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esting specifications pdf document, neta acceptance testing, ansi neta mts ... 2021 neta ett 2022 neta mts 2023 each standard is revised on a four year.esting specifications pdf document, neta acceptance testing, ansi neta mts ... 2021 neta ett 2022 neta mts 2023 each standard is revised on a four year.

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02 woodmac.

com

Every week in The Edge, Wood Mackenzie’s Chairman and


Chief Analyst Simon Flowers shares his take on the natural
resources industry’s biggest stories, how they are likely to
evolve and what that means for your business.
The Edge’s Future Energy series draws insights from Wood
Mackenzie’s Energy Transition Service and highlights the
technologies shaping the transition away from fossil fuels
toward a decarbonised future.

Table of Contents
1. Future energy - green hydrogen 3

2. Future energy - carbon capture and storage 6

3. Future energy - zero-carbon heating 9

4. Future energy - offshore wind 12

5. About the Energy Transition Service 15


woodmac.com 03

Future energy: green hydrogen


Could it be a pillar of decarbonisation?
The ambition is net-carbon neutral. The EU,
and others, want to get there by 2050, some
even sooner. Achieving that goal needs
policy, investment and technology. Hydrogen
is one of the technology pillars on which

out more, I chatted to Ben Gallagher, our lead


analyst on emerging technologies.

What is the attraction of hydrogen?


It’s a super-versatile energy carrier with exceptional energy density (MJ/kg).
Today, around 70 million metric tonnes of hydrogen are produced globally, used

and glass manufacturing. In the future, hydrogen will have a huge role to play in
decarbonising the global economy, especially in hard-to-decarbonise sectors. But,

How is hydrogen produced today?


The technology is entirely based on fossil fuels. Around 71% is ‘grey’ hydrogen
(steam methane reformation, or SMR) while most of the rest is ‘brown’ hydrogen

challenge is dealing with the carbon and high emissions that result. The future for
the current technology is all about ‘blue’ hydrogen, where the production process is
paired with carbon capture and storage (CCS). But CCS isn’t yet widely commercial
and needs scaling up, too.
04 woodmac.com

Grey, brown, blue – what about green hydrogen?


The technology is different, with the hydrogen produced from water by renewables-
powered electrolysis. The process is zero carbon and gives very pure hydrogen,
whereas grey or brown hydrogen contains impurities. The idea is that green hydrogen
piggybacks on the rapid roll-out of renewables in the coming decades. As penetration
of intermittent solar and wind generation into power markets rises, system prices will

drop, becoming cost-effective for green hydrogen. The hydrogen can then be sold or
stored until it’s needed. Green hydrogen therefore becomes both a form of energy
storage and a balancing tool for renewables.

What are the uses?


As well as the sectors hydrogen already sells into, green hydrogen’s zero-carbon
credentials open a wide range of new ones. Green hydrogen will be critical for

in gas pipelines (though hydrogen’s low volumetric density poses challenges for
existing infrastructure), in fuel cells for electric vehicles and many other applications.

And the economic challenges?


Green hydrogen has to compete with SMR hydrogen, which costs between US$1-
2/kg without CCS – or 50 cents more when paired with CCS. These are costs that
green hydrogen can’t even get close to currently. Green hydrogen’s economics
are particularly sensitive to two factors – power prices and plant utilisation rates.
The economics only work on what are unrealistic assumptions today – high load
factors (more than 50%) and low electricity prices (below US$30/MWh). But, right
now, a green hydrogen plant paired with a renewable source could expect load
factors nearer 20%; typically, power purchase agreement prices for renewables are
nearer to US$50/MWh globally.

How could green hydrogen become viable?


First, cost reduction – we expect capex to fall by 30-40% by 2030, especially as the
manufacturing process for electrolysers moves to automation, unit feedstock costs

green hydrogen well out of the money.

What needs to change?


The big impetus is likely to be policy and societal desire for change. If, as we expect,
national and corporate strategies embrace green hydrogen as part of a strategy to
decarbonise, it could take off, driving the economic threshold down. That means
investment in R&D, improvements in technology, pilot projects with industrial users
and adapting to changing power markets as renewables penetration increases.
Carbon pricing will be key – we estimate a carbon price of US$40/tonne in 2030
could get green hydrogen on a level with SMR-produced hydrogen paired with CCS.
woodmac.com 05

When?
Realistically, it’ll be another decade before hydrogen starts to make a meaningful
contribution to decarbonisation. Today green hydrogen is tiny, with only around
US$365 million invested in 94 MW of capacity, though the pipeline of new projects
has quadrupled in less than a year to over 15 GW. That shows the interest the
technology is attracting in China, Japan, the US, Europe and Australia, but so far,
it’s only scratching the surface. If the pieces fall into place it could be huge. We
think hydrogen could displace 1400 Mtoe of primary energy demand by 2050 under
a 2-degree scenario LINK, 10% of global supply, with green hydrogen the majority
of that. Scalable, commercial green hydrogen would answer a lot of questions
around global decarbonisation.

And who will invest?


Only a handful of companies have entered the electrolyser market. But rising
membership of the Hydrogen Council, formed in 2017, reveals the widespread
interest among big players across multiple sectors including automakers (among
them BMW, GM and Honda), power and gas utilities (Engie and EDF), engineering

Hydrogen deployment under a 2-degree pathway

400 Hydrogen displaces

300 Displacement built via


sub sector analysis

200
Mt

100

0
2020
2021
2022
2023

2025
2026
2027
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2030
2031
2032
2033

2035
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2040
2041
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2045
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2049
2050
2024

2034

2044

Blue hydrogen comes when SMR hydrogen is paired with CCS while green hydrogen comes from splitting of water
molecules using renewable electricity.

Source: Wood Mackenzie


06 woodmac.com

Future energy: carbon capture & storage


Central to decarbonisation strategies

bold targets to become net-carbon neutral.


Governments, too, will head in that direction.
But how to get there? Carbon capture
and storage (CCS) is invariably central to
the strategy. I asked Ben Gallagher, lead
analyst on emerging technologies, about the
opportunity and the challenges.

What is CCS?
A method of removing the carbon dioxide (CO2) released in the processing or
combustion of hydrocarbons. CCS can be applied in power generation, natural-gas

There’s now a search underway to use the carbon or embed it in materials – what’s
called carbon capture utilisation and storage.

Why’s there so much interest in CCS?


Few think the global economy can thrive for the next few decades without coal, oil
and gas. The world will be emitting carbon for decades yet; the trick will be to capture
and store it. Commercial, scaled-up CCS means we can use fossil fuels while greatly
reducing CO2 emissions until energy consumption is fully decarbonised. It’s going to
be hugely important for hard-to-decarbonise sectors like cement and steel.

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