Modelling White Hydrogen

Abstract

To prevent the worst dangers of climate change, the EU has committed to net zero by fully decarbonizing the European energy sector by 2050. While most energy sectors can be decarbonized by electrification, some “hard-to-abate” sectors need other solutions to lower their emission output. The EU has chosen green hydrogen to replace fossil fuels in such sectors. However, despite many advantages, it is expensive to produce and thus not competitive in the energy market. Therefore, the EU has created the Hydrogen Strategy as a central policy package to optimally implement green hydrogen within the energy sector. The finding of naturally occurring hydrogen, known as white hydrogen, could revolutionize the EU transition towards hydrogen as its production cost could be very low. However, as much is unknown about what effects white hydrogen could have on energy markets, it creates uncertainty for the EU and the Hydrogen Strategy. Modeling future scenarios can reduce the uncertainty for policymakers. While green hydrogen has been studied with a modeling approach, no such literature exists on white hydrogen. Thus, this study aimed to fill this knowledge gap by modeling white hydrogen to increase insights into the white hydrogen system and how it might affect the future energy system. During this study, a Decision Making under Deep Uncertainty approach was used to analyze the effects and uncertainties of white hydrogen on the global energy system and EU hydrogen policymaking. First, a system dynamics model was made to model global energy markets, including all relevant hydrogen. This model was tested with various experiments under uncertainty. Then, multiple scenarios were developed to match the possible trajectories of a white hydrogen market. The system behavior within the model was analyzed using the Exploratory Modeling Analyses method to determine the effects of white hydrogen on the energy system. Finally, the EU hydrogen policies were analyzed in the context of the scenarios, and recommendations were made to the EU on handling the uncertainty surrounding white hydrogen. The system analysis showed that the global energy system is heavily impacted by white hydrogen in scenarios where the white hydrogen market takes off. In specific scenarios, the price of white hydrogen may directly compete with gas prices, leading to a surge in demand. As the prices of other types of hydrogen decrease, they will also see an increase in demand, resulting in a net positive effect for all hydrogen types. However, despite rising demand, the production of white hydrogen may not keep up, leading to a lower overall usage of hydrogen. This supply-demand gap could cause significant shortages of hydrogen, which will exacerbate the existing energy shortages caused by carbon taxing and result in an overall decrease in energy usage. The results showed that the EU can only achieve its renewable hydrogen goals by 2030 and 2050 if the white hydrogen market grows substantially. An increase in the share of white and green hydrogen will lead to greater use of renewable energy sources. This, combined with a decrease in energy demand, will achieve net zero emissions more frequently and earlier in cases where the white hydrogen market grows. While EU hydrogen policies contribute to these goals, their impact alone is not enough to achieve them. However, the white hydrogen market works well with these policies, increasing total hydrogen demand. Furthermore, results showed that the policies aimed at reducing hydrogen prices significantly impact all scenarios, with the hydrogen bank policy being particularly effective. Yet, if hydrogen becomes too expensive, the sudden increase in green hydrogen prices could harm the green hydrogen market. The results suggest that developing the white hydrogen market is crucial for achieving renewable hydrogen goals, and policies that drive down hydrogen prices are also important in reaching these objectives. ii iii The main scientific contribution of this study lies in the modeling of white hydrogen within a dynamic system, which allows asserting the impact of white hydrogen on the energy system under multiple scenarios. The insights gained from it serve as a first indication of how the white hydrogen market may develop and how it can contribute to the adaptation of hydrogen. This study could function as a wake-up call for the EU and other governmental bodies to take white hydrogen seriously and implement timely policies to maximize its potential, enabling a more optimal transition towards renewable hydrogen and benefiting society. Overall, this study showed that in most scenarios, white hydrogen has a significant impact on the energy system. In general, white hydrogen market growth will stimulate the hydrogen market, resulting in a higher share of renewables in the EU energy mix, increasing the chances of the EU reaching net zero. The timely adoption of white hydrogen policies could ease EU efforts to transition towards clean hydrogen. However, the EU should not bet on one horse and should continue its efforts to