In this final Part 4, I present my case for why the hydrogen-plus value chain is going to be key to getting Singapore to Zero, while enhancing energy supply and enabling new growth opportunities. Hydrogen-plus encapsulates the idea that hydrogen need not be viewed in isolation, but more as a key enabler of a broader solution. I discuss this more below. This is the part I am personally most excited about so I’ll get right into it.
Part 4 outline:
Framing the Overall Discussion
In the IEA’s 2019 report, The Future of Hydrogen, the IEA describes “clean hydrogen is currently enjoying unprecedented political and business momentum” and calls for “pragmatic and actionable recommendations” to be acted upon “to take full advantage of this increasing momentum”.
But I also want to address the opposite sentiment right upfront as well. Despite the growing and widespread enthusiasm for hydrogen, it seems hydrogen is also potentially becoming a controversial topic with plenty detractors as well, who for many reasons think hydrogen is “bad”. Perhaps one of the more high-profile incidents that contributed to this controversy is Elon Musk’s labelling of hydrogen fuel cells as “fool cells” and ‘mind-bogglingly stupid‘.
“Battery vs Hydrogen“. This is straight up a false dichotomy we do not need for constructive and progressive discussions. I do not believe in absolute one-size fit all solutions, and there are applications where batteries will do better, and some that hydrogen will. And for some use segments that Tesla is targeting, Elon Musk is correct, but I think the negative characterization wasn’t necessary.
The bigger picture for hydrogen is in fact its potential to tackle hard-to-decarbonize sectors such as heavy-duty transportation such as marine fuels and long-haul trucks and industrial processes such as steelmaking.
And for energy-importing countries like Singapore, which do not have adequate local renewable power resource, hydrogen promises to be a viable pathway to decarbonize power generation by importing zero-carbon energy resources from resource-rich regions.
In other words, the “best” solutions are application-specific and circumstantial. So the question isn’t whether hydrogen is “good or bad?” But instead “what is the best / lowest-cost zero-carbon solution for each application or circumstance?”
I am a proponent of hydrogen not because hydrogen is an absolute and total solution, but because of its potential to complement renewable power (and batteries) to deliver a more holistic energy transition solution for the world.
Common Arguments For and Against
I would be remiss if I did not address the fundamental arguments for and against hydrogen. Hydrogen has great potential, but it does have its inherent challenges. Fortunately, there are now available solutions to many of these challenges, which is why hydrogen is gaining traction, not just from an aspirational perspective, but from technical and economic ones as well.
- Clean: on combustion (or utilization in fuel cells), only energy and water are released
- Versatile: can be used across a wide range of energy applications and is a valuable feedstock for chemicals and manufacturing
- Complements Renewables: to tackle hard-to-decarbonize sectors
- Offers pathway to Zero: Can be made from low-carbon sources, and eventually entirely from renewable energy
- Not Zero-Carbon: around 99% of all hydrogen is produced from gas and coal today
- Expensive: challenging to handle, store, transport and distribute makes the hydrogen value chain costly
- Inefficient: the hydrogen value chain suffers from substantial efficiency losses, e.g. when compared to using batteries to store and discharge renewable electricity
- Unsafe: negative public perception of hydrogen being explosive and unsafe
- Hype?: It’s been proposed before. What’s different this time?
The first two arguments are really only valid in today’s hydrogen value chain and are not relevant to the potential of where the hydrogen value chain could be 10-20 years from now. Trends are already underway to resolve these key challenges and are presenting very interesting opportunities that are actionable today. This is the main topic of this proposed roadmap. How we can begin producing zero-carbon hydrogen at low-cost and at-scale and resolve the logistics challenge so that transporting the hydrogen to markets do not result in a huge cost penalty.
But before we get to that, I think it is just as important to comment on arguments 3 to 5 in more detail to address some prevalent biases.
1. Inefficient. Here’s a chart that is commonly found on the internet on discussions about why hydrogen doesn’t make sense.
At first glance, I will admit that this can be quite persuasive. Efficiency is what engineers obsess about to maximize value for a given input. However, this comparison is circumstance-specific and alone cannot lead to a general conclusion that battery is better in all circumstances. Consider the following:
- Adjustment for production-related energy. Manufacturing batteries is energy intensive. Using the baseline GREET 2018 conditions, the lifecycle energy associated with the production of batteries is approximately 315 kWh / kWh-battery. Assuming a battery is good for 500 full-depth cycles, then efficiency would be adjusted from 73% to [500 x 73% / (500+315)] = 44.8%. The same analysis could be done for the other two pathways, but the penalties would not be as substantial.
- Additional battery load. The bottom line of the analysis concludes at the kinetic energy (or motion energy) delivered to the wheels. But batteries are heavy and add to the load a battery electric vehicle must carry. This reduces actual mileage efficiency that is not accounted for in the analysis.
- Efficiency is not everything. The fact that the fossil-fuel to internal combustion engine value chain is highly inefficient yet thrived suggests that efficiency is not the only factor of consideration. There is utility value in fungibility, convenience, availability, and supply chains that the battery pathway cannot fulfil.
- Efficiency penalty is necessary for utility. The above analysis assumes there is availability of renewable power next door, and this is an ideal scenario, and not a practical assumption for all circumstances, especially for energy-importing countries such as Singapore. Renewable power, no matter how abundant, is useless if it cannot be cost-effectively connected to markets. For energy to be transported, conversion is often necessary to reduce logistics costs and attrition of energy during transmission, and conversion inevitably leads to efficiency losses. For example, even electricity has to be transformed to high voltage to minimize resistive losses over long distances, and many more examples where efficiency penalties are a necessary function of optimizing a value chain. At the end of the day, what matters is the final cost to customers and the carbon intensity of the final energy delivered.
2. Unsafe. All forms of fuels and energy storage are inherently dangerous to a certain degree. Some points to note here:
- Standards. We have been using highly combustible fuels for decades and throughout have understood and improved the standards of handling these fuels. Hydrogen will have to go down the same path. Safety standards must be developed, especially around handling, fuel systems, and fail safe features at the pump, tailored to its specific properties.
- Give and take. While hydrogen is more easily ignitable than petrol or diesel, it is non-toxic and much lower density than air, implying that it would dissipate very quickly upon an accidental leak.
- Batteries are no different. Safety risks such as thermal runaways in batteries can be triggered by several events. But these likewise can be mitigated by engineering of appropriate controls.
3. Hype? The global momentum around hydrogen is not the first time in history this has happened. In fact, the history of hydrogen and fuel cells go back two centuries. Some notable events:
- 1959: Francis T. Bacon of Cambridge University in England invents the first practical hydrogen-air fuel cell.
- 1970: Electrochemist John Bockris coined the term “hydrogen economy”, publishing a paper than describes how hydrogen plays a role to enable the United States to be supplied with energy derived from the sun.
- 1973: OPEC oil embargo and oil supply shock sparked fears of end of the era of cheap petroleum, and the need for alternative fuels. Development of hydrogen fuel cells for commercial applications began.
- 2003: President George W. Bush announced in his 2003 State of the Union Address a $1.2 billion hydrogen fuel initiative to develop the the technology for commercially viable hydrogen-powered fuel cells. This was around the time when concern for peak oil was growing.
The 1973 and 2003 events suggests that the sudden urgency and enthusiasm for hydrogen fuel cells in the past have been borne out of a necessity to ensure energy security. But as soon as the oil supply pressures eased, markets returned to petroleum and hydrogen became a fancy and expensive fad. Addressing climate change had always been a secondary goal, behind affordable energy.
What’s different now? Three things:
- A global consciousness shift: Climate urgency has become ever more important, and for the first time in modern history, global priorities are shifting towards environment over economics. The pricing of carbon reflects this change in mentality. Corporations are increasingly laying out ESG and net-zero initiatives. Investors are adhering to ESG policies and pulling out investments from companies that are not aligned with combatting climate change. Policymakers are also committing their countries to net zero targets. And more than ever, people, especially the younger generation are actively demanding for ‘less talk more action’.
- Pathway to cost-competitiveness: The rapid decline in capital costs of renewable power in the 2010s provides strong widespread confidence in a viable path to a viable hydrogen economy. Furthermore rising carbon costs will increase the costs of carbon-emitting energy and expedite the path to cost-parity.
- Enabling technologies: The advancement of sensors and digitalized control systems will help make the handling and utilization of hydrogen much safer. And technologies for carbon capture and sequestration have been further developed that will help lower the cost of low-carbon hydrogen as a transition step.
So while there are certainly shortcomings, they can mostly be addressed with technology, right policy, and concerted effort by industry to develop the value chain.
Nature Provides the Clues: Hydrogen-Plus
The reality is that we use hydrogen all the time. It is not just in fossil hydrocarbon fuels, but also in the food we eat, e.g. carbohydrates (containing carbon, hydrogen and oxygen). Hydrogen is prevalent in fuels, natural or synthetic, because it is a very good carrier of energy. By itself, combustion only releases water, but it is indeed challenging to store and distribute, rendering the value chain costly. Cost and scale have been the greatest barriers to adoption. But nature provides us with some clues:
- Storage and Distribution: Nature has evolved to combine hydrogen with carbon and oxygen, so that energy from the sun can be captured and stored in stable carrier forms that can be efficiently distributed over long distances.
- Utilizable carrier: The carrier forms (e.g. carbohydrates) are not just carriers but also have utility in themselves and need not be reconverted back into hydrogen.
- Materials: The combination of hydrogen and carbon are also basic building blocks for materials – not just plastics, but also our human bodies, which approximately 98% of the atoms are hydrogen, carbon and oxygen.
Hydrogen-plus: So hydrogen-plus refers to the idea that hydrogen is best coupled with other elements to create energy carrier forms that are stable, easy to store, transport and highly versatile in terms of direct-use applications, or be reconverted back into hydrogen at end markets.
Inspirations from nature: As we’ve discussed, hydrocarbons are not inherently bad because of the carbon content, but specifically fossil hydrocarbons that contain fossil carbon that was locked away in the ground. So the question becomes, how can we replace the fossil carbon with a different binder? Sustainable carbon is an obvious contender. But there are only two sources and both have their challenges:
- Biomass: Sourcing biomass at scale to support our vast global energy system will be challenging. It would have to be done sustainably without the typical adverse impacts from anthropogenic change-of-land-use.
- Direct Air Capture (DAC): DAC captures CO2 directly from air. This has high potential in the longer term future, but the technology is as of date not yet commercially feasible due to its high cost.
Hydrogen + Nitrogen: Ammonia
An alternative binder is nitrogen. Hydrogen can be combined with nitrogen to form Ammonia (NH3). This is a well established process that has been used for decades. Nitrogen is abundant in the air (78%) and so it is easy to cycle it through the atmosphere – Nitrogen extracted from air to produce ammonia, and on utilization, nitrogen is released back into the air. Coincidentally, nitrogen is also the fourth most abundant element in our body (talk about mimicking nature).
Ammonia as an energy carrier and hydrogen carrier has been discussed for years. But it has never become more relevant now that the hydrogen trend is underway and ammonia is an optimal zero-carbon solution for hydrogen’s shortcomings around storage and distribution.
Already, ammonia is a globally traded commodity, primarily for nitrogen fertilizers:
- Annual production volume: 181 million metric tons
- Ammonia has been shipped globally for over 75 years
- Ports around the world have infrastructure to receive and deliver ammonia
- Established handling and safety standards
An ammonia-based hydrogen energy value chain can leverage existing global shipping infrastructure to connect supply regions to markets cost-effectively.
In “The Future of Hydrogen” report, IEA also compares the three highest potential seaborne transport options for hydrogen – (a) liquefied hydrogen, (b) liquid organic hydrogen carriers (LOHC) and (c) Ammonia. It draws the same conclusion that ammonia is the lowest cost option. Some key points to note for each option:
- Liquefied Hydrogen: negligible reconversion cost. But costly to liquefy due to very low boiling point (-253 deg C); storage is costly as well and boil-off has to be managed to reduce attrition of product.
- LOHC: Easy to store and ship and use existing shipping infrastructure. But dehydrogenation step is costly and requires energy input at import destination; carrier must be returned to export location on ballast voyage; multiple LOHC technologies with lack of standardization.
- Ammonia: Easy to store as liquid under moderate pressure (~10 bar) or moderate refrigeration (boiling point of -33 deg C); highest hydrogen content per unit volume of the three options; benefit from existing shipping infrastructure; high recoverable hydrogen per unit carrier-mass relative to LOHC; flexibility to use directly as zero-carbon fuel. But dehydrogenation requires some energy input (slightly less than LOHC).
Production of Clean Hydrogen
The above discusses how we can transport hydrogen to markets cost-effectively. But how can we produce cost-competitive clean hydrogen?
First of all, it is important to qualify the adjective ‘clean’ in front of hydrogen. While hydrogen combusts to release only energy and water, the lifecycle carbon intensity of the hydrogen is dependent on the upstream production process.
There are primarily 4 major types of hydrogen, each given a color code.
|Brown||Produced via coal; CO2 is emitted||19 – 20|
|Grey||Produced via natural gas; CO2 is emitted||9 – 11|
|Blue||Produced via natural gas; CO2 is captured and permanently stored||0.2 – 1|
|Green||Produced via renewable-powered electrolysis||0|
According to the The Future of Hydrogen report by IEA, around 71% of the world’s hydrogen is currently made via grey, 28% via brown and other fossil feedstock, and less than 1% via green and blue. In aggregate, hydrogen production contributes 830 million metric tons of CO2 per year.
Going forward, hydrogen production must only be from Blue or Green pathways for hydrogen to contribute to the decarbonizing of global energy systems. Collectively, Blue and Green are referred to as ‘Clean’.
Blue, then Green
Transitioning the global energy system requires a balance of costs, scale and overall system emissions. The Framework presented in Part 3 emphasizes this whole-of-system mentality and approach required to evaluate what options we should undertake and how we sequence them. In that regard, while it may be appealing to go straight to Green, there are several reasons why Blue should come before Green.
Unit Cost. In aggregate, Blue is expected to be more cost-competitive than Grey by 2025-2030, while Green is expected to be more cost-competitive than Blue in some regions by 2030 and in most regions by 2050. The diagram below, extracted from the Hydrogen Council’s Feb 2021 report Hydrogen Insights, illustrates these cost trends.
Total Capital Cost. According to the Hydrogen Council report, Hydrogen, Scaling Up, global demand for hydrogen could be as high as 78 EJ by 2050, which is equivalent to around 650 million metric tons per year. To produce this amount of hydrogen via the Green pathway and converted into ammonia would require a CAPEX investment (at today’s costs) in the order of $15.3 trillion; whereas the Blue pathway would require around $3.8 trillion.
Substantial Power. To produce 650 million metric tons of hydrogen per year via renewable-powered electrolysis would require around 35,750 TWh of renewable power.
- This is around 1.3x the world’s total electricity generated from all sources of around 27,000 TWh in 2019.
- Assuming the best solar irradiance of around 2,000 kWh/kWp (e.g. deserts in Middle East), around 18,000 GWp of solar PV would required. This is around 30x the aggregate solar PV capacity installed globally today.
- It would be more reasonable to prioritize decarbonizing the power sector itself first, except where the renewable resource is too disconnected from end-use markets, and cannot be connected cost-effectively via grid.
Practically Zero. Blue is not 100% zero-carbon, as 100% carbon capture is not practically feasible. However, capturing CO2 in upstream production is most effective as it is done early in the value chain when CO2 is most concentrated and in large quantities, allowing for economies of scale in carbon capture and storage.
Additionally, upstream extraction of natural gas and power have to be accounted for, although contribution from these sources are also decreasing with better methane leak management and a cleaner power production mix. Overall, the carbon footprint of Blue is as much as 90-95% reduction relative to Grey, and for practical purposes, this is a significant reduction and puts us on the right path to zero.
Blue is critical to transition. In summary, Blue hydrogen offers the potential for commercially viable, scalable, cost-competitive low-carbon hydrogen production to kickstart the transition until Green becomes viable by around 2050.
Hydrogen-Ammonia Value Chain
The diagram below illustrates the elegance of the hydrogen-ammonia value chain.
Scaling up Clean Hydrogen Supply with Blue. Blue hydrogen can be produced in regions with good gas supply and CCS capacity. With practically zero carbon footprint, Blue hydrogen will play a vital role in the next 20-30 years to rapidly scale up global hydrogen supply and decarbonize global energy systems.
As costs of solar PV, wind turbines, energy storage and electrolyzers continue to fall, Green hydrogen is expected to become cost-competitive with Blue by 2030 in certain regions and begin large-scale capacity deployments in parallel with Blue. By 2050, Green is expected to be more cost-competitive than Blue in most regions and will gradually displace Blue production capacity.
Lowest seaborne transportation logistics cost. In most circumstances, such as the case for Singapore, supply regions and markets are separated by oceans. As discussed, Ammonia is already being shipped globally for decades and is best positioned to leverage existing shipping infrastructure. Overall, it is the lowest cost pathway for shipping hydrogen.
- Direct use: In addition to being the lowest-cost hydrogen carrier, ammonia is also by itself a fuel and has its own direct applications. Some direct applications of ammonia include ammonia as zero-carbon marine fuels, power generation, and fertilizers.
- Reconversion: Ammonia can also be reconverted into hydrogen via cracking. The recovered hydrogen can then be distributed locally to serve applications such as industrial feedstock, ground transportation fuel, and building heat and power.
- Zero-carbon: Since ammonia does not contain carbon, all end uses above do not result in CO2 emissions, i.e. the entire clean hydrogen-ammonia value chain practically has a zero carbon footprint.
Countries/Regions Actively Developing Hydrogen
In line with their commitments to net zero, several countries have already announced specific plans for hydrogen as part of their energy transition strategy. Worth noting include:
Japan‘s Green Growth Strategy
- In December 2020, Japan’s Ministry of Economy, Trade and Industry (METI) announced its Green Growth Strategy.
- At the outset, METI describes the Green Growth Strategy as “a set of industrial policies to create a virtuous cycle of economy and environment” – an opportunity for further growth rather than a cost of managing climate change.
- Non-electricity sectors:
- Japan plans to decarbonize by electrification where feasible
- Use new zero-carbon fuels, including hydrogen
- Use fossil fuels with carbon capture and storage (CCS)
- Electricity sector:
- Expand renewable capacity, in particular offshore wind
- Nuclear power
- Thermal power with CCS
- Hydrogen and Ammonia for power
- Ammonia targets:
- Demand: 3 mil tons by 2030; 30 mil tons by 2050
- Applications: Power generation and Ship fuel
- Power (begin with 20% ammonia co-firing in 2030 and increase over time)
- Supply chain: target to secure 100 mil tons supply through Japanese companies to supply local demand and start supply to other Asian countries by mid 2030s
- To secure supply, Japanese companies are now making investments along the value chain.
- Hydrogen targets:
- Demand: 3 mil tons by 2030; 20 mil tons by 2050
- Applications: Power generation (5-10 mil tons), heavy-duty vehicles (6 mil tons), steelmaking (7 mil tons)
- Notable industry activity:
- Japan METI formed the Ammonia Energy Council (October 2020) with membership from the Japanese public and private sector
- JERA (November 2020), a JV between two of Japan’s largest power companies, TEPCO and Chubu Electric, has set out a roadmap to decarbonize its power generation facilities with ammonia. JERA will begin by co-firing ammonia at 20% in 2030, and shift to 100% ammonia by 2040. JERA is working in collaboration with IHI, Marubeni and Woodside Energy on the ammonia value chain.
- Mitsubishi Heavy Industries announced (March 2021) it is developing a 100% ammonia-fired gas turbine, targeted to be commercialized by 2025.
- Saudi Arabia and Japan demonstrated world’s first production and shipment of blue ammonia in 2020.
South Korea‘s Hydrogen Roadmap
- In January 2019, South Korea’s Ministry of Trade, Industry and Energy (MOTIE) released the Hydrogen Economy Roadmap of Korea.
- Concurrently, a Study Task Force consisting of Korean industry participants release the Hydrogen Roadmap Korea.
- Key points:
- Hydrogen as central to Korea’s energy and decarbonization strategy
- Leverage Korea’s strengths in hydrogen fuel cell technology and petrochemical plant infrastructure for producing, circulating and utilizing hydrogen
- Focus on hydrogen fuel cell EVs. By 2040, 40,000 buses, 80,000 taxis, 30,000 trucks, 2.9 million cars, and 1,200 hydrogen refueling stations; 3.3 million FCEVs to be exported by 2040.
- Hydrogen pilot cities will be created to utilize hydrogen in all possible areas – residential industrial and transportation.
- Hydrogen targets:
- 2030: 4.9 mil ton/year
- 2040: 8.8 mil ton/year
- 2050: 16.9 mil ton/year (32% transport, 21% building heat and power, 15% power)
- Notable industry activity:
- Hyundai (July 2020) produces world’s first heavy duty fuel cell EV truck on assembly line and plans to roll out 1,600 units by 2025
- POSCO (December 2020) announces plans to establish hydrogen production capacity of 5 million tons and contribute to establishing South Korea’s hydrogen ecosystem.
- SK Group and Hyundai Motor (March 2021) form a “hydrogen alliance” to expand the hydrogen charging infrastructure – “ultimately install hydrogen chargers at every SK gas station across the nation”. SK commits to invest $16.4 billion over next five years into building a hydrogen value chain.
EU’s Hydrogen Strategy
To become climate-neutral by 2050, Europe needs to transform its energy system.— European Commission 🇪🇺 (@EU_Commission) July 8, 2020
▶️ Watch @TimmermansEU and @KadriSimson present the EU strategies for Energy System Integration and Hydrogen.
They will bolster the #EUGreenDeal and the green recoveryhttps://t.co/ykCGKX1lgU
The Hydrogen Strategy is an integral part of the Europe’s clean energy transition. The EU projects that renewable electricity can decarbonize a large share of EU’s energy consumption by 2050, but recognizes that hydrogen will be critical to bridge the gaps as “a vector for renewable energy storage”. In particular, “hydrogen can support the decarbonization of industry, transport, power generation and buildings”. The EU expects hydrogen will form 13-14% of its energy mix by 2050.
The Hydrogen Strategy is also part of The European Green Deal, which like Japan’s and South Korea’s plans, is positioned as a plan for simultaneous economic growth and decarbonization.
In conjunction with the release of the Hydrogen Strategy, Hydrogen Europe, a research initiative of the European Commission and Fuel Cells & Hydrogen Joint Undertaking (FCH JU), released the “Hydrogen 2030: The Blueprint” report. Key highlights:
40 GW electrolyzers in Europe (requiring additional 80 GW of additional renewable electricity production from onshore/offshore wind and solar PV).
40 GW in Europe’s neighbourhood (30 GW in North Africa and 10 GW in Ukraine) with export to the EU.
8.2 mil tons existing grey hydrogen could be retrofitted with carbon capture equipment, though it is unlikely not all can be done given space and CO2 storage constraints.
Additional 1.3 mil tons production required and expected to be via coal with CCS.
The EU sees itself at the “forefront of hydrogen developments”, and aims to “create a world class manufacturing industry, especially in electrolyzer, fuel cell and other hydrogen equipment and manufacturing applications”.
There is a common theme in the country examples of Japan, South Korea and the EU region.
- Hydrogen plays a critical role in the energy transition towards decarbonization and enabling a more sustainable energy system
- Hydrogen will enable new economic growth opportunities
- Each country/region has identified its core competence and has clear hydrogen strategies to maintain its respective leadership position.
- Each sees this as a broader economic opportunity for which they can export their expertise to the world as the hydrogen economy develops globally.
- Japan focus: technology development for fuel cells and power generation; and global supply chain development and procurement.
- South Korea focus: ground transportation, including hydrogen fuel cell vehicle manufacturing and integrated hydrogen infrastructure.
- EU focus: technology for clean hydrogen production – electrolyzers (alkaline, PEM, SOEC) for Green hydrogen, syngas process and carbon capture technology for Blue hydrogen; and technology for clean fuel utilization – e.g. ammonia. The EU is also a world leader in policy implementation for cleaner energy standards, including the EU Emissions Trading System (ETS), Carbon Contracts for Difference programme, and certification standards.
- Net-importers of energy: These countries also have modest renewable energy resources and do not have enough to produce all its hydrogen demand from renewable power. They also do not have much domestic gas supply and/or CO2 storage capacity, limiting the scale of Blue hydrogen production. Therefore, each will be an energy net-importer, just as they have been in the era of fossil-fuels.
Singapore has considerably less land space and no energy resources nor CO2 storage capacity compared to the countries mentioned. Singapore too will be an energy net-importer in a zero-carbon energy world.
But how can clean (Blue & Green) hydrogen and ammonia be applied to decarbonize Singapore’s Energy System?
And just as important, considering the above pointers and Singapore’s inherent lack of resources to produce clean hydrogen and ammonia at-scale, how can Singapore position itself to be relevant and play a strategic role in this rapidly emerging zero-carbon energy value chain?
We explore these two questions in more detail in the final sections below.
Background: The International Maritime Organization (IMO) has been one of the more prominent global-level organizations promoting the reduction of pollution and emissions; which in the case of IMO, applies to global shipping. In 2017, global shipping consumed 276 million metric tons of oil equivalent per year, and emitted around 1.06 gigatons of CO2 (around 3% of global total CO2 emissions). Traditionally, ships consume high-sulfur fuel oil (HSFO), which is the heaviest and most-polluting fraction of oil, “the bottom of the barrel”, and has been a major contributor of pollutants such as SOx, NOx and particulate matter (PM).
In a series of targets, IMO has played a key role in driving down emissions in the shipping sector. These targets are as follows:
- IMO 2020: Reduction of sulfur content (by mass) in fuel to 0.5%
- IMO 2030: 40% reduction in CO2 emissions across fleet
- IMO 2050: 70% reduction in CO2 emissions across fleet
Alternative fuel options: In response, there has been a flurry of activity in the shipping industry, exploring various fuel options that could meet these objectives. Some of these fuels are:
- Low-sulfur fuel oil (LSFO) and Marine Gas Oil (MGO). These are still oil-derived fuels. They meet the low-sulfur standards of IMO2020 but, because of the refining required, have a higher GHG intensity than HSFO. So these fuels are temporary options.
- Liquefied Natural Gas (LNG)
- For several years, LNG has been touted as possible marine fuel of the future because relative to HSFO, it emits significantly lower amount of pollutants and also around 20-30% lower carbon intensity. However, the fact that it contains fossil carbon implies that LNG is not compatible with IMO 2050 targets and the longer-term net-zero future, unless the carbon is bio-sourced or captured from ambient sources.
- Furthermore, LNG, which is essentially methane, is a more potent greenhouse gas than CO2. The extended value chain from well to ship gives rise to higher probability for methane slip, and such slippage, from a GHG perspective, has the potential to offset any carbon reduction benefit.
- In one of two reports put out by the World Bank in April 2021, “Volume 2: The Role of LNG in the Transition Toward Low- and Zero-Carbon Shipping“, the World Bank details its findings and its conclusion that LNG has a “Limited” role as a bunker fuel and given “the uncertainties surrounding the GHG benefits of LNG suggest that new public policy support for LNG as a bunker fuel should be avoided.“
- Methanol. Like LNG, use of methanol as marine fuel would have lower pollutant and CO2 emissions. But just like LNG, methanol also contains carbon, which if produced via fossil natural gas is not compatible with the longer term zero-carbon future.
- Ammonia. Ammonia (and hydrogen) is the only option that does not contain carbon and so does not emit any CO2 on combustion, offering the best pathway to meet IMO2050 and global net-zero targets.
Considering the above options and the growing global determination to get to zero-carbon, Ammonia is quickly rising to become the top candidate for marine fuels going forward. Just in the short span of 2020-2021, almost all major shipping companies, bunkering and trading companies have indicated interest for ammonia fuel. Major marine engine manufacturers such as MAN and Wartsila are also actively developing ammonia-powered engines and are on-track to have these commercialized by as early as 2024.
MPA on Ammonia. In light of these developments, I am encouraged that the Maritime and Port Authority of Singapore (MPA) has taken up an active role in developing the opportunity for ammonia bunkering as one of the tools to decarbonize global shipping.
Given that Singapore is the largest ship refueling port in the world, I believe Singapore’s participation in this transition to zero-carbon ammonia fuels is one of the strategically important angles in which it could play a global leadership role.
Singapore: Power Generation
Today, over 95% of Singapore’s power is generated by natural gas-fired combined cycle gas turbines (CCGT). We are using the cleanest fossil resource and also the most efficient technologies, resulting in a relatively low grid carbon intensity of 400g/kWh. This is a great achievement, and Singapore has been ahead of the curve in the 2010-2019 decade where switching to natural gas was touted globally as the transition fuel to a sustainable energy future.
But the global carbon situation has evolved rapidly. If we are to get to net zero, we will need a plan to transition away from LNG to zero-carbon fuels. Ammonia is a potential candidate.
As noted before, Mitsubishi Heavy Industries is already developing 100% ammonia-fired gas turbines which are targeted to be commercialized by 2025. This could be the technology of choice for expanding gas-turbine power generation capacity.
Ongoing research also suggests that a blend of ammonia and hydrogen (70:30 to 50:50) has similar operating properties of natural gas and could be used in existing natural gas-fired gas turbines with necessary modifications. Since ammonia can be cracked to recover hydrogen, it is possible to couple a cracker with a gas-turbine, so that ammonia delivered can be cracked on-site to get the optimal blend. This offers the opportunity for existing gas turbines to be retrofitted, rather than build new capacity.
Additionally, just like the co-firing of ammonia with coal, Japanese engineering companies such as MHI and IHI are already actively engineering solutions for ammonia and hydrogen to be blended with natural gas to be used in existing gas turbines, likely also with some retrofit.
With electrification as a core strategy for decarbonizing Singapore, coupling that with reducing the carbon intensity of power generation will result in a greater decarbonization effect. In addition, the inorganic addition of demand from electrification of the transport sector and setting up of new data centers will have to met with new supply, providing Singapore an opportunity to develop new zero-carbon power generation capacity.
Generally, there are two kinds of emissions related to industry (using cooking as an analogy):
- Process emissions are derived from the chemical conversion of feedstock (ingredients),
- Energy-related emissions are that from the combustion of fuel (cooking gas) or indirectly the grid carbon intensity if electricity is used.
Singapore’s industries are primarily petrochemicals based, which emission profile is typically around 1/3 process emissions, and 2/3 energy-related emissions.
There are a few approaches to decarbonizing industry:
- Carbon capture and storage (CCS): If CO2 can be captured from the process and stored away permanently, the carbon emissions from use of fossil-fuels can be abated. Unfortunately, Singapore does not have much CO2 storage capacity so this approach would not be feasible.
- Carbon capture and utilization (CCU): Just like the Newater concept, carbon captured can be recycled as a feedstock for industrial processes to produce both fuels and materials. The recycling can be thought of using the carbon twice, effectively reducing the carbon intensity. It is a good transition step but does not offer a sustainable pathway towards net-zero emissions.
- Electrification: Certain portions of energy use such as driving mechanical components and certain heating applications can be electrified, providing a pathway for overall value chain carbon reduction as the electricity grid is also decarbonized. In addition, by pairing electrolysis with CCU, electricity can also be used to convert CO2 into carbon monoxide (CO), which is a useful industrial feedstock.
- Cleaner Feedstock: Hydrogen is a useful feedstock used extensively in the petrochemicals industry for producing higher value chemicals. Introduction of clean hydrogen can decarbonize industry by displacing the use of fossil hydrocarbon feedstock.
- Zero-carbon energy: For the remaining processes which required on-site fuel-generated heat, zero-carbon fuels such as ammonia could be used as substitutes.
Considering the various options, the hydrogen-ammonia value chain offers Singapore several options to decarbonize its industry sector.
Singapore: Upstream Development
As we’ve discussed the clean hydrogen-ammonia value chain is highly applicable to decarbonizing Singapore’s own energy needs, allowing it to achieve its net-zero commitments despite being an energy importing country.
The natural follow-up question is where is the supply? The answer to that is… there isn’t much today.
As we’ve discussed, virtually 99% of ammonia and hydrogen produced today is via grey and brown; i.e. from fossil natural gas and coal without carbon capture and storage. Blue and green hydrogen-ammonia production capacity has to be developed globally at-scale to realize the decarbonization potential for the global energy system. And this is potentially Singapore’s next big opportunity.
Singapore’s strategic advantage is in its current position as an integral part of the fossil-energy value chain. Already, almost 20% of the world’s ship fuel is supplied by Singapore’s ports, Singapore is a major oil hub and is quickly becoming an LNG hub.
And as we have discussed, transitions are happening across multiple sectors that resoundingly conclude that clean hydrogen is an integral part of the overall solution. Naturally, Singapore is well suited to develop its place as a value chain integrator and a hub for clean hydrogen-ammonia in the region. Despite Singapore’s relatively small nation size, its reputation as a hub allows it to leverage volumes from regional demand and its sizeable market share of global shipping fuel to develop and secure upstream clean hydrogen supply at-scale.
Just as the Japanese companies have been “mobilized” to invest, develop and secure hydrogen-ammonia supply, and just as Singapore’s Pavilion Energy has been tasked to invest, develop and secure LNG supply, it likewise makes strategic sense for Singapore to consider investing, developing and securing supply of blue hydrogen-ammonia.
The natural gas resources, the carbon storage capacity, and the technology for blue hydrogen-ammonia production already exist today. Blue is readily deployable at-scale. The final challenge is to identify the right conditions to develop these projects at the lowest cost possible. Based on the work I do, low cost is a key factor to scale up production, anchor confidence in the sustainability of zero-carbon hydrogen-ammonia supply chains and catalyze the adoption in downstream applications to realize the decarbonization benefits.
In short, this is a dual-opportunity for Singapore to decarbonize Singapore’s energy system and unlock new growth avenues.
Integrated Value Chain Strategy
I’ve emphasized the importance of considerations around infrastructure capital investments. Infrastructure are long-lived assets and it would be prudent to leverage existing infrastructure, retrofit where possible, and only build new infrastructure that are compatible with the long-term energy transition.
Another key strategy is how we transition upstream and downstream assets separately but in synch as an integrated value chain, that allows ready-to-go infrastructure to be deployed first while others undergo their own transition.
The grey box represents the conventional fossil-based energy system. On the electricity side, coal-to-gas transition has been ongoing for about 2 decades to decarbonize electricity generation. In the illustration, ‘Electric Grid’ supplies electricity to conventional applications such lighting, heating and air-conditioning, and household and commercial appliances.
Transition Step 1 (yellow box): Electrification has been a successful decarbonization strategy. Specifically, electrification of applications that conventionally were powered by oil & coal, such as industrial compressors and ground transport.
The displacement of internal combustion engine vehicles (ICEVs) with battery electric vehicles (BEVs) is part of this transition. While most electricity is produced from coal and gas today and that means the lifecycle GHG impact of BEV isn’t always better than ICEVs, the significant decline in renewable power costs offers the potential for renewable power to become an increasing portion of the energy mix over time and decarbonize electricity generation, thereby reducing the lifecycle emissions of BEV. This is an example of how the downstream and upstream transition separately, but in synch towards the longer-term target of net-zero.
Transition Step 2 (green box): There are many applications that are hard to electrify and cannot fit into Step 1 by default. This includes industrial processes such as steelmaking, cement and chemicals, and heavy-duty transportation. For these applications, this is where the zero-carbon hydrogen-ammonia value chain comes in. It leverages the same successful transition strategy that upstream and downstream transition can happen separately but in synch.
Clean hydrogen-ammonia can be produced at-scale to supply a wide range of energy applications with moderate retrofit to global logistics infrastructure. Greater market penetration of hydrogen-ammonia will require new downstream infrastructure build-out but can be done gradually over 20-30 years.
Also, upstream Blue will be developed at larger scale than Green initially, and over 20-30 years transition to Green as costs for Green broadly become more cost-competitive than Blue.
The important point is that with the integrated value chain strategy, the macro-trends and opportunity set for investments upstream and downstream are evergreen. How the upstream or downstream transitions does not impact the other. Downstream assets can built with certainty of long-term relevance, and upstream assets can be built with certainty of long-term markets.
Transition Step 3: This is the remaining part of the energy system that cannot be addressed by the hydrogen-ammonia value chain. Specifically, the manufacturing of carbon-based materials which are prevalent in almost all the products we use today, require a carbon-based feedstock. Candidates include zero-carbon methane or methanol that can be produced from sustainable bio-source or captured ambient CO2. However, these sources are either not scalable or not cost-effective today and I believe them to be 10-20 years away before they become commercially viable. However, carbon-based materials represents a smaller proportion (<10%) of our current energy system, and it makes sense to work on the 90% lower-hanging-fruits first and address the remaining 10% later.
Considering this transition framework, Singapore’s energy transition could be illustrated as follows:
On the Singapore side (downstream), we can address:
- Marine fuels: transition of bunker fuels to ammonia
- Industry: Ammonia for heat and hydrogen for feedstock
- Electricity: Ammonia for power generation with dynamic load-balancing capabilities
- Transportation: Hydrogen fuel cells for heavy-duty transportation
On the upstream side, Singapore can play an active role in developing and investing in upstream production assets and securing supply, enabling a supply chain opportunity that would meet the volume needs for both Singapore’s energy transition, and regional supply.
Headwinds for LNG
Natural Gas has been a core strategy for Singapore to decarbonize its energy system, avoid urban pollution and also to enhance energy security. Since 2013, LNG has become an important route to import natural gas as pipeline-based imports declined. However, it appears LNG might face headwinds given the new developments in the zero-carbon energy value chain, technology, resources, market interest, policy shifts towards more rapid decarbonization. Some key considerations:
- The direct combustion of fossil natural gas is not compatible with net-zero targets
- Bio-methane and synthetic methane is unlikely to be produced at large-scale to meet global energy demand
- LNG volumes could be expected to continue to grow for around the next 10 years, but will eventually begin to decline as zero-carbon substitutes become more prevalent. Therefore, LNG as a broad-based energy supply has a limited lifespan and is likely to decline to niche applications.
- The infrastructure built for the LNG value chain is purpose-built and not directly compatible with many other fuels. Consequently, LNG assets may eventually be forced to operate at suboptimal rates or be decommissioned prematurely – the uncertainty of which is a risk on investment.
Major global trends are underway. Net-zero has become the a global agenda, not just among policymakers, but also of corporation and investors globally. More importantly, the world has what it needs to get going on decarbonizing energy systems.
Despite its relatively small nation size and lack of resources, Singapore can leverage its unique position as a value chain integrator and role as a regional hub to aggregate volumes necessary to develop and invest in upstream production assets. In so doing, Singapore can secure supply of zero-carbon energy that is critical to decarbonizing its energy system, and enable new economic growth opportunities as a hub to supply zero-carbon energy commodities to the region.
Thank you for reading this series of articles. If it has piqued your interest, do leave me your comments or questions below or in the contact page and I look forward to connecting with you.