May 18, 2023 • Paul Rodden • Season: 2023 • Episode: 215
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In episode 215, Today is part two of our review of the hydrogen Council's 2023 Hydrogen insight report. I'll go through the second half of the report and give you my takeaways on today's hydrogen podcast.
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Today is part two of our review of the hydrogen Council's 2023 Hydrogen insight report. I'll go through the second half of the report and give you my takeaways on today's hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where's capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
Okay, welcome back, everyone on our second half coverage of the hydrogen insights for 2023. In the last podcast, I covered the press release and the first couple of exhibits now I want to dive into the second half of the exhibits and give my overview on their insights. And so starting up with exhibit ten, 3 million tonnes per year clean hydrogen capacity has passed fid with North America and China leading. About 2.1 million tonnes per year clean hydrogen has passed fid in addition to the 800 kilo tons per year operational capacity, of which about 1.1 million tonnes per year is low carbon hydrogen, and the remaining 1 million tonnes per year is renewable.
Since the previous publication, the volumes of low carbon and renewable hydrogen have grown notably, with about 400,000 tons per year of each technology having passed fid. All low carbon hydrogen volumes at or past fid are in North America, whereas renewable hydrogen is more geographically dispersed. China is the largest market at 35% share of volumes, followed by the Middle East and North America, with about 20% of volumes each. Although being the largest and announced supply with 13 million tons per year announced until 2030. Europe accounts for less than 5% of committed supply capacity. This may be driven by a lack of transparency on regulatory framework and subsidies, as well as high energy prices following the war in Ukraine.
Next exhibit 13 Clean hydrogen momentum in North America continues with 170 Clean hydrogen projects announced across the continent. The industry has announced a total of 170 Hydrogen projects in North America as of the end of January of 2023, accounting for approximately 15% of total announced projects globally. In the past eight months, about 70 new projects were announced of the 170 total projects 135 aim to be fully or partially commissioned by 2030 representing $46 billion of announced direct investment in hydrogen value chains. Of the 135 projects proposed by 2030 More than 40% have reached fid under construction or are operational, and 25% are undergoing feasibility and field studies. The number of announced projects through 2030 has grown by 60% in the past eight months. While the share of projects at each level of project maturity has stayed consistent, indicating an even distribution of growth across the project funnel. Large scale projects for industrial offtakers account for more than half of the announced projects.
Out of the 106 large scale industrial projects announced 86 are planning full or partial commissioning by 2030. 19 projects are undergoing feasibility or feed studies and 35 projects have passed fid. There are eight gigascale projects announced and of those eight, five are undergoing feasibility and field studies. And one is that the Fid stage three out of the eight gigascale projects are on renewable hydrogen supply, with intended use in sustainable aviation fuel or for the transportation sector. And so out of a total of 175 announced projects 134 projects have disclosed their intended off take sector, road transport is the off taker for 40 projects, followed by ammonia 34 and power and blending into the gas grid 25. And next is exhibit 14, more than half of announced investments in North America are still in early stages, announced hydrogen projects North America through 2030 amount to total direct investments of $46 billion, up from 29 billion in the previous publication. along the value chain most investments are focused on clean hydrogen supply account mean for more than three quarters of investments followed by end use, which is about 15% and infrastructure about 5%.
The investment gap in midstream and end use has increased after the inflation reduction act as the incentives focused on hydrogen production. Committed investments or projects already at fid or beyond account for 20% of investments in North America, compared to only 7% For the rest of the world. This could be due to the fact that almost three quarters of North American projects are low carbon projects compared to 20% across the rest of the world, the value chain for low carbon hydrogen production is more mature than for renewables, and the projects tend to be larger. Additionally, the deployment process is faster when retrofitting existing steam methane reforming or SMR facilities. The past eight months have seen an increase of more than 50% and total announced investments, almost half of the investments in North America are considered mature. In other words, either in the planning stage or already committed having grown by about 20% In the past eight months to $20 billion. Estimated investments in projects and an early announcement stage or before the detailed planning and engineering stage have more than doubled from 12 billion to $25 billion. And this is likely driven by the passage of the IRA in August of last year spurring new announcements that are still relatively in early stages.
As momentum around project announcements accelerates challenges to deploying at scale remain formed, and in some cases are exacerbated by the rapidly growing hydrogen industry. The last exhibit I'll talk about for this podcast is exhibit 19. midstream infrastructure to transport hydrogen does not exist at scale today. Large scale cost effective transport of hydrogen could require a hydrogen pipeline network complemented by trucking based transport for distributed end uses examples being hydrogen refueling stations. With only 16 100 miles of hydrogen pipelines in place today, the US hydrogen industry would rely on truck based delivery despite higher unit costs for new uses outside of industrial clusters, where hydrogen pipelines currently exist. Trucking could add more than $1 per kilogram to the cost of delivered hydrogen compared to pipeline delivery. The cost range of that will vary based on distance capacity, equipment utilization and hydrogen form. Examples being gaseous versus liquid. Projections show 60% of us hydrogen production will flow through pipelines in 2050. However, there are only 1600 miles of hydrogen pipelines in the US today primarily concentrated in major industrial clusters in the Gulf Coast, and California.
In contrast to that 500,000 miles of natural gas transmission pipelines to move natural gas from producing regions to demand centers across the country. Building the long term network could connect potential hydrogen clusters with approximately 10 North South pipelines and five east west pipelines, which could require an estimated $100 billion. investments of only 3 billion in hydrogen infrastructure projects until 2030 have been announced in North America so far, a rapid ramp up is needed to enable a pipeline network pipelines to distribute hydrogen could develop from one retrofitting the existing natural gas pipeline, which could require both infrastructure upgrades to enable the existing natural gas pipeline to accommodate hydrogen molecules and the phasing out of existing natural gas transport in order to use the pipelines for hydrogen. The US, unlike Europe does not have many places with parallel natural gas pipelines running the same routes, making pipeline retrofits a less viable option. For most of us as compared to Europe, or two building new pipelines may be more feasible than retrofits in the US. However, new pipelines face their own potential challenges primarily permitting interstate pipelines complicate the process of obtaining rights of way, making permitting a multi year process.
In the meantime, producers are developing alternatives such as colocation of end uses and production facilities and trucking for hydrogen distribution, particularly to smaller end uses, like refueling stations and small industrials, producers off takers and transporters can coordinate to aggregate and connect regional supply and demand. The US Department of Energy's hydrogen hub funding is mobilizing these efforts across the country. Adding twin pipelines to existing natural gas pipelines could accelerate the process in some cases by utilizing existing pipelines right of way, inter agency and enter jurist diction, coordination to streamline the permitting process and create consistency across regions could help reduce timelines. Now as for the bulk of the remainder of the report, it focuses on the IRA and the effect it has had, and the effect it's had on renewable hydrogen projects. So the first thing I want to focus in on is what this report talks about in the project development in AMEA, or Europe, the Middle East, and Asia. Now, with all of the news coming out of the Middle East and Europe, it's no surprise that they're really supporting the bulk of the projects moving forward. And it's also not a surprise at all.
To learn it, the bulk of the projects are moving forward in China. Again, not really a surprise considering there are no regulatory roadblocks in China. If the country wants a hydrogen facility, the country makes a hydrogen facility, and they really don't care about any carbon intensity levels they may be putting out from that development. The next piece to talk about is that fid is still lagging project announcements. Now, this was expected to be the case right 2020 to 2022 saw massive investments in hydrogen development but it is only a matter of time before those investments went quiet, while the investors waited to see the progress on the capital already allocated to technology and or project development. And so with that being said, as the technology moves into further developmental stages, and gets closer to production, or even showing signs of economies of scale, and projects move past fid and start breaking ground, I think we'll start seeing a new series of investments in either tech and project scaleups, or new project funding. And to build on that a little further, the report talks about Project announcements are slowing down from the past two years.
Why is that? Well, I believe that the bulk of investments have slowed due to initial funding depletion, technology developers and project and hub developers are still pushing forward. But progress is understandably slow. I think new money into new projects will slow until fid's have been made on the current project load. Those fid's may also be delayed until further infrastructure developments are made as highlighted in this report on the midstream side, especially if the project fid hinges on off taker opportunities and or hydrogen takeaway availability.
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