The ultimate hydrogen guide

How to become a hydrogen trader and is it a suitable career for the future?

This article is intended to give you a brief overview of the topic of hydrogen. We will explain what hydrogen is, how to become a hydrogen trader and will discuss if pursuing a career in this field might be worthwhile or not.

What is hydrogen? An overview.

To make it simple hydrogen is, in its pure form, an invisible, odorless, nontoxic gas. Hydrogen is lighter than air and is abundant on Earth but almost exclusively in chemical compounds (water, acids, hydrocarbons, etc.). Hydrogen is obtained by splitting water (H2O) into oxygen (O) and hydrogen (H2). However, it takes a lot of energy to split the molecule H2 and if this is done with the help of electric current, it is called electrolysis.

Hydrogen is clean (depends on extraction), safe, and almost infinitely available (estimated to contribute 75% of the mass of the universe), which makes it the most abundant chemical element in the universe. This means that because it is so abundant, hydrogen can always be extracted locally as well.

Production paths – the colors of hydrogen 

There are a large number of different paths and each is associated with a color. Therefore, there are broad color-ranges from turquoise to green. Gray, blue and green hydrogen are the most popular and also the most assertive path in the long term:

To produce 1 kg of hydrogen by water electrolysis, at least 9 kg of water (this is the stoichiometric value) are required.

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Hydrogen’s supply and demand – the market’s response to physical laws

Various uses for hydrogen

Industry

The dominant demanders are namely oil refining, ammonia production, methanol production and steel production. Refineries are the greatest hydrogen consumers.

Global hydrogen production and use by sector, as of 2019

Transport

1. The competitiveness of hydrogen fuel cell cars depends on fuel and cell costs along with refueling stations. For trucks, the priority is to reduce the price of hydrogen.
Shipping and aviation have limited low-carbon fuel options available and represent an opportunity for hydrogen-based fuels.
2. As a fuel source, the energy conversion of hydrogen is two to three times more efficient than with conventional engines, i.e., a further distance can be driven with less fuel. In addition, only water is produced as a waste product. Hydrogen-powered vehicles do not emit CO2 or other harmful gasses such as volatile organic compounds, carbon monoxide and nitrogen oxides.
3. In 2019 the transportation sector accounts for less than 0.01%, however in order to reduce the emission intensity of this sector, industry leaders hope to increase this share.

Buildings

Hydrogen could be blended into existing natural gas networks. The highest potential is for multifamily and commercial buildings, particularly in dense cities while longer-term prospects could include the direct use of hydrogen in hydrogen boilers or fuel cells.

Power generation

1. Hydrogen is one of the leading options for storing renewable energy. This is a major advantage and highly important, because the storage of renewable energies still poses a major challenge to date

2. Hydrogen and ammonia can be used in gas turbines to increase power system flexibility.

3. Ammonia could also be used in coal-fired power plants to reduce emissions.

Demand development

Sustainable development could lead to hydrogen demand of 520 million metric tons by 2070.


Forecast global hydrogen sector demand in sustainable development scenario 2019 – 2070
Source: IEA; ID 760001

Although the transportation sector is yet only a minor consumer, it is expected to become the largest by mid-century. Hydrogen could be used as a form of energy storage for non-dispatchable renewable electricity. 

The steel sector is expected to become the largest industrial hydrogen consumer.


 Industrial hydrogen demand in Europe by sector 2020 – 2050
Source: Agora Energiewende, AFRY

Main drivers for adoption hydrogen strategies

Environmental awareness and decarbonization policies: there is an increasing number of countries adopting hydrogen strategies.

– If environmentally harmless sources, it is a very clean energy source 🡪 no CO2-emissions, etc. 

– Unlimited occurrence 

– Continued high oil and gas prices make it more attractive. As the recent rise in European natural gas prices means that green hydrogen from renewables is currently cheaper to produce than polluting grey H2 from unabated methane

– Can be obtained locally and dependence on oil-producing countries, for example, is thus reduced

– Can be transported and stored easily 

– Wide range of applications

– Existing infrastructure (gas) could be used 

– Storage technology for renewable energy generated electricity

– High energy content 🡪 one kilogram of hydrogen provides about as much energy as 2.8 kilograms of gasoline

– Increasing government subventions and subsidies, as well as increasing investments by companies

– Decreasing costs for green hydrogen as a main driver beside hydrogen strategies, stricter regulations, etc. 

Potential threats 

– Today, most hydrogen is still produced with fossil fuels 🡪 this does not achieve the intended positive effect on the climate which, of course, does not correspond to the goal to be pursued with hydrogen.

Share of global hydrogen production 2020, by manufacturing process
Source: Global CCS Institute; ID 1200503

– Methane won from natural gas is the most common feedstock used in industrial hydrogen production. This  form of hydrogen is also referred to as gray hydrogen as it is derived from fossil fuels and waste CO2 is released during the production process. Only 0.3% of all pure hydrogen is green hydrogen and thus free of CO2 emissions (as of 2020)

– Even if the costs continue to rise and the spread narrows accordingly, greener hydrogen is still very expensive compared to gray hydrogen.

Global production costs of hydrogen by source, as of 2018.
Source: IEA; ID 1132774

– In natural gas producing countries gray and blue hydrogen are to remain the cheaper production options until at least 2030.


Forecast hydrogen production costs in the U.S. 2030, by scenario
Source: FCHEA

– Delays due to infrastructure projects not approved or approved slowly 

– The ramp-up of green hydrogen only makes sense if the rate of expansion of solar and wind power plants keeps pace and the supply of green electricity for other sectors is not thereby reduced. There is a risk that this will not be the case, at least not in the short to medium term

– Hydrogen fuel cells are less efficient than directly charging vehicles. Conversion losses result in hydrogen fuel cell vehicles being less energy efficient than EVs.


Source: T&E; Recharge; ID 934482

– Assuming hydrogen is produced through electrolysis, its conversion from electricity to hydrogen and transportation to refueling stations result in an energy loss of some 39%. The reforming of hydrogen back into electricity within the vehicle’s fuel cell battery brings down the overall efficiency to just 30% compared with an EV’s 77%.

Hydrogen’s transportation

Hydrogen, in various forms, is easier to transport than electricity over long distances and since it is a gas, the transport is comparable to that of natural gas. 

Smaller quantities of hydrogen can be transported via truck trailers, while larger quantities can be transported by pipeline or ship.

In the European environment, hydrogen transport in pipelines, even in newly built pipelines, is the most economical option for distances of up to around 10,000 km. For such pipeline-based transport, the study on the “European Hydrogen Backbone” (EHB) calculates specific transport prices of ~ 0.16 €/kg per 1,000 km transport distance with almost fully utilized pipelines. 

However, especially at the beginning of the hydrogen economy, utilization will be lower, so that the pioneer customers of such a network will have to expect higher transport costs. This can be mitigated by government support for the development of this infrastructure. 

The transportation prices determined in the EHB study are based on a significant portion of converted natural gas pipelines in the planned system. Since these pipelines already exist, their use reduces system costs, accelerates implementation, avoids corresponding environmental impacts, and thus increases social acceptance.

In addition to the use of existing plant components, the resulting hydrogen transport system will be supplemented by selected new constructions if natural gas pipelines cannot be converted in a timely manner for reasons of supply security.

Hydrogen can basically be transported in pipelines or in bulk in individual vehicles, such as ships, trains or trucks. Due to the low transport volumes that can be achieved, road transport will be used primarily for smaller quantities and local distribution. For national and regional transport as well as local distribution in H₂ clusters, pipelines play the central role. In the European environment, pipeline transports are by far the cheapest transport option, but for global imports from e.g., Chile or Australia, ship transport is necessary. Hydrogen can be transported methanized as so-called green natural gas or SNG via existing LNG infrastructure. Parts of existing or still emerging LNG terminal facilities are also suitable for the use of pure hydrogen. This suitability applies especially to those parts downstream of the regasification process.

Hydrogen’s impact on the environment

Hydrogen is expected to play a big role in the shift to a green economy according to many voices from various sectors/industries, especially for hard-to-abate sectors that cannot be directly electrified. 

What is decisive here, as already explained above, is the process that is used. Accordingly, the production of hydrogen from fossil fuels does not offer any significant advantages compared to green hydrogen from renewable energy sources. This green hydrogen would have the following benefits for the climate.

Cumulative emissions reduction by mitigation measure in the Net Zero Scenario, 2021 – 2050


Source: IEA

ydrogen has, according to several experts, a central role in helping the world reach net-zero emissions by 2050 and limit global warming to 1.5 degrees Celsius. Complementing other decarbonization technologies like renewable power, biofuels, or energy efficiency improvements, clean hydrogen (both renewable and low carbon) offers the only long-term, scalable, and cost-effective option for deep decarbonization in sectors such as steel, maritime, aviation, and ammonia. 

From now through 2050, hydrogen can avoid 80 gigatons (GT) of cumulative CO2 emissions. With an annual abatement potential of 7 GT in 2050, hydrogen can contribute 20% of the total abatement needed in 2050. This requires the use of 660 million metric tons (MT) of renewable and low-carbon hydrogen in 2050, equivalent to 22% of global energy demand.

Infrastructure

Hydrogen has the advantage that existing infrastructure, such as a gas pipeline, can also be used for hydrogen. Overall, however, it can be said that the infrastructure is far from being sufficiently developed, and this will still take a great deal of money and time.

Global hydrogen refueling stations in 2021, by country


Source: US Department of Energy, Hydrogen Tools; ID 1026719

Japan is the home to two automakers currently selling hydrogen-run cars; namely Toyota and Honda. This, among others, is the main reason why the country has the largest hydrogen-refueling network. 

But what about the development? Here the number of hydrogen fuel stations in the EU and the U.S.


Source: FCHEA, ACEA, EAFO


Hydrogen pipeline network

Current hydrogen pipeline network and estimated global CAPEX for new and retrofitted pipes:


Source: Hydrogen Tools, Hydrogen Council, McKinsey

Besides relying on tankers for hydrogen transport, pipeline use has also been explored. The global hydrogen pipeline network measures roughly 4,500 kilometers in total. Most pipelines are located adjacent to refineries and other end consumers in Texas, Louisiana, Belgium, and the Netherlands, as well as the German Rhine/Ruhr region.

Within Europe, the latter region could be the easiest to convert into a hydrogen hub, due to the infrastructure already in place and on-site use by heavy industries located there. Retrofitting no longer usable onshore distribution pipelines is expected to be the cheapest option for converting pipelines for hydrogen use, estimated to be between 0.1 and 0.2 U.S. dollars per kilometer in CAPEX.

Global investments in hydrogen – transportation related

Most hydrogen investments focus on fuel cell technology. Global investment in hydrogen 2020, by type:


Source: Bloomberg New Energy Finance; ID 1206844

Hydrogen trade volume and prices

The EEX (power and gas exchange, based in Leipzig, Germany) is planning to launch an index to price hydrogen in 2022 to aid trading of the commodity. 

Additionally, there are plans for a hydrogen exchange in the Netherlands by 2027.

RWE Supply & Trading and Australian hydrogen project developer The Hydrogen Utility Pty Ltd (H2U) have joined forces to develop hydrogen trading between Australia and Germany and therefore signed a Memorandum of Understanding. 

As you can see, and these points above are only representative for a large number of projects, hydrogen will become tradable like gas or oil in the future, according to many experts. However, it is difficult to estimate until this will happen in this form, especially with regard to market liquidity.

Hydrogen major trade movements

Global hydrogen projects by region – as of 2020

Hydrogen’s potential trade routes

Landed costs for hydrogen to range between 3.5 and 4 USD/kg. A forecast hydrogen landed costs worldwide in 2030, by route:


Source: Hydrogen Council; McKinsey

There are multiple ways of transporting hydrogen from production sites to consumer markets. Hydrogen may be stored as a compressed gas, in liquid form (LH2), or through the means of liquid organic hydrogen carriers (LOHCs) and ammonia. When comparing estimated shipping prices, LH2 is expected to be the more expensive option, although regasification at import terminals would come with significantly lower costs than cracking of ammonia or dehydrogenation of LOHCs. Landed costs for LH2 shipped from production sites in Saudi Arabia to end consumers in the EU are estimated to amount to 3.5 U.S. dollars per kilogram in 2030. Landed costs for hydrogen shipped as LOHCs between Chile and the U.S. or as ammonia between Australia and Japan are expected to be slightly higher.

Hydrogen’s prices

Green hydrogen produced with renewable resources costs between about $3/kg and $6.55/kg, according to the European Commission’s July 2020 hydrogen strategy. Fossil-based hydrogen costs about $1.80/kg, and the commission estimated the cost of blue hydrogen, which pairs carbon capture with steam methane reformation of natural gas, at about $2.40/kg.

Hydrogen key companies

The Top Key players of Hydrogen Market include:

  • Linde Group
  • Air Liquide
  • Air Products
  • Air Water
  • Taiyo Nippon Sanso
  • Messer GroupYingde Gases

However, major trading companies such as Vitol are also entering the hydrogen business. In April last year, for example, they acquired a stake (10% equity interest) in the Norway based green hydrogen company Gen2 Energy and other players such as Trafigura have also already gained a foothold in this market, either through joint investments or shareholdings, in this case in H2 Energy.

These two examples are again representative for a number of projects of (trading) companies that want to gain a foothold in this lucrative market. The areas of application and potential employers are therefore numerous.

Is hydrogen trader a sustainable career for the future?

Hydrogen, and primarily green hydrogen, is certainly an interesting commodity but it currently plays a rather subordinate role. The reasons for this include a lack of infrastructure and the fact that the production of green hydrogen is currently not economically feasible. 

But should this change, and by all appearances it will, and projects such as a hydrogen exchange in the Netherlands provide the necessary liquidity, hydrogen will certainly be highly interesting. However, there are still a number of subjunctives in the formulations and a time horizon is also difficult to estimate at present.

How to become a hydrogen trader?

An adequate question in this context is how to become a gas trader, because hydrogen is ultimately nothing other than gas. Hydrogen itself and especially green hydrogen are still in their infancy. 

But if you want to learn everything about commodity trading in general and have the opportunity to make a career in this field, then click on the following link now and sign up for our course and benefit from extensive content and so much more.

If you want to learn more about our education program, do not hesitate to download our brochure. Click here!

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