Hydrogen and carbon capture are key components for deep decarbonisation, according to DNV GL’s 2020 Energy Transition Outlook (ETO).
In its 2020 ETO, it set out that fossil fuels will account for 54% of primary energy supply in 2050 – compared to around 80% today. CO2 emissions from energy use are set to fall just 15% to 2035, before dropping 40% to 2050, with the oil and gas industry accounting for more than 80% of world energy-related carbon emissions in 2050. The scaling of hydrogen and carbon capture storage (CCS) technology will be a catalyst to begin deeply decarbonising the oil and gas value chain after 2035 and transform the oil and gas industry’s ability to remove significant amounts of carbon emissions.
From the mid-2020s, natural gas will become the world’s largest energy source, before global gas demand peaks around 2035. This will result in three significant developments: the amount of natural gas used for power generation will fall as renewables scale significantly and electricity replaces natural gas in sectors where feasible to do so; natural gas will be partially decarbonised through gas reforming and CCS to produce blue hydrogen; and green hydrogen will join decarbonised gas in replacing some of the final demand for natural gas, mostly in hard-to-abate sectors.
By 2050, 13% of natural gas supply was forecast to be decarbonised through CCS, with hydrogen partly realising its potential to become the “low carbon fuel of the future” to complement renewables around this time. Future policy changes could impact this, however, with the report citing the 2019 ETO which forecast energy demand for hydrogen as an energy carrier to be 7EJ/ year in 2050. Since then, policies and initiatives in Europe, China and North America, such as net zero targets and hydrogen strategies, have led DNV GL to increase its forecast to 24EJ/ year.
CCS will play an integral role in scaling hydrogen from 2035, with the report acknowledging that while costs of electrolysers and renewable energy will fall over the next decade, making green hydrogen more viable, blue hydrogen has lower production costs and could have an equally low carbon footprint. When considering the synergies with the operation of infrastructure for natural gas, blue hydrogen could serve as a “particularly appealing starting point” for scaling the hydrogen economy. In 2030, it projected 85% of hydrogen used as an energy carrier to be blue.
There will likely be a symbiotic rollout of hydrogen deployment and uptake of CCS, with blue hydrogen production accounting for a significant share of CCS deployment and a dominant share of demand for hydrogen as an energy carrier. Green hydrogen will significantly increase from 2035, growing at a faster pace than blue hydrogen in the 2040s, with production levels of both being relatively equal by mid-century. The split would differ by region as strategies for hydrogen vary owed to national resources and priorities.
With CCS “extremely sensitive” to the carbon price, the hydrogen economy is sensitive to the level at which CCS scales which, in turn, is key to scaling hydrogen. Along with exploiting synergies with natural gas, supportive policies such as national hydrogen strategies will be key to turning ambition for the hydrogen economy into reality. In the shorter-term, the oil and gas industry can help to scale the hydrogen economy by proving the safety case for hydrogen – key for broad acceptance and adoption – as well as developing and adapting infrastructure. DNV GL stressed the need for partnerships among government, industry and associations, labelling them “crucial” to scaling innovation and new technologies for decarbonisation. CEO DNV GL – Oil & Gas, Liv Hovem said: “Collaboration on frameworks for making hydrogen and CCS safe, effective, and commercially viable will give the oil and gas industry the certainty it needs to manage new risks and accelerate its transformation towards a low-carbon future.”