Hydrogen is likely to satisfy just 5pc of global energy demand by 2050 under current policies, according to a new report by risk management company DNV. But this figure needs to rise to 15pc to be consistent with a pathway to net zero by 2050, it says.

“Hydrogen is essential to decarbonise sectors that cannot be electrified, like aviation, maritime, and high-heat manufacturing and should therefore be prioritised for these sectors,” says DNV CEO Remi Eriksen.

“Policies do not match hydrogen’s importance,” he adds.

Policy forecast

Global spend on producing hydrogen for energy purposes from now until 2050 will be $6.8tn under current policies, with an additional $180bn spent on pipelines and $530bn on building and operating ammonia terminals, according to DNV’s forecasts.

The firm’s modelling shows green hydrogen costs will decrease significantly towards 2050, to $1.5/kg. Production costs in Europe vary from $3/kg for green hydrogen from solar PV, $4/kg using offshore wind and $6/kg using nuclear power.

“Hydrogen is essential to decarbonise sectors that cannot be electrified” Eriksen, DNV

The global average cost for blue hydrogen will fall from $3/kg in 2030 to $2.2/kg in 2050. Costs are already $2/kg in regions with access to cheap gas—such as the US—but are significantly higher in Europe and other locations due to high gas prices.

Globally, green hydrogen will reach cost parity with blue within the next decade, the report’s model shows.

By 2050, 72pc of hydrogen will be green and 28pc blue, derived from fossil fuels with carbon capture and storage. This compares with 66pc and 34pc respectively in 2030. Some regions with cheap natural gas will have a higher share of blue hydrogen.

Demand

Hydrogen will remain too expensive to be widely used this decade and the demand will instead be created through policy support and incentives from governments mainly in Europe, OECD Pacific countries, North America and China.

Direct use of hydrogen will then be dominated by the manufacturing sector, where it will replace coal and gas in high-temperature processes such as iron- and steelmaking from the late 2020s.

In the 2030s, the average price of hydrogen will fall by half compared with the early 2020s, and hydrogen’s role in industrial heating will become more widespread.

The 2040s will be the decade of demand diversification as more hard-to-abate sectors—such as heavy-duty transport and maritime—are forced to use hydrogen or its derivatives to decarbonise. Uptake will mostly still be driven by the increased cost of fossil fuels because of carbon pricing, or by decarbonisation mandates.

Trade

The DNV model expects most seaborne trade to be in the form of ammonia.

“The coming decade will see little change in trading volumes and patterns, but as ammonia starts to be used in significant quantities as a maritime fuel, trade volumes will increase,” says the report.

5pc – Projected global energy demand satisfied by hydrogen by 2050 under current policies

The model sees a twentyfold increase in ammonia seaborne transport from 2030 to 150mn t/yr of shipments in 2050.

Lack of demand means transport of hydrogen via pipeline does not begin to happen at scale until the 2040s. In 2030, 0.6mn t/yr is traded via pipeline, with this figure rising to 3.3 mn t/yr in 2040 and 6mn t/yr in 2050.

Cost considerations mean more than 50pc of pipelines used for transporting hydrogen globally will be repurposed natural gas pipelines, with this figure rising to as high as 80pc in some regions, as the cost of repurposing pipelines is expected to be just 10-35pc of cost of building a new connection.

In 2050, 96pc of the installed capacity of interregional pipelines will be repurposed from the natural gas network—notably with Europe repurposing its existing connections with the Middle East and North Africa.

The scenario assumes the wide development of carbon pricing regimes. Europe, North America, the OECD Pacific, and Greater China regions are projected to reach carbon-price levels in the range of $22-95/t CO₂ by 2030 and $70-135/t CO₂ by 2050.

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Author: Tom Young