Hydrogen trade can diversify energy imports, improve energy security


Green hydrogen has been highlighted as a low-cost alternative, capable of diversifying energy imports and improving energy security, through new research.

On 7 July, the International Renewable Energy Agency (IRENA) published a report, exploring the importance of future hydrogen trade. With no cost-effective way to transport renewable energy over long distances to link low cost production sites with demand centres, hydrogen offers potential as an energy carrier. The cost-effectiveness of trade in hydrogen, however, will be whether scale, technologies and other efficiencies can offset the cost of transporting the hydrogen from low cost production areas to high demand ones.

For it to be cost-effective, the cost of producing green hydrogen must be sufficiently less expensive in the exporting region than the import region. This will compensate for the transport cost. As the scale of projects increases and technology develops to reduce transport costs, the cost differential will grow larger. It outlined how hydrogen trade can lead to a lower cost energy supply, with cheaper imported energy being tapped into, while also resulting in a more robust energy system with a greater number of alternatives able to cope with the occurrence of unexpected events.

Through its analysis, IRENA explored  a 1.5°C scenario, as set out within its World Energy Transitions Outlook where 12% of final energy demand is supplied by hydrogen. Around a quarter of this (150Mt) could be satisfied through international trade, while the other three quarters is domestically produced and consumed. This differs from oil, where 74% is internationally traded, but is similar to gas, where 33% is traded across borders.

Around 55% of that hydrogen is expected to travel via pipeline, with most of this hydrogen network based on existing natural gas pipelines. This would be concentrated in the two regional markets of Europe and Latin America. The remaining 45%, meanwhile, would be shipped, predominantly as ammonia, which would mostly be used without then being reconverted back into hydrogen.

On costs, it forecast the cost of producing green hydrogen from solar PV, or solar-onshore wind hybrid configurations to fall below $1 per kg of hydrogen (kgH2) for a majority of regions by 2050, based on optimistic assumptions. A more pessimistic outlook would put this figure at $1.3/kgH2. The cost of shipping ammonia, meanwhile, is projected to decline by one order of magnitude from $8/kgH2 to $0.8/kgH2 based on 20,000km.

At these levels – $1.5-2/kg for delivered hydrogen – the prices charged by different exporters should be very close to one another. This will ensure that most countries have multiple potential trading partners at a small switching cost penalty, meaning trading partners will not likely be defined by cost exclusively. Instead, it will be a combination that includes cost, energy security and other geopolitical factors.

Therefore, for hydrogen trade to take off, there are multiple dimensions working in synergy that are required, including a market to be created, generating demand, promoting transparency and bringing suppliers and end users together; a market regulatory framework, both flexible enough to enable growth and be adaptive; a certification scheme that is consistent across borders with an internationally agreed methodology; and for the required technology to be developed and improved through innovation. The deployment of financing is also key to construct the infrastructure, both for global trade and for much larger upstream renewable energy generation.

It further noted that for large-scale hydrogen production and trade to be a viable component of the 1.5°C scenario, the electricity used to produce it must be additional and not detract from other essential, more effective uses. This means upscaling and accelerating renewable energy generation needs to be at the heart of the transition to green hydrogen, tripling from today’s 290GW a year to over 1TW by the mid-2030s, at least.

Featured Image: Global hydrogen trade flows under Optimistic technology assumptions in 2050.