Hydrogen Competition in the 2022 ADP
Particularly since the passage of IRA, we've received many questions about the appropriate applications for hydrogen to contribute to decarbonization. Opinions vary widely, with some touting the promise of a 'hydrogen economy' using hydrogen as the principle means of storing, delivering, and consuming energy and others stating categorically that its unlikely to be of any use compared to direct electrification strategies.
To add some structure to the discussion, one famous (at least in energy circles) framing of the question is the Clean Hydrogen Ladder introduced by Michael Liebrich. This positions the potential use of hydrogen on a 'ladder' from A to G, with A representing unavoidable applications of hydrogen and G representing uneconomic dead-ends.
In this white paper, produced as part of EER's Annual Decarbonization Perspective (ADP), we assess the use of hydrogen in our scenarios using the Clean Hydrogen Ladder to add both a U.S. perspective to the question and also to add a quantitative perspective (in terms of Mt H2) to the use of hydrogen along each rung of the ladder. Figure 3 below categorizes the uses of hydrogen in ADP using Liebrich's A-G grades.
Overall, our whitepaper concludes that:
The results of the Annual Decarbonization Perspective are closely aligned with the hierarchy of the “Clean Hydrogen Ladder”; hydrogen applications in the top three rungs of the ladder account for over 70% of hydrogen used in ADP’s Central scenario.
In every decarbonization pathway, hydrogen production grows dramatically, but the differences in hydrogen consumption between scenarios indicates its role is one of the least certain pieces of decarbonization. A critical factor is that hydrogen remains uncompetitive against most end-uses that can be directly electrified. Additional use of hydrogen, past what we see in the Central scenario and specifically at lower rungs of the ladder, represents a 'failure mode' in terms of achieving cost-effective electrification of end-uses.
Most hydrogen is used for feedstock applications (synthetic fuels and ammonia) rather than direct uses, as the delivery costs of direct use make it uncompetitive (e.g. domestic heating).
The competitiveness of e-fuels derived from hydrogen is highly dependent on low-cost renewable deployment; constraints on siting renewables make other fuel strategies more competitive and shrink the role of hydrogen in the energy system.
Nationally, most of the hydrogen is produced using electrolysis but with greater production shares of non-electrolytic hydrogen outside of the wind belt.
It’s important for policymakers to consider three key decision points for when hydrogen makes sense:
Is electrification technically feasible?
How flexible is the electrified end-use (which can reduce average costs)?
Does the end use need a hydrocarbon (not needing hydrocarbons reduces cost)?
The white paper supporting these conclusions is downloadable below: