Volume 46: Energy Transitions toward Carbon Neutrality: Part IX

A Novel Framework for Simulating Market Equilibrium in International Hydrogen Trade Khalid Alanazi, Shivika Mittal, Adam Hawkes, Nilay Shah

Abstract

Hydrogen has gained significant attention as a possibly important energy vector in the pursuit of climate change mitigation objectives. Global demand for renewable hydrogen is anticipated to increase across many decarbonization scenarios. To meet this demand, many countries have unveiled strategies aimed at bolstering domestic low-carbon hydrogen production or facilitating imports. Within this context, international trade has emerged as a means of importing hydrogen from regions with low-cost production capabilities. However, investment decisions in the development of international hydrogen markets are moving slowly due to large uncertainties regarding the magnitude of future demand and willingness to pay for hydrogen in key end- use applications.
In this study, we develop a novel modelling framework capable of simulating global hydrogen market equilibrium and international trade scenarios in the long-term future. Our methodology includes the development of supply and demand curves, as well as a global hydrogen trade model that takes into account various supply chain options. Using this framework, we are able to derive quantitative insights into equilibrium supply and demand, pricing dynamics, trade flows, costs, and many more. We apply this framework to investigate the optimal development of hydrogen markets in 2050 under a 1.5°C climate change mitigations scenario. Our findings indicate that new hydrogen sectors could see a global demand surge to 195.2 Mt, with international trade constituting a quarter of this demand.

Keywords hydrogen trade, hydrogen markets, energy systems modelling, supply-demand equilibrium