In the world hydrogen market, natural gas is the predominant feedstock. BCC Research reveals in its new report that while generating hydrogen from renewable resources is preferred for environmental reasons, natural gas will continue to dominate the production of ammonia and hydrogen due to the prohibitive cost of alternatives methods. Nevertheless, interest is growing for using other feedstocks such as coal and biomass for both ammonia and hydrogen, as well as electrolytic processes for hydrogen.
The industrial hydrogen market consists of three distinct segments: refinery hydrogen; on-site supply; and merchant hydrogen. Merchant hydrogen is the hydrogen produced by one company for another’s use, delivered by pipeline, bulk liquid, tube truck, or cylinders.
The global production of merchant hydrogen is expected to reach 7.1 million metric tons (MT) and 8.5 million MT in 2015 and 2020, respectively, reflecting a five-year (2015-2020) compound annual growth rate (CAGR) of 3.7%. North America, the largest producer of merchant hydrogen, should total 4.2 million MT in 2015 and 5.1 million MT in 2020, demonstrating a five-year CAGR of 4%. The demand for hydrogen is growing relatively slowly in the U.S. due to underlying transformation in chemical and energy markets. China, the fastest growing region, is anticipated to produce 0.4 million and 0.6 MT of merchant hydrogen in 2015 and 2016, respectively, reflecting a projected five-year CAGR of 8.4%.
The produced cost of hydrogen depends significantly on feedstock prices. Because about 95% of U.S. hydrogen is produced from natural gas, the relationship between the cost of natural gas and delivered cost is almost a one-to-one correspondence. Since shale gas entered the market in 2010, gas prices have plummeted to their lowest levels in 20 years. The forecasted growth in natural gas prices from 2015 to 2020 was predicted at 7.2%, using CME futures prices as a proxy for industrial gas cost. The same growth is currently reflected in the new EIA Annual Energy Outlook for 2015. Therefore, today’s merchant hydrogen market, valued at $18 billion in the U.S., is expected to reach about $32 billion by 2020 due to increases in both production and in the cost of natural gas.
Widespread production, distribution and use of hydrogen will require many innovations and investments to be made in efficient and environmentally acceptable production systems, transportation systems, storage systems, and usage devices, particularly fuel cells.
“Despite the unfavorable economics for uses of hydrogen other than for refining and as a chemical intermediate, interest in it has always remained strong because hydrogen in transportation would not directly generate greenhouse gases,” says BCC Research analyst Gerry Runte. “Moreover, if the hydrogen can be obtained via ‘renewable’ resources such as wind or solar power or even biological processing, it would truly be emission-free. The report notes a number of developments, particularly with regard to hydrogen-fueled vehicles and the fueling infrastructure that will influence the merchant hydrogen market over the long term.”
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