Renewable Energy Program

Hydrogen could be the “missing link” in the energy transition from a technical perspective: hydrogen from renewable electricity allows large amounts of renewable energy to be channelled from the power sector into sectors for which electrification (and hence decarbonisation) is otherwise difficult, such as transport, buildings and industry.

Hydrogen could thus play a key role in facilitating three positive outcomes: the decarbonisation of these sectors; the integration of large amounts of variable renewable energy (VRE); and the decoupling of VRE generation and consumption through the production of transportable hydrogen.

However, hydrogen is not economically competitive at present, and therefore significant reductions in the cost of production and distribution need to take place for the decarbonisation of such sectors to take place. This notion is becoming well recognised around the globe as a result of various developments, which include the need for deep decarbonisation (COP21), the increasing share and decreasing cost of renewable energy sources, wind and solar in particular, and the associated need for additional flexibility in power systems. In parallel, technological advancements and cost reductions in

hydrogen-related technologies are increasing the competitiveness of hydrogen from renewable electricity.

1.2 HYDROGEN TODAY

The hydrogen industry is well established and has decades of experience in industry sectors using hydrogen as a feedstock. The hydrogen feedstock market has a total estimated value of USD 115 billion and is expected to grow significantly in the coming years, reaching USD 155 billion by 2022.2 In 2015 total global hydrogen demand was estimated to be 8 exajoules (EJ) (Hydrogen Council, 2017).

The largest share of hydrogen demand is from the chemicals sector for the production of ammonia and in refining for hydrocracking and desulphurisation of fuels. Other industry sectors also use hydrogen, such as producers of iron and steel, glass, electronics, specialty chemicals and bulk chemicals, but their combined share of total global demand is small (Figure 4).

Over 95 % of current hydrogen production is fossil-fuel based. Steam-methane reforming (SMR) is the most common way of producing hydrogen. Oil and coal gasification are also widely used, particularly in China and Australia, albeit to a lesser extent than SMR. Only around 4 % of global hydrogen supply is produced via electrolysis, mainly with chlor-alkali processes (Figure 4).

Figure 4: Global hydrogen demand and production sources

1.3 HYDROGEN IN THE ENERGY TRANSITION

Hydrogen is an energy carrier and not a source of energy. It can be produced from a wide variety of energy sources. Historically, hydrogen has been predominantly produced from fossil sources. In a low-carbon energy future, hydrogen offers new pathways to valorise renewable energy sources (see Section 2.1 for a discussion of possible pathways for the production of hydrogen from renewable power). This outlook report focuses on hydrogen produced from renewable electricity via electrolysis – referred to, more simply, as “hydrogen from renewable power”, or in industry parlance as “power-tohydrogen”.

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Hydrogen and electricity, as energy carriers, are complementary in the energy transition. Hydrogen from renewables has the technical potential to channel large amounts of renewable electricity to sectors for which decarbonisation is otherwise difficult: • Industry: Hydrogen produced from fossil fuels, currently widely used in several industry sectors (refineries, ammonia,bulk chemicals, etc.), technically can be substituted by hydrogen from renewables. In the longer term, hydrogen from renewables may replace fossil fuel-based feedstocks in these CO₂ emissions-intensive applications provided it can achieve economic competitiveness, which may require modification of existing processes.