DNV: Despite falling short of Paris Agreement requirements, hydrogen technology set to bring significant changes to energy transition by 2050

Renewable and low-carbon hydrogen is expected to play an important role in decarbonizing and reducing emissions from hard-to-electrify sectors and reaching the Paris Agreement climate goals. While these targets require hydrogen to account for approximately 15% of the world’s energy demand by 2050, DNV’s forecast indicates that its uptake will fall well short of the total required, making up just 5% of the global final energy mix in 2050. Despite lagging behind these requirements of the Paris Agreement, the developments in hydrogen technology and infrastructure over the next three decades are expected to spur industry-transforming changes, DNV predicts in its latest ‘Energy Transition Outlook 2023’.

On October 11, DNV presented its insights on geopolitical developments, energy security concerns, new policies, and technology advancements shaping the speed and future of energy transition, which includes hydrogen as one of its pillars.

DNV’s projections indicate that the global adoption of hydrogen and its derivatives will lead to hydrogen making up just 0.5% of the global final energy mix in 2030 and 5% in 2050. In some parts of the world, the share of hydrogen in the energy mix will be twice as high as these percentages.

Although hydrogen’s contribution to global energy demand is projected to reach only 5%, the developments in hydrogen technology and infrastructure by 2050 will be significant, with the potential to transform various industries, DNV explained.

The estimated global expenditure on hydrogen production for energy purposes from now until 2050 is expected to reach $6.8 trillion, with an additional $180 billion allocated for hydrogen pipelines and $530 billion for the construction and operation of ammonia terminals.

DNV forecasts that hydrogen’s future demand as an energy carrier will grow from its current negligible levels to surpass 238 million tons of hydrogen annually by the year 2050. The predominant application of hydrogen will be in manufacturing (58%), followed by transport (20%), and buildings (14%), with the remaining portion allocated to electricity generation and various other purposes.

According to DNV’s ‘Transport in Transition’ report, the uptake of hydrogen in the maritime industry is anticipated to start in the mid-2020s, but will take ten years to start scaling noticeably. Hydrogen-based fuels, such as ammonia and e-fuels, are anticipated to provide the majority of zero-emission fuels for the shipping industry by mid-century.

Based on DNV’s outlook, the adoption of e-fuels (mainly e-methanol) in shipping will reach 480 petajoules (PJ) or 3% of the shipping fuel mix in 2030, increasing to 1,800 PJ (12%) in 2040 and 2,600 PJ (19%) in 2050.

On the other hand, ammonia’s initial uptake in shipping is expected to be slower than e-methanol, but it is likely to scale more rapidly toward the end of the forecast period. DNV’s hydrogen forecast predicts ammonia usage in shipping to be 170 PJ (1% of the shipping fuel mix) in 2030, 1,900 PJ (13%) in 2040, and 5,000 PJ (36%) in 2050.

When it comes to aviation, hydrogen, either in its pure form or as derived e-fuels, is projected to gain traction during the 2030s, primarily due to considerations of cost and availability. In road transport, DNV foresees hydrogen playing a relatively minor role, primarily in heavy-duty long-distance trucking due to battery-electric solutions gaining substantial ground in this segment.

Even though hydrogen has the potential to substitute fossil fuels for generating high-temperature heat in industrial processes, its current utilization of hydrogen in these high-heat applications is minimal, mostly because of its costliness as an alternative fuel. Nonetheless, low-carbon hydrogen is anticipated to play a significant role in the manufacturing sector by 2050, particularly in regions leading the transition, such as Greater China and Europe.

The utilization of hydrogen in buildings is anticipated to be concentrated in four regions characterized by the presence of existing natural gas infrastructure and relatively more accessible hydrogen sources, namely North America, Europe, Greater China, and the OECD Pacific regions.

Furthermore, starting from 2030, DNV anticipates the gradual incorporation of hydrogen into power generation facilities, albeit in limited quantities, and initially, primarily involving injecting hydrogen into natural gas grids. Here, the leading regions are forecasted to be OECD Pacific, followed by Europe and Greater China. These regions will increasingly harness hydrogen for electricity generation, with North America also joining in from the mid-2040s.

When it comes to hydrogen supply, DNV’s outlook predicts that the composition of the future hydrogen supply will be influenced by two interrelated trends: an increasing utilization of hydrogen as an energy carrier, and a gradual phasing out of existing production capacity in favor of more environmentally friendly alternatives.

By 2030, DNV expects that one-third of the global hydrogen supply will be derived from low-carbon and renewable sources. Within this mix, methane reforming with CCS will constitute 14% of the global total, while hydrogen generated through electrolysis will contribute 13%. By 2050, 85% of the world’s hydrogen supply will originate from low-carbon pathways.

The International Energy Agency (IEA) recently warned that new projects in the low-emissions hydrogen sector could be hindered by the slow roll-out of financial incentives and increased cost pressures.

Even though the number of announced projects continues to expand rapidly and more than 40 countries worldwide have set out national strategies, installed capacity and volumes remain low as developers wait for government support before making investments. As such, low-emissions hydrogen still accounts for less than 1% of global hydrogen production and use and will need to grow more than 100-fold by 2030 to get in line with the Net Zero Scenario, IEA said in its review.

Some countries already introduced government funding programs through schemes such as the US Clean Hydrogen Production Tax Credit, the European Union’s Important Projects of Common European Interest, and the UK Low Carbon Hydrogen Business Model.

In the US, the Bipartisan Infrastructure Law allocated up to $7 billion for the Regional Clean Hydrogen Hubs (H2Hubs), which will fund six to ten hubs across the United States. Referring to three sources familiar with the matter, Reuters reported that the Biden administration is expected to announce on October 13, 2023, the winners of $7 billion in federal grants. However, comments from the US Department of Energy were not obtained.

In the European Union (EU), the 27 member states approved the Renewable Energy Directive, which includes mandatory usage targets for renewable hydrogen and its derivatives, known as renewable fuels of non-biological origin, or RFNBOs.

The directive states that the industry will need to increase the use of renewable energy annually by 1.6%. Member states agreed that 42% of the hydrogen used in the industry should come from RFNBOs by 2030 and 60% by 2035.

Finally, DNV delves into various ways of hydrogen transport, predicting that it will primarily be transported via pipelines for medium distances within and between countries, but it is unlikely to be transported between continents.

Ammonia, being safer and more convenient for transport — especially by ship — is expected to account for 59% of energy-related ammonia trade between regions by 2050. To maximize cost-efficiency, over 50% of hydrogen pipelines worldwide will be repurposed from existing natural gas pipelines, potentially rising to as much as 80% in specific regions, as the cost of repurposing pipelines is projected to be only 10–35% of the cost of building new ones.

Moreover, by 2050, less than 2% of global hydrogen will have been transported via ships, and only about 4% through interregional pipelines, according to DNV.

In the forecast, ammonia emerges as the preferred zero-emission fuel for international shipping and it is assumed that all seaborne hydrogen transport will involve liquid ammonia.

DNV added it anticipates a 20-fold increase in ammonia seaborne transport between 2030 and 2050, with its usage growing from almost nothing in the mid-2030s to constituting 95% of the trade in 2050, totaling 150 million tonnes of shipments at that time.