Runeel Daliah, analyst at Lux Research examines why the industrial sector is driving hydrogen technology innovation and the crucial role the storage sector will play as this economy evolves
The ongoing transition from fossil fuels to renewable energy has raised the level of interest and investment in renewable hydrogen.
To date, much attention is focused on fuel cell technology and the transportation sector, but it must be remembered that hydrogen is, first and foremost, an essential feedstock for the industrial sector. Most of the hydrogen produced globally today is consumed by the chemicals and refining industry, and only a very small portion is used in transportation. Given its immense footprint in industry, it stands to reason that the industrial sector, and not the transportation sector, should be the bedrock for hydrogen technology innovation.
The industrial sector has a different set of priorities when it comes to hydrogen technology development. In transportation, innovation interest focuses at the point of use, i.e. fuel cells. In industry, innovation lies at the point of production, in this case steam methane reforming or water electrolysis. Both technologies are at commercial scale, but steam methane reforming dominates the market, as it is the more scalable and cheaper option for hydrogen production. However, trends in the energy transition are starting to impact the industrial sector, and this is where water electrolysis technology becomes crucial.
Unlike power generation and the transportation industry, the industrial sector has largely been insulated from regulatory policies aimed at limiting greenhouse gas (GHG) emissions, which is incongruous given that the industry contributes 21% of global CO2 emissions. Since the 2015 Paris agreement, the sector has found itself under increasing pressure to innovate toward low-carbon technologies.
Decarbonising the industrial sector, however, is no easy task. Unlike power generation and transportation, where the end goal has always been to completely remove carbon from the equation, this is not possible in the chemicals sector, as carbon is an essential building block in many chemicals; a molecule of methanol will always contain one carbon atom. This is why the chemical industry is deeply entrenched with the oil and gas sector, the source of carbon feedstock worldwide, and decoupling the two sectors from each other was, until recently, deemed implausible. However, action is being taken to do so, and it is primarily driven by the energy transition of the power generation sector.
The adoption of renewable electricity is growing and primarily driven by zero-emissions solar photovoltaics and wind turbines. This influx of renewable electricity onto the grid changes the outlook for water electrolysis. Using renewable electricity to generate hydrogen from water electrolysis eliminates all CO2 emissions and provides the chemicals sector with a zero-carbon hydrogen feedstock. Combined with emerging technologies such as direct air capture for non-fossil carbon feedstock, it allows the chemicals sector to completely decouple itself from the oil & gas industry. This is why interest and investments in industrial applications of water electrolysis continue to grow. Just as the lithium-ion battery acts as a bridge between the power generation and transportation sectors, water electrolysis can act as a bridge between the power generation and chemicals sectors.
Despite all this activity, there are still challenges for hydrogen innovation in the industrial sector. First, there is no regulatory framework that currently supports the adoption of low-carbon technologies, including water electrolysis, in the industry. This means that water electrolysis projects will compete head-on with fossil-based technologies on a cost basis. Second, the cost of hydrogen production from water electrolysis today is simply too high compared to natural gas reforming, and access to very cheap renewable electricity is crucial. Third, and perhaps most importantly, there is still no widespread infrastructure for hydrogen storage and distribution. This challenge is not yet consequential as hydrogen used in industry is mostly generated on-site and used immediately; however, for renewable hydrogen to seamlessly penetrate the global industrial sector, hydrogen will have to be generated in locations with access to cheap renewable electricity and transported to industrial clusters worldwide. This requires an international distribution and storage network for hydrogen, which does not exist today.
Compression remains the incumbent method for hydrogen storage and transport, but it is not suitable for international distribution. Emerging methods such as liquefaction, physical adsorption on solid material, and chemical bonding in synthetic hydrocarbons or liquid organic carriers provide higher volumetric storage capacities and are fast gaining traction in industry. There will be no winning option – the choice of a storage and distribution medium for hydrogen will be dependent on cost, location, transport distance, and safety requirements. While it is too early to predict what the ideal mix of storage and distribution technologies will be, one thing is sure - as the hydrogen economy evolves, engineering companies active in gas storage and shipping will have a crucial role to play.
Harshit Sharma, oil & gas expert, Lux Research, will be talking more about the role hydrogen will play in the industrial sector in a decarbonised future on the second day of the Tank Storage Asia conference on September 25 & 26. For more information visit www.tankstorageasia.com.
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