Hydrogen factfulness: Part II

This will be a long-form analysis, which we’ll reveal across the next three newsletters.

To do so, we’ll focus specifically on the case of Spain, aiming to project future consumption in sectors where we know hydrogen will have a role—and even in some where it might not. As always, we’ll rely on quick calculations and rough figures which, if you're interested, we can explore in greater depth with proper references.

We’ll also distinguish between two things:

• Regulated market: It’s undeniable that, just like what happened with renewables, hydrogen will need to enter energy systems through regulations imposed by different governments—whether through quotas, incentives or similar mechanisms, as we are already starting to see. The regulated market will be essential to achieving hydrogen deployment strategies. But more importantly, it must pave the way for hydrogen to become part of what we call the natural market. We don’t expect the regulated market to disappear. One way or another, it will always play a role—even if in subtler forms than fixed quotas. For example, by making natural gas or imports from other economies more expensive. This regulated market will be particularly important over the next ten years.
• Natural market: As with renewables, hydrogen will eventually outperform its alternatives in terms of cost—for example, in heavy road transport after 2030. With infrastructure and vehicles in place, opportunities will open up for organic growth beyond what regulation alone can drive. This could also happen in other areas, such as those promoted by voluntary markets, where corporations or segments of the population choose to purchase green products—as we’re already seeing in tenders like ZEMBA.

Hydrogen uses

Before we begin—and without trying to reinvent the wheel—we’ll borrow this illustration from IRENA, which identifies the sectors where hydrogen is expected to have a real market. These applications will be the basis for our analysis of total and potential demand (applying an estimated penetration rate for renewable hydrogen) in Spain.

Illustration 1 Applications where hydrogen will take priority over electricity (IRENA)

These sectors are:

• Refineries: For the production of fuels as well as fertilisers and chemical products. In this analysis, we will not consider a potential future decline in hydrogen consumption in refineries due to decreasing use of fossil fuels.
• Steel production: For reducing iron ore in blast furnaces, replacing coal.
• Aviation and maritime transport: Replacing petroleum products such as fuel oil and kerosene. Competing with biofuels, although, as we’ll see, with certain synergies.
• High-temperature heat generation: In industries requiring more than 400 °C. Replacing natural gas or coal and competing with electricity or biogases.
• Seasonal storage: For storing renewable energy over long periods of time. We will not include this in the analysis due to the difficulty in estimating any meaningful figures.
• Road transport: For use in long-haul trucks and buses. It will compete with biofuels and batteries, although the use of batteries in long-distance vehicles is challenging due to operational and infrastructure needs (e.g. deploying multiple 1 MW chargers at existing service stations where 20 trucks stop per hour is unrealistic).

With that in mind—and setting aside the potential for export to Europe, as well as seasonal storage—we’ll now move on to analysing the potential and realistic hydrogen market in Spain.

Demand by sector

As you may have noticed earlier, hydrogen will serve different purposes depending on the sector in which it is used—either as a feedstock or as an energy source.

Refineries

How much hydrogen do refineries and the chemical industry currently consume in Spain?

Spain currently consumes 500,000 tonnes of hydrogen in its refineries and chemical plants. This breaks down into 300,000 tH₂/year used for oil processing, and 200,000 tH₂/year for fertiliser production. Assuming an estimated output of 100 tonnes of hydrogen per MW of installed electrolysis capacity (with a 60% utilisation factor), this would require a total of 5 GW of electrolysis just to decarbonise today’s grey hydrogen production.

However, refineries and chemical plants produce more than just fuel—they also provide many of the products essential to our daily lives. These are products we will continue to rely on, and in a decarbonised future, they must be produced in a sustainable way.

Illustration 2 Products obtained from the different fractions of crude oil

The key focus here is the naphtha fraction, through which olefins and most plastics are produced. We'll use a reference value indicating that 12% of the crude oil entering the process ends up as naphtha.

In 2024, Spain consumed approximately 60 million tonnes of crude oil, which would yield around 7.2 million tonnes of naphtha. We’ll reduce this to 6 Mt/year, since a portion (15–20%) is blended with petrol. Now comes the biggest simplification in this entire analysis: we’ll assume that from 1 tonne of naphtha, we obtain half a tonne of olefins (ethylene, propylene, and similar), while disregarding other by-products of the reaction.

Thus, those 6 Mt/year of naphtha translate into 3 Mt/year of olefins, which are then used in the production of plastics, fibres, resins, solvents… the very foundation of the chemical industry.

As our regular readers will know, when we talk about sustainable chemistry, we talk about methanol—because this molecule can be converted into olefins, replacing crude oil as a feedstock. This is already widely done in China, although with fossil-based methanol.

How much electrolysis would be needed to decarbonise olefins using green methanol?

In this case, plants that convert methanol into olefins consume around 1.8 tonnes of methanol for every tonne of olefins produced. This means that Spain would require 5.4 million tonnes of methanol per year to fully decarbonise the chemical production currently based on crude oil (we have left out potential natural gas use due to lack of data).

To wrap things up… producing one tonne of methanol requires 0.2 tonnes of hydrogen. Therefore, 1.08 million tonnes of hydrogen would be needed to produce all the olefins currently being manufactured. That amount of hydrogen corresponds to 10 GW of electrolysis.

At this point, we already have a meaningful overview of consumption in the petrochemical industry:

Table 1 Total H₂ consumption in petrochemicals in a scenario where all feedstock comes from renewable hydrogen.

Next newsletter

This analysis will continue in the next newsletter, where we will quantify the total demand from potential hydrogen consumers in Spain. Then, in the following edition, we’ll conclude with an assessment that assigns a realistic hydrogen penetration rate to each sector—giving us a clearer picture of how much hydrogen will be needed and when that demand is likely to begin.

If you find our analyses interesting, make sure to subscribe to the newsletter. And if you’d like to explore any of these topics in more depth, just drop us a line—we’ll be happy to see how we can help.