Implications of low-carbon hydrogen production on renewable energy systems webinar, 30 March 2023, Paris, CEFIM, OECD

1. The Role of Renewable Hydrogen in Clean Energy
Transitions
Dr Ilkka Hannula, Senior Energy Analyst
OECD workshop, Thu 30 March 2023

2. IEA 2022. All rights reserved. Page 2
Peak fossil fuel demand is coming this decade
Today’s policy settings are now sufficiently strong that they produce a distinct peak in fossil fuel use before 2030
Fossil fuel demand in the Stated Policies Scenario, 1900-2050
EJ
150
300
450
600
Oil
Coal
Natural gas
1900 1950 2000 2050
Oil
Coal
Natural gas
Historical Projected

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Emissions trends to 2050
The power sector leads emissions reductions to 2030, but all sectors contribute to the net zero emissions goal,
with remaining residual emissions balanced by atmospheric removals in 2050
Energy-related CO2 emissions by sector and gross and net emissions in the NZE Scenario, 2010-2050
Emissions by sector Gross and net emissions
-4
0
4
8
12
16
2010 2020 2030 2040 2050
Gt
CO₂
Electricity
Industry
Transport
Other
Buildings
-10
0
10
20
30
40
2010 2020 2030 2040 2050
Gt
CO₂
Gross
emissions
Net emissions
BECCS and DACS

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Low-emission fuels are an important pillar of a net-zero energy system
Low-emission fuels coming from sustainable bioenergy, hydrogen and ammonia or fossil fuels with CCUS
more than quadruple their contribution to total energy demand by 2050 in the IEA NZE scenario.
Global final energy consumption by fuel in the NZE.

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…but it is only one piece of the puzzle.
0%
20%
40%
60%
80%
100%
2020 2030 2050
Share
of
TFC
(%)
Coal Oil Natural gas
Renewables Electricty Hydrogen
District heat
Share of total final energy consumption by
fuel in the NZE, 2020-50
Cumulative CO2 reductions by mitigation
measure in the NZE, 2021-50
Hydrogen is an important part of the Net Zero Emissions Scenario…

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Rising demand is met with low-carbon hydrogen technologies
Hydrogen production jumps six-fold by 2050 in the NZE scenario, driven by water electrolysis and natural gas
with CCUS, to meet rising demand in shipping, road transport and heavy industry.
200
400
600
2020 2030 2040 2050
Mt
Biomass
Electricity
Refining CNR
with CCUS
Fossil fuels
Global hydrogen production in NZE
25%
50%
75%
Shipping Road
transport
Aviation Chemicals Iron and
steel
Synthetic fuels Ammonia Hydrogen
Share of hydrogen fuels by sector in 2050 in NZE

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Many regions have opportunities for low-cost low-emission hydrogen
Ambitious policy for deployment can make hydrogen from electrolysis competitive with hydrogen from fossil fuels
within this decade. Overall, in the NZE 150 Mt low-emission H2 (all sources) needed by 2030 and 435 Mt by 2050.
Hydrogen production cost from hybrid solar PV and wind systems in the NZE, 2030

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Local cost can be minimised by optimising the use of wind & PV
India has the potential to use low-carbon fuels domestically produced at low cost from wind and solar,
transported by pipeline
Production cost estimates for electrolytic hydrogen from a mix of wind and solar PV in 2030
0
5
10
15
20
0.00
0.50
1.00
1.50
2.00
2.50
Taltal Magallanes Gujarat Karnataka Rajasthan Port
Headland,
Australia
Aqaba,
Saudi Arabia
Abu Dhabi
Chile India
USD/GJ
USD/kg
H
2
Water
Curtailment
Wind
electricity
Solar
electricity
Electrolysis

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Cheap solar PV and wind drive green H2 project development
Renewable capacity dedicated to hydrogen production grows 100-fold by 50 GW by 2027 with a geographically
diversified pipeline of projects across all continents. Further acceleration is required to achieve net zero targets.
Renewable capacity dedicated for H2 production 2022-2027 (left) and current renewable H2 pipeline and NZE 2030 demand (right).
0%
5%
10%
15%
20%
25%
0
2
4
6
8
10
12
14
16
18
20
China Europe Australia Middle
East &
N.Africa
Chile United
States
Other
GW
Offshore wind Solar PV Onshore wind % total RE capacity growth (right axis)
0
20
40
60
80
100
Current pipeline NZE 2030
Mt
H2
Demand FID + Operational
Construction/FID/Feasibility Concept

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The first steps for international hydrogen trade have been taken
Selected international hydrogen trade projects
A global hydrogen market can help countries with limited domestic production potential and provide export
opportunities for countries with good renewable resources or large CO2 storage potential.
Liquefied
hydrogen,
Q1 - 2022
Ammonia,
2020
Exporting location
Importing location
LOHC,
2020

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Transport is a key component of total supply cost of H2 and ammonia
Ammonia is more expensive to produce than hydrogen, but its supply costs are lower if shipped over a long distance
Supply cost of low-emission hydrogen and ammonia based on pipeline or marine transport
0
5
10
15
20
25
30
35
Hydrogen Ammonia Hydrogen Ammonia
Pipeline transport Marine transport
USD/GJ
Transport
Liquefaction
Fuel production

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Low-emission H2 exports reach 12 Mt by 2030 based on projects under development
Planned hydrogen exports by region/country, 2030
Significant hydrogen exports are planned in every major region of the world. Electrolytic hydrogen production
accounts for 88% of planned export volumes by 2030, and most projects target ammonia as the carrier.

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…but off-take and importing arrangements lag the scale of planned exports
The importing countries tend to be net importers of fossil fuels and have insufficient domestic renewable energy
resources to meet total energy demand
Export volumes from planned projects with off-take arrangements or intended destinations by importing country/region, 2030

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Six phases of renewables integration
Several countries and power markets are already in Phase 4, and will be increasingly entering
Phases 5 & 6 as countries pursue their net-zero targets.
1 Phase 1. VRE has no noticeable impact at the all-system level.
Phase 6. Seasonal or inter-annual
surplus or deficit of VRE supply
6
Need for seasonal storage and use
of synthetic fuels or hydrogen
Phase 5. Growing amounts of VRE surplus
(days to weeks)
5
Coping with longer periods of
surplus or deficit of energy
Phase 4. The system experiences periods where VRE
makes up almost all generation
4
Ensuring robust power supply
during periods of high VRE
generation
Phase 3. VRE generation determines the operation pattern of the
system
3
Accommodating greater variability
of net load and changes in power
flow patterns on the grids
2 Phase 2. VRE has a minor to moderate impact on system operation
Minor changes to operating
patterns of the existing
system
Key transition
challenges
Key
characteristics
of variable
renewable
energy
integration
phases

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Low-emission fuels can decarbonise thermal fleets
• Three major options for decarbonising
fossil fuel electricity generation
- Early retirement / reduced operation
- CCUS retrofit to power plants
- Co-firing with low-carbon fuels
• Technology is progressing rapidly
- Small gas turbines already operating
at >90% share of hydrogen
- 20% co-firing with coal tested with
ammonia at pilot scale
- Large-scale projects with higher co-
firing rates are under development

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Major expansion of supply infrastructure is needed
Co-firing 60% of ammonia in a coal fleet of just 10 GWe would also require massive
expansion of the current electrolyser and CO2 storage capacities, depending on the production route.
Demand for low-carbon ammonia for different co-firing modes in a 10 GWe coal fleet.

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Major expansion of supply infrastructure is needed
Co-firing 60% of ammonia in a coal fleet of just 10 GWe would also require massive
expansion of the current electrolyser and CO2 storage capacities.
Demand for low-carbon ammonia for different co-firing modes in a 10 GWe coal fleet.

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Major expansion of supply infrastructure is needed
Co-firing 60% of ammonia in a coal fleet of just 10 GWe would also require massive
expansion of the current electrolyser and CO2 storage capacities.
Demand for low-carbon ammonia for different co-firing modes in a 10 GWe coal fleet.

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IEA policy recommendations
1. Move from announcements to policy implementation
2. Raise ambitions for demand creation in key applications
3. Identify opportunities for hydrogen infrastructure & ensure that short-term actions align with long-term plans
4. Intensify international cooperation for hydrogen trade
5. Remove regulatory barriers

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