Introduction

The world currently emphasizing on clean energy due to carbon emissions concerns from fossil fuel-based power generation, is striving to navigate through the realm of non-conventional energy which comes with a plethora of challenges from high capital cost to the environmental parameters required to achieve optimal output. Among, various renewable energy sources which are being explored to reduce the carbon footprint from power generation as well as industrial processes, the inclination towards hydrogen for power generation & industrial processes, has been witnessing significant traction in past couple of years. Apart from hydrogen being used as a clean power generation employing small to large scale fuel cells, it is also can be used for energy storage from renewable sources in gaseous or liquid form to be used later. However, currently the major consumption of Hydrogen is as a feedstock for petroleum, ammonia, methanol & metal industries. Use of hydrogen for transportation, power generation & grid balancing, and others are a niche stage as compared to the feedstock applications in the U.S. In the United States, 40% of annual hydrogen production is attributed by merchant hydrogen, followed by around 20-25% produced on site in refineries, 20% in ammonia plants and 15-20% in methanol/chemical facilities. Merchant hydrogen is produced in central facilities and distributed via pipeline, bulk tanks or cylinder truck delivery.

Hydrogen Supply vs Demand

In the last decade the on-site production of hydrogen at the refineries has witnessed a slight decline and but the purchase from merchant suppliers have increased by multifold times owing to the higher consumption of hydrogen for reduction of sulphur content in distillates, as per the stringent industry regulations, and increase in refinery capacities.

U.S. Merchant Hydrogen Annual Production, 2018 (Million Tons)



U.S. Merchant Hydrogen Annual Production, By Producer & Region, 2018 (Million Tons)

Producer

Midwest

Northeast

South

West

 Air Liquide

          0.00

               -  

          0.37

          0.15

 Air Products 

          0.06

          0.14

          1.22

          0.28

 Linde

          0.17

          0.00

          0.14

          0.03

 Praxair

          0.17

          0.02

          1.03

          0.20

 Markwest Javelina

               -  

               -  

          0.03

               -  

 Others

          0.00

               -  

          0.06

               -  

 Grand Total

          0.40

          0.16

          2.84

          0.66

Source: H2Tools.org

Assumptions:

v  Annual production is calculated assuming the plants of respective producers’  are running at 85% capacity and plants are operational for 350 days in a year (considering 15 days annual downtime)

 

U.S. Merchant Hydrogen Annual Production, 2022 (Million Tons)

Region


Supply (Million Tons)

Demand (Million Tons)

West

0.72

1.05

South

2.77

2.39

Midwest

0.65

0.85

Northeast

0.21

0.15

Total

4.35

4.44

Northeast U.S.: Hydrogen Supply Vs Demand & Pricing (Million Tons, $/Kg), 2022

The prices of hydrogen in the Northeast region is analyzed to be the lowest owing to abundant supply of natural gas, lowest demand of hydrogen w.r.t other regions due to lower concentration of end users, and higher supply than the demand. The hydrogen production & distribution in this region is majorly decentralized and in proximity to the off-takers reducing the transportation cost.

 

West U.S.: Hydrogen Supply Vs Demand & Pricing (Million Tons, $/Kg), 2022

The demand for hydrogen in the region is West U.S. is higher than the supply, owing to which are price is the highest among all 4 regions. The region lacks higher concentration of hydrogen production sites and distribution network in the region as compared to South region. The transportation of hydrogen majorly done via gas tankers and liquified hydrogen cylinders which increases the cost even further.

South U.S.: Hydrogen Supply Vs Demand & Pricing (Million Tons, $/Kg), 2022

 


 

The second lowest hydrogen price is analyzed to be in the South region where the Gulf Coast is the largest producer of hydrogen and an extensive pipeline network for distribution. The supply of hydrogen in this region is estimated to be higher than the demand owing to which the prices are lower.

 

Midwest U.S.: Hydrogen Supply Vs Demand & Pricing (Million Tons, $/Kg), 2022

 


In the Midwest region, the demand for hydrogen is higher than the supply owing to the high concentration of the end users such as ethanol, ammonia, metal and minerals and so on.

To tackle the current challenges in production and distribution, government initiatives play a pivotal role. The U.S. government's support for green hydrogen projects, as evidenced by the allocation of $7 billion in funding for regional "Green Hydrogen hubs," showcases a commitment to fostering a sustainable hydrogen economy. Suppliers in the merchant hydrogen market are adopting innovative approaches to enhance production efficiency and address infrastructure challenges. Collaboration with research institutions, technology investments, and a focus on sustainable practices are key strategies to ensure a resilient and competitive market presence. The trends and growth in demand for merchant hydrogen in the U.S. present a dynamic landscape. Overcoming challenges requires a collective effort from industry players, government bodies, and suppliers. As technology continues to evolve and investments increase, the future of merchant hydrogen appears promising, contributing significantly to the clean energy transition.

Hydrogen Production

Hydrogen despite being referred to as a clean source of energy, it does have another aspect which contradicts it being a clean source with zero carbon footprint if produced from carbon-based feedstock. Majority of the hydrogen production in the U.S. is based on steam methane reforming (SMR) from natural gas which accounts for around 95% hydrogen production in the U.S. Other commercial processes used for hydrogen production includes gasification, renewable liquid reforming, standard electrolysis & high temperature electrolysis. The table 1. denotes the production cost of various grades of hydrogen in the U.S. The cost of the cleanest grade i.e., green hydrogen, is analyzed to be the highest among all the grades, 2-3 times higher than blue hydrogen owing to the high CAPEX on electrolyzes, OPEX on operations & maintenance & heavy dependence on renewable power supply. However, in the U.S. blue hydrogen has a significant advantage over green hydrogen, owing to various benefits such as on demand production & storage based on existing natural gas infrastructure and majority of the grey hydrogen being produced close to the end user in refining and chemical sector in major industrial hubs.

Table 1. Production Cost Benchmarking for Hydrogen Grades

Hydrogen Fuel Type

Grade

Process/Source

Production Cost ($/Kg)

Hydrogen from fossil Fuel

Grey Hydrogen

from Natural Gas

2 - 6

Brown Hydrogen

from gasification of coal

2 - 3

Blue Hydrogen

Grey Hydrogen

from fossil fuel + Carbon Capture & sequestration

4 - 8

Brown Hydrogen

from gasification of coal + Carbon Capture & sequestration

4 - 5

Green Hydrogen

Green Hydrogen

From Electrolysis (PEM)

6 - 8

Greener than Green Hydrogen

SGH2

Biomass/Recycled Paper

2 - 3

Source: SGH2Energy

Hydrogen Distribution & Challenges

In the U.S Merchant suppliers or industrial gas suppliers distribute SMR based hydrogen & by-product hydrogen, to its customers through dedicated pipelines (as gas), bulk tanks/tube trailers (high pressure gas) and cylinder tank delivery (as cryogenic liquids). Hydrogen distribution through pipelines is the lowest cost option for delivering large volumes of hydrogen over long distances (over 300km). Currently, the hydrogen distribution pipeline in the U.S. is only limited to 1,600 miles (around 2500km) which is again concentrated near major industrial clusters such as the Gulf Coast and California. This is one of the major factor behind the deviation in prices of hydrogen gas purchased by various end user sectors.


Fig: U.S: H2 Production & Distribution Network Vs Natural Gas Distribution Network

Source: National Renewable Energy Laboratory; Energy Information Administration [https://hydrogencouncil.com/wp-content/uploads/2023/05/Hydrogen-Insights-2023.pdf]

Hydrogen, despite its lower volumetric energy density, presents potential for efficient energy transport, with hydrogen pipelines capable of carrying up to 88 percent of the energy content of methane pipelines due to its higher volumetric flow. However, expanding hydrogen infrastructure faces challenges. The construction of new pipelines demands substantial capital and time, necessitating stable and high hydrogen demand. Additionally, the low molecular weight of hydrogen requires compressors to operate at triple the speed of those for natural gas, contributing to operational costs. To address cost challenges, some midstream players are exploring alternatives such as repurposing natural gas pipelines or blending hydrogen into existing pipelines. Pipeline repurposing could reduce costs by 60 percent compared to building new hydrogen pipelines. Blending low hydrogen volumes, up to 20 percent, requires minor modifications. However, these alternatives introduce challenges, notably hydrogen-induced embrittlement of metal pipeline components, increasing the risk of cracking and potential failure. Embrittlement is more likely in high-strength gas transmission pipelines. Safety concerns arise from hydrogen's wide flammability range and near-imperceptible flame, necessitating stricter leak-detection systems if cracking leads to leakage. Moreover, separating hydrogen from natural gas blends adds complexity and cost, particularly at lower blend ratios. The efficacy of hydrogen blending as a decarbonization strategy is debated, with scrutiny on the associated increase in energy costs. Balancing the promise of hydrogen as a clean energy carrier with infrastructure challenges and safety considerations remains a key focus in advancing its role in the energy transition.

In scenarios requiring low-volume distribution over short distances, high-pressure tube trailers could become the preferred method due to lower capital intensity than pipelines, excluding hydrogen blending costs. Hydrogen, compressed into tubelike cylinders, is stacked in trailers for hauling. Tube trailers, limited to 250 bar pressures (since hydrogen is produced at 20 to 30 bar), can carry up to 900 kg of hydrogen per trailer, limiting their high-volume distribution capacity. As demand gradually increases during early hydrogen deployment in the United States, tube trailers offer flexibility, allowing demand to aggregate and eventually justify capital-intensive investments in hydrogen pipelines. Another approach involves transporting hydrogen in its liquefied form. Liquid hydrogen tankers become viable for higher-volume and longer-distance transport when pipelines are impractical. The liquefaction process, requiring cooling to -253°C and storage in insulated tanks, is energy- and capital-intensive, with over 30 percent of the hydrogen's energy content used for liquefaction. Despite boil-off issues, liquid hydrogen can be more economical than tube trailers over long distances, given its ability to transport a larger hydrogen mass. Alternative carriers like ammonia and liquid organic hydrogen carriers (LOHCs) are being considered for high-volume, long-distance hydrogen transport. Ammonia leverages mature transport infrastructure due to its widespread use as a fertilizer feedstock, while LOHCs open up oil infrastructure as a transport pathway, facing challenges due to low round-trip efficiencies and high costs.