing the analysis provided the caveat that, while the model highlights the lowest-cost carrier from point to point, it does not take into consideration the hundreds of thousands of tons of toluene, or any chemical carrier, that would need to be purchased by asset owners. Another member followed, adding that in terms of LOHC, there are only a handful of companies around the world that are aggressively developing the technology, and the scale-up needed to become the dominant hydrogen carrier would likely take decades to accomplish, if ever. They added that any industry player could build a massive ammonia plant today, while a LOHC plant of the same scale would be a first-of-a-kind project, indicating a mismatch between scale and the optimism surrounding LOHC’s timeline.
At this point, the team considered a hypothetical scenario where most of the world would adopt ammonia as the energy carrier of choice, building on the first debate of the day. The first assumption:
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If major players in a region get behind a technology like LOHC, it could push suppliers to move away from ammonia. This situation is not hard to imagine coming to fruition for Japan in 10 years. But a counterpoint was made that users would not dictate the energy carrier choice and would instead be the suppliers. For example, if Japan wanted to buy LOHC from Australia, and Australia was supplying ammonia to the rest of the world, would Japan really have the leverage to demand a certain carrier, or would it be forced to adapt to ammonia? The team agreed that the vital question for the future global energy trade is who would be in the position of power — users or suppliers?
To wrap up the second debate, the team agreed that LOHC could theoretically fill a niche role in solving a “last-mile” delivery problem for ammonia — where toxicity may push governments to strongly regulate its transportation in and out of heavily populated port regions.
Hypothesis: Hydrogen is bound to be limited to local production and consumption
Our entire team strongly disagreed, with a resounding “No!” The adapted figure from David MacKay’s analysis of global energy production and demand was used to illustrate the challenges of meeting energy demand solely through domestic renewable energy. One team member made the point that, while this analysis is true for renewable energy and green hydrogen, it does not take into consideration that hydrogen can also be produced from natural gas. Another member disagreed, stating that, as we had come to a consensus on earlier, renewable energy prices would drop far enough that green hydrogen would actually be the lower-cost choice, and it was unlikely that a country would opt for a “dirtier” and more expensive form of hydrogen in the future.
To keep the lively debate going, the team attempted to tackle a much larger question: What is hydrogen’s role in the future of energy security for countries across the world? Immediately, everyone sat up in their seats. One team member opened the discussion by stating that, assuming there is no longer an oil and gas industry in 50 years, there will still be a need for strategic energy reserves, whatever that energy source may be. In a shift toward a hydrogen economy, we may see not only a change
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in who the key global energy producers are but also an expansion in the number of countries involved. New players do not necessarily mean more stability in the energy sector, and it’s possible that they would lead to even more conflict than before, but that discussion is more political than technological.
Moving back to considering the techno-economic factors of new energy producers, the discussion centered around who would be responsible for building out a hydrogen supply chain. One possibility was North Africa as a key hub for green hydrogen production, but would Europe, likely to consume the green hydrogen, build the infrastructure? Before anyone could answer, a more interesting question was posed: Why would industry players stay in Europe when they could simply move to North Africa, where energy costs would be cheaper? The team noted that energy security really meant economic security, a larger question than anyone signed up to answer that day.
From the debate on question two, four things became clear:
• A dominant energy carrier for the future hydrogen industry is unlikely to emerge.
• While the economies of scale in chemical production could potentially drive down costs and pick up traction for one particular energy carrier, the new global energy trade will likely first be dictated by regional demand, availability of transportation assets, industry know-how, risk management, and, of course, local and global politics.
• The scale required for any future hydrogen energy carrier would need to match that of the current oil and gas trade, which is significant.
• Any technology pathway being pursued today has an opportunity to carve out its own share in a multitrillion-dollar market, and the winning technology may come down to who can scale the fastest, not who is cheaper or better.
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QUESTION #3: WHAT INDUSTRY WILL BE THE DRIVER FOR A WIDESPREAD HYDROGEN ECONOMY?
In our third and final debate, we tackle this question in an attempt to map out the path toward a hydrogen economy.
Hypothesis: Transportation fuel will be the main driver and leading application for hydrogen
Our debate kicked off with a team member taking the position that the hydrogen economy is about the expanded use of hydrogen, and out of all the sectors, transportation is the only sector large enough to move the needle in terms of supply and demand. This position was immediately shot down by another team member stating that “it didn’t work before — why would it magically work now?” When asked to elaborate, the team member referenced the Shell Sky scenario (left figure), showing that even in Shell’s bullish scenario for hydrogen adoption, we would not see a significant uptick in the road transportation sector until after 2050 and that even by the end of the century, it would still be a minor energy source compared to electricity. When other forms of transportation were brought up — heavy-duty, aviation, and shipping — the group quickly agreed that their energy demand is still a minor portion of the energy system and that even the prospects of hydrogen are not promising outside of heavy-duty vehicles.
Our in-house mobility expert stated that, at the end of the day, it comes down to costs — not just vehicle costs but the costs of fueling infrastructure. In terms of vehicle costs, the team member cited Toyota Mirai, the first commercially mass-produced fuel cell vehicle on the market, initially priced at $57,000 in the U.S. Without significant cost reductions, the outlook for fuel cell vehicle adoption is grim. Even in the most optimistic case, new car sales are not expected to break $1 million by the end of the decade (right figure). Then there’s fueling infrastructure. “It’s just way too expensive, and nobody wants to build [it] right now.” The group discussed the $1.5 million cost of a single hydrogen fueling station as the reason there are barely 300 public hydrogen fueling stations around
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the world. One team member put the final nail in the coffin, adding that the cost of an electric vehicle charging station is 0.05% of that cost.
The first debate in this category wrapped up with the group agreeing that despite the large addressable market, the economic fundamentals are still currently too large of a hurdle — though the group did agree that this could drastically change with very targeted investments in the range of multiple billions of dollars from government.
Hypothesis: Hydrocarbon production, processing, and refining will catalyze green hydrogen production
All eyes were on the resident green hydrogen specialist to kick off the second debate. The opening statement was made that the industrial sector will be the primary driver of the hydrogen economy because what that really means is a low- or zero-carbon hydrogen economy. The point was made that the idea of a hydrogen economy is not about increasing hydrogen usage initially but about evolving the existing use of hydrogen. This means that the refining and petrochemicals industry would be the primary driver, with major companies active in the space today, building electrolyzer capacity and eventually infrastructure for hydrogen storage and transport. An analogy was made to the rise of electric vehicles, which occurred because the electric grid was constructed first for all sectors, and the rise of electric vehicles piggybacked on the existing infrastructure. The same will happen for green hydrogen.
It was becoming clear that the debate was quickly turning into a “chicken or the egg” discussion, but the group agreed that demand is more important than supply in the early phases of the hydrogen economy and that demand for green hydrogen will come from the industrial sector. A team member added that we are already witnessing increasing activity, with companies “one-upping” each other with large-scale electrolyzer projects. “You build 1 GW, I build 2 GW” — that pushes down costs with larger manufacturing capacity, automation, and scale-up know-how (above figure). Another team
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member added that refining is not the only industry that has shown strong interest in green hydrogen. Steel emerged as the next opportunity to drive green hydrogen use, and if a country like China were to decide to use hydrogen in its steel production, it would drastically shift the demand landscape.
The group reached a consensus that the near-term growth opportunities for green hydrogen will come from the existing demand industries — refining, petrochemicals, and ammonia production. This first step will lead to a domino effect of new infrastructure build-out to shift green hydrogen production from on-site generation and self-consumption to an eventual commodity energy carrier for other industries.
Hypothesis: Hydrogen will become a bulk energy carrier and the drop-in replacement for natural gas in our energy system
The last debate in this category mirrored the overarching theme of previous debates. Hydrogen will likely be one of several energy carriers in the future energy mix. The first team member opened the discussion with the statement that shifting to 100% hydrogen is just plain difficult and costly. The team member highlighted the exorbitant cost of a new build hydrogen pipeline and the investment required even in a retrofit strategy (above figure). But the pipeline is not the only issue — converting customers over to hydrogen is also a logistical issue. And while it might be possible to switch over every household from natural gas to hydrogen in a few demonstrations or towns, the likelihood of it becoming universal is close to none.
A team member shifted the conversation by highlighting that the challenges of hydrogen becoming a bulk energy carrier go far beyond technical details. Several governments across the world want to electrify — not shift from natural gas to hydrogen — and burning hydrogen for heat is a good way to lose money, especially when electric heating is clearly a better solution. When the idea of just blending hydrogen into existing natural gas pipelines was raised, it was quickly shot down as overly complicated, with some countries already shelving the idea. It was becoming clear that the team agreed that hydrogen would not become the future bulk carrier, but what would it be?
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As the conversation ended, there was a growing consensus that the bulk energy carrier of the future will likely be electricity, with hydrogen serving as a complement when electricity is not a viable option. “The hydrogen economy is just an electrified economy,” said one team member as the group concluded one last time.
From the debate on the third question, three things became clear:
• While transportation has the potential from an addressable market perspective to boost hydrogen demand, the outlook for fuel cell vehicles is unclear, as electric vehicles have surpassed them as the powertrain of the future.
• A true hydrogen economy will be a green hydrogen economy — first with on-site generation and self-consumption but eventually leading to a global renewable energy trade.
• Lastly, hydrogen — or any other form of energy — will unlikely become the bulk energy carrier in the future energy system.
Hydrogen Economy 2021: 10 Predictions
To conclude, Lux Research analysts built their 2021 predictions for the hydrogen economy — some safe ones, some bold ones, and even some very opinionated and specific ones, in typical Lux Take fashion. Below are our 10 predictions, in no particular order.
1. South America emerges as a key hot spot for the hydrogen economy
Discussion on the hydrogen economy has been largely dominated by Japan, South Korea, and Europe. However, South America stands to gain from the hydrogen economy due to its abundance of cheap renewable energy and key mineral resources. With Chile’s announced plans to produce the world’s cheapest green hydrogen by 2030, we expect several other nations in the region to step up their efforts and solidify South America as a key player in the hydrogen economy.
2. The EU Commission rolls out a green hydrogen incentives framework.
Europe took the lead in the hydrogen economy with Germany’s groundbreaking national hydrogen strategy. This leadership position will continue into 2021 as the EU unveils a regulatory framework to incentivize the use of green hydrogen in industrial processes and other applications. This will come as no surprise to the industry, as the EU increased its decarbonization target to a world-leading 55% by 2030.
3. The U.S. unveils a natural gas-hydrogen transition plan
Not to be mistaken for a national hydrogen strategy, the U.S. will announce a transition plan to mitigate the risk of stranded assets for the more than $500 billion worth of natural gas pipeline projects under
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construction. With the National Renewable Energy Laboratory (NREL) leading efforts, the HyBlend project will get the green light in 2021 to move from research and development to infrastructure transition by 2030.
4. Governments worldwide take more concrete steps to phase out ICE vehicles
The partial or complete ban on internal combustion engine vehicles will grow in 2021 — adding to a list of countries that currently includes the U.K., France, and Norway, among many others. While the move will benefit battery electric vehicles the most in the near term, it will reignite interest in fuel cell vehicles, especially for heavy-duty trucks and smaller form factor vehicles.
5. China announces projects to triple global electrolysis capacity by 2025
China’s ability to scale technologies is no secret. From solar and wind deployments to Li-ion battery installations, the country has single-handedly moved the needle on new energy technologies. With growing interest in green hydrogen, China will announce 5 GW of electrolyzer capacity to be constructed before 2025, relying heavily on its domestically developed alkaline electrolyzer technology.
6. Hydrogen cities begin to emerge across the globe
While these “cities” will likely remain fairly small and serve mostly as pilot trials, we will see a handful of them pop up throughout the world, especially in Japan, South Korea, and Europe. South Korea is already ahead of the game, announcing its plan to create a hydrogen city by 2022 where hydrogen is the primary fuel for cooling, heating, electricity, and transportation. As companies, cities, and countries continue to try and outdo each other in all things hydrogen, new hydrogen cities are inevitable.
7. A clear focus on building hydrogen refueling infrastructure along highway corridors will emerge
To date, most hydrogen refueling infrastructure has been built in cities due to their high population densities or by private companies for fleet operators. As interest in fuel cell vehicles shifts to heavy-duty applications, such as long-haul trucking, new hydrogen fueling stations will also shift toward highway corridors.
8. Overzealous venture capitalists will spur investments in hydrogen-related startups
While venture capitalists have found little success in backing energy startups in the past, the recent rise in share prices for hydrogen startups will likely lead to growing investor interest. Bloom Energy, Plug Power, and FuelCell Energy saw their share prices increase nearly fivefold in 2020, and we expect venture capitalists to aggressively look for the next big unicorn but likely end up with another Nikola Motor.
Hydrogen Economy: 2021 Predictions 19
9. Nel or ITM Power will be acquired.
In 2019, Cummins acquired Hydrogenics, a leading fuel cell and hydrogen production technology provider. This will unlikely be the last such acquisition. Nel and ITM Power will likely entertain a series of offers in 2021, with one company unable to turn down a deal. Potential buyers could potentially come from a variety of industries as the growing gap between interest in hydrogen and in-house expertise continues to widen, though a likely sector to make such a move in 2021 is industrial gas.
10. General Motors will announce an additional supply deal in fuel cells.
GM has made it clear that the usage of fuel cells in passenger vehicles is not on its near-term roadmap. However, the company is willing to operate as a component supplier to other companies, such as Nikola and Navistar, as it continues to develop and plan manufacturing capacity for fuel cells. One promising customer could come in the form of the U.S. military, which values the low temperature and noise of a fuel cell powertrain, in a deal that would include on-site green hydrogen production.
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About the Authors
Arij van Berkel, Ph.D.
Vice President, Research at Lux Research
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Runeel Daliah
Senior Analyst at Lux Research
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Yuan-Sheng Yu
Managing Consultant, Energy at Lux Research
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Arnold Bos
Managing Director, Consulting at Lux Research
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Christopher Robinson
Director, Research at Lux Research
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About Lux Research
Lux Research is a leading provider of tech-enabled research and advisory services, helping clients drive growth through technology innovation. A pioneer in the research industry, Lux uniquely combines technical expertise and business insights with a proprietary intelligence platform, using advanced analytics and data science to surface true leading indicators. With quality data derived from primary research, fact-based analysis, and opinions that challenge traditional thinking, Lux empowers clients to make more informed decisions today to ensure future success.
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