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Bullish, Bearish or Somewhere in Between? Reviewing Supply and Demand Scenarios for Blue and Green Hydrogen

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Over the last five years, there has been a renewed and increasing interest in hydrogen as a pathway to decarbonization across sectors, including transport. Past reports on hydrogen for members have reviewed production pathways (see report Oct. 20, 2020) and countries’ plans for hydrogen in transport (see report Jan. 13, 2021). Much has happened even in the last 18 months in the hydrogen space, as last month’s report on policy showed (see report Apr. 19, 2022). Countries are getting much more serious and concrete about developing their hydrogen markets.

This report is the second in a series on hydrogen planned through the June-July timeframe. It focuses on the market potential for hydrogen, particularly blue and green hydrogen, as well on underlying cost and economics. Other reports and posts will cover hydrogen for aviation and shipping, the potential for hydrogen internal combustion engine vehicles (ICEVs) and global projects and select companies in the space. Hydrogen will surface in another planned report on renewable fuels of non-biological origin (RFNBOs). An on-demand webinar is planned for the June timeframe to review the body of research to date in a more summarized way.

Currently, and as members know, hydrogen is primarily used as a feedstock in a number of key industrial processes. According to the International Energy Agency (IEA), global hydrogen demand was around 90 million metric tons (MT) in 2020. This includes more than 70 MT used as pure hydrogen, primarily in oil refining and ammonia production, and less than 20 MT mixed with carbon containing gases primarily for methanol production and steel manufacturing. This excludes around 20 MT that is present in residual gases from industrial processes used for heat and electricity. Oil refining is the largest consumer of hydrogen currently, accounting for 41% of global hydrogen demand in 2020. Natural gas is the main fuel for hydrogen production at this time, with steam methane reformation being the dominant method in the ammonia and methanol industries, as well as in refineries.

This report reviews supply, demand, costs and economics of hydrogen, especially for the 2030 and 2050 timeframes. We look through the lens of three different organizations to do so: the industry-backed Hydrogen Council, the IEA as an international organization representing governments and Goldman Sachs, one of the premier global banking institutions. In summary, each of the three organizations project a substantial scale up of both blue and green hydrogen by 2030 and continuing into 2050. The most progressive, perhaps understandably, comes from the industry through the Hydrogen Council.

Demand scenarios from all three organizations point to a potential clean hydrogen (both blue and green) of around 500-600 MT by 2050. Much of this is ultimately expected to come from green hydrogen. That means there will need to be a major scale up of electrolyzer and renewables capacity. Electrolyzer capacity projections range from 1-4 terawatts (TW) required by 2050 and 4.5-6.5 TW in renewables expansion. Addressable markets include transportation (for road vehicles, marine and aviation) and power generation, among others.

Key Points: 

  • Demand scenarios from the Hydrogen Council, IEA and Goldman Sachs point to a potential clean hydrogen (both blue and green) of around 500-600 MT by 2050.
  • Most of this is expected to come from green hydrogen, necessitating a massive expansion of electrolyzer and renewables capacity.
  • All three organizations expect that mobility will be the largest-consuming sector. This includes road transport (especially heavy-duty trucking), marine and aviation.
  • Overall, IEA projects hydrogen and hydrogen‐based fuels meet 10% of global final energy demand in 2050, while the Hydrogen Council projects 22%.
  • Electrolyzer capacity projections in the three analyses range from 1-4 terawatts (TW) required by 2050 and 4.5-6.5 TW in renewables expansion.
  • Underpinning these analyses is the assumption that there will be stronger, tougher prices on carbon that are over USD 100/ton. As noted in last month’s report, such a price only exists in three countries right now.
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