Hydrogen

A key part of a clean and secure energy future

Hydrogen can help tackle various critical energy challenges, including helping to store the variable output from renewables like solar and wind to better match demand. It offers ways to decarbonise a range of sectors – including long-haul transport, chemicals, and iron and steel – where it is proving difficult to meaningfully reduce emissions. It can also help improve air quality and strengthen energy security.


Present and potential industrial uses of hydrogen

Hydrogen use today is dominated by industrial applications. The top four single uses of hydrogen today are: oil refining (33%), ammonia production (27%), methanol production (11%) and steel production via the direct reduction of iron ore (3%).  Virtually all of this hydrogen is supplied using fossil fuels. These existing uses of hydrogen underpin many aspects of the global economy and our daily lives. Their future growth depends on the evolution of demand for downstream products, notably refined fuels for transport, fertilisers for food production, and construction materials for buildings.

More than 60% of hydrogen used in refineries today is produced using natural gas. Tougher air pollutant standards could increase the use of hydrogen in refining by 7% to 41 MtH2/yr by 2030. While further policy changes to curb increases in oil demand could dampen, or even reverse, the pace of growth, hydrogen demand for oil refining is projected to remain significant in the next decade.

	Allowed sulphur content in refined products	Oil demand (right axis)
2005	21.83543385	84.6193993
2006	21.49870244	85.7664916
2007	21.32970009	84.5371646
2008	20.45849204	83.394557
2009	18.89476505	86.573521
2010	17.19166229	86.691524
2011	16.68849793	88.0329085
2012	16.57887401	89.6583124
2013	16.2864684	90.7118963
2014	15.49782716	92.4755398
2015	15.50678239	93.3613409
2016	15.69895291	94.81026416
2017	15.69873725	96.25265105
2018	15.70160472	97.71828993
2019	15.88652097	98.94153532
2020	13.54039304	99.64613375
2021	13.58895656	100.3719363
2022	13.44494901	101.0503291
2023	13.5516273	101.7454175
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Current global refining capacity is generally thought sufficient to meet rising oil demand, which implies that the majority of future hydrogen demand is likely to arise from existing facilities already equipped with hydrogen production units. This suggests an opportunity for retrofitting CCUS as a suitable option to reduce related emissions.

Demand for ammonia and methanol is expected to increase over the short to medium term, with new capacity additions offering an important opportunity to scale up low-emissions hydrogen pathways. Greater efficiency can reduce overall levels of demand, but this will only partially offset demand growth.

Whether via natural gas with CCUS or electrolysis, the technology is available to provide the additional hydrogen demand growth projected for ammonia and methanol (up 14 MtH2/yr by 2030) in a low-carbon manner. As a priority, substituting low-emissions pathways for any further coal-based production without CCUS would significantly help cut emissions.

Opportunities for hydrogen in buildings, power and transport

Hydrogen holds long-term promise in many sectors beyond existing industrial applications. The transport, buildings and power sectors all have potential to use hydrogen if the costs of production and utilisation develop favourably relative to other options. The complex processes involved in developing and deploying hydrogen, however, mean that carefully crafted policy support will be critical.

The largest near-term opportunity in buildings is blending hydrogen into existing natural gas networks. In 2030 up to 4 Mt of potential hydrogen use for heating buildings could come from low-concentration blending which, if low-carbon, could help to reduce emissions. The potential is highest in multifamily and commercial buildings, particularly in dense cities, where conversion to heat pumps is more challenging than elsewhere. Longer-term prospects in heating could include the direct use of hydrogen in hydrogen boilers or fuel cells, but both of these would depend on infrastructure upgrades and on measures to address safety concerns and provide public reassurance.

	Blank	Hydrogen demand	Competitive with gas boiler (right axis)	Competitive with electric heat pump (right axis)
Canada	0.72	0.36	0.91	1.21
United States	5.11	2.56	1.38	1.25
Japan	0.48	0.24	3.44	1.9
Korea	0.37	0.18	1.95	0.95
Western Europe	2.79	1.39	2.7	2.26
Russia	1.48	0.74	1.75	1.64
China	1.78	0.89	1.4	1.31
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Power generation offers many opportunities for hydrogen and hydrogen-based fuels. In the near term ammonia could be co-fired in coal-fired power plants to reduce CO2 emissions. Hydrogen and ammonia can be flexible generation options when used in gas turbines or fuel cells. At the low capacity factors typical of flexible power plants, hydrogen costing under USD 2.5/kg has good potential to compete. Key low-carbon competitors for such services include natural gas with CCUS and biogas. In the longer term, hydrogen can play a role in large-scale and long-term storage to balance seasonal variations.

Steel and high-temperature heat production offer vast potential for low-emissions hydrogen demand growth. Assuming that the technological challenges that currently inhibit the widespread adoption of hydrogen in these areas can be overcome, the key challenges will be reducing costs and scaling up. In the long term it should be technically possible to produce all primary steel with hydrogen, but this would require vast amounts of low-carbon electricity (around 2 500 TWh/yr, or around 10% of global electricity generation today) and would only be economic without policy support at very low electricity prices.

Shipping and aviation have limited low-carbon fuel options available and represent an opportunity for hydrogen-based fuels. Ammonia and hydrogen have the potential to address environmental targets in shipping, but their cost of production is high relative to oil-based fuels. Hydrogen-based liquid fuels provide a potentially attractive option for aviation at the expense of higher energy consumption and potentially higher costs. Policy support in the form of low-carbon targets or other approaches is critical to their prospects.

	Base ship	Fuel cell / engine	Storage	Infrastructure	Fossil fuel	Delivered hydrogen / ammonia	Synthetic fuel (best case)	Synthetic fuel (air capture)
VLSFO	8.174	0.554	0	0	13.873	0	0	0
LNG	8.174	1.832	0	2.975	10.801	0	0	0
ICE Hydrogen	8.174	1.668	10.419	3.824	0	27.226	0	0
ICE Ammonia	8.174	1.668	0.023	2.949	0	21.963	0	0
Synthetic fuels	8.174	1.832	0	2.975	0	0	31.867	30.26
FC Hydrogen	8.174	2.771	4.482	3.253	0	25.195	0	0
ICE Ammonia	8.174	1.668	0.023	2.949	0	17.106	0	0
Synthetic fuels	8.174	0.554	0	0	0	0	20	13
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The competitiveness of hydrogen fuel cell electric vehicles depends on fuel cell costs and on the building and utilisation of refuelling stations. For trucks the priority is to reduce the delivered price of hydrogen. In early stages of deployment, building hydrogen stations that serve captive fleets on hub-and-spoke missions could help to secure high refuelling station utilisation and thus could be a way to get infrastructure construction off the ground. For cars the priority is to bring down the cost of fuel cells and on-board hydrogen storage. This could make them competitive with battery electric vehicles at driving ranges of 400–500 km and make them potentially attractive for consumers that prioritise range.

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