Hydrogen Economy OutlookMACQUARIE KOREA GREEN ENERGY DAY

Ali Izadi

@AI_Energy

aizadinajafa@bloomberg.net

November 2, 2021

1 November 2, 2021

BNEF coverage

Strategies for a cleaner,

more competitive future

2 November 2, 2021

1. Hydrogen can help decarbonize hard-to-abate sectors, if produced cleanly

2. Clean hydrogen will get cheaper than fossil-fuel based hydrogen by 2030

3. Clean hydrogen demand grows rapidly, but significant technical and policy

challenges remain

Key messages

3 November 2, 2021

Source: International Energy Agency, Morgan Stanley. See notes pane for notes.

The production of hydrogen is already a big, and polluting, businessSupply and demand for hydrogen globally, 2018 Key statistics, 2018

● 117MMT produced

● $130 billion in sales

● Over 99% derived

from fossil fuels

● Releases 830MtCO2

(2.2% of global energy

related CO2)

● Consumes around 6%

of natural gas and 2%

of coal

4 November 2, 2021

Source: BloombergNEF. *Note: some of these sectors could also use hydrogen for its chemical properties, such as fertilizers, plastics, fuel refining and steel.

Using the energy in H2 could help decarbonize hard-to-abate sectors…

Chemicals

ProductsBuildings

Fuel for

H2

Residential &

commercial

Industry

Steel Cement

Paper Food

Aluminum

Heavy transport

Power

Electricity peaking

and seasonal

balancing

Fertilizers*

Plastics*

Fuel refining*

Feedstock forHeat for

Steel* Glass

Metallurgy Food

5 November 2, 2021

…but for H2 to cut emissions, it needs to be made it without releasing CO2

‘Green’ H2 from

renewable

electricity

‘Blue’ H2 from fossil

fuels with carbon

capture and storage (CCS)

‘Turquoise’ H2 from

methane pyrolysis

Pink / yellow / purple:

• From nuclear electricity

or biomass

• These color labels are

applied inconsistently

Not CO2-free:

• ‘Gray’ H2 from fossil

fuels without CCS

• H2 from electrolysis

powered by high-carbon

grid electricity

Source: BloombergNEF. Image source: Wikimedia.

6 November 2, 2021

1. Hydrogen can help decarbonize hard-to-abate sectors, if produced cleanly

2. Clean hydrogen will get cheaper than fossil-fuel based hydrogen by 2030

3. Clean hydrogen demand grows rapidly, but significant technical and policy

challenges remain

Key messages

7 November 2, 2021

0.0

14.9

29.8

44.6

59.5

74.4

89.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2 3 4 5 60.0

14.9

29.8

44.6

59.5

74.4

89.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2021 2030 2050

$/MMBtu$/kg (real 2020)

Renewable H2

‘Blue’ H2 from

natural gas

with CCS

‘Blue’ H2 from

coal with CCS

Source: BloombergNEF. Note: CCS = carbon capture and storage. Assumes equal CCS costs in all countries.

Today, making H2 from renewables is expensive, but that will changeHydrogen production costs, 2021-2050

8 November 2, 2021

Source: BloombergNEF Hydrogen: The Economics of Production From Fossil Fuels (web | terminal)

Costs of ‘gray’ and ‘blue’ hydrogen largely depend on fossil fuel pricesLevelized cost of H2 production

from natural gas reforming

Levelized cost of H2 production

from coal gasification

0

1

2

3

4

30 40 50 60 70 80 90 100 110 120

Coal price ($/metric ton)

Levelized cost of H2 ($/kg)

With CCS (2050)

0

1

2

3

4

1 2 3 4 5 6 7 8 9 10 11

Natural gas price ($/MMBtu)

Levelized cost of H2 ($/kg)

With CCS (2050)

9 November 2, 2021

1. Hydrogen can help decarbonize hard-to-abate sectors, if produced cleanly

2. Clean hydrogen will get cheaper than fossil-fuel based hydrogen by 2030

3. Clean hydrogen demand grows rapidly, but significant technical and policy

challenges remain

Key messages

10 November 2, 2021

Other fuels

Hydrogen

Natural gas

indicates the decrease in energy density when storage is accounted forDiesel

Methanol

LNG -162 C

AmmoniaLH2 -253 C

CH2 700 bar

NMC battery H2

CNG 250 bar

Gasoline

Natural gas0

10

20

30

40

0 20 40 60 80 100 120 140

Gravimetric energy density (MJ/kg)

Volumetric energy density (MJ/l)

Liquid hydrocarbons

Heavy Light

More space required

Less space

required

Source: BloombergNEF, The Engineering ToolBox. Note: uses high heating values (HHV).

Hydrogen is light but takes up a lot of space compared to fossil fuels…Volumetric and gravimetric energy densities of different fuels

11 November 2, 2021

…in other words, storing hydrogen is harder than storing fossil fuels…

Source: Cenergy. *Note: the exact ratio depends on the energy density of the natural gas in question.

Compressed natural gas Compressed hydrogen

3-4x

12 November 2, 2021

Source: BloombergNEF. *Note: the exact ratio depends on the energy density of the natural gas in question.

Compressed natural gas Compressed hydrogen

…and transporting H2 is harder than transporting natural gas for the same reason

3-4x

13 November 2, 2021

Source: Flaticon.com. *Note: 1-1.2x, depending on the calorific content of the natural gas in question.

Piped natural gas Piped hydrogen

Pipeline transport of H2 is comparable to that of natural gas

1-1.2x

14 November 2, 2021

Source: BloombergNEF.

Producing and using hydrogen can be inefficient

H2

68%

Total efficiency:

31%

Use H2 to

generate

electricity

Use electricity to

make H2

Store H2 in a

pressurized

tank

Round-trip efficiency of electrical storage via H2

15 November 2, 2021

Hydrogen has better prospects in some sectors than in others

Source: BloombergNEF, concept from Liebreich Associates

Unavoidable sectors

cannot decarbonize without

using clean hydrogen.

High potential sectors

need a low carbon price to

adopt H2, or other methods

of CO2 removal cost more.

Medium potential sectors

may find H2 competitive in

some circumstances.

Low potential sectors

could use some H2 under

special circumstances.

Uncompetitive sectors

have cheaper alternatives

to cut CO2.

High potential

Medium potential

Uncompetitive

Unavoidable

Low potential

Oil

refining

Methanol

productionAmmonia

productionNH3

Cement

Ships Aircraft

Trucks,

buses

Heating

homes

Passenger

cars

Steel

production

Peaking /

seasonal

power

Aluminum

production

The prospects for widespread adoption of clean H2 in various sectors

16 November 2, 2021

Green Scenario Gray Scenario Red Scenario

Three pathways to meet the carbon budget required for a well-below two-degrees pathway

Electrification and

renewable energy

“Green”

hydrogen

Electrification and

renewable energy

Electrification and

renewable energy

Fossil fuels +

CCS + removals

“Blue”

hydrogen

“Red”

hydrogen

Nuclear

power

Bioenergy

Recycling

Demand-side efficiency

Bioenergy Bioenergy

17 November 2, 2021

‘Green’ scenario ‘Red’ scenario ‘Gray’ scenario

How much H2 is used will depend on whether and how decarbonization occurs

Source: BloombergNEF New Energy Outlook 2021 (web | terminal). Note: excludes existing market of 117Mt.

Future H2 demand will depend

on policy. BNEF’s New Energy

Outlook 2021 presents three

scenarios.

Green scenario: net-zero is

reached in 2050 via renewable

power, with hydrogen demand

rising 11 times.

Red scenario: nuclear replaces

H2 in power sector.

Gray scenario: the world

reaches net zero using fossil

fuels with CCS.

Should we reach net zero by

2050, a mixture of all three

scenarios is likely. H2 demand

would be lower if we do not reach

net zero.

0

200

400

600

800

1,000

1,200

1,400

2020 2030 2040 2050

Mt

0

200

400

600

800

1,000

1,200

1,400

2020 2030 2040 2050

Mt

0

200

400

600

800

1,000

1,200

1,400

2020 2030 2040 2050

Mt

0

1000

2020 2030 2040 2050

MMtPower Non-energy use Other Shipping Rail

Aviation Road Commercial Residential Other industry

Petrochemicals Cement Aluminum Steel

18 November 2, 2021

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Ali Izadi

aizadinajafa@bloomberg.net

@AI_Energy