Internationally recognized organizations, researchers and governments point hydrogen as a key energy carrier towards the necessary energy transition. Countries with lower potential for renewable electricity will need to import hydrogen from countries with potential for competitive production of hydrogen. This means that international hydrogen supply chains will be created, in which ports are essential nodes in the network. 

Hydrogen as a promising option for a sustainable future

Hydrogen (H2), and in particular green hydrogen (CO2-free H2, which is produced by electrolysis of water using clean electricity), is considered as a promising energy carrier to achieve the global greenhouse gases (GHG) emissions targets set by many nations in the world. Potential green hydrogen and its derivatives applications include:

• Steel industry: shifting from a GHG-intensive to a hydrogen-based steelmaking process.
• Oil processing and base chemicals: using green hydrogen instead of grey hydrogen (as it is commonly used nowadays) in refining processes and ammonia production or by replacing current fossil oil-based feedstocks by green H2 in the chemical industry (Power-to-Chem).
• Energy sector: for short-term storage (although batteries are a competing and more efficient technology), for long-term storage (in which H2 offer advantages compared to batteries), to reduce the need for the grid expansion (since investment costs of electricity lines are typically lower than for pipelines for H2) or for space heating.
• Transport sector: using H2 as a fuel for long distance passenger car travel, heavy duty road freight transport, and smaller boats such as ferries or using H2 derivatives as a fuel (gasoline, diesel, kerosene, methanol, and ammonia) as a replacement of their fossil equivalents, especially in maritime and air transport.

Figure 1. Schematic production routes of hydrogen and its derivatives

Source: Guidehouse

 

The need to create hydrogen international supply chains to achieve carbon neutral goals

The success of hydrogen for the different applications mainly depends on the technology development cost and the green H2 production cost. Countries with a large and cheap renewable electricity potential are in a better position to produce green hydrogen to both achieve their own climate target goals and to export it to countries located in less favourable geographic conditions, such as North-Western Europe. Maritime transport of H2 or its carriers may contribute to bridging the imbalance between the geographical demand for green H2 and the regional productional potential, thus opening trade and business opportunities.

As an example, the Port of Rotterdam predicts a throughput of 20 million tons of hydrogen by 2050. However, only 10% of this volume will be produced with Dutch offshore wind or natural gas, whereas the remaining 90% will need to be imported in order to achieve their climate goals. The imported green hydrogen will need to come from countries where sustainable energy is abundantly available and therefore, green hydrogen production costs are lower, such as Australia, Chile, Iceland, or UAE. The feasibility of these supply chains will depend not only to the production capacity of green energy but also on the stability of the political climate, the development demand (with all its uncertainties), price levels to be reached and competition in supply.

Figure 2. Expected hydrogen flow in the Port of Rotterdam

Source: Port of Rotterdam Authority

Figure 3. Hydrogen costs from solar PV and onshore wind systems in the long term

Source: IEA (2019). The future of hydrogen: Seizing today’s opportunities. Report prepared by the IEA for the G20, Japan.

The global energy system is already strongly based on international trade. For instance, Germany imported 72% of its primary energy consumption in 2019. In a strive towards decarbonization, it is likely that current energy importer countries will continue to be so, for which hydrogen trade is a very promising alternative.

Besides being a necessity to achieve carbon neutral goals, trading green hydrogen and derivatives internationally brings the following benefits for importing and exporting countries:

• Cost benefits: renewable energy supply from countries with cheap production potentials can reduce costs of the energy transition for importing countries.
• Volume benefits: some countries may have a large technical potential for renewable electricity (larger than the demand) but in practice many potential sites cannot be used for renewable electricity generation (e.g. land use by agriculture).
• Seasonal benefits: international trade of renewable energy could match complementary patters of supply-demand (e.g. high demand in north Europe in winter and in UAE in summer), leading to better resource utilization and lower system costs.
• Diversification benefits: exporting synthetic fuels (produced from H2) could diversify fossil fuel exports and compensate for shrinking oil exports in the course of long-term decarbonization.

The formation of stable international hydrogen and derivatives market require the feasible and reliable transportation of these energy carriers. The two main promising options for large-scale hydrogen transport at a considerable distance (over 1,500 km) are pipelines and shipping.

Pipelines are economical at large traded volumes due to economies of scale in pipeline construction and high-fixed costs, and for lower distances. Although it is a promising option if existing natural gas pipelines are retrofitted, shipping becomes the preferred alternative for long-distance and deep-sea transport, which will be the case, for example, for the trade between North Europe and south hemisphere potential exporting countries. The distance of the breakeven point between pipelines and shipping is still debatable, but it is expected to be around 3,500 km as estimated by the International Energy Agency.

The role of ports and shipping in the hydrogen market

Considering the previously described benefits of trading H2, it is expected that H2 trade will occur between regions located at a considerable distance. Therefore, maritime transportation of hydrogen is essential to develop these supply chains, for which ports are the origin and destination nodes. Additionally, shipping offers advantages for smaller trading volumes and import terminals require less upfront investment than pipelines.

Rather than the shipping distance, the main factor that influences the feasibility of hydrogen maritime transport is energy density, due to vessels space limitation. Gaseous H2 counts with a very low energy density, so in that sense, alternative carriers are more favourable:

• Liquid H2 energy density is almost twice as high as gaseous H2 (at 700 bar) making it a more attractive transport form; however, the liquefaction process consumes approx. one-third of H2’s energy content. In addition, liquid H2 transport conditions are challenging and the process of loading and unloading could induce H2 losses.
• H2 derivatives are easier and cheaper to transport due to their higher energy density, lower volatility and easier storage requirements. Nevertheless, conversion and reconversion processes at origin and destination incur in high costs and energy losses. These costs are expected to decrease with economies of scale. The advantage of some H2 derivatives like ammonia is that they can be used directly for some final applications (e.g. as feedstock for the chemical industry) and no reconversion to H2 needs to take place, avoiding the associated costs and energy losses in the process. Loading and unloading of H2 derivates at ports do not pose any difficulties since it is a common practice in the present.

Figure 4. Schematic overview of the hydrogen supply chain through maritime transportation

Source: ALG

The first generation of liquid H2 ships are currently being developed based on LNG ships. They are small scale ships with a limited capacity (170-300 ton H2 per ship), making transport a relevant cost in the supply chain. However, it is expected that transport costs will reduce significantly in 2030 thanks to the increase of vessels capacity (up to 6,500-11,000 ton H2 per ship) which will be specifically developed for liquid H2 and derivatives, paving the way for large-scale maritime hydrogen transport. The most impactful costs of the transport chain will then be shifted to the port storage infrastructure.

Are ports prepared for the projected future hydrogen supply chains?

The answer is clear: not yet. However, ports located in the main potential importing and exporting countries are in the process of studying how to do so, and pilot projects are under development.

There is potential for retrofitting existing infrastructure of ports industrial and petrochemical clusters such as oil and gas pipelines, marine loading arms, jetties, or tanks. Moreover, derivatives such as (grey) ammonia are already handled in numerous ports. The alternative option would be developing new hydrogen import and export terminals or ports, for which an optimal site shall be selected based on supply and demand locations, physical conditions or synergies with existing infrastructure, among other factors.

The main investment for existing ports lies on the H2 conversion and reconversion plants, which are yet to be developed in existing ports. Using centralised (re-) conversion plants lower the costs compared to decentralised processes, since H2 double handling and transport can be avoided by injecting the H2-based electricity directly into the existing grid. This will undoubtedly favour the development of future hydrogen supply chains and is a key development for ports located in future H2 exporting and importing locations.

 

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About the authors
Ibai Erdozain holds a MSc in Industrial Engineering and is a Principal for the Maritime and Ports practice at ALG ierdozain@alg-global.com
Ignacio Rodríguez de la Rua holds a MSc in Civil Engineering and is a Senior Engagement Manager for the Maritime and Ports practice at ALG. irodriguezrua@alg-global.com 
Alejandra Ares  holds a MSc. in Civil Engineering and is a Consultant for the Maritime and Ports practice at ALG. aares@alg-global.com 
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