The world market and its potential
According to the document, current world-wide demand for hydrogen amounts to about 116 million tonnes a year, including 74 million tonnes of pure hydrogen. A further 42 million tonnes of hydrogen is used in mixtures with other gases as raw material or fuel for producing thermal energy and electricity. More than 95 % of world consumption of hydrogen is intended for oil refining and the chemical industry – which also produces the hydrogen.
In terms of the structure of world-wide hydrogen production, 75 % comes on the basis of natural gas and most of the rest (23 %) from coal. The share of electricity at this time totals only 2 %.
At the moment, there is no global market for hydrogen as an energy source. The development of technologies and mass production of hydrogen energy could lead to the formation of a substantial market.
Russia’s concepts are based on the notion that in future, a world-wide market and mass production of hydrogen will develop in the same manner as oil and LNG markets, with deliveries from centres of production to centres of consumption. Local markets will also appear, in which smaller levels of production and consumption of hydrogen will be concentrated within the framework of the same countries or within smaller regions.
Forecasts for the development of world hydrogen energy and global markets for hydrogen remain very vague with very large discrepancies in estimates of production and consumption. World-wide demand for hydrogen could total from 40 million to 170 million tonnes by 2050, depending on how quickly world-wide low-carbon economies development and on how quickly hydrogen technologies develop.
Economies of production
As noted in the document, the most economically efficient means of producing hydrogen is steam methane reforming, coal gasification with CO2 capture and electrolysis of water with nuclear energy and hydro power used as a base. The most environmental production process is the production of hydrogen by means of electrolysis of water using renewable energy sources as a base – but this is considerably more expensive than other methods.
This production process could be made less costly by lowering the costs of electrolysers (including by devising new types) and by reducing the costs of both nuclear energy and renewable energy sources.
By proceeding with these methods, the cost of hydrogen produced with renewable energy as a base could decline to $2 per kg by 2050 and could therefore be considered alongside energy produced from fossil fuels.
Russia’s hydrogen sector – pluses and minuses
The concepts are based on the idea that hydrogen production in Russia and the development of hydrogen technologies will be intended principally for export. Potential export volumes could amount to 0.2 million tonnes in 2024, from 2-12 million tonnes in 2035 and 15-50 million tonnes in 2050, depending on how quickly world low-carbon economies develop and a rise in demand for hydrogen on world markets.
Russia has a number of advantages for the development of hydrogen energy.
These include: 1) Large reserves of gas and coal and significant potential for its nuclear power stations, wind farms and solar power stations for the production of inexpensive, low-carbon hydrogen. 2) Underused generating capacity. 3) Developed oil refining and chemical industries in which steam methane reforming and electrolysis are used. 4) A developed scientific and technical base. 5) A favourable geographical position allowing for exports of hydrogen to areas featuring likely centres for its consumption in Europe and in the Asia-Pacific region.
But there are also systemic limitations inhibiting the development of hydrogen energy.
These are: 1) The high cost of low-carbon hydrogen compared to traditional energy sources. 2) A lack of technologies for capturing, storing, transporting and using CO2. 3) Lack of transport. 4) Low demand at this time for hydrogen as an energy source. 5) Lack of a legal base, including as regards safety 6) The high cost of capital to carry out projects, compared to other competitor countries. 7) Limitations in programmes of government support and low levels of investment in research and developing of hydrogen technologies 8) An inadequate national system of standardisation and certification for hydrogen energy. 9) A considerable level of uncertainty in terms of the future of developing hydrogen energy world-wide.
Hydrogen export clusters and ideas for developing a domestic market
The concepts provide for Russia setting up three scientific-industrial clusters for the development of hydrogen production: a north-west cluster aimed at exporting to Europe, an eastern cluster aimed at export to Asia and an Arctic cluster aimed at supplying energy to areas in the Arctic as well as exports of hydrogen and energy mixtures to markets in the EU and the Asia-Pacific region.
An additional southern cluster could also be set up aimed at producing hydrogen with renewable energy sources The advantage of this southern cluster would be proximity to major ports for export.
The following are measure proposed to developing a domestic hydrogen market. 1)Boost production of hydrogen at enterprises where it is current produced in limited volumes for its own use – this would be done with the aim of shipping H2 abroad. 2) Design and develop prototypes of buses, trucks and trains and introduce their use in large cities. 3)Set up vitally important networks of hydrogen refuelling stations. 4) Use hydrogen as a means of storing energy in local energy systems and for its subsequent use in generating electricity. 5) Launch pilot projects for the use of hydrogen in the communal housing context subject to meeting conditions for safety and economic efficiency.
At the same time, the plan proposes drafting measures to stimulate the use of hydrogen and improve its competitivity compared to alternative, popular forms of energy in Russia.
The document proposes modest measures of government support in terms of developing hydrogen energy in Russia, using a higher coefficient rate on expenditure to reduce taxable income of organisations and setting up specific funds from state and non-state sources.
To stimulate the establishment of infrastructures, it is proposed to use both state financing and co-financing of infrastructure projects, including h the framework of agreements on protecting and encouraging capital investment. Budgets of Russian regions are to be included in this.
Stages of development of hydrogen energy in Russia
The development of hydrogen energy in Russia is to take place in three stages.
The first stage (2021-2024) involves the creation of hydrogen clusters and the setting up of pilot projects to culminate in hydrogen exports of 0.2 million tonnes in 2024 as well as the use of hydrogen energy on the domestic market.
In this stage it is vital to establish a legislative base with standards as well as measures for government support for hydrogen energy. In this period, new pilot projects are to be launched for the production of hydrogen from fossil fuels, including the use of technologies for capture, storage and use of carbon dioxide as well as electrolysis of water using different types of low-carbon generation. At the same time, plans call for the establishment of world-class scientific-technological centres and testing sites for the development of Russian hydrogen energy.
The second stage (2025-2035) calls for the launch of the first commercial projects of hydrogen production with the aim of producing export volumes up to 2 million tonnes a year – with the optimistic scenario of 12 million tonnes — by 2035.
It is at this stage that plans call for the establishment of major export-oriented hydrogen production sites as well as the launching of pilot projects on the use of hydrogen on the domestic market. In this period, mass use of hydrogen technologies is to start in different sectors of the Russian economy as well as mass production of equipment, electrolysers, fuel cells, gas turbines, hydrogen energy, hydrogen-powered plants, hydrogen refuelling stations, hydrogen transport and robotics.
And it is in this period, that we an expect world-wide demand for hydrogen to emerge. The volume of hydrogen supplies on world markets could reach 15 million tonnes, or 50 million tonnes according to an optimistic scenario.
The cost of producing hydrogen using renewable energy sources as a base will decline and approach the cost of hydrogen production using fossil fuels – and that will launch the start of major projects on production and export of low-carbon hydrogen based on use of renewable energy.
In this third stage, Russia plans to become one of the major exporters of hydrogen and energy mixes based on hydrogen as well as industrial production of hydrogen energy for countries of the Asia-Pacific region and Europe.
On domestic markets, Russia expects to see the beginning of widespread commercial use of hydrogen technologies for transport, energy and industry.