Hydrogen pipeline well below net zero requirements: IEA

The current hydrogen project pipeline points to huge growth in low-carbon hydrogen production in this decade, but projects would need to be scaled up by a factor of nine to put the world on track to reach net zero emissions by 2050, the IEA said.

The pipeline suggests low-carbon hydrogen production could reach 17mn t by 2030, from less than 1mn t today. But the IEA's Net Zero 2050 scenario has 150mn t of low-carbon hydrogen capacity by 2030.

Planned electrolyser projects could produce 8mn t of hydrogen by 2030, up from just 50,000 t today. The electrolyser pipeline comprises 350 projects under development with a combined capacity of 54GW, and another 40 early stage projects with 35GW of capacity.

Europe will remain the main market for electrolyser development, but Australia could catch up in a few years, it said.

A low amount of manufacturing capacity could create a bottleneck for electrolyser development. Global capacity is just 3GW/yr, 85pc of which is alkaline and 15pc proton exchange membrane (PEM). Over 60pc of capacity is in Europe and 35pc in China. But if all announced expansions are realised, manufacturing capacity could reach 20 GW/yr.

There are 16 active projects producing hydrogen from fossil fuels and carbon capture, utilisation and storage (CCUS) producing 0.7mn t. Another 50 projects are under development and could lead to 9mn t by 2030. The US and Canada currently lead, but the UK and Netherlands have a major share of the projects under development.

The IEA sees costs for hydrogen from natural gas at between $0.50-1.70/kg. Using CCUS increases this to around $1-2/kg, with the cost of capturing carbon estimated between $50-70/t. Using renewable electricity to produce hydrogen from water costs between $3-8/kg, but by 2030 this could drop to $1.30-3.50/kg. And in the longer term it could fall to $1-3/kg, making it competitive with fossil fuel hydrogen in locations with the best renewable resources.

Total costs for PEM electrolysers are around $1,750/kW, compared with $1,000-1,400/kW for Alkaline electrolysers. Costs for alkaline electrolysers are lower in China, at $750-1,300/kW, it said.

Electrolyser costs could fall by 60pc by 2030, taking into account current plans. If capacity was deployed in line with the IEA's net zero scenario target, costs could fall by 70pc to $400-440/kW.

The IEA projects domestic hydrogen production in Japan will cost over $4/kg by 2030, making imports from Australia competitive — it projects imported ammonia imported from Australia and reconverted to hydrogen to cost below $3/kg.

But domestic production in Europe will be just over $2/kg, rendering imports from the middle east uncompetitive. Importing ammonia to Europe could make economic sense if it is used as ammonia rather than reconverted into hydrogen, as it could be delivered for $1.80/kg before reconversion losses.

Total hydrogen demand could reach 105mn t by 2030 under currently announced plans, well below the 200mn t required for net zero, IEA said. Demand for hydrogen is currently around 90mn t, causing annual CO2 emissions of 900mn t. Hydrogen demand includes 40mn t for refineries and 45mn t in chemical production and 5mn t for steelmaking. Around three quarters of the chemical production is used for ammonia and one quarter for methanol.

To bridge the gap between announced projects and what is required to decarbonise, governments must support demand creation. They need to bring into force policy instruments such as carbon prices, auctions, quotas, mandates and requirements in public procurement, it said.

This will require significantly more investment — around $1,200bn by 2030 would be required to put the sector on track for net zero emissions by 2050. So far, countries have pledged $37bn, while the private sector has pledged $300bn.

By Killian Staines