Hydrogen

More efforts needed
Shutterstock 681046012
In this report

Hydrogen technologies maintained strong momentum in 2019, awakening keen interest among policy makers. It was a record year for electrolysis capacity becoming operational and several significant announcements were made for upcoming years. The fuel cell electric vehicle market almost doubled owing to outstanding expansion in China, Japan and Korea. However, low-carbon production capacity remained relatively constant and is still off track with the SDS. More efforts are needed to: scale up to reduce costs; replace high-carbon with low-carbon hydrogen in current applications; and expand hydrogen use to new applications.

Low-carbon hydrogen production, 2010-2030, historical, announced and in the Sustainable Development Scenario, 2030

Openexpand
Tracking progress

Demand for pure hydrogen is around 70 Mt per year, mostly for oil refining and chemical production. This hydrogen currently is produced from natural gas and coal, and associated CO2 emissions are significant.

Clean energy progress for hydrogen can be tracked using three main indicators:

  • the extent to which low-carbon hydrogen production replaces conventional hydrogen in existing industrial applications.
  • demand in new sectors (e.g. some transport and industrial applications, gas grid injection and electricity storage), where characteristics such as storability and a lack of harmful emissions occurring from its use make it a leading clean-energy vector.
  • scale-up, cost reductions and improvements (in efficiency, lifetime and process integration) of cross-cutting technologies such as electrolysers, fuel cells and hydrogen production with carbon capture and utilization or storage (CCUS).

Developing low-carbon hydrogen production routes is critical for hydrogen to aid in clean energy transitions. Most hydrogen is currently produced through emissions-intensive natural gas reforming and coal gasification.

The two main low-carbon production routes involve: coupling conventional technologies with CCUS; and generating hydrogen through water electrolysis.

Coupling conventional technologies with CCUS is still the main route for low-carbon hydrogen production and will likely remain so in the short to medium term because production costs are lower than for other low-carbon technologies such as electrolysis.

Interest in projects that combine conventional technologies with CCUS is growing. Six projects, with a total annual production of 350 000 tonnes of low-carbon hydrogen, were in operation at the end of 2019, and more than 20 new projects have been announced for commissioning in the 2020s, mostly in countries surrounding the North Sea.

Electrolysers enable the production of clean hydrogen from low-carbon electricity and water. While electrolysers are a well-known and long-used technology in a variety of industrial sectors, the fastest-growing market is for uses that serve energy and climate objectives: vehicle fuelling; hydrogen injection into the gas grid; using hydrogen as a cleaner input for industrial processes; electricity storage; and synthetic fuel manufacturing.

In recent years, the number of projects and installed electrolyser capacity have expanded considerably, from less than 1 MW in 2010 to more than 25 MW in 2019. Furthermore, project size has increased significantly: most projects in the early 2010s were below 0.5 MW, while the largest in 2017-19 were 6 MW and others fell into the 1 MW to 5 MW range.

In March 2020, a 10 MW project started operation in Japan, and a 20‑MW project in Canada is under construction. Plus, there have been several announcements for developments in the order of hundreds of MWs that should begin operating in the early 2020s (see the IEA hydrogen project database).

As alkaline electrolysers are the most mature electrolysis technology, they dominate the market, especially for large-scale projects (both already operational and announced).

However, many new projects are now opting for polymer electrolyte membrane (PEM) designs. PEM electrolysers are at an earlier stage of development than alkaline electrolysers, but they can operate more flexibly and are therefore more compatible with variable renewable electricity generation.

Projects involving high-efficiency solid oxide electrolyser cells (SOECs) are also beginning to be announced, nearly all of them in Europe to produce synthetic hydrocarbons. However, electrolyser users remain divided over whether the operational benefits of PEMs (flexibility) and SOECs (efficiency) are worth the additional costs compared with alkaline electrolysers. 

Global electrolysis capacity becoming operational annually, 2014-2023, historical and announced

Openexpand

While most electrolysis technology is deployed for the use of hydrogen in the transport sector, a higher share of recently announced projects involve injecting hydrogen into the gas grid or reducing emissions in existing hydrogen applications such as refining and ammonia production. Some technology developers are also pilot-testing electrolysis applications in steel production.

Hydrogen has long been known as a potential low-carbon transport fuel, but establishing it in the transport fuel mix has been difficult. However, the fuel cell electric vehicle (FCEV) market is beginning to flourish, catalysed by developments in Asia.

The global FCEV stock nearly doubled to 25 210 units at the end of 2019, with 12 350 new vehicles sold – more than doubling the 5 800 purchased in 2018.

Fuel cell EV deployment, 2017-2019, and national targets for selected countries

Openexpand

While US sales fell slightly in 2019 (2 100, compared with more than 2 300 in 2018), the United States remain the world leader in FCEV stock, with approximately one in three FCEVs running on US roads, followed by China, Japan and Korea.

Fleets in Asian countries expanded significantly in 2019, reducing the gap with the United States. The number of new sales rose in Japan (more than 700 compared with around 600 in 2018), Korea and China.

The situation in China and Korea is particularly dynamic, with new sales climbing from a few units in 2017 to almost 4 400 and 4 100 respectively in 2019.

In the case of China, this impressive progress was stimulated by policies supporting the adoption of fuel cell buses (with a stock close to 4 300) and light-duty trucks (more than 1 800), making China the leader in global stock of fuel cell buses (97%) and trucks (98%).

Some major truck manufacturers have announced plans to develop models in and to also begin deploying units in Europe and Japan.

At the end of 2019, 470 hydrogen refuelling stations were in operation worldwide, an increase of more than 20% from 2018.

Japan remains the leader with 113 stations, followed by Germany (81) and the United States (64). The number of stations in operation expanded considerably in Korea (+20), Japan (+13) and Germany (+12) whereas the United States added only one HRS in 2019.

Similar to FCEVs, the number of refuelling stations increased threefold in China in 2019 (from 20 to 61), giving China the fourth-largest number of stations, followed by Korea and France.

In non-road vehicles, new applications are gaining recognition. At the end of 2018, two fuel cell trains produced by Alstom became operational in Germany, and successful trials led to the announcement that another 14 will be put into service in 2021. The United Kingdom and the Netherlands have also shown interest in Alstom hydrogen trains, and a fuel cell tram began operating in Foshan (China) in 2019, with China exploring further possibilities for H2-fuelled rail.

In addition to transport, domestic and industrial heating are sectors that could raise low-carbon hydrogen demand for decarbonisation purposes. Existing infrastructure (such as gas grids) could be used to enable demand increases.

Injecting hydrogen into the gas distribution grid is a low-regret option for increasing low-carbon hydrogen demand for domestic and industrial heating. Blending hydrogen up to 20% on a volumetric basis into the gas grid requires minimal or potentially no modifications to grid infrastructure or to domestic end-user appliances.

The GRHYD project in France, which began blending 6% hydrogen into the natural gas grid in 2018, already reached 20% on a volumetric basis in 2019, demonstrating the technical feasibility of this approach for domestic use.

Injecting hydrogen into the gas transmission grid is more challenging due to material incompatibilities at high pressures and a lower hydrogen concentration tolerance in the blending that industrial users can accept. However, some pilot experiments are testing the feasibility of injecting hydrogen at the transmission level, and a project developed by Snam in Italy has already demonstrated the feasibility of blending hydrogen up to 10%.

Several projects around the world are already injecting hydrogen into gas grids.

The largest (6 MW of electrical input) has been operational in Germany since 2015, and as this is a sector in continuous expansion, several more projects will be launched in the early 2020s. A growing number of countries is interested in gas grid hydrogen-blending because the increasing use of variable renewable electric generation leads to periods of surplus and curtailment.

Although interest was initially limited to Europe, since 2017 other countries (such as Australia, Canada and the United States) have become curious about how to make use of their robust gas grids to boost low-carbon hydrogen demand. Installations that can blend roughly 2 900 tonnes of hydrogen per year into the gas grid are currently in place around the world.

Of all sectors, industry has the highest hydrogen demand, especially for refining and chemical and steel manufacturing. As these industries use high-carbon hydrogen, replacing it with low-carbon hydrogen would be an ideal opportunity to ramp up demand while decreasing GHG emissions in the short term.

Interest in substituting low-carbon for high-carbon hydrogen is growing in the chemical and refining sectors. Some large projects are already applying carbon capture to fossil-based hydrogen production in both sectors (e.g. Shell’s Quest project).

Regarding electrolytic hydrogen, although this alternative is still limited to some pilot or small-scale experiences, a number of important large-scale developments (up to 100 MW) were announced in 2019 and are expected to be operational in the early 2020s. Most of these announcements involve oil refining or methanol and ammonia production.

In addition, building on initial pilot projects currently under way in Europe, electrolytic hydrogen is gaining momentum in steelmaking. Without making any major changes to existing direct reduced iron furnaces, up to 35% of the natural gas can be substituted by hydrogen. Several steelmakers are pursuing blending as a transition strategy to forge the way to the deployment of the pure hydrogen direct reduced iron route, for which a large pilot plant is under construction in Sweden and a first demonstration trial is projected for 2025.

The political momentum for hydrogen use continued to gather strength in 2019. This is fundamental for the advancement of hydrogen technologies and markets, since climate change ambitions remain the main impetus for widespread low-carbon hydrogen use. An increasing number of countries announced hydrogen strategies and roadmaps in 2019, in many cases establishing targets for the deployment of hydrogen technologies:

  • In May 2019, a new Hydrogen Initiative was launched at the 10th Clean Energy Ministerial (CEM10) held in Vancouver (Canada) to spotlight the role hydrogen and fuel cell technologies can play in the global clean energy transition. This initiative, co-led by Canada, Japan, the Netherlands, the United States and the European Commission, aims to boost international collaboration on policies, programmes and projects to accelerate the commercial deployment of hydrogen and fuel cell technologies across all sectors of the economy. The IEA was selected to co‑ordinate this initiative.
  • In September, 35 countries and international institutions attending the 2nd Hydrogen Energy Ministerial Meeting agreed to the Global Action Agenda as a principle to guide expanded RD&D on hydrogen. The document included a target to reach 10 million hydrogen vehicles and 10 000 HRSs in ten years to encourage the use of hydrogen and fuel cells in mobility.
  • In June, hydrogen was the focal point of the G20 discussions in Osaka (Japan), where G20 leaders acknowledged the opportunities offered by further development of innovative, clean and efficient hydrogen technologies.
  • Japan, the European Commission and the United States signed a partnership for future co‑operation on hydrogen and fuel cell technologies.
  • The European Fuel Cells and Hydrogen Joint Undertaking launched the Hydrogen Roadmap for Europe highlighting all the opportunities hydrogen provides to decarbonise the gas grid and the transport and industry sectors, and its systematic role in the transition to a sustainable energy system. In turn, the certification scheme developed under the CertifHy project issued the first Guarantees of Origin for projects producing low-carbon hydrogen.
  • Korea announced its Hydrogen Economy Roadmap in January 2019, targeting FCEV passenger car production capacity of 6.2 million and the deployment of 40 000 FC buses, 30 000 FC trucks and 1 200 HRSs by 2040.
  • In March 2019, Japan updated the Strategic Road Map for Hydrogen and Fuel Cells (initially published in 2017), confirming previous targets for mobility, the hydrogen supply chain and the domestic sector.
  • The Netherlands published a Climate Agreement containing a package of measures having broad societal support, including targets for hydrogen production (500 MW of installed electrolysis capacity by 2025 and 3 GW to 4 GW by 2030) and mobility (15 000 FCEVs, 3 000 FC heavy-duty trucks and 50 HRSs by 2025, and 300 000 FCEVs by 2030).
  • Australia’s government published Australia’s National Hydrogen Strategy defining 57 actions in areas such as regulation, infrastructure, mobility and R&D with the aim of positioning Australia as a world leader in hydrogen production and exports.
  • In October, Natural Resources Canada published 2019 Hydrogen Pathways - Enabling a Clean Growth Future for Canadians defining ten high-level actions to make hydrogen and fuel cell technologies part of the clean growth solutions that provide environmental and economic benefits to Canadians.
  • Several regional governments such as the Occitanie region (France), the South Australian Government and a number of German Landers have also unveiled hydrogen plans.

The targets set in various national roadmaps and strategies still focus mainly on transport applications, although there has been a clear trend since 2018 of including targets for other sectors such as industry, domestic buildings and power generation. This shows that there is renewed interest in the cross-sectoral role that hydrogen can play, contributing simultaneously to the decarbonisation of different sectors.

Country Targets set before 2018 Targets set in 2018 Targets set in 2019
Spain1 Mobility

500 FCEVs and 20 HRS by 2020

Belgium1 Mobility

22 HRS by 2020

Finland1 Mobility

21 HRS by 2020

United Kingdom1 Mobility

65 HRS by 2020

France2 Mobility

5 000 FECVs by 2023 and 20 000-50 000 by 2028
200 FC trucks by 2023 and 800-2 000 by 2028
100 HRS by 2023 and 400-1 000 by 2028

Industry

10% decarbonised H2 use in industry by 2023 and 20-40% by 2028

Japan3 Mobility Mobility

200 000 FCEVs by 2025 and 800 000 by 2030
1 200 FC buses by 2030
10 000 FC forklifts by 2030
320 HRS by 2025 and 900 by 2030

Domestic sector

5.3 million cumulative sales of micro-CHP FC units by 2030

Supply chain

300 000 tonnes/year by 2030

Korea4 Mobility

80 000 FC taxis by 2040
4 000 FC buses by 2040
3 000 FC trucks by 2040
81 000 FCEVs by 2022 and 2.9 million by 2040 (plus 3.3 million exported)
310 HRS by 2022 and 1 200 by 2040

Power

1.5 GW of capacity by 2022 15 GW of combined production (7 GW exports, 8 GW domestic) by 2040

Domestic sector

50 MW of micro-CHP FCs by 2022 and 2.1 GW by 2040

Supply chain

0.47 million tH2/y by 2022, 1.94 million tH2/y by 2030 and 5.26 million tH2/y by 2040

The Netherlands5 Mobility

15 000 FCEVs, 3 000 FC heavy-duty vehicles and 50 HRS by 2025 and 300 000 FCEVs in 2030

Supply chain

500-800 MW of installed electrolyser capacity by 2025 and 3-4 GW in 2030

Germany6 Mobility

100 HRS by 2020 and 400 by 2025

Participants of the Hydrogen Energy Ministerial7 Mobility

10 000 HRS and 10 million FCEVs by 2030

Notes: HRS = Hydrogen refuelling station. 2nd Hydrogen Energy Ministerial participants: Argentina, Australia, Bangladesh, Brunei, Canada, Chile, Costa Rica, the European Commission, France, Germany, Indonesia, Italy, Japan, Korea, Morocco, the Netherlands, New Zealand, Norway, Oman, Pakistan, the Philippines, Poland, Russia, Saudi Arabia, Spain, Tanzania, Thailand, the United Arab Emirates, the United Kingdom, the United States and Vietnam.

Hydrogen value chains can be complex and require cross-sectoral co‑ordination. This multiplies risks, especially for new network infrastructure and first movers.

There are currently few applications for which low-carbon hydrogen is a cost-effective fuel or feedstock. Therefore, the incentives for investment are low and the path to cost reductions and competitiveness is unclear. In addition, there is a strong link between the widespread production and use of low-carbon hydrogen and climate change ambition, which will continue to be its main driver.

For these reasons, governments have a central role in building the right environment for low-carbon hydrogen technologies to prosper and contribute to climate targets as well as other policy objectives, such as air quality and energy security. The development of robust policies and regulations can incentivise private sector investment in low-carbon hydrogen, raising both supply and demand and eventually making it financially self-sustaining in a greater number of sectors and countries.

Defining a clear role for hydrogen in long-term policies and strategies would instil in investors the confidence that hydrogen investments will be profitable for decades to come.

Governments can therefore shape future expectations for the sector by establishing clear targets and pathways. This would also help the industry sector define clear long-term goals for hydrogen, especially in key subsectors such as refining, chemicals, iron and steel and long-distance transport.

Multilateral initiatives and projects can assist in knowledge-sharing, developing best practices and leveraging spillover benefits. Examples of necessary global-scale actions requiring international co‑operation include:

  • Establishing the first international trade route, which will be crucial to initiate international hydrogen trading. The Asia-Pacific region is strong candidate to launch the first routes and the Hydrogen Energy Supply Chain (HESC) developed between Japan and Australia offers a good model of potential first steps to achieve this objective.
  • Developing coastal hydrogen hubs to scale up low-carbon hydrogen production and use, from which low-carbon hydrogen uptake can be expanded to other sectors. Conditions are favourable in areas such as the North Sea, south-eastern China, north-western India, the Gulf of Mexico or the Persian Gulf. Non-coastal hubs would also offer interesting opportunities, although their potential for deploying hydrogen production from fossil fuels with CCUS may be limited.

Existing infrastructure, such as natural gas grids, can provide significant opportunities to create and scale up low-carbon hydrogen demand. Policies and regulations supporting hydrogen blending in the gas grid (such as renewable fuel obligations and low-carbon fuel standards) can accelerate the deployment of low-carbon hydrogen by linking it with secure energy demand.

Even blending at low concentrations (around 5% per volume) can significantly increase the deployment of supply technologies and result in cost reductions. Once this low-concentration blending has been demonstrated as economically sustainable, it could be raised by steps up to 20% with almost no infrastructure modifications.

Despite not being cost-competitive today, rapid FCEV stock expansions are another near-term opportunity to create low-carbon hydrogen demand by increasing its use in transport through fleets, freight transport, and transport corridors.

Opportunities can vary from one country to another, so policy makers need to identify which vehicle types to focus on, and how and where to encourage infrastructure development to optimise utilisation.

Current regulations are restricting the uptake of low-carbon hydrogen. Regulators should therefore address all barriers and obstacles, and adopt a harmonised set of standards to facilitate widespread hydrogen use across all sectors and through different infrastructures.

Some barriers deserve especial attention because they are impeding demand growth, and removing them could help in building social acceptance:

  • blending limits in natural gas grids
  • demonstration of the safety case for new applications, especially in the domestic and industrial sectors
  • hydrogen refuelling standards and permitting processes for refuelling stations.

Low-carbon hydrogen remains more costly than incumbent fuels and feedstocks. For this reason, appropriate policies should be adopted to foster the development of sustainable markets for low-carbon hydrogen. This would provide investment security for suppliers, distributors and users, reinforcing and expanding supply chains to drive cost reductions.

Demand creation must be accompanied by robust strategies to address first-mover risk.

New applications for hydrogen, low-carbon hydrogen supplies and the development and adaptation of infrastructure are highly uncertain, with risks concerning both capital and operational costs. Policy instruments to counterbalance these risks, such as loan guarantees, tax breaks and other ad-hoc tools (e.g. accounting systems that enable the trading of guarantees of origin) can encourage the private sector to invest, learn and share risks and rewards.

Although creating economies of scale is critical to cut costs significantly, R&D will also be crucial to reduce expenditures and improve the competitiveness of low-carbon hydrogen technologies.

More-developed technologies (TRL>7) such as fuel cells and electrolysers could benefit from R&D to improve their performance and manufacturing processes, thus decreasing material and system costs and extending their operational lifetime, as well as address any additional performance and lifetime issues that may be identified during demonstration.

Less-developed technologies (TRL 5-7) such as hydrogen-derived fuels could benefit from financial support to get successfully demonstrated and thus gain investor confidence, which would reduce risk perception and drive down financing costs.

Finally, the least-developed technologies (TRL<5), such as biomass gasification with CCUS and seawater electrolysis, will require R&D support and knowledge-sharing to advance their validation process and approach commercialisation in the long term. These technologies, although far from the commercial stage, have high potential to deliver crucial benefits for the hydrogen sector, including producing negative GHG emissions and deploying electrolysis in areas with high solar potential but limited water availability.

Government actions, including the use of public funds, are critical in setting the research agenda and the level of risk-taking, and in attracting private capital for innovation. Industry should consider R&D one of its priorities when establishing long-term strategies to realise costs savings that could close the gap with high-carbon hydrogen technologies and enhance the competitiveness of low-carbon hydrogen.

Resources