D7B.3 Cost analysis and comparison of different hydrogen carrier import chains and expected cost development

One of the central transitions that is part of our global efforts to transition to at least net zero, are the energy transition and the raw material transition. The energy transition describes the change in the global primary energy supply and demand from fossil-based energy to renewable energy. The raw material transition, or the transition towards a circular use of materials and fuels, aims to change our linear take-make-waste economy into an economy that does not deplete our planet earth. Both these transitions are essential, and as the focus of this research encompasses hydrogen, ammonia and methanol, both the energy transition and the transition to a decarbonized (chemical) commodities industry are at the heart of the study that lies in front of you.

The Netherlands, Germany and Belgium are three befriended spiders in the web of the current global energy market. Primary energy and raw material sources are imported and partially sourced from regional resources in the form of coal, crude oil and natural gas. These fossil molecules act as building blocks that naturally combine hydrogen (H₂), carbon (C), nitrogen (N₂) and oxygen (O₂) molecules. From these molecular building blocks, many products are manufactured and services are provided to meet our societal needs. In fully sustainable future energy and material value chains we may trade these individual hydrogen, carbon, nitrogen and oxygen molecules separately, or in an intermediate form (e.g. ammonia (NH₃) or methanol (CH₃OH)) and build more complex molecules, such as ethylene (C₂H₄) or jet fuel (e.g. C₉ to C₁₆) from the ground up ourselves. This study focusses on the import of hydrogen, ammonia and methanol from locations with abundant renewable energy potential to the Netherlands.

Given the variety of hydrogen import supply chains that can be developed towards the Netherlands and NW Europe, it is of importance to have a thorough understanding of the technological and economic performance of these import chains to be able to make informed strategic, policy and investment decisions. Materialization of scalable hydrogen import supply chains is a challenge as the upstream, midstream and downstream processes of the future are yet to be developed. Uncertainties remain regarding (1) the process and technology mixes involved, the (2) demanded hydrogen volumes-over-time, and the (3) dependencies between each of the hydrogen carrier import supply chain element that need to be aligned to safe-guard an efficient global supply chain.

The objective of this study is to identify and compare import supply chains to the Netherlands from a technical and logistical perspective, and to increase the insight into the expected cost development from 2030 to 2040 of imported hydrogen, ammonia or methanol via five hydrogen carrier options: synthetic ammonia, synthetic methanol, liquid hydrogen, compressed hydrogen and the liquid organic hydrogen carrier methylcyclohexane.

Insight 1: The cost ranges of the selected hydrogen carrier import countries is too large to distinguish the single most cost-effective import routes.

There is no clear consistency in the lowest cost estimates for country-carriers combinations. Domestic production of H₂ without carrier conversion has lower costs than importing hydrogen carriers with ships or hydrogen pipelines. NH₃ and MeOH import, without the aim to reconvert to H_{2 ,} have a smaller cost spread.

Insight 2: Technology-related costs and geographical factors are both dominant cost drivers of the levelized cost of imported hydrogen.

Technological cost drivers:
> Hydrogen production. This dominant cost driver accounting for an average cost of 50% in LH2 and LOHC chains, 70% in NH₃ and MeOH chains and up to 90% in cH2 chain. In addition to the cost of power, the specific investment costs and efficiency (losses) are main cost drivers.
> The specific investment costs as well as the economies of scale factor of industrial process plants (carrier production and reconversion).

Geographical cost drivers:
> The local cost of renewable electricity. The LCoE is the main cost driver in all chains.
> The full load hours. The annual utilization of RES, PtH2 and H2tX assets determine the mass flow of the import chain. The larger this mass flow, the lower the LCoH2.
> Distance of country of import is only relevant for shipping LOHC and LH₂ when the cargo consumed as a shipping fuel. NH₃ and MeOH are more effective fuels.

Insight 3: Supply chain efficiencies and load-following hydrogen production volumes illustrate the importance of maximizing the mass flows of molecules.

Improvement of the process efficiency in the power-to-hydrogen, hydrogen-to-X and X-to-hydrogen steps would lead to savings in cost and energy. Improvements in these processes may, however, be thermodynamically challenging and/or costly. Maximization of the full load hours of each asset along the supply chain is also of major importance. The higher the utilization rate of the power-to-hydrogen process, the more constant the hydrogen production annually. And consequentially, the larger the mass flow of hydrogen carriers towards the Netherlands, which drives down the LCoH₂.

Insight 4: Current uncertainties in technology-specific costs lead to large spreads of cost estimates.

Current uncertainties in the techno-economic input parameters of many assets in the supply chains lead to large spreads of cost estimates. Results in this study are on the expensive end of the cost ranges compared to  benchmark studies. The aggressive uncertainty analysis shows that imported LCoH₂ estimations with optimal site specific conditions and optimized and integrated assets can be lower.

Recommendations

Future research is recommended to focus on four topics that are deepening or broadening the analysis conducted in this study:

1. Strive for a maximization of asset utilization in future cost assessments by maximizing the full load hours of assets up to the carrier production assets, optimize the dimensions of assets in the logistics network and incorporate end-user demands in dimensioning the reconversion assets.
2. To assess the value of storage and investments that are required to guarantee a secured supply of hydrogen by shifting the perspective to supply network analysis and increase the level of detail of the time-scale relevant to the security of supply-topic (e.g. days, hours).
3. Adding more types of molecules (e.g. fuels and feedstock) can enrich the comparison, and by making deliberate decisions on the location of each supply chain element, the costs of more complex supply chains can be compared.
4. By adding the imported hydrogen purity levels to the cost comparison, the levelized cost of hydrogen can more accurately represent the quality of each product that is imported.