The global demand for hydrogen continues its uptrend, reaching 95 million tonnes (Mt) in 2022, according to data from the International Energy Agency (IEA). China remained the largest consumer of hydrogen with 29% share (27 Mt) of the global consumption. Strong growth was also seen in North America and the Middle East. Of total, demand in North America accounted for 17%, followed by 13% in the Middle East. The demand in Europe was recorded at 8%.
The consumption of hydrogen is still concentrated around conventional applications, mainly refining, the chemical sector, and industry including ammonia production. Refineries were the largest consumers of hydrogen, representing 43% (41 Mt) of total hydrogen use. Following the use in refining, ammonia production required a large amount of hydrogen, consuming nearly 33% (32 Mt) of the hydrogen demand.
The supply of hydrogen, based on global production, increased to almost 95 Mt in 2022, on par with the demand. Over 70% of global production facilities in 2022 were located in China, the United States, the Middle East, India, and Russia, with China alone contributing nearly 30% to the supply.
Despite the push towards Net Zero Emissions, the real de-carbonisation adoption is still far off the track. Almost all (99.3%) of the global hydrogen supply was met by production from unabated fossil fuels, while less than 1% of the hydrogen supply in 2022 was derived from low-emission and renewable hydrogen production.
Natural gas without carbon capture, utilisation, and storage (CCUS) was the predominant feedstock for hydrogen production, constituting 62% (59 Mt), followed by coal (21%) and by-product hydrogen *(16%). Supply of low-emission hydrogen came from fossil fuels with CCUS, whereas hydrogen from the electrolysis process was minimal with production under 100 kt last year.
*By-product hydrogen is produced at refineries and in the petrochemical industry during naphtha reforming, and is often used for other refinery and conversion processes (e.g. hydrocracking, desulphurisation).
IEA forecasts a continued positive trend in hydrogen demand. Consumption is expected to grow by 6% annually until 2030, implying that more than 150 Mt of hydrogen would be required to fulfil the demand. Of this projection, almost 40% will stem from the use in emerging applications such as heavy industry, transport, the production of hydrogen-based fuels or electricity generation, and storage. The current use of hydrogen in these new sectors was not at scale accounting for less than 0.1% of global consumption.
Hydrogen consumption in Europe reached nearly 8 Mt in 2022, representing approximately 8% of the global hydrogen demand. The continent has experienced a downturn in hydrogen demand largely attributed to reduced activity in the chemical industry.
From a European viewpoint, the European Commission has put forward various initiatives to amplify the demand (consumption) and supply (domestic production and imports) of hydrogen, while creating clarification of hydrogen attributes appropriate for use within Europe.
FuelFU Maritime is the EU legislative masterpiece to boost a sizable demand for renewable hydrogen or RFNBOs within the marine sector since the regulation passes full responsibility for compliance to the shipping companies. Particularly, a specific provision, enforcing a 2% blending obligation for marine fuels, establishes a predictable minimum demand for RFNBOs. Consequently, the regulation would shift a demand curve for renewable hydrogen rightward once implemented, as well as simultaneously enhance investor and producer confidence in the production of RFNBOs.
The European Hydrogen Bank (EHB) is the EU’s premier financial instrument, aiming to increase the supply of RFNBO hydrogen in Europe. The initiative focuses on supporting both domestic production and imports of RFNBOs. The domestic production will be subsidised through an auction system, of which the first pilot auction is scheduled for November this year. This inaugural auction will serve as a learning opportunity for the Commission to improve its support mechanism to ensure a level playing field for hydrogen producers in Europe.
The Commission’s effort to delineate the environmental attributes of hydrogen is, in addition, beneficial for the hydrogen supply sector. The two RFNBO Delegated Acts provide clarity of production feedstock, process, and types of hydrogen applicable for imports into the EU, facilitating the rollout of the EU hydrogen market.
What remains lacking in the EU hydrogen’s value chain is the harmonisation of the hydrogen certification systems. So far, the Commission continues its pursuit to reach a consensus agreement to clarify a practical, standardised approach for various hydrogen certificates. A few initiatives, such as the Union Database, hydrogen GOs and RFNBO certification, have been established; however, unclear guidelines leave market participants with uncertainty regarding certificate eligibility. This ambiguity could potentially hinder the growth and uptake of the hydrogen market.
Veyt specialises in data, analysis, and insights for all significant low-carbon markets and renewable energy.
