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On Hotspots                                                                NO.10    2020 / 12



                                    Hydrogen Development
               A                    H   ydrogen                Devel         opment

                                                                   ook
                                                             utl
                                                         O
               P                                         Outlook

               P



                L            As a low-carbon, clean energy carrier,   of hydrogen production can be as low as

                             hydrogen can play an important role in   USD 1.50 per kg in the short term if the
                 I           achieving carbon-neutral goals. Industries   cost of natural gas is within USD 3/MMBtu,
                             such as automotive, chemical, heating
                                                                      complete with the right geography. In
                             and power are looking to low-carbon      regions with high natural gas costs, such as
               C             hydrogen as an important alternative to   Europe, the cost of hydrogen production
                                                                      could reach USD 2.10 per kg in the short
                             achieve sustainability goals. Advances in
                             technology and demonstration projects    term and drop to USD 1.80 in the medium
               A             have significantly reduced the cost of   term (2030) under the right geographical
                                                                      conditions.
                             hydrogen applications. However, the
                             scenario for large-scale application of    Electrolytic water based hydrogen
                T            hydrogen energy is not clear, mainly due   production. The cost depends on the
                             to the fact that there is still disagreement
                                                                      investment cost of the facility, the cost of
                             on the cost competitiveness and          electricity and the utilization rate of the   47
                 I           development trajectory of hydrogen       facility. According to McKinsey analysis, by
                                                                      2030, the cost of electrolytic water based
                             energy applications.
                                                                      hydrogen production can be reduced to
               O             Production costs are on a                USD 1.9/kg if the investment in electrolysis
                             downward trend
                                                                      facilities is kept at USD 500/kW, the facility
                             There are currently three main types     utilization is 30%, and the electricity cost is
               N             of hydrogen production: industrial by-   at 1 cent.
                                                                        Since 2010, the cost of electrolytic
                             product based hydrogen production,
                             fossil fuels based hydrogen production   hydrogen production has dropped 60%,
                             and electrolytic water based hydrogen    from USD 15 to USD 6 per kg. Analysis
                             production. The main sources of future   shows that the cost of electrolytic hydrogen
                             large-scale use of clean hydrogen should   production will continue to decline. In
                             be hydrogen from fossil fuels and hydrogen   the case of German offshore wind power
                             from electrolytic water.                 based hydrogen production, the cost of
                               Fossil fuels based hydrogen production.   electrolytic hydrogen will be reduced by
                             The main fossil fuels for hydrogen       about 60% more to USD 2.60 per kg by
                             production are natural gas and coal. A   2030.
                             carbon capture facility is also required
                             to make the hydrogen “clean”. The price   Transportation  and  distribution
                             of fossil fuel based hydrogen production   costs need to be further reduced
                             depends heavily on the price of energy,   The long-distance transportation of
                             and the cost of CCS depends heavily      hydrogen will drive international trade due
                             on geographic conditions, such as the    to the large cost differences in hydrogen
                             availability of depleted gas fields and   production between regions. This is
                             suitable rock formations. In regions such   particularly true for Japan or South Korea,
                             as the U.S. and the Middle East, the cost   where the lack of suitable locations to


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