IRENA: Hydrogen Economy Will Have Less Need for Tankers
As leading shipowners begin to look to hydrogen-based fuels to power their future fleet, the global supply of green hydrogen is of great importance for planning the maritime industry's energy transition. The source, quantity and distance to market for hydrogen-based fuels will also matter to the tanker operators of tomorrow, who will get their ton-mile revenue from "green" products rather than crude (assuming that the transition goes as planned).
In a new report released Tuesday, the International Renewable Energy Agency (IRENA) predicts that hydrogen-based fuels will have a regional, distributed production base, with greater "resilience and energy security" than the current trading arrangements for oil and gas.
"Hydrogen markets are expected to be regional to a large extent and much smaller than today’s oil and gas sectors," predicts IRENA.
If its most optimistic forecast for the green transition holds, global hydrogen demand could be seven times higher in 2050 than it is today. This is a small fraction of the overall global energy market, which will be dominated by the direct use of renewable electricity and battery-electric power, but it is still a monumental leap on a 30-year timescale. The report predicts that two-thirds of that supply will come from renewable power, with the other third from "blue" fossil-fuel based hydrogen production.
About one eighth of the total hydrogen supply may be traded internationally by ship in the form of green ammonia, IRENA predicts, and the same amount may be traded by pipeline. The waterborne ammonia trade would require a significant ramp-up in the ammonia carrier fleet, as it would represent about 25 times the current volume of this specialized trade.
The other proposed methods of transporting hydrogen by sea - as a cryogenic liquid, or as a dissolved gas in an organic solvent - are not likely to play a significant role, IRENA predicted. Both have technical and cost challenges, particularly over long distances. Liquid hydrogen loses cargo to boil-off while under way, which reduces its efficiency. It is also bulky and costly to handle and store, since it must be kept at a frigid temperature of -423 degrees Fahrenheit.
By contrast, ammonia is widely traded today and is a known commodity in the maritime world. Though it is toxic and must be handled with care, the procedures for shipping it safely are well established.
Cost of capital may shape trading patterns
The location and distribution of hydrogen production will come down to an unexpected factor, according to IRENA - the cost of capital. Interest rates are higher in some countries than in others, and since capex is so high as a proportion of lifecycle cost for renewable energy projects, the cost of capital will play a determining role in what gets built and where.
This means that some areas with excellent renewable energy potential may end up having to import their hydrogen, simply because their high borrowing costs make development uneconomic (like Argentina). Meanwhile, others with access to affordable financing may end up as net hydogen exporters (like Chile, which may be destined to supply the Argentine market). As the price of borrowing changes in each nation, the distribution of new projects will evolve.
This means there will also be an essential role for large multinational energy companies. "Large companies with solid balance sheets and access to low-cost capital can help develop competitive green hydrogen projects at costs well below the country values used in this analysis," IRENA noted.