Power Engineering - U.S. merchant and on-site hydrogen sales to reach $2.7 billion by 2008

Oct. 13, 2003 -- Hydrogen is now a major energy source, and an important chemical feedstock for a multitude of key industrial processes. Customers are therefore looking for reliable cost-effective supply options, among them, the utilization of hydrogen from merchant and on-site gas suppliers, and small hydrogen generators on-site at end-user facilities.

Together they meet the needs of users in specialty chemicals, fats and oils, metals, glass and power utilities. On-site hydrogen generators will increase and boost productivity and enhance product quality for these end users.

Revenues from merchant and on-site hydrogen sales will reach $2.7 billion in 2008 up from $1.8 billion in 2003, an average annual growth rate (AAGR) of 8.4%, according to an upcoming report from Business Communications Company, Inc. (RC-239 Merchant Hydrogen Utilization and On-Site Distributed Generation).

Driving growth over the next five years will be progress and prospects for refining and petrochemicals, and for the emerging hydrogen markets. The largest of the major companies with significant plant design/build, hot end process partnerships, and financing capabilities are keen to capture their share of the 15 million to 100 million standard cubic feet long-term sale of hydrogen, with additions to major pipeline supplies and stand-alone on-site process equipment.

This will prove to be a relatively fast growth segment of the hydrogen industry and will provide very significant increases in revenues and cash flows over the next five years.

Revenues for hydrogen packaged in cylinders will decrease from $535.4 in 2003 to $381.8 in 2008, a decline of 6.5%. There has been a slow migration from cylinder to bulk storage to on-site production within the industrial gases industry as a whole. With advances in process equipment technology and efficiency, automation, and shifts in market segment emphasis, cylinder gases are moving to merchant bulk supply and merchant bulk supply is moving to on-site/pipeline supply.

As a consequence, revenues from on-site plants and pipelines will increase at an AAGR of 16.7% through the forecast period. The technology is available to prevent embrittlement, but, depending on the configuration being considered, distribution costs may be affected.

Gas companies are looking to enhance revenues by increasing the supply of on-site/pipeline hydrogen. Another reason for increased demand is an expanding customer base, including small refineries that require more hydrogen for hydroprocessing of high sulfur crude oil.

A winner in the product spectrum competition has been the dispersed, small-sized "on-demand" plant. Revenues from dispersed, small-sized "on-demand" plants, will reach $83.3 million in 2008, thereby increasing at an AAGR of 15.1% from 2003 through 2008. This growth is due to the increasing realization that these types of products provide ultra-high purity hydrogen (>99.99999) in a safe and efficient manner. Over the next five years, BCC anticipates even more compact models, freeing up laboratory space, which is a key challenge in the commercialization of these machines.

They are designed to integrate into any laboratory, and to complement other scientific instrument uses. These typically supply electrolytically produced hydrogen for a variety of uses occasioned from fuel cells, analytical and a myriad other developments arising from the prospects of an eventual hydrogen economy.

Liquid hydrogen shipment revenues will increase from $487.8 million in 2003 to $641.5 million in 2008, an AAGR of 5.6%. At atmospheric pressure, liquid hydrogen (known as LH2) boils at 20°K (-423°F), making liquefaction, storage, and distribution challenging. Liquefaction is also very energy-intensive.

Nevertheless, greatly reduced space requirements compared with gaseous hydrogen make the use of LH2 an attractive option in some cases. The cost of distribution in tanks is likely to remain higher for LH2 than for other liquid fuels such as gasoline. This is because hydrogen takes up several times more space than an energy-equivalent amount of other fuels. It also requires special insulating equipment to keep it liquid.

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