IEEJ：November 2021© IEEJ2021

IEEJ Webinar

The Economics of the Green Hydrogen
International Supply Chain
The Institute of Energy Economics, Japan (IEEJ)
Yoshiaki SHIBATA, ●Sichao KAN, Masato YOSHIDA, Hiroko NAKAMURA, Toshiyuki SAKAMOTO

Outline(1) Background & Objectives(2) Methodology & Assumptions(3) Major Findings

IEEJ © 2021

(4) Implications
1

Background & Objectives
v For Japan to achieve carbon neutrality by 2050, import of clean hydrogen from overseas will be necessary.
v Blue hydrogen, though cheaper today, has higher carbon footprint than green hydrogen. Besides, blue hydrogen also has
other risks such as increasing pressure on divestment of fossil fuel assets, etc.. In this sense, green hydrogen is one of
the important options for future clean energy supply.
v Furthermore, resource countries of green hydrogen is more diversified than that of blue hydrogen, which will also
contribute to Japan’s energy security.

IEEJ © 2021

This study reveals the costs and carbon footprint across the whole green and blue hydrogen supply chainsfrom potential suppliers to Japan.
2Cases

Solar PVWind
Natural gas + CCS
JapanBrown coal + CCS
United StatesSaudi Arabia| Liquefied Hydrogen (LH2)| Methylcyclohexane (MCH)| Ammonia (NH3)IEEJ © 2021

Australia

Source for map:https://www.stat.go.jp/data/sekai/pdf/worldmap.pdf

Chile3

Outline(1) Background & Objectives(2) Methodology & Assumptions(3) Major Findings

IEEJ © 2021

(4) Implications
4

Methodology: Hydrogen Supply

IEEJ © 2021

Green H2Blue H2

Hydrogenproduction

Hydrogenpipeline
Conversion

Export port
(Liquifiedhydrogenstorage tanks)

Liquified H2ship

H2+Toluene->
MCH

Export port
(Toluene storagetanks)

MCH shipPort in Japan(Toluene storagetanks)

MCH
Reconversion

Haber-Bosch:green H2 or H2from brown coal
CCS

Export port
(NH3 storagetanks)

NH3 shipPort in Japan(NH3 storagetanks)

NH3Reconversion
Or noreconversion

Natural gas reforming + CCS
Brown coal gasification + CCS

Water electrolysis with Solar PVor Wind power

Recoversion

Shipping

Liquefaction

Assume100km
pipeline
distance
for allcases

Receiving
port

Export port

Resource countries

Port in Japan(Liquifiedhydrogenstorage tanks)

Japan5Methodology: Blue NH3 from Natural Gasv Since the process of NH3 production from natural gas is already a mature and widely-used technology, thestudy assumes hydrogen production and NH3 production are integrated in the case of blue NH3 production
from natural gas.

NH3 production

Export port

Shipping

Receivingport

NH3 production
Natural gas
input + CCS(90% capture)

Export port
(NH3 storagetanks)

IEEJ © 2021

Resource countries

NH3 shipPort in Japan(NH3 storagetanks)

Reconversion

NH3Reconversion
Or noreconversion

Japan6

Methodology: Flow for GHG Emission Estimation

Green H2Blue H2

Upstream

Fossil fuelexploration,
production,
processing

No GHGemission forRE powergeneration

HydrogenHydrogenpipeline

H2 production(+CCS)
Naturalgas/coal +carbon capture
rate: 90%

Liquefaction(Grid electricity)
H2compression&pipeline(Gridelectricity)

No GHGemission

Conversion andexport port

Receiving
port

Using H2 as shipping fuelPort in Japan(Blue/Green H2 emissionfactor)(Gridelectricity)

Hydrogen + Toluene ->MCH(Grid electricity,natural gas)

Fuel for shipping: Very
low sulfur fuel oil(VLSFO)• NH3 production from H2(Grid electricity)• NH3 production fromnatural gas (Natural gas)

Fuel for shipping: Very
low sulfur fuel oil(VLSFO)Resource countries
IEEJ © 2021

Shipping

Port in Japan(Gridelectricity)

Port in Japan(Gridelectricity)

Recoversion

MCH-> Hydrogen+ Toluene(Natural gas, Gridelectricity)

NH3->Hydrogen +Nitrogen(Natural gas, Gridelectricity)

Japan

7

Major Assumptions (1)Two cases for Electrolyzer CAPEX (2030)

v225,000 ton annual hydrogen production(annual hydrogen consumption for 1 GW scalehydrogen power generation plant)

700USD/kW

v2030 as reference year

336USD/kW

v CAPEX, OPEX, conversion efficiency, and othertechnical spec assumptions based on studies from IEA(Future of Hydrogen) and Applied Energy Institute, etc.

IEEJ © 2021

Base Case

Low Electrolyzer Cost Case

8Major Assumptions (2)v Assumptions on renewable LCOE, capacity factor, fossil fuel prices, etc. were made based on published research
reports.

Chile

4.0

100%
90%

3.1cent/kWh80%

3.5
3.0
2.5
2.0
1.5

70%

1.9cent/kWh60%

46% 50%

32%

40%
30%

1.020%

0.5

10%

IEEJ © 2021

0.00%

100%
90%

3.5

80%

2.5
2.0
1.5

1.7cent/kWh32%

Gas

6.2

4Coal16.2-United States

4.0

3.0

Saudi Arabia

Australia

Australia

Fossil Fuel Price (2030)

Assumptions on RE LCOE and Capacity Factor (2030)

64% 70%2.1cent/kWh60%
50%
40%
30%

1.020%

0.5
0.0

4.0100%3.5

3.1cent/kWh 3.1cent/kWh80%

3.0

90%

70%

2.560%

2.0

41% 40%

1.5

50%

29%

30%

1.0

10%

0.50%0.0(USD/mmbtu)

20%
10%0%

Solar PV

Wind

Solar PV

Wind

Solar PV

Wind

LCOE

Capacity Factor

LCOE

Capacity Factor

LCOE

Capacity Factor(USD/ton)9Major Assumptions (3)International Shipping Routes
United StatesJapanSaudi Arabia

Yokohama

6,593 nautical
miles (12,210km)

9,254 nautical
miles (17,138km)

Ras Tanura

Chile9,192 nautical
miles (17,024km)

Australia
4,907 nautical
miles (9,088km)

Melbourne
IEEJ © 2021

Houston9,259 nautical
miles (17,148km)

Mejillones,
Antofagasta
Cabo Negro,
Magallanes
10Major Assumptions (4)v90% carbon capture rates for bule hydrogen/NH3 (IEA)

Assumptions on Grid CO2 Emission
Factor (2030)

vUS EPA’s report* is the reference for the estimation

Emission Factor(kg-CO2/kWh)of fossil fuel upstream GHG emission factorResource Country

Assumptions on Fossil Fuel’s Upstream GHG
Emission Factor
4.2 g-CO2eq/MJ

Australia

0.40

Chile

0.10

Saudi Arabia

0.30

United States

0.27

2.7g-CO2eq/MJ

IEEJ © 2021

＊Grid CO2 emission factors were estimated based on the countries’
2030 power generation mixes published by the governments.

Natural gas

Coal＊United States Environmental Protection Agency, Inventory of U.S.
Greenhouse Gas Emissions and Sinks 1990-201911

Outline(1) Background & Objectives(2) Methodology & Assumptions(3) Major Findings

IEEJ © 2021

(4) Implications
12Major Findings: Hydrogen Production Cost
Hydrogen Production Cost (2030)
1.7
1.7
1.3Green(Low ELY Cost)

Green(Base)Blue

AUS_CoalCCS
AUS_GasCCS
Saudi_GasCCS
US_PV

2.8
2.5
2.3
2.1
2.0
1.6
2.1
1.9
1.9
1.5
1.3
1.3

US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_WindIEEJ © 2021

0.0

1.0

2.0

3.0

Electrolyzer CAPEX:

700USD/kW
Electrolyzer CAPEX:

336USD/kW$/kg-H24.0

5.0

6.0

7.0

v If electrolyzer’s CAPEX could be reduced to around 1/3 of today’s level (900USD/kW) by 2030, green hydrogenproduction cost in countries such as Chile or Australia can be cheaper than blue hydrogen.
13

Major Findings: Hydrogen Import Cost
MCH

AUS_CoalCCS
AUS_GasCCS
Saudi_GasCCS
4.1
6.0 US_PV
5.7 US_Wind
5.5 AUS_Wind
AUS_PV
5.3
Chile_PV
5.2
Chile_Wind
4.8
US_PV
5.3
US_Wind
5.2
AUS_Wind5.0
AUS_PV
4.6
Chile_PV
4.5
Chile_Wind$/kg-H2
4.5

1.0Blue

2.0

3.0

4.0

5.0

6.0

7.0

3.2

2.8
2.5
2.3
2.1
2.0
1.6
2.1
1.9
1.91.5
1.3
1.3

Green(Base)

2.8
2.5
2.3
2.1
2.0
1.6
2.1
1.9
1.9
1.5
1.3
1.3

0.0

1.7
1.7
1.3

0.0

1.0

3.7
3.6

Blue

4.9
4.8

4.9
4.6
4.3
4.1
4.1
3.7
4.2
4.0
3.8
3.4
3.4
3.4

Green(Base)

1.7
1.7
1.3

Ammonia

Green(Low ELY Cost)

AUS_CoalCCS
AUS_GasCCS
Saudi_GasCCS
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind

Green(Low ELY Cost)

Green(Low ELY Cost)

Green(Base)Blue

Liquefied Hydrogen2.0

3.0

4.0

5.0

1.7
2.0
1.5

AUS_CoalCCS
AUS_GasCCS
Saudi_GasCCS
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind$/kg-H26.0

7.0

2.8

2.8
2.5
2.3
2.1
2.0
1.6
2.1
1.9
1.9
1.5
1.3
1.3
0.0

1.0

2.0

3.0

3.3

4.3

5.2
4.9
4.9
4.7
4.4
4.1
4.5
4.4
4.5
4.1
3.8
3.7
4.0

5.0

$/kg-H26.0

7.0

IEEJ © 2021v Green hydrogen from Chile has the lowest cost when the hydrogen carrier is liquefied hydrogen or MCH.
v However, when the hydrogen carrier is ammonia, blue hydrogen (produced with natural gas + CCS) is the cheapest.
14

Major Findings: Carbon Footprint
MCH

Liquefied Hydrogen
4.8
4.1

5.3

US_PV

5.3

2.1

US_Wind

2.1

US_Wind

4.8

AUS_PV

4.8

0.8

Chile_PV

5.0

Chile_PV

0.8

Chile_Wind
kg-CO2eq/kg-H25.0

Chile_Wind
kg-CO2eq/kg-H2

3.0
3.0

AUS_PV0.0
1.0
Production
Export terminal
Reconversion

2.0

3.0
4.0
5.0
Compressor&Pipeline
Shipping

6.0
7.0
8.0
Conversion
Import terminal

9.00.01.0
2.0Production
Export terminal
Reconversion

3.0

4.0
5.0
6.0
Compressor&Pipeline
Shipping

5.2

2.8

5.2

3.5

5.9

3.5

AUS_PV

7.0
8.0
9.0
Conversion
Import terminal

5.0

2.8

US_Wind1.5

1.0
2.0Production
Export terminal
Reconversion

5.9
3.8

1.5
0.0

8.6

5.2

2.6

AUS_Wind

AUS_Wind

AUS_Wind

Chile_Wind

6.5

6.6 Saudi_GasCCS

US_PV

6.2

2.8

AUS_GasCCS

Saudi_GasCCS
US_PV

Chile_PV

IEEJ © 2021

AUS_GasCCS

Green(Base)

Green(Base)

Saudi_GasCCS

AUS_CoalCCSBlue

AUS_GasCCS

Blue

5.8Green(Base)Blue

AUS_CoalCCS

Ammonia
AUS_CoalCCS
7.5

3.8
3.0

4.0
5.0
6.0
Compressor&Pipeline
Shipping

kg-CO2eq/kg-H2
7.0
8.0
9.0
Conversion
Import terminalv For hydrogen production, carbon footprint of green hydrogen is much lower than that of blue hydrogen.
v However, if electricity input for hydrogen conversion, transportation, and storage is from the grid (which is theassumption for this study), hydrogen supply chain from countries with lower grid CO2 emission factor, such as Chile,
will has lower carbon footprint.
v Among the hydrogen carriers, liquefied hydrogen has the lowest carbon footprint because shipping fuel is also liquefiedhydrogen, liquefied hydrogen supply chain needs no reconversion,.
v For ammonia, if it is used directly (means no reconversion needed) the supply chain’s carbon footprint will be lower.
15

Major Findings: Impact of Carbon Price (assuming 100USD/CO2carbon price)
MCH

AUS_CoalCCS
0.6 5.5
0.5 5.3AUS_GasCCS
Saudi_GasCCS
0.4 4.5
US_PV
0.2 6.2
US_Wind0.2 5.9
AUS_Wind
0.3 5.8
0.3 5.6 AUS_PV
0.1 5.3 Chile_PV
0.1 4.9 Chile_WindUS_PV
0.2 5.5
0.2 5.4 US_Wind
0.3 5.4 AUS_Wind
AUS_PV
0.3 4.9
Chile_PV
0.1 4.6
Chile_Wind
0.1 4.6$/kg-H2

IEEJ © 2021

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Blue

0.5 3.9
0.5 3.3

Green(Low ELY Cost)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.9

5.2

0.5 5.7
0.5 5.4
0.6 5.5
0.6 5.3
0.4 4.8
0.4 4.4
0.5 5.0
0.5 4.9
0.6 5.0
0.6 4.6
0.4 4.2$/kg-H2
0.4 4.1

Green(Base)

Green(Base)

0.0

Ammonia

AUS_CoalCCS
0.7 4.4
AUS_GasCCS
0.7 4.3
Saudi_GasCCS
0.7 3.9
US_PV
0.5 5.4
US_Wind0.5 5.1
AUS_Wind
0.5 4.7
AUS_PV
0.5 4.5
Chile_PV
0.5 4.6
Chile_Wind
0.5 4.2
US_PV
0.5 4.7
US_Wind
0.5 4.6
AUS_Wind
0.5 4.3
AUS_PV
0.5 3.9
Chile_PV
0.5 3.9
Chile_Wind$/kg-H2
0.5 3.9

Blue

AUS_CoalCCS
AUS_GasCCS
Saudi_GasCCS
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind

Green(Low ELY Cost)

Green(Low ELY Cost)

Green(Base)

BlueLiquefied Hydrogen

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0v If hydrogen carrier is liquefied hydrogen or MCH, in the Low Electrolyzer Cost Case the import cost of greenhydrogen from Chile can be competitive with blue hydrogen from Saudi Arabia.
v However, when the hydrogen carrier is ammonia, blue hydrogen from Saudi Arabia still has cost advantage.
16

Major Findings: Ammonia Direct Use

2.8
2.5
2.3
2.1
2.0
1.6
2.1
1.9
1.9
1.5
1.3
1.3

IEEJ © 2021

0.0

1.0

2.0

2.0

2.5

3.5

Blue

1.7
2.01.54.4
4.0
4.1
3.9
3.6
3.2
3.7
3.5
3.6
3.2
2.9
2.9
3.0

4.0

5.0

Green(Base)AUS_CoalCCS
AUS_GasCCS
Saudi_GasCCS
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind

Unit of $/t-NH3$/kg-H26.0

7.0

Green
(Low ELY Cost)

Green(Low ELY Cost)

Green(Base)Blue

Unit Converted to $/kg-H2
AUS_CoalCCS
AUS_GasCCS
Saudi_GasCCS
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind

309
355264497
437
416
380
356
289
371
346
336
264
239
231
0

200

353

400

619

448

780
720
727
690
642
575
654
629
646
574
525
517
600

800

$/t-NH3
1000

v If ammonia is used directly as fuel (no reconversion needed), blue ammonia from natural gas (from Australia or Saudi
Arabia natural gas) has the lowest cost.

1200

17

Major Findings: Ammonia Direct Use (carbon price: 100USD/t-CO2)

2.8
2.5
2.3
2.1
2.0
1.6
2.1
1.9
1.9
1.5
1.3
1.3

IEEJ © 2021

0.0

1.0

0.3 2.8
0.3 2.2

0.6 4.1Blue

1.7
2.0
1.5

0.3 4.7
0.3 4.3
0.4 4.4
0.4 4.2
0.1 3.8
0.1 3.4
0.3 4.0
0.3 3.8
0.4 4.0
0.4 3.6
0.1 3.1
0.1 3.1

2.0

3.0

4.0

5.0

Green(Base)AUS_CoalCCS
AUS_GasCCS
Saudi_GasCCS
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind

Unit of $/t-NH3$/kg-H26.0

7.0

Green
(Low ELY Cost)

Green(Low ELY Cost)

Green(Base)Blue

Unit Converted to $/kg-H2309355
264
497437416
380356289371346336264
239
231

AUS_CoalCCS
AUS_GasCCS
Saudi_GasCCS
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind
US_PV
US_Wind
AUS_Wind
AUS_PV
Chile_PV
Chile_Wind
0200

50 49847 400110 729

50 83050 77063 78963 75226 66826 60150 70450 67963 70963 63626 551
26 543

400

600

800

$/t-NH3
1000

1200v Even with a carbon price of 100USD/t-CO2, the cost advantage of blue ammonia from natural gas (from Australia or
Saudi Arabia) can still be maintained.
18Outline(1) Background & Objectives(2) Methodology & Assumptions(3) Major Findings

IEEJ © 2021

(4) Implications
19Uncertainties
It should be noted that there are uncertainties in the assumptions made in thisstudy:v Blue hydrogen/ammonia is assumed to be produced with an additional cost for CCS with a carbon capture rate of90%. However, in the case of blue ammonia, the current carbon capture rate for the entire blue ammonia production
from gas is, in general, 50% to 60%. If a carbon capture rate of 90% is sought for all blue ammonia production, costs
could be higher.
v In terms of green ammonia production, this study assumes the same process as blue ammonia production from gas.
However, to maintain the large-scale and constant operation assumed for this process additional equipment such asbuffer tank will be needed to cope with variable input (since the hydrogen for ammonia production is produced withvariable RE).

IEEJ © 2021v Assumptions of this study were made based on best available data when the report was published. However, thetechnologies associated with hydrogen supply chain are evolving very fast and how to reflect the up-to-datetechnology development in the calculation will be an issue for future analysis.

20Implications
Cost Reduction of Green Hydrogen Supply Chainv Green hydrogen from Chile has the lowest cost among the green hydrogen options. Green hydrogen could becheaper than blue hydrogen by 2030 with electrolyzer’s CAPEX be lowered to 1/3 of today’s level (900USD/kW).
v To achieve the hydrogen price target set by the Japanese Government (30JPY/Nm3(≒3.1USD/kg-H2) by 2030,
20JPY/Nm3(≒2.1USD/kg-H2) by 2050), besides continued efforts on R&D of liquefied hydrogen and MCH, measures forproduction cost reduction of green hydrogen in the resource countries will be needed.
v Some of the green hydrogen production cost reduction measures include:ü Smoothed power input to electrolyzer from a combination of solar PV and wind
ü R&D on electrolyzer’s cost reduction
ü Scaling-up market for green hydrogen applications including markets in resource countries. For example, market for utilizing
green hydrogen for grid balancing

IEEJ © 2021

v Cooperation between Japan and resource countries is necessary
ü Supporting resource countries on developing hydrogen strategy/roadmap, which can help encouraging more investment togreen hydrogenü Sharing know-hows with resource countries on domestic hydrogen supply infrastructure
ü Cooperation with resource countries on hydrogen export infrastructures, e.g. ports, etc.
ü Cooperation on international certifications / standards for hydrogen supply chain’s carbon footprint evaluation

21

Implications
Other Implications: Energy Security
v Import of green hydrogen from countries in the Asia-Pacific region such as Chile will contribute to Japan’s energy
security because of the diversification of energy supply sources.

IEEJ © 2021

v Though there may be concerns that long distance between Chile and Japan would result in high shipping cost ofhydrogen, the results of the study suggest that long shipping distance’s impact on the overall hydrogen import cost isactually quite limited.

22

IEEJ © 2021

Thanks for your time and attention.

23

Contact:report@tky.ieej.or.jp