Industry Trends & Growth
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The primary challenge to using more hydrogen in our energy systems is the cost of producing, storing, and transporting it.
National Energy Policy, 2001

INDUSTRY TRENDS & GROWTH
Worldwide annual consumption of hydrogen is approximately four hundred billion cubic meters. Consumption continues to grow in established markets such as petrochemical, petroleum, and chemical refining, synthetic fuels, food processing, electronics, and materials production such as glass and steel. The demand for hydrogen is expected to escalate this decade at a rate of 10 to 15% per year as a result of various economic, environmental, political, and sociological reasons. This growth will be prompted by new applications in the transportation, commercial, and residential sectors. An example is fuel for fuel cells, used residentially and for personal transportation.

Petroleum plants are increasingly facing more stringent requirements for low sulfur content in transportation fuels. Beginning in 2005, new regulations will drive a typical refinery's hydrogen consumption up by 150-200 metric tons per day. While hydrogen is commonly wasted in petroleum refinement today, recovering that hydrogen from the plant's off-gas streams requires significant capital investment. Furthermore, refiners have to consider reducing hydrogen production rather than simply trying to control it more effectively because production of hydrogen, by whatever means, entails production of carbon dioxide, which is not used by the refinery and must be abated in response to increasingly restrictive carbon dioxide emission regulations. Among the new clean fuel regulations is an EPA emission standard for heavy-duty highway vehicles that will take effect in model year 2007, reducing the level of sulfur in highway diesel by 97 percent. While the review of this rule was underway, the Committee on Science of the U.S. House of Representatives stated, "These deep sulfur reductions will require significant investments that not all refiners may choose to make." One alternative to capital investment for refiners is as-needed purchase of merchant hydrogen.

Ammonia production accounts for some 48% of the current growth in demand for bulk hydrogen. (Fifty percent of that growth is due to the petroleum industry.) Ammonia production facilities that depend upon natural gas to produce hydrogen on site are intermittently forced to shut down due to natural gas price increases during the heating season. New sources of merchant hydrogen independent of natural gas offer an alternative to stabilize ammonia plant operations by providing hydrogen at a reliable price.

Low-emission internal combustion hydrogen vehicles will add to the demand for merchant hydrogen if the competition of petrol-burning hybrid automobiles can be overcome. The biggest hurdle for this particular advance toward cleaner air is the creation of a retail distribution network for fuel. Fleet vehicles are fueled at the fleet's central maintenance and parking facility, so fuel distribution is more immediately surmountable. A few American cities already employ fleets of hydrogen burning buses for public transportation.

Fuel Cells, the hydrogen “motor”, combine hydrogen with oxygen found in the surrounding air, channeling the electrical release in one direction, and releasing only water vapor. Fuel cell technology has a bright future in the mid-decade for powering large fleet vehicles and for replacing batteries in certain small-scale applications such as personal computers. Hydrogen is the energy source for these fuel cell applications. Research and development in fuel cell technology for automobiles is pushed by strong government support. Greater growth in hydrogen demand may follow later in the decade to support fuel cells' potential for other applications, such as electrical power for homes and commercial buildings.

Furthermore, and difficult to forecast precisely, new hydrogen management technologies will increase the availability in regions where demand is high and make prices more attractive to plants that are looking for an alternative to on-site production, and create new alternatives to on-site production at plants using hydrogen.
Once applications for hydrogen as an energy carrier have become well established, the United States will require much more hydrogen than it now produces. An estimated 40 million tons of hydrogen will be required annually to fuel about 100 million fuel-cell powered cars, or to provide electricity to about 25 million homes. Many factors will affect the choice of production methods, how they will be used, and when they might be demonstrated and commercialized.

The next stage of development will include mid-sized community systems and large, centralized hydrogen production facilities with fully developed truck delivery systems for short distances and pipeline delivery for longer distances. As markets grow, costs will drop through economies of scale and technological advances; carbon emissions will decrease with commercialization of carbon capture, sequestration, and advanced direct conversion methods using photolytic, renewable, and nuclear technologies.