Chemical Industry Bets on Low-Carbon Hydrogen to Meet Energy, Sustainability Goals

April 10, 2023
Infrastructure and cost challenges remain as chemical producers look to increase blue and green hydrogen capacity.

By 2030, 83% of chemical producers expect low-carbon hydrogen to demonstrate value for their organizations, according to a Capgemini Research Institute report published on April 6.

The report, based on survey responses from 500 executives in the energy and utilities industries, focused on the production of hydrogen using renewable or nuclear-energy-powered electrolysis that emits zero or marginal carbon. Nearly two-thirds of survey respondents said they plan to invest in low-carbon hydrogen initiatives by 2030, and 9 in 10 plan to do so by 2050.

Demand for hydrogen increased at least 10% in the past three years, with additional investments expected from traditional hydrogen-consuming industries, including the chemicals and petroleum refining sectors.

Chemical producers are already major consumers of hydrogen. But the industry is now becoming a significant player in the development of low-carbon fuels, says Mark Viehman, principal, hydrogen and clean fuels, Capgemini Americas.  

“The distinction between the energy companies and chemicals companies is starting to blur—the role of chemicals companies in the energy transition is accelerating with the development of new sustainable fuels,” he says.

In the near term, chemical producers will likely develop low-carbon hydrogen facilities where they’re already producing hydrogen made from conventional higher-carbon hydrogen production processes.

“There are some market leaders moving in this direction already, most notably CF industries with its large “green” and “blue” facilities under development,” Viehman says.

Infrastructure, Cost Pose Challenges

Low-carbon hydrogen holds promise as a sustainable feedstock for various chemicals, including ammonia and aviation fuels. However, cost remains an issue.

“The challenge is cost and current lack of hydrogen transport infrastructure,” Viehman notes.

These issues are the same reasons hydrogen fuel cell cars have not met market expectations, according to Viehman.

“There’s nothing wrong with the cars; the problem is getting the hydrogen to them, and at a cost that can compete against fossil fuels,” he says.

Viehman adds the U.S. Department of Energy has set goals for reducing the cost of low-carbon hydrogen to $1 per kg., down from the current price of $4 to $8 per kg. In the meantime, chemical companies can benefit from tax credits under the Inflation Reduction Act for low-carbon hydrogen production.

“However, unless a chemicals company is located on a dedicated hydrogen pipeline system or has sufficient demand to warrant the construction of a facility on site – or perhaps shared with neighboring chemicals companies – the lack of hydrogen transmission infrastructure is a serious impediment to deployment.”

In the future, major chemical companies may develop small, modular nuclear reactors on site to provide a reliable source of process heat and steam, as well as hydrogen that has a very low carbon intensity, Viehman says.

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