Humanity has set itself the goal of achieving net zero. This means that we have committed to actually changing large parts of our world in the next two and a half decades. Increasing renewable electricity production is certainly key to achieving this, but we are convinced that simply producing more and more power from renewables will not solve the issue alone. The question then is: What is the missing piece of the puzzle and what is its role?
In the last three years, Fichtner has worked on more than 60 projects in the field of green hydrogen and green hydrogen-based chemicals. As a result, I have had the chance to speak to many people around the world about hydrogen. And I was able to think about and learn a lot about the role that green hydrogen can play in achieving decarbonization. My personal takeaway is that green hydrogen-based chemicals are a not only a piece of the puzzle but a cornerstone of achieving decarbonization and changing our world. I am fully aware that this is a bold statement. It is bit like what Steve Jobs said:
“The people who are crazy enough to think they can change the world are the ones who do.”
So, in this H2 Insight, I want to explain my and our thinking at Fichtner. And my wish for today would be that after my presentation you do not consider people to be crazy for thinking that hydrogen has an important role to play in changing our world on the path to net zero.
Why do we think that green hydrogen is an important driver for decarbonization? To understand this, we must first understand the challenge of net zero. The focus of efforts to reduce carbon emissions over the last two decades has been on the power sector. And this has yielded tangible results. However, the power sector is only a minor part of global GHG emissions. Other sectors: similar size, especially industry, agriculture and - to a lesser extent - transportation. This means: If we want to achieve net zero, we have to decarbonize all sectors.
Let’s have a look at the final energy consumption leading to those CO2 emissions. I am going to show this on the next slide. On this slide, you can see the final energy consumption of the European Union as an example.
- Final energy: the energy that consumers use
- Electricity sector: around a quarter
- Around a third (currently increasing, around 40%) renewable
- Key for net zero: decarbonization of the direct use of chemical energy
- Where do we use chemical energy?
- Heat: As Europeans and especially Germans have been made aware in recent weeks, we consume a lot of natural gas to heat our homes.
- Mobility: petroleum products both in ground but also in aerial transport.
- Industry: We make steel, ammonia, concrete, etc. – the things that our world is built from and consumes.
- Each of these sectors: roughly a third of total chemical energy.
So we have to decarbonize these applications if we want to achieve net zero. For this purpose, we need a chemical energy source that is carbon-neutral. And this is where hydrogen comes into play.
What can green hydrogen be used for?
- Direct use: mobility in fuel cell vehicles and trains, decarbonizing the gas grid, power generation. These are the most prominent examples.
- Fuel ammonia: Transport and use of hydrogen in thermal power plants is easier as ammonia. Therefore, especially in East Asia (Korea and Japan), there is a push for ammonia co-firing. Rationale: countries with large thermal power plant fleets that cannot increase renewables fast enough in line with their emission reduction targets. So ammonia is an important part of renewables, if you like.
- Green fertilizers: Around 50% of worldwide grey hydrogen production is currently used for ammonia. This grey ammonia can be replaced by green hydrogen and ammonia. This contributes to reducing CO2 emissions in agriculture.
- Green methanol: Methanol is already an industrial product. This feedstock can be decarbonized or it can serve as an input for synthetic fuels.
- Synthetic fuels: Planes and cars with combustion engines will not disappear any time soon. For cars, the infrastructure and required renewable electricity in the country itself need to be built up first. For planes, a commercial alternative to combustion of fuels is not available yet. Therefore, synthetic fuels can be used to decarbonize the existing stock.
- Green steel: Consumers are demanding more and more sustainable products. This requires green materials, amongst which steel is one of the most important ones.
As you can see, many sectors of our world require carbon-neutral replacements of their products. These sectors are considerable in size. And as a result, we have seen a rapid development in the green hydrogen project pipeline supplying them.
That is a remarkable development. It shows how much potential industry sees in the field of hydrogen. And it does not stop at the announcement of projects. It is part of an integrated value chain forming across the globe: The countries that are commodity exporters today are positioning themselves to export green chemicals in the future. Some examples are:
- Australia, a country exporting coal and other raw materials. It is positioning itself as a green and blue hydrogen supplier to Japan, the rest of Asia and the world.
- Chile, a country with an established mining industry. It intends to use its great renewable resources to export green chemicals to the global market.
- Saudi Arabia, an oil-exporting country. With NEOM, it has an advanced green ammonia project aimed at the global export market.
- Other examples in the region include the United Arab Emirates and Qatar.
What should not be forgotten: Norway, one of Europe’s main gas suppliers. It is actively developing the supply of blue hydrogen to Europe.
For the exporting countries, this is also a chance to enlarge their value chain. Example: Saudi Arabia currently exports mainly oil, a raw material. With green ammonia, it would export a finished product instead.
In addition, the Ukraine war has intensified energy import discussions in Europe. E.g. the German Minister of Economic Affairs is currently visiting various countries in search of the LNG quantities we require. And in those talks, green hydrogen is a topic as well.
So you can see that hydrogen is being taken seriously, and that we need to change large parts of our world that today use fossil fuels to generate their products. At the beginning, I said that hydrogen can be a significant part of changing the world. Therefore, I want to close with an illustration of how large this impact can be.
Hydrogen is an established product. 70 million tonnes of hydrogen are produced today. With a cost per tonne of 1,000 to 1,500 $/tonne, this amounts to a market of roughly 100 billion dollars per year. The carbon footprint of this sector is roughly that of Germany. This needs to be decarbonized. However, when people speak about green hydrogen, they mainly think of something different: replacing fossil fuels. And this market is significantly larger. As a rough estimate, it amounts to 5 trillion tonnes of hydrogen per year.
Certainly, other things will take a share of that potential market: energy efficiency, electrification of applications like e-mobility and so on. But even capturing a share of this potential is enormous and a fundamental change to our industry and our world. And, as I have shown, I do believe that this is necessary and inevitable if we want to achieve net zero. Therefore, I do believe that green hydrogen-based chemicals will drive decarbonization and change how the world looks in the decade to come.