BNEF estimates 5 million tonnes of clean hydrogen by 2030 when the IEA says we need 300 million tonnes by 2050 – it is time for policy action

The world may produce some 5 million tonnes of clean hydrogen by 2030 – hardly where we need to be given that the International Energy Agency reckons in its net zero scenario that we need nearly 300 million tonnes by 2050.

Don’t confuse the green product premium with the green transition premium.  

The electrotech revolution took the stage at COP, driving home the pathway we need to follow: 

• Electrify everything that can be electrified, which is more than we previously thought; 
• Ensure the grid is zero or low carbon: solar, storage and wind are scaling up faster than anyone thought possible; 
• Renewable energy is now the cheapest source of power in the world’s sunbelts (we need eg hydropower and smart pricing to seasonally cope in places like Europe); and
• What cannot be electrified directly urgently needs truly low carbon molecules.

We will get far, and much further than we thought, with green electricity. But we need our green molecules.  

Martin Tengler, who heads up the hydrogen desk at Bloomberg NEF (BNEF) concluded this week that our industry is hoping for 72 million tonnes of clean hydrogen by 2030. BNEF’s own estimate is that there will be no more than 5 million tonnes. 

Production in China is just about the only part of our sector which continues to under-promise and overdeliver: As mentioned by the secretary-general of the China Hydrogen Energy Alliance, Wan Yanming: “…our country's green hydrogen production capacity has exceeded 220,000 tonnes per year, accounting for more than 50% of the global total” and surpassing the original target of 100 000-200 000 tonnes. (Hydrogen Insight)  

Green ammonia coming out of China may soon be able to compete with grey ammonia, particularly with a carbon price. The International Energy Agency predicts green hydrogen in China could reach cost parity with grey hydrogen by 2030. I bet it happens before then.  

However, this is not sufficient. We not only need to compete with grey alternatives. We need altogether new industrial processes to compete with the incumbent practices built around fossil fuels. 

For example, to make steel out of iron, we need to swap coal with green hydrogen;  to run our ships, we need to replace bunker fuel with green ammonia or green methanol; to fly our planes we need to swap fossil fuels with e fuels or hydrogen; to produce fertilisers we need to start with electricity and not gas; and in many industrial processes we need green hydrogen, ammonia and methanol instead of grey products. 

The cost gap, or green premium for shipping illustrates. A tonne of bunker fuel costs just under 500 USD. It is reported that green ammonia can now be bought from China for about 600 USD per tonnes, with grey costing something like 550-650 USD per tonne. So the problem is not necessarily the difference between grey and green ammonia prices. The challenge is that ammonia has a significantly lower energy value than bunker oil. You need something like 2.2 times of ammonia for each tonne of bunker fuel.  

We thus need to distinguish between two different cost gaps, or green premiums. The first one is the gap or premium over the grey, incumbent fossil fuel. We can call this the product premium. The second is the gap between the incumbent method, compared to the new ones. We can call this the transition premium.  

Martin Tenger also wrote “The numbers are clear: most export projects won’t be built unless demand-side policy incentives strengthen.” Yes, we need those policy incentives. We didn’t get them from the IMO this autumn. The EU will lead the global charge through FuelEUMaritime, through industrial mandates and more.  

The fossil fuel lobbyists have argued that the clean hydrogen we will need will be blue. This week, BP’s blue hydrogen project in Teeside in the UK was shelved, giving way to data centres.  

Last week, we heard from ExxonMobil that it will pause what may have been the world’s largest blue hydrogen project, at Baytown, Texas, US. When my successor as the CEO of the Green Hydrogen Organisation recently asked Michael Liebreich and others if they knew of any blue hydrogen projects which were set to meet emission limits of maximum 0.2 methane leakage and minimum 95% carbon capture, no-one identified a project or shared any associated costs.

It is frightening to reflect on Martin’s forecast of 5 million tonnes of clean hydrogen by 2030. The International Energy Agency concluded just before COP that even if we can electrify more than we have thought possible, something like 10% of final energy use will still in the Net Zero Emissions Scenario require low-carbon molecules. A back-of-the-envelope calculation makes us at the Green Hydrogen Organisation translate this into a demand of around 300 million tonnes by 2050.    
 
We desperately need those demand incentives if we are going to get anyone close to nearly 300 million tonnes of genuinely low carbon molecules by 2050.   
 

Jonas Moberg,

Chair, GH2