Hydrogen and Renewable Gas Forum

Presentation

Hydrogen and its role in the European energy system of the future
10 March 2021

Catherine Robinson, Executive Director, Hydrogen and Renewable Gas

Catherine.Robinson@ihsmarkit.com, + 44 7817 617 935

Confidential. © 2020 IHS Markit®. All rights reserved.

 Hydrogen and its role in the European energy system of the future

Low-carbon hydrogen is becoming a core element of climate policies

• Global commitments towards decarbonization are increasing—Renewable gas (including

hydrogen) is now recognized as a critical pillar alongside renewable power

• Policy frameworks are being put in place to drive large-scale consumption of low-carbon gas
supported by a global hydrogen market

• Transport (logistics and HGV) and industry (steel and chemicals) are expected to be early
adopters of low-carbon hydrogen

• Hydrogen for energy use is expected to be a mix of domestically produced hydrogen from
coal/natural gas (grey/blue hydrogen), hydrogen from electrolysis (green hydrogen) and imports

• Industry is responding to the policy push: More, larger projects are being announced

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 Hydrogen and its role in the European energy system of the future

Hydrogen and its role in the European energy system

Questions to answer

• Where can hydrogen play a role in decarbonizing the European economy?

• What are Europe’s hydrogen ambitions?

• What does low-carbon hydrogen cost?

• What is the status of low-carbon hydrogen today?

• What is needed to develop large-scale use of low-carbon hydrogen in Europe?

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 Hydrogen and its role in the European energy system of the future

Role of low-carbon hydrogen in meeting net-zero ambitions

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 Hydrogen and its role in the European energy system of the future

The role of electricity will grow, but low-carbon gas will become an important
part of all sectors of a net-zero carbon economy
•Roles
Hydrogen
for gasfrom renewable
in a very power
low carbon can
energy serve multiple roles:rrrrrr
system

Residential and
Industry Power generation Transport
Commercial
Daily demand variation Gas Elec Align supply and demand

High
Direct
biomass
Peak heat ST
High temperature heat Seasonal storage Heavy
GT duty
HP
Logistics

Low-pressure gas
Low Generation Demand
Electricity
Long-duration / Long
Peak heat High temperature heat
seasonal storage distance
Note: ST = solar thermal; GT = geothermal; HP = heat pump.
Source: IHS Markit © 2021 IHS Markit

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 Hydrogen and its role in the European energy system of the future

Hydrogen is now integral to the global 2050 vision

Funds allocated to H2 in COVID-19 recovery plans. Multiple H2-related policy documents explaining
governments’ strategic intentions and specific measures to support projects
Timeline of global policy and regulatory documents relating to hydrogen (selected reports)

New Zealand: Vision for H 2 Netherlands: United

Norway: H2 Spain: H2 Italy: National
(Sept ‘19) Strategy on Kingdom
Strategy Roadmap strategy for
(June ‘20)
H2 (Oct ‘20) green H2
South Korea: Australia: (June ‘20) (Nov/ ‘20) Poland
H2 Economy National H2
Roadmap Strategy Portugal: Germany: Russia: Chile: National New
Japan: Basic (Jan ‘19) (Nov ‘19) National National H2 Hydrogen strategy for Zealand
H2 Strategy Strategy for H 2 Strategy road map green H2
(Dec ‘17) (Oct ‘20) (Nov ‘20)
(May ‘20) (June ‘20)

January 2019 January 2020 December 2020

Published national H 2 strategies COVID-19

China: H2 Fuel France: H2 focus European Council
restrictions
Cell Vehicle within COVID-19 endorsement for
Expected national H2 strategies Roadmap Recovery Plan Hydrogen Strategy
(Nov ‘19) California: EU: H2 (Sept ‘20)
Other H2 government documents (Dec ’20)
H2 refuelling Strategy
(July ‘20)
station target Hydrogen strategy
(Dec ‘19)
for Canada
(Dec ’20)
Source: IHS Markit © 2021 IHS Markit

Decarbonisation of gas firmly on the agenda in many major global markets

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 Hydrogen and its role in the European energy system of the future

Hydrogen is expected to become a significant part of the energy mix

Governments are beginning to propose targets for hydrogen use throughout the energy sector

Target hydrogen use within the energy sector

45%
Netherlands: By 2050, 30%
40%
Percentage of the energy mix

Germany: In 2030, the government to 50% of the total energy

expects around 35-55 TWh of hydrogen to Canada: Within the government’s
35% “Transformative” scenario, mix is expected to be
be needed in the energy sector, which is gaseous energy carriers, all
30% around 5 to 10% of the energy mix. They hydrogen could make up to 31%
of delivered energy by 2050. of which could be hydrogen
expect to produce around 14 in a decarbonized world.
25% TWh through domestic electrolysis.
20% South Korea: By 2040, the target
is 10% of power generation, 3% European Union: By 2050
Portugal: The 2030
15% of the total energy mix, to be from up to 24% (2,251 TWh) of
target is to have
hydrogen fuel-cells with around the energy mix could be
10% hydrogen be 5% of
half of that produced domestically. supplied by hydrogen.
the final energy
5% consumption.
0%
2020 2025 2030 2035 2040 2045 2050 2055 2060

Canada European Union Germany Netherlands Portugal South Korea

Source: IHS Markit © 2021 IHS Markit

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 Hydrogen and its role in the European energy system of the future

Costs of low-carbon hydrogen

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 Hydrogen and its role in the European energy system of the future

The low-carbon hydrogen supply chain

IHS Markit Hydrogen supply chain techno-economic analysis
Liquid H2 trucks Compressed H2 tube trailers H2 pipeline
LH2
or or H2 or LH 2
H2
CNG

Re-Conversion

Steam reforming / or H2
Gasification
H2
Ammonia / Methanol / LOHC*
Conversion or direct use
H2O

e- H22 ++½OO2 2
H LNG
Water
electrolysis Synthetic CH4
+CO2 /CO
(methanation) End use
H2O
H2
Local water HH22++½OO22
HVDC
electrolysis

Production Transmission, distribution and storage End-use

Source: IHS Markit * Liquid organic hydrogen carriers © 2021 IHS Markit/1736808

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 Hydrogen and its role in the European energy system of the future

IHS Markit studies consider a range of H2 production pathways

Pathways vary in terms of feedstock, scale, commercial availability, maturity, and cost

H2 production pathways

Mature ← Maturity level → R&D

Hydrocarbons gasification Hydrocarbons

(coal, liquid residues POx) gasification with CCS
Gasification
Biomass gasification
Steam reforming (natural Steam reforming with
gas, naphtha) CCS
Reforming Autothermal reforming (ATR) ATR with CCS
Waste to biogas & biogas reforming

Electrolysis* AEC Electrolysis* SOEC

Electrolysis
Electrolysis* PEM

Methane pyrolysis
Pyrolysis with solid carbon sequestration

Note: AEC = alkaline electrolytic cell; SOEC = solid oxide electrolytic cell. PEM = Proton exchange Color code
membrane. POx: partial oxidation. *Low carbon if using low carbon power supply.
Source: IHS Markit Low-carbon H2 Unabated H2 © 2021 IHS Markit

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 Hydrogen and its role in the European energy system of the future

Hydrogen production costs

Relationship between the cost of natural gas and the cost of low-carbon hydrogen
Mature technology Developing technology
Production cost on equivalent

x8
energy content basis

Hydrogen
from
renewable
x4-5
electricity

x?
x2
Hydrogen from
natural gas 2015 2020 2030
Natural gas with CCS
Operating projects are small,
Large-scale production
but scale is growing rapidly
Hydrogen cost driven by Main cost driver today—electrolysis
natural gas price Future cost driver—cost of electricity

Source: IHS Markit © 2021 IHS Markit

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 Hydrogen and its role in the European energy system of the future

In Europe today, hydrogen from water electrolysis is 2-3 times more

expensive than methane reforming with carbon capture and storage

Levelized cost of hydrogen production in Europe – 2020

6
Cost of hydrogen (2018 Euros/kg H2)

Capital and O&M

Fuel/feedstock
5 CO2 emissions
CO2 emission
CO2
CO 2
transportand
transport andstorage
storage
4 Grid fees
Storage for firm hydrogen
TOTAL
3

0
No CCS 92% CCS 92% CCS Grid Dedicated offshore wind Dedicated onshore wind Dedicated solar PV —
100,000 Nm3/h 100,000 Nm3/h 2,000 Nm3/h — Germany — France Spain
Plant size H2 output H2 output H2 output
Large SMR Large ATR Small ATR
Natural gas reforming Hydrogen from electrolysis
2,000 Nm3/h
H2 output

Source: IHS Markit © 2021 IHS Markit

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 Hydrogen and its role in the European energy system of the future

If storage for firming hydrogen supply is not needed, the cost of hydrogen
can fall below 2 Euros/kg between 2025 and 2030 in Europe
Cost of intermittent hydrogen (without storage) at the boundary of the production facility in Europe
Hydrogen from renewables vs ATR with CCS
100 MW
Solar PV – Spain Typical large scale
1.8 500 MW 2 MW
2025

ATR-CCS-to-H 2
Onshore wind – France 500 MW 2 MW
Years and electricity input

of 100,000 Nm3/h
capacity:
Offshore wind – Germany Range 1.4-2.4 €/kg 500 MW 2 MW

Solar PV – Spain
technology

1.5
2030

Onshore wind – France

Offshore wind – Germany

Solar PV – Spain
2040

Onshore wind – France Assuming 500 MW electrolyzer and

€14.5/MWh solar LCOE. Portugal
winning bid (Aug 2019)
Offshore wind – Germany

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0
Euros/kg
Source: IHS Markit 500 MW 2MW : Input capacity range of installed electrolyzer © 2021 IHS Markit

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 Hydrogen and its role in the European energy system of the future

Status of low-carbon hydrogen today and potential for growth

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 Hydrogen and its role in the European energy system of the future

Development of hydrogen as an energy carrier would dwarf current

consumption: Current hydrogen demand*—2% of global energy demand.

* Demand for hydrogen in refineries and chemical sector

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 Hydrogen and its role in the European energy system of the future

The global pipeline for Power-to-Hydrogen grew exponentially in 2020 and is

now close to 60 GW. Size of planned projects moved from 11 MW to 600+ MW
Global evolution of the electrolysis pipeline (GW) Average planned capacity in 2016 and 2020 (MWe)

70 800
Capacity, megawatts electric (GWe)

megawatts electric (MWe) input

667
60 700

600
50
500
40
input

400
30 56.7
300
20
200

10 18.0 100
0.1 0.7
12.0 9
0 0
2016 2017 2018 2019 2020 2016 2020

Source: IHS Markit © 2021 IHS Markit Source: IHS Markit © 2021 IHS Markit

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 Hydrogen and its role in the European energy system of the future

Europe will continue to dominate short-term additions with ~70% of capacity

in advanced stage of development and 20% of early-stage capacity

Power-to-X project pipeline by region and status* (as of January 2021)

120%
105 MW 58 MW 838 MW 24,282 MW 32,778 MW
Capacity, MWe input

100%

80%

60%

40%

20%

0%
Operating Under construction Advanced planning Early planning Announced
Germany Rest of Europe United States/Canada Asia Australia Rest of the world
Notes: *Project status definition: Advanced planning = projects that have completed the feasibility study and are moving forward with front-end engineering and design, applying for permits, issuing
purchase orders for equipment, or taking a final investment decision; Early planning = projects with a feasibility study in progress; Announced = earliest-stage projects—projects announced with very
limited information on the partners and stakeholders, the capacity of hydrogen production, the online date, etc. In many of t hese cases, details of the electrolysis capacity are not provided and are
estimated from the renewable power capacity announced.

Source: IHS Markit © 2021 IHS Markit

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 Hydrogen and its role in the European energy system of the future

Low-carbon hydrogen is now at the heart of the long-term visions of many

companies and governments. Investment expected to accelerate

Hydrogen will be a major part of the future energy mix—20-50% of energy use in a net-zero carbon
scenario

Hydrogen is versatile through the full value chain—from production to end use. All parts of the
energy system would be impacted by large-scale hydrogen development

Momentum is increasing and policies are targeting barriers to hydrogen development—e.g.

limited infrastructure, low demand, high costs

Hydrogen produced by electrolysis dominates current announcements, but hydrogen from

natural gas (with CCS) will play a major role in future supply

The market model emerging for hydrogen is similar to natural gas—moving in time to an international
traded market with large-scale, regulated infrastructure

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