As European countries look to renewable hydrogen to meet their ambitious net-zero targets, they will have to seek out the most cost-efficient sources to meet increasing future demand, according to energy market analytics firm Aurora Energy Research.

The energy transition will require rapid delivery of blue and green hydrogen at scale if countries are to reach their net-zero carbon emissions targets. Domestic production is unlikely to be sufficient to meet all demand, and many countries may be forced to look further afield.

Renewable hydrogen demand in Europe remains low, at around 300TWh, and is mostly consumed by the ammonia and industrial sectors. But Aurora predicts hydrogen demand in Europe will grow up to eightfold by 2050 in an optimistic scenario, to 2,500TWh, creating an industry worth up to €125bn/yr ($151bn/yr). Even under its conservative scenario, it predicts demand will treble between now and 2050.

“Even with the transport costs [to Europe] associated with production in Morocco, it can be viable and undercut green production in countries such as Germany ” Howard, Aurora Energy Research

Aurora’s energy analysts said during a webinar that Europe’s low-carbon hydrogen demand could be met by both domestic and imported production in the future. They found that imported hydrogen will become as cheap as that produced in Europe by 2030—even when the cost of transport is taken into account.

“By looking at the costs involved in producing this hydrogen and bringing it to Europe, we found that imported hydrogen could be cost-competitive with hydrogen produced in Europe, despite the conversion and transportation costs involved,”  said Aurora’s head of global commodities Anise Ganbold.

She added that this will impact how European countries should plan to develop their renewable hydrogen economies.

Aurora’s analysts compared the costs of delivering renewable hydrogen to a hypothetical consumer in northern Germany from Germany, France, the Netherlands, Spain, Australia, Chile, Morocco, Norway, Russia and the UK.

Low-cost imports

Chile, Morocco and Australia are exploring the viability of producing green hydrogen specifically for the export market. In June 2020, Morocco partnered with Germany to produce green hydrogen, while Australia intends to become a big hydrogen exporter globally. Meanwhile, Russia is targeting the production of 200,000t of blue hydrogen each year by 2024, rising to 2mn t/yr by 2035.

In 2030, blue hydrogen produced in the Netherlands will be the “cheapest source of low-carbon hydrogen” for a consumer in northern Germany, said Richard Howard, research director at Aurora.

The Netherlands is followed close behind by blue hydrogen transported by Norway as compressed hydrogen by pipeline, and green hydrogen from Morocco transported by ship as ammonia. Green hydrogen produced in Germany ranks towards the bottom, in seventh place.

2,500TWh – Hydrogen demand in Europe will grow up to eightfold by 2050

Aurora’s analysis factors in the costs of converting hydrogen before and after transportation, as well as the costs of transporting it through trucking, sea freight or pipelines.

However, based purely on production costs, the firm predicts Morocco-produced green hydrogen (from solar co-located with electrolysers) will be the least expensive low-carbon hydrogen in 2030—cheaper than blue hydrogen produced in Norway, Russia or the Netherlands and any other green hydrogen produced in Europe.

“Morocco could be supplying relatively cheap green hydrogen and, even with the transport costs associated with production in Morocco, it can be viable and undercut green production in countries such as Germany,” Howard added.

However, this will be highly dependent on future power market prices in Morocco.

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Author: Stephanie Baxter