Hydrogen could become an increasingly important energy carrier in Sweden, especially if the various projects at LKAB, SSAB and Vattenfall to use hydrogen instead of coal in the production of steel are successful.
The use of hydrogen may also increase in other areas, not least in combination with fuel cells as backup power. Many vehicle manufacturers see hydrogen fuel cells as a complement to the ongoing electrification of the transport sector.
The purpose of this report is to describe how the production and use of hydrogen is developing in the world. The analysis focuses on Japan and the USA since these are the leading countries in this area of development. Other countries such as South Korea and those that are major gas producers are also interested in the development of hydrogen and fuel cells.
The cluster of international companies that work with the extraction, conversion and distribution of natural gas is a central component of the hydrogen production system since these companies see hydrogen as an expansion of their current activities. Moreover, in many countries, natural gas is the most important energy source for the production of hydrogen.
Japan’s energy supply is dominated by the importation of oil and liquid natural gas (LNG) which means it is dependent on a small number of countries, primarily in the Middle East. Replacing some of the oil and LNG with hydrogen, which can be imported from many other countries, is seen as being an important way of reducing vulnerability. Such hydrogen would probably be made out of coal - an energy source that is available in many countries. In order to achieve this, specially designed ships will be built. Another alternative is to import ammoniac as fuel for large-scale electricity production.
When it comes to volume, the long-term plan is that hydrogen will primarily be used for the production of electricity. However, Japan intends to demonstrate its know-how in this field at the 2020 Olympic Games in Tokyo by using hydrogen for both the Olympic Village’s energy supplies and fuel for many of the Village’s buses and cars. To be able to do this, there are substantial subsidies available for the purchase of cars and buses with fuel cells and investments in hydrogen refuelling stations. Vehicles and fuel cells are seen as being a complement to battery-driven vehicles. The advantages of fuel cells and hydrogen are greater capacity and much faster refuelling.
In the USA, there is rapid development of hydrogen fuel cells for fork-lift trucks and backup power for hospitals, offices and mobile phone towers. In these sectors, the use of hydrogen could be the most competitive solution from a financial point of view for some companies.
The state of California is pushing for a regulation that prescribes that the development of buses and cars with fuel cells and hydrogen must result in vehicles with zero emissions. The main reason for this regulation is to reduce local air emissions. Developments have come furthest with regard to buses since access to refuelling stations is not as important for buses as for cars. Only one refuelling station is required in order to supply a local fleet of buses with hydrogen.
Today there are more than 100 active players in Sweden within the field of hydrogen and fuel cells. These include major industrial players such as AGA, Sandvik and SSAB. There are also newer, small players whose activities have growth potential. Some examples are fuel cells from PowerCell and fuel cells plates from Cell Impact. There are also several universities, consultant companies and institutes in Sweden that are active in the field of hydrogen and fuel cells.
The production of hydrogen in Sweden could be substantial if electricity is used to produce hydrogen for the steel production industry. That hydrogen would be produced using renewable energy sources - hydropower and wind power. The hydrogen would then be a relatively eco-friendly energy carrier. However, using coal as an energy source to produce hydrogen would not be particularly eco-friendly. If hydrogen is produced from coal and used in a fuel cell car, the emission of greenhouse gases is greater than that from a petrol or diesel car, unless the carbon dioxide is sequestered at the hydrogen production stage. This could mean that hydrogen may be seen as being an energy carrier that is harmful for the environment. To counteract that, Sweden should promote the labelling of hydrogen so that consumers can choose hydrogen that has been produced in a more sustainable way.
As well as hydrogen being used in steel production, it should be possible for hydrogen to grow as fuel for forklift trucks and as backup power. The government could support that kind of development in the same way as the USA, namely by adapting regulations, compiling knowledge and through monitoring.
When it comes to vehicles, hydrogen fuel cells are further away from being competitive. Moreover, battery-driven vehicles are developing fast but compared with batteries, fuel cells enable longer distances and faster refuelling. These properties are important, not least for public transport and in a share economy where a self-drive vehicle is shared by several people. However, the market in Sweden is too small to pursue this development which means Sweden will probably be a follower or it may need to get involved in international cooperation projects. If it is decided that investments in hydrogen for vehicles can be justified, a first step would be to increase the number of hydrogen refuelling stations. State aid would be needed to do that.
Hydrogen could become big – But how should it be produced and who will use it?
Direct response 2016:27