[finance daily reporter Jeong kyeong chun] Global hydrogen demand and supply are increasing, but low-emission hydrogen still accounts for less than 1% of the total. Most of the hydrogen used is fossil fuel-based, and it was analyzed that the climate change mitigation effect is minimal.
According to the ‘IEA Global Hydrogen Supply, Demand and Policy Trends 2024’ report, global hydrogen demand in 2023 will reach 97 million tons, up 2.5% year-on-year. By country, it is China (1/3 of total demand) and the United States, and is mainly used in traditional industrial sectors such as oil refining, chemicals, and steel. However, most of it is met with fossil fuel-based hydrogen that has no greenhouse gas reduction measures.
The analysis is that the increase in demand is due to global industrial trends and has no benefit in terms of climate change mitigation. Carbon emissions related to hydrogen production and consumption increased by 1.5% year-on-year to 920 million tons.
Low-emission hydrogen demand in 2023 will increase by about 10% year-on-year, but will still be very low at less than 1% of total hydrogen demand. The IEA’s 2050 Net Zero Scenario projects that total hydrogen demand will reach about 150 million tonnes per year by 2030, 45% of which will be met by low-emission hydrogen.
If the current policy environment continues, demand for low-emission hydrogen is expected to increase tenfold to more than 6 million tons in 2030, but this is still far below the 65 million tons of low-emission hydrogen demand in 2030 required under the net-zero scenario.
The number of low-emission hydrogen purchase contracts between companies signed in 2023 is more than 2 million tons per year, and about 40% of them are confirmed. The chemical sector accounts for the largest proportion (about 1/5) of all hydrogen purchase contracts, while the refining and shipping sectors have smaller volumes but high proportions of binding contracts. Existing hydrogen utilization fields such as ammonia, methanol production, and refining appear to be advantageous for the introduction of low-carbon hydrogen in the short term due to their lower technical risk compared to new fields.
On the supply side, low-emission hydrogen production is also extremely small. In 2023, global hydrogen supply is mainly covered by domestic production in industrial hubs, and international trade is minimal. China accounts for about 30% of global production, followed by the US and the Middle East (14% each) and India (9%). About 95% of hydrogen production is fossil fuel-based, of which more than 60% is produced through natural gas reforming.
Low-emission hydrogen production is less than 1 million tons per year, less than 1% of global production, and most of it relies on fossil fuel-based production using CCUS. Hydrogen production from water electrolysis is less than 100,000 tons as of 2023, and about 75% is concentrated in China, Europe, and the United States.
Based on announced projects, annual low-emission hydrogen production is expected to reach 49 million tonnes by 2030, of which about two-thirds will be produced through electrolysis. This represents about three-quarters of the total low-emission hydrogen production under a net-zero scenario.
The electrolysis facility capacity has nearly doubled to 1.4 GW by the end of 2023 compared to the previous year. However, this is only 1/6 of the capacity expected in 2021, and although progress is being made, it is much slower than expected. Alkaline electrolysis technology accounts for the largest share at over 60%, and cation exchange membrane electrolysis technology accounts for 22%. By 2030, the facility capacity is expected to reach 230 GW (up to 520 GW), with Europe accounting for over 25%, Latin America and Africa accounting for 17% each, and Australia accounting for 15%.
Fossil fuel-based low-emission hydrogen production using CCUS reached about 600,000 tons in 2023. More than a quarter of CCUS projects under construction or planned are related to hydrogen or ammonia production. Production is expected to increase 18-fold to 11 million tons per year in 2030, but the net-zero scenario requires about 17 million tons by 2030.
The cost of hydrogen production by electrolysis in 2030 is expected to fall to the level of fossil fuel-based production using CCUS. It is analyzed that the cost of hydrogen production by electrolysis can fall to the level of $2/kg under the assumption of large-scale distribution as in the net-zero scenario. The cost of hydrogen production by electrolysis is expected to be the lowest in Australia and South America. It is expected that the carbon price system will be a factor in increasing the cost of hydrogen production without CCUS.
