Hydrogen is a unique energy resource that does not pollute nature during combustion, but has not yet become the leading or at least widespread source of energy in the world. Nevertheless, most countries of the world assign hydrogen a key role in reducing emissions to ‘net zero’ by 2050.

Russia is known to be the country with the largest reserves of natural resources, and it can be assumed that in the coming energy transition it can occupy a key role as one of the key suppliers of hydrogen and technologies for its production. In the study of prospects for the development of exports of Russian hydrogen energy technologies, SBS Consulting identifies which domestic developments in the production and use of hydrogen could be competitive in the coming energy transition.

GLOBAL HYDROGEN MARKET

I. Global production and demand

As of 2022, the world produces 95 mln tonnes of hydrogen per year. 95% of this comes from grey hydrogen, the most unecological of all: 72% from steam-methane reforming, and 23% from coal gasification.

Production is fairly stable: 90 mln tonnes of hydrogen were produced in 2018, and since then has gradually increased by 6% by 2022.

Similarly, hydrogen demand has increased by 6% between 2020 and 2022. 80% of hydrogen consumed is pure hydrogen and the remaining 20% is blended hydrogen. Almost all hydrogen (96%) is consumed by the refining and chemical industries.

II. The role of hydrogen in the global carbon neutrality goals

Currently, the leaders in hydrogen consumption (China, USA, Japan), friendly countries (India, Turkey), and UN member states consider hydrogen a key resource for achieving climate goals. Net-Zero 2050 in the case of UN countries, and specific national documents in the case of other countries.

III. Global Hydrogen Market Forecast

Hydrogen and climate strategies are mostly made up to 2050: global hydrogen production is expected to be around 250 mln tonnes per year by then. In monetary terms, that's $654 bln. China and the US will take 63% of this market, South Korea, Australia and Japan 24%, and Russia and other countries will account for the remaining 13%.

As for the friendly consumption leader countries, total consumption by 2050 (China, India, Iran, Turkey, Peru) is expected to reach 130 mln tonnes annually. Hydrogen vehicles will be a key driver of consumption. In addition to transport, hydrogen is planned to be used in thermal power generation, electricity generation, methanol and steel production, and as a fertiliser.

IV. Country-specific consumption dynamics and drivers

CHINA

China is currently the largest hydrogen consumer in the world, with annual consumption of about 35 mln tonnes, split roughly equally between ammonia production, methanol production, petroleum refining and other industrial applications.

To meet China's future demand for hydrogen, more than 120 investment projects are currently announced there to build production facilities. The largest of these - the largest in the world - has already attracted more than $4.5 bln in investment.

As for vehicles, the main driver of hydrogen consumption, there are already more than 8,000 hydrogen cars on Chinese roads; by 2050, it is planned to see almost 30 mln hydrogen-fuelled vehicles on public roads.

Ammonia consumption will also increase, as ammonia allows storing hydrogen energy.

INDIA

Current hydrogen consumption in India is about 6.5 mln tonnes per year, and is used mainly in petroleum refining. Consumption is expected to reach nearly 30 mln tonnes annually by 2050, and will be split roughly equally between the petroleum refining, steel, ammonia and methanol industries. It is also expected that 6.3 mln tonnes will be consumed by hydrogen vehicles (50 mln units by 2050; currently, two hydrogen filling stations already operate in India). Thus, hydrogen consumption by vehicles will grow at a rate of 19% annually from 2030 onwards.

IRAN

Iran's hydrogen consumption as of 2022 is estimated at 2.9 mln tonnes per year; it is used in petroleum refining and the production of methanol and ammonia. Iran is also an active purchaser of hydrogen: hydrogen in liquid or gaseous state is the 55th most popular product imported by Iran.

The country shows a low level of hydrogen development: no hydrogen strategy has been approved at the state level, and the country is not pursuing ambitious climate or environmental targets, as it has not ratified the Paris Agreement on climate change. Thus, there are no significant drivers of hydrogen consumption growth in Iran.

TURKEY

In Turkey, hydrogen is used exclusively for refining purposes: annual consumption varies between 0.6 and 0.7 mln tonnes. However, according to the Turkey's National Energy Plan, hydrogen consumption will grow to 4.1 mln tonnes annually by 2050, of which 1.2 mln tonnes will be used for vehicles. Under the Net Zero scenario, the share of hydrogen vehicles will reach 20 % in public and freight transport. Hydrogen will also be used as a substitute for imported gas and oil.

PERU

Among the countries studied, Peru has the lowest consumption: about 110,000 tonnes annually. Almost 100% of hydrogen is used in the petroleum refining industry. According to the Peru's law for the promotion of green hydrogen, consumption will grow 4 times - up to 449 thousand tonnes annually due to 40% penetration of hydrogen in the industry, and replacement of half of the trucks in mining with hydrogen trucks. In addition, 50 to 100 hydrogen petrol stations and up to 2,500 hydrogen fuel cell vehicles are planned to be in use as early as 2030.

EVALUATION OF RUSSIAN PRODUCTS' COMPETITIVE CAPACITY

I. Roadmap for the development of hydrogen production and export

Russia already has a roadmap for the introduction of hydrogen and the development of hydrogen exports. It was created in 2021 and specifies the plan and benchmarks for hydrogen utilisation until 2050.

The main goal to be achieved by following the strategy is to realise the potential for production, export, application of hydrogen and industrial products for hydrogen economy, and to become one of the world leaders in their production and export, while ensuring the competitiveness of the country's economy in the global energy transition.

Between 2021 and 2024, the roadmap calls for the following steps:

• Establishment of regional hydrogen clusters, development of support measures and regulatory frameworks
• Launch of pilot projects for hydrogen production from fossil fuels with carbon dioxide capture and electrolysis
• Building scientific and technological infrastructure
• Development of technologies and production of industrial products for hydrogen economy

Exports are expected to reach 0.2 mln tonnes over this period of time.

Over the next 11 years to 2035, the following key achievements are expected:

• Serial and mass application of hydrogen technologies, scaling up their production and exports
• Development of infrastructure in the regions of high demand for hydrogen with the start of large-scale export-oriented production

Exports will initially amount to 2 mln tonnes, and in an optimistic scenario may reach 10 mln tonnes.

In the final planning stage from 2036 to 2050, there are highly ambitious expectations:

• Realisation of large-scale hydrogen production and export projects based on renewable energy sources
• Russia becomes one of the largest exporters of hydrogen and energy mixes, industrial products and technologies to the global market
• Wide commercial application of hydrogen technologies in transport, energy and industrial sectors

In the baseline scenario, exports will amount to 10 mln tonnes, while in the optimistic scenario they may reach 50 mln tonnes.

II. Assessment of competitiveness in production

Given the expected levels of hydrogen production in Russia, there may be an excellent export opportunity; however, the key factor will remain the cost of hydrogen and the appropriate selling price that a domestic producer will be able to offer.

The price of green hydrogen, probably the most sought-after of all, varies widely across countries due to the diversity of energy sources for generation and the high capital costs of building the capacity for production. In the case of green hydrogen, the leading countries are those with abundant renewable energy sources: sun, wind, and water. The lowest cost of green hydrogen is found in Australia, ranging from $2.76 to $4.14 per kg. The third place is occupied by Russia with production costs ranging from $3 to $7.5 per kg. Among all countries, the price of green hydrogen production varies by ±28% depending on the price of renewable energy.

Blue hydrogen (produced through steam-methane reforming and carbon dioxide capture) is cheapest to produce in countries rich in natural gas. The top three are India ($1.5/kg), China ($1.4), and Russia ($1.5).

Finally, the third type of hydrogen with a low carbon footprint is yellow hydrogen, which is produced through electrolysis of water using electricity generated by nuclear power plants. Here Russian hydrogen ranks first in terms of production cost - $0.5 per kg. The nearest rival is Japan with a production cost of $2.6 per kg. However, yellow hydrogen is sensitive to the price of electricity: depending on the cost of electricity generation at NPPs, the cost of hydrogen can fluctuate by 38% in both directions.

Naturally, the price of resources and the capital intensity of production are not the only factors. The cost of production can also be influenced by government support for the production of environmentally friendly varieties. Such practices exist, for example, in the USA and Australia.

III. Export potential to hydrogen consuming countries

Nowadays Russia has an additional factor capable of restraining its export potential - sanctions. The list of potential foreign trade partners is limited due to them. Nevertheless, considering the prospective volumes of hydrogen consumption in friendly countries, one cannot say that the market available to Russia is small.

The title of the most attractive foreign trade partner is shared by China and India. China has the world's largest hydrogen market; imports from Russia increased by 46% between 2021 and 2022, while hydrogen consumption will grow by 6% between 2022 and 2030. India's consumption is significantly lower, but the respective figures are 367% and 63%.

Turkey also has prospects to become an importer of Russian hydrogen: imports from Russia increased by 103% in 2021 and 2022, and hydrogen consumption will grow by 214% between 2022 and 2030.

However, in any case, hydrogen exports also have a number of constraints that require special attention:

At the production stage:

• Russia is at the initial level of hydrogen production infrastructure development. The first full-scale start of hydrogen production (rather than generation within refineries for domestic consumption) is only planned for 2030.
• High capital costs: the Ministry of Energy estimates the volume of investments for hydrogen infrastructure development at $21.1 bln (6% of Russia's federal budget expenditures for 2022). In addition, according to initial estimates, without state support for manufacturers at the pre-project planning stage, successful hydrogen projects are possible only in Yakutia and Sakhalin, in special economic zones. Both indicators (IRR, NVP) are expected to be negative for projects in other regions.

And at the transport stage:

• Hydrogen is sensitive to transport conditions. Depending on the distance, hydrogen needs to be transported in one of three forms: compressed gas (up to 2,600 km), liquefied hydrogen (up to 16,500 km), LOHC (a technology in which hydrogen is mixed with other substances to reduce the pressure and temperature requirements of transport; if hydrogen from LOHC is needed, the substance is easily separated into hydrogen and the original admixture) (up to 25,000 km). For shorter distances, either pipeline or land transport is used; but in either case, hydrogen production facilities will also need to convert the hydrogen to the required form right at the production site
• The export strategy was developed before sanctions were imposed, and it assumed that key partners would be Japan, Europe, and South Korea. As these markets are now closed, the options remain China, India and Peru. Delivery to these countries may be significantly more difficult than those originally planned.

IV. Comparison of hydrogen production and transport technologies

Despite the lack of running facilities for hydrogen production, transport and utilisation in Russia, all necessary developments already exist and can compete with foreign technologies.

Water electrolysis (by all methods: AWE (Alkaline Water Electrolysis), AEM (Anion Exchange Membrane Electrolysis), PEM (Proton Exchange Membrane Electrolysis), SOEC (Solid Oxide Electrolysis Cell)) and hydrogen transport (both in liquefied and gaseous form and as a mixture) have already been developed by Russian companies Centrotech and H2 Tech. The use of hydrogen as a vehicle fuel is already being developed by KAMAZ.

Russian water electrolysis technologies are not inferior to foreign analogues in terms of energy efficiency: worldwide, the efficiency of electrolysers is about 4 kWh/m3. And in terms of productivity there is still room for growth: the generation rate of Russian plants is 1,000 m3/h. Leading electrolysers can produce up to 4,000 m3/h.

The Russian manufacturers are not sitting idle when it comes to logistics either: metal-composite cylinders used in natural gas transport are suitable for hydrogen gas. The means of transporting liquefied H2 is still only at the stage of development by H2 Tech. Containers must maintain a temperature of -253 oC, which can cause technological difficulties. The leader in the transport of liquefied hydrogen is Japan, where the Suiso Frontier tanker capable of carrying 75 tonnes of liquefied hydrogen has been designed and built, and the Spera Hydrogen system has been developed to produce methylcyclohexane from hydrogen for transport in containers at a pressure of 4 atmospheres.

V. Hydrogen vehicles

The phrase ‘hydrogen vehicles’ may sound like something from the world of science fiction, but it has not been so for several years. Asian countries have become pioneers in this segment, with mass-market models of the Toyota Mirai, Honda Clarity and Hyundai Nexo on the global market. All three passenger cars mostly share the technical characteristics of the base models of car manufacturers, and their total production volume has exceeded the mark of 95 thousand units. A working prototype was presented by Aurus, a Russian concern. The Senat model is similar to the petrol variants, but is not mass produced.

Several models of hydrogen buses - so-called fuel cell buses - are produced and operated worldwide: Toyota Sora (Japan), Hyndai Elec City Fuel Cell Bus (Korea), Connexion Solaris Bus (the Netherlands and Poland); their total fleet is more than 500 units. The Russian KAMAZ 6290 is still at the stage of operational testing. Similar to passenger car models, fuel cell buses do not differ from their petrol counterparts in terms of technical characteristics.

В сегменте грузовиков отечественные разработки ближе к коммерческой реализации: АФК «Система» и белорусская Белкоммунмаш планируют произвести 20 грузовиков , а поставка первой партии планируется на 2024 г., также АФК «Система» планирует запуск в серию грузовиков, судов, складской техники на водороде. Среди конкурентов – шведско-китайский Volvo, корейский Hyundai и голландский HyMax. Последнего которого произвели уже 90 штук. Также существуют разработки и уже эксплуатируемые модели рельсового транспорта.

10 hydrogen fuel cell trams are already running in China, and there have been several shipments of such trams to Turkey. In Korea, a Hyundai tram model is under operational testing. In Russia, the St. Petersburg State Unitary Enterprise ‘Gorelectrotrans’ has upgraded an existing tram model for hydrogen fuel cell use, and the tram has been successfully piloted but not put into production. Hydrogen fuel cell train models can be found in China, Korea and Germany. In Japan, a hydrogen fuel cell train is scheduled to be launched in 2030. The last type of transport that has so far been able to be powered by hydrogen fuel is ships. In Japan there are two models of hydrogen-fuelled passenger ships, and the Dutch Holland Shipyard Group already operates a ship with a capacity from 2 to 4 times higher than that of Japanese ships. In Russia, the Baltsudoproekt Central Design Bureau has designed a hydrogen fuel cell-powered vessel and it was laid down at the Zelenodolsk Shipyard in February 2023.

SUMMARY

As of 2023, the equipment for hydrogen production by electrolysis has already been developed and made ready for operation in Russia with above-average performance among the countries studied. Thus, the technology is ready for export. The main focus of industrial policy in this sector should be on investment in R&D to improve the performance of electrolysers.

Russian hydrogen transport technologies will be in high demand in the future, as the global niche is a ‘blue ocean’. To maintain Russia's role as a global energy supplier, it is crucial to ensure competitiveness and technological sovereignty in hydrogen transport.

The use of hydrogen as a transport fuel is the least developed link in the chain in Russia. At the moment, there are no willing consumers in transport - the key driver of hydrogen demand in the future. The main course of action on this issue should be to stimulate R&D of the necessary technologies and stimulate demand for domestic products.