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The establishment of a carbon-neutral hydrogen economy requires an end-to-end reconfiguring of the hydrogen value chain, while understanding the origin of national interests and options to enter it. Thus, there is a need to develop an understanding of the supply and demand factors determining the global hot spots and the significance of trade and transportation corridors for such a hydrogen economy. First step is to understand the demand side of the hydrogen market.

Geographic split of hydrogen consumption

In 2017, the largest regional consumers of hydrogen, in descending order, were Asia, the Middle East, Europe and the US, with China alone comprising roughly one third of the total consumption.

This coincides well with the use of hydrogen in refineries as well as heavy and (petro)chemical industries, being located predominantly in these regions. Thus, African nations, along with South and Central America, currently account for just minor shares of the global consumption.

Geographic split of hydrogen consumption
Segmentation of hydrogen importers

Segmentation of hydrogen importers

In light of the share of hydrogen consumption between countries, one could expect that trade of hydrogen as a commodity would mirror, more or less, an image corresponding to this distribution.

Interestingly though, according to the United Nations Trade Statistics, China accounted for less than 1% (0.16%) of the total import trade of hydrogen in 2017. This is credited to the fact that China is self-sufficient in supply of hydrogen (with coal being the predominant source).

The same conclusion could be made for the Middle East (from natural gas and oil sources), while the United States and Europe, especially France and the Benelux countries, appear as major importers.

National considerations for being an importer, exporter or self-sufficient

Realizing that there are countries that are self-sufficient in their hydrogen needs, we turn our attention to a view on the supply side drivers to understand the mechanics of how hydrogen hot spots appear.

Worldwide, a range of countries have openly started to declare an intent with respect to their position in a global hydrogen economy with very different motives, based on industrial considerations and strengths in their respective energy mixtures; irrespective of which, several countries envision a shared global hydrogen ecosystem.

Based on analysis by the International Energy Agency, we can see that ability of different countries to develop as hydrogen producers largely depends on their natural resources. As we discussed in an earlier article in this series – The hydrogen trajectory – the source of hydrogen production determines its affordability and degree of carbon footprint. Within the next decade, some countries will likely be able to cost-effectively produce natural gas-based hydrogen (combined with CCS) owing to local natural gas resources (e.g. Russia and Australia), while wind-rich and sun-rich regions would in general hold an advantage to be cost-competitive producing green hydrogen (these include the Middle East, Northern Africa and South America). So, one driver is basically geographically bound.

Hydrogen costs from Hybrid Solar PV heatmap

To some extent, countries that have planned hydrogen futures for themselves – Japan and South Korea as frontrunners – are evolving as technology exporters for fuel cell vehicles and fuel cell technology, while their hydrogen visions are mainly based on imports (from Australia and the Middle East). This complementarity is acknowledged through hydrogen vision documents of both importer and exporter groups.

Innovation and cost reductions in both blue and green hydrogen is driven largely by industry aspirations owing to companies domiciled in countries holding technology export possibilities. Toyota, Airbus, Linde Group, Air Liquide, BMW, Bosch, Cummins, Chevron Corporation all belong to this category – and thus help to promote national interests in advancing the hydrogen agenda.

Global hot spots and corridors

With this in mind, it is of relevance to relate and map out these underlying (energy based) import needs and (industry based) export potentials to understand where global hydrogen hot spots appear. The map below shows examples of exactly this:

Global hot spots and corridors

Based on the availability of natural resources and established industry segments, the following observations can be made:

  • A range of countries from the southern hemisphere are envisioning, or have already positioned, themselves as hydrogen (and its derivatives) exporters, across South America, North Africa, the Middle East and Australia to utilize strong positions for low-cost hydrogen production, either as blue (from a coal/natural gas source) or green (from solar, hydro and wind).
  • Countries that aim to be technology exporters (for example Japan, Korea, France, and the USA) are in many cases not well positioned to be net exporters.
  • Only China and Australia are, at this point, expected to become self-sustaining in hydrogen at sufficient scale to meet their ambitious decarbonization objectives.
  • A detailed description of a region’s import/export relations is outside the scope of this article, but for now we conclude that main corridors are developing across ALL continents, and this tells us that carbon-neutral hydrogen will be a globally traded commodity.
  • Commitment to formalized hydrogen infrastructure investments are seen across several regions, while development of trading relationships is most mature in Asia Pacific, where Australia is very progressive in plans to become a “future hydrogen export powerhouse”. This is substantiated by formalized MOUs between Australia and Japan/South Korea, respectively.

How national positions and aspirations, turn into national objectives and hydrogen strategies will be the topic of the next article in this series releasing in the coming weeks (Viewpoint 3), where both blue and green hydrogen is of relevance. Here, we will bring in learnings from the world’s first end-to-end hydrogen supply chain project.

The Hydrogen Energy Supply Chain Project (HESC)

The HESC project is a world-first pilot project to produce and transport clean hydrogen from Australia to Japan, for use in mobility (fuel-cell driven cars, trains, trucks, buses and ships), power generation and semiconductors. This world-first project aims to establish the world’s first international liquid hydrogen supply chain, and being in full commercial operation by 2030.

The project is supported financially and operationally by Australian and Japanese governments and industry partners, across the value chain, demonstrating both political and commercial commitment.

Sources: KPMG, hydrogenenergysupplychain.com

The distribution step of the hydrogen value chain

As discussed in Viewpoint 1 – The hydrogen trajectory – to bring down the levelized cost of hydrogen (LCOH), the capital and operational expenditure of energy projects are the predominant factors.

Yet, what is evident from the corridor map above (and while applying an end-to-end perspective on the value chain) is that to connect demand with supply across regions and continents will necessitate trucks, trains and ship carriers, capable of transporting hydrogen safely and cost-effectively over large distances. In other words, low-cost transportation of hydrogen is an important factor for the successful establishment of the hydrogen value chain.

Hydrogen value chain

While gaseous hydrogen will be utilized in end applications at pressure levels suitable for the specific function, the transport itself however, needs to apply the most profitable form of logistic, which entails compressing or liquifying the hydrogen gas to optimize the volumetric energy density. For this, modes of transporting hydrogen across larger distances include pipeline, compressed gas cylinders transported by tube trailers or cryogenic tanks via trains or ships with stepwise increase in capacity and reach.

Technical concepts and standards already exist for compressed hydrogen gas cylinders, which can be distributed by tube trailers with up to 26 m3 per tank, according to Hydrogen Europe. This number is higher for liquid H2 due to the higher density (and can be multiple numbers for each lorry), yet transporting the massive demand that global trade routes will face requires hydrogen tankers with capacities equivalent to the likes of oil and LNG carriers.

A first contribution on this journey came in 2019, where a first-ever liquid hydrogen carrier was launched by Kawasaki Heavy Industries, holding a capacity of 1,250 m3 – this may seem insignificant compared to typical LNG carrier sizes (easily exceeding this by a factor 100), nonetheless it marks yet another milestone in the advancement of an upcoming hydrogen economy.

Endnotes:

  • 2020, world Bank, https://oec.world/en/profile/hs92/hydrogen-6280410?yearSelector1=tradeYear2
  • 2019, IEA, The Future of Hydrogen
  • 2020, Australian Ministers for the Department of Industry, Science, Energy and Resources, https://www.minister.industry.gov.au/ministers/canavan/media-releases/australia-japan-agreement-exciting-step-towards-hydrogen-future
  • 2020, Australian Ministers for the Department of Industry, Science, Energy and Resources, https://www.trademinister.gov.au/minister/simon-birmingham/media-release/positioning-australia-future-hydrogen-export-powerhouse
  • 2020, Hydrogen Engineering Australia, Hydrogen Energy Supply Chain (HESC) homepage, https://hydrogenenergysupplychain.com
  • 2019, Hydrogen Communities (publication), Assessment for suitability of communities for conversion to hydrogen, KPMG, 
  • 2020, Hydrogen Europe, https://hydrogeneurope.eu/hydrogen-transport-distribution
  • 2020, LNG Industry, https://www.lngindustry.com/lngshipping/19062014/first_lng_carrier_entered_service_50_years_ago_802
  • 2019, The Japan Times, https://www.japantimes.co.jp/news/2019/12/13/business/tech/kawasaki-heavy-launches-worlds-first-liquid-hydrogen-ship-quest-establish-green-supply-chain/

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