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US refiners and chemical manufacturers lead hydrogen production and consumption

Published by , Editorial Assistant
Hydrocarbon Engineering,

The EIA reports that US manufacturers specialising in chemicals and petroleum refining have traditionally accounted for the largest shares of both hydrogen consumption and production, and they pay the least for it. With new legislation, the EIA expects changes to how hydrogen is consumed and distributed in the country.

EIA’s Manufacturing Energy Consumption Survey (MECS) data is collected and published every four years and remain the only nationally representative source of estimates of energy-related characteristics, consumption, and expenditures for manufacturing establishments in the US. These data are critical to measuring energy intensity and understanding efficiency gains or losses within manufacturing.

The EIA is currently collecting MECS data for 2022, and expects to publish it beginning in the summer of 2025 through spring 2026.

Refiners, which make up much of the petroleum and coal products subsector under the North American Industry Classification System, and chemicals manufacturers tend to have more buying power than other manufacturing subsectors because they use more hydrogen. On average in 2018, the chemicals subsector paid US$6.18/million Btu for hydrogen, and the petroleum and coal products subsector paid US$6.77/million Btu, according to the MECS data published in 2021. In the MECS, the EIA reports the average price of hydrogen purchased by manufacturing establishments for use in their on-site operations.

Within these two industrial subsectors, petroleum refiners used 68% of all US hydrogen production, and nitrogenous fertilizer (ammonia and derivatives) industries used 21%. The large-scale use of hydrogen helps individual manufacturers negotiate low prices in their contracts to secure their hydrogen feedstock requirements. Large industrial hydrogen consumers also frequently have the capacity to either generate their own hydrogen or use hydrogen produced as a byproduct of chemical processes at nearby facilities.

The reported purchase price of hydrogen across all US manufacturing industries in 2018 averaged US$6.82/million Btu, although prices varied widely. Industries that manufacture electrical equipment, appliances, and components, which use hydrogen with a greater purity, paid the highest average price for hydrogen at US$86.19/million Btu.

Based on data from MECS and the EIA's Petroleum Supply Annual (PSA), total US production of hydrogen in 2018 was 10 million t, of which 40% was merchant hydrogen sold by industrial gas companies. About two-thirds was sourced from the steam methane reformer (SMR) process, which mainly uses natural gas as a feedstock. The remaining one-third of hydrogen production came as a byproduct of other chemical processes. A small but growing amount of hydrogen is also produced from electrolysis of water — a process that separates water molecules into hydrogen and oxygen.

Newly built merchant plants in the US using SMR have the lowest levelised cost of hydrogen, which the National Energy Technology Laboratory estimated at US$1.06/kg in 2018, or US$8.00/million Btu in 2018 US dollars, including cost of hydrogen compression. The cost does not include the capture of carbon dioxide, which is produced as a byproduct in the SMR process. In the US, the low cost of natural gas used by the industrial sector in 2018, which the EIA estimate averaged US$3.89/million Btu, drives the relatively low hydrogen production costs from SMR, compared with other production methods.

Since 2018, federal policy efforts have been advanced to increase the production of hydrogen using other processes and to expand hydrogen distribution networks within different regions of the US.

Given these new policies, the EIA expects hydrogen supply and distribution to expand in the US and consumption by current and new industrial consumers to grow.

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