As Hydrogen Picks Up Steam, Midstream Can Help

Summary

  • Hydrogen has long been conceptualized as the energy of the future given its small carbon footprint. But the industry is only now beginning to ramp up with the help of government incentives.
  • By 2050, 40-50% of hydrogen produced in the U.S. is expected to be sourced from natural gas. This reinforces long lives for existing natural gas infrastructure.
  • The hydrogen industry will require traditional midstream assets like storage and transportation infrastructure to connect growing production with rising demand.

Hydrogen is often heralded as the fuel of the future. That's due to its smaller carbon footprint and ability to power a variety of vehicles and industrial processes. The future may be present, as technology is starting to catch up and large-scale hydrogen production is becoming a reality. The hydrogen industry in the US is expected to become a long-term source of demand for natural gas. Additionally, like traditional energy, hydrogen will require its own storage and transportation infrastructure similar to existing midstream assets. Today’s note looks at how midstream is set to play an important role in the hydrogen value chain and could see long-term benefits.

Witnessing the Hydrogen Revolution

Hydrogen has the potential to advance net-zero initiatives. It can be used as a fuel in various automobiles, waterborne vessels, and airplanes. Hydrogen also has the potential to power energy-intense industries like steel manufacturing. Production in North America is set to grow. Aggressive forecasts estimate that up to 121 million tons of hydrogen could be produced in the North America by 2050, according to a study by McKinsey. For context, the U.S. currently produces around 10 million tons of hydrogen a year.

There are two main categories of low-carbon hydrogen, blue and green, that are differentiated by their production. Hydrogen derived from natural gas that utilizes carbon capture technology (CCS) to reduce the fuel’s carbon footprint is known as blue hydrogen. It is differentiated from green hydrogen, which is produced using renewable energy and water in a process called electrolysis. The US Department of Energy (DOE) estimates that 40-50% of hydrogen produced in the U.S. will be derived from natural gas using CCS by 2050.