Why are no oil refineries built?
55% used in oil refineries - demand will fall, not rise
The promise of a “hydrogen economy” is currently receiving a great deal of attention in national and traditional media circles. In general, traditional media and their journalists are not technical, so coverage usually follows along with press releases from the fossil fuel industry and major automakers who continue to try to push the fuel cell light vehicle line up.
Governments are investing billions in the promise of the hydrogen economy, fueled by oil and gas lobbyists, as outlined in CleanTechnica in various pieces lately. Germany provides 10.76 billion US dollars. Canada provides $ 1.2 billion. One source suggests that the total EU commitment of € 0.5 per capita is in the range of $ 250 billion. The numbers are obviously drawing attention, and of course the traditional press gets a lot of things wrong.
Eric Reguly, Head of the European Bureau for Canada Globe and post, does it more right than not in a piece released yesterday, “The Myth of the Green Hydrogen Revolution. “While providing context for the current size of the global hydrogen market, it misses the mark of what hydrogen is actually used for today and why the market will actually shrink. Everyone else too, to be fair.
Hydrogen demand per year courtesy of the IEA
The International Energy Agency was founded in 1974 to ensure the security of oil supplies. It has a poor track record of energy transition projections, but is very reliable in terms of historical statistics. In his The future of hydrogen According to reports from 2019, the IEA revealed one of the other dirty little secrets of clean, green hydrogen: Most of it is used in the petroleum industry in refineries, and this has been the main source of market growth for the past 30 years.
That's right, 55% of the world's annual hydrogen market of $ 120 billion is fueled by refining petroleum products. As the Norwegian oil and gas giant Equinor and the McKinsey global consulting firm, among other things, predicts peak oil demand before 2030 and a decline in global demand after that. The hydrogen market will actually shrink considerably.
Government money is not necessarily wasted, of course. The 35.7 million tonnes of hydrogen that are mainly used for ammonia outside the oil and gas industry are required for decarbonization and should be decarbonized with green hydrogen rather than the fig leaf made from “blue” hydrogen. And the useful non-fuel derivatives of petroleum are mostly still needed. About 20% of a barrel of oil is made into products that will not be incinerated, and there is no reason to believe that we will not pump crude oil out of the ground for these by-products in the future. This reduces the drop in demand and leads to an annual requirement of perhaps 48.7 million tons. And there will be new markets for hydrogen, although these are unlikely to ever meet the petroleum industry's refining demand.
When we electrify everything and stop burning fossil fuels, we may see an annual demand of 60 million tons of hydrogen, maybe 80% of the current demand.
That takes some electricity. With capacity factors of 37% and 25% for wind and sun and a 50:50 split of generation, the 48.75 MWh of electricity required to electrolyze one ton of hydrogen from water would require around 439 GW of wind and 650 GW of solar. That is less than we have already built. If China continued to build at the 2020 rates, the world's electricity needs for green hydrogen alone would be met by this country in far less than 10 years.
As the wholesale price of wind and sun continues to drop to USD 20 per MWh by 2030 and we continue to build up a lot of capacity, it can be assumed that green hydrogen, like most wholesale prices, will cost just under USD 1 - the cost is energy. This is very close to the current hydrogen spot prices of around 80 cents per year, Platt's new daily price index for the goods. There is potential to take advantage of even lower prices in times of overcapacity at lower prices, but electricity suppliers want to make money. Some of the current uses of hydrogen outside of the oil and gas industry are likely to see prices spike.
According to the literature and my bottom-up calculations, the current hydrogen product generates 830–1,000 million tons of CO2 annually. That's a large number, and eliminating most of it with green hydrogen is a very good goal. In the median of the CO2e value of wind and sun per kWh, this means a reduction of around 98% at the current rates. This will only improve if supply chains and wind and solar distribution continue to decarbonise.
In other words, government spending on hydrogen is very useful, but should be very carefully focused on where it actually adds value, almost entirely of replacing black and gray hydrogen with green hydrogen in non-oil and gas markets.
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