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Business Model Canvas (Hydrogen Storage and Distribution)

Executive Summary

There is a strong association between hydrogen and energy. Hydrogen is currently being considered the future of energy as it provides an alternative clean, safe energy option. This study seeks to explain the business model canvas of the hydrogen storage and distribution industry. The main focus of this study, however, is the value proposition and the essential resources used in this new business. By analyzing the value proposition and critical resources of hydrogen storage and distribution, it is easier to understand how this new business is attractive in its industry and what are its competitive advantages over its key competitors in the market. The analysis also clarifies some of the relevant contemporary issues that the entry of this business will solve, including sustainability and how it can solve the global energy crisis. Lastly, the study provides relevant recommendations for businesses investing in hydrogen storage and distribution on some proven, cost-effective and efficient methods for storing and transporting hydrogen.

Introduction

A business model canvas is a template used in strategic management to develop a new business model. Using the chart created, this template can be used as a guideline for businesses to evaluate their potential tradeoffs and establish a description of their infrastructure, value proposition, finances, and customers. The hydrogen storage and distribution industry is an emerging industry serving an emerging market and therefore using the Key building blocks presented by the Business Model Canvas (BMC). For this study, however, only two of the BMC concepts will be evaluated and how they can be used to eradicate or minimize the challenges presented by the process of hydrogen storage and distribution (Braun et al. 2021). These concepts are Key Resources and Value Propositions.

Background

For decades, hydrogen and energy have had a strong connection. Approximately 200 years ago, hydrogen was the critical resource for powering the first internal combustion engines. Further research and experimental assessment have determined that hydrogen is now an integral part of the modern refining industry. Some of the main classifications of hydrogen that make it essential, especially in the refinery and other related industries, are light, energy-dense, and storable. It is yet to show any threat to the ecosystem as it does not directly emit pollutants to the environment. Hydrogen continues to gain more value in the industry, with its demand constantly increasing. Currently, the total market potential of hydrogen per year is 60 million metric tonnes per year, with refineries and CPIs (Chemical Processing Industry) being the largest market with a potential demand of 68 million metric tonnes per year (Mouli-Castillo et al., 2021). In terms of countries, the United States reports a hydrogen demand of 10MMT/year. Hydrogen demand continues to increase after the enhancement of global sustainability measures. According to statics, the resources required to satisfy the current demand for hydrogen are minimal, which ultimately helps preserve the natural resources used as critical resources in the production, storage, and distribution of hydrogen. Based on proven and unproven reserves, hydrogen will take years to deplete compared to other resources and their annual consumption reports, such as natural gas, coal, and nuclear. Unlike these other resources, hydrogen production is based on diverse domestic resources that can help meet the aggressive growth in its demand.

Relevance

According to research, hydrogen storage and distribution has been identified as an area of advancement with the potential to create a large market base. The globe continues to face an energy crisis due to the Russian-Ukraine war. This has increased prices of essential commodities, transportation, food, and energy globally. This has created an opportunity for increased hydrogen demand (Singh et al., 2021). Due to the global energy crisis, more policies and projects have been implemented across the globe to facilitate the development of technologies to include innovative and creative ideas that can help reduce the storage and distribution costs of hydrogen so that it can be used widely across the world.

Design and Methodology

Method

The primary method used in this study is secondary data collected from different literature reviews. The evaluation of hydrogen storage and distribution has been top of interest for many researchers, and therefore there are adequate resources available online with relevant and peer-reviewed information. Using literature review as a qualitative data collection method is instrumental in collecting more data in a shorter period than other data collection methods such as surveys. Research articles were retrieved using keywords such as hydrogen, hydrogen storage, and value propositions of hydrogen.

Data analysis

The materials retrieved from online databases were divided into two to find out the potential of the hydrogen storage and distribution industry. The research articles used contained information about the importance of hydrogen and the relevance of hydrogen storage and distribution. Most articles used were recent peer-reviewed articles to ensure that the information collected was current and, therefore, relevant to the research topic and that the research findings could be used to analyze emerging issues worldwide.

Findings

According to the Analysis of the research materials used, it was established that the transport sector, which incorporates road, rail and marine, ammonia & methanol industry, power, and buildings sector are the primary targets for possible hydrogen penetration (Mouli-Castillo et al., 2021). In the chemical industry, ammonia and methanol are the primary targets because of their consistent demands for large quantities of hydrogen as feedstock. Road, rail, and marine transport are considered in the transport sector. Hydrogen also plays a role in sustainable aviation fuel (SAF) and is primarily relevant for regions with local synthetic-fuel industries. The opportunity for hydrogen-based micro-CHPs deployment and hydrogen blending in the construction and building sector is being sufficiently explored.

Significance of Hydrogen Storage and Distribution

The penetration of hydrogen consumption yielding the growth of hydrogen storage and distribution would mean significant changes in respective sectors.

Transport sector: According to statistics, hydrogen penetration in the transportation sector could result in 25% private vehicles, or roughly 200,000, or even 50%, or roughly 400,000 FCEVs, and between 15,000 and 31,000 trucks, respectively. It could also result in between 630 and 1,260 hydrogen buses on public transportation lines (this estimate centered on the current PSOs), between 10 and 20 hydrogen trains, 43 to 85 hydrogen engines for freight transport, and up to 4 to 7 ferries, depending on the scenario. (the number is based on the current PSOs and is assumed while taking the current routes in to account). Realizing this potential in the industrial sector would require Estonia to transition from a significant importer of ammonia, methanol, and urea to an exporter.

Building and construction sector: based on the analysis of the significance of hydrogen in the building sector, it has been determined that Micro-CHPs would be the most widely deployed in the buildings sector by 2050, providing clean heat and electricity to up to 21,700–43,400 households/houses and generating up to 239 GWh of hydrogen-based heat (Singh et al., 2021).

Power supply sector: according to statics conducted using the concept of high possibility, 250 MW of gas-powered emergency plants would be converted to hydrogen. Significant investments are also needed for such transformative shifts. However, this will also contribute to the high production of renewable energy and offer consumers of energy more affordable choices, promoting the expansion of this industry (Ratnakar et al., 2021).

Summary

The research concludes that these modifications would result in higher high investment totals reported in various hydrogen value chain segments, with most of those investments coming from the private sector or from businesses and individual consumers. (in the transport and heat sector) (Mehrjedi and Hemmati, 2020). Most hydrogen use cases are still not competitive, and the infrastructure and legal framework still need to be developed. As a result, there is a significant need for public investments in the early stages of development to jump-start the utilization of hydrogen and create favorable conditions for the private sector to follow.

Discussions

Value Proposition

The main problem that hydrogen storage and distribution seeks to address is the global energy crisis. With the achievement of hydrogen storage and distribution, most global challenges continue to face due to the distractions in the supply chains caused by the after-effects of the global pandemic and the Ukraine-Russian war. To best understand hydrogen storage and distribution, it is essential to understand the importance of hydrogen and how it can be used to solve most of the issues related to the global energy crisis and supply chain instructions. The value of hydrogen is seen in how hydrogen storage and distribution can be used to solve some of the significant global issues currently facing because of using alternative resources.

Carbon emissions: due to the demand for sustainability, most industries have been forced to use fuel that does not harm the ecosystem. Hydrogen has been used in the contemporary business world, particularly in industries such as oil refining, steel production, ammonia production, and methanol production (Peschel,2020). Virtually all of this hydrogen is supplied using fossil fuels; this implies that contrary to other resources, hydrogen shows potential for minimal emissions, reducing the effect of pollutants or greenhouse gasses in the atmosphere and helping promote global sustainability efforts. Using hydrogen, therefore, helps companies to enhance their reputation with consumers currently interested in purchasing or consuming products produced by companies that are mindful of sustainability measures.

Reduced transportation and distribution costs. In the transport industry, there has been an increased pressure caused by the intense competition of hydrogen fuel cell cars which depends on fuel cell costs and refueling stations. However, for trucks, the top priority is reducing the delivered price of hydrogen. Shipping and aviation industries have also limited low-carbon fuel options and continue to show the intention of creating an opportunity for hydrogen-based fuels (Ratnakar et al., 2021).

Modern construction. The building and construction industry also has the potential to demand more hydrogen to help enhance the efficiency of their operation. In building and construction, hydrogen can be used by blending it into already natural gas networks; mixing hydrogen and other natural gas provides a very high potential for constructing more durable and robust houses, especially multifamily and commercial buildings, particularly in dense cities. However, companies that want to use hydrogen as a long-term prospect can use it in hydrogen boilers and fuel cells. While there are alternative resources that can be used to facilitate the same results, studies have shown that using hydrogen is more effective and cost-practical, especially since the nature of this industry is quite crucial and errors can cost human life.

A solution to the global energy crisis. With the concerns that continue to face significant business due to the energy crisis, hydrogen gains more value due to its role in power generation (Mouli-Castillo et al., 2021). according to research, hydrogen is one of the leading options f resources that can be instrumental in storing renewable energy. Since non-renewable energy continues to face the threat of extinction caused by diminishing resources, renewable energy has gained more popularity, and more companies have been investing in renewable energy to help guarantee future continuity of operations in case the energy crisis worsens than it currently is. In addition, hydrogen, when mixed with ammonia, can be used in gas turbines to increase power system flexibility.

Key Resources

The storage of high-density hydrogen for stationary and portable applications remains a significant concern for the energy sector. This is because hydrogen’s available storage and distribution facilities can only accommodate high-volume systems and can only store hydrogen in a gaseous state (Tarasov et al., 2021). Figure 1 below shows compressed gas storage. Hydrogen storage requires the use of advanced pressure vessels made of fiber-reinforced composites that are capable of reaching 700 bar pressure. These composites have significantly emphasized system cost reduction, making them more suitable for the industry. The HFTO (hydrogen and fuel cell technologies Office) is strategically pursuing two main pathways: the near term and the long term. The long-term pathway focuses on two significant areas; cold or cryo-compressed hydrogen storage, which has enhanced hydrogen density, and insulated pressure vessels that can meet DOE (Department of Energy) targets. The second focus is materials-based hydrogen storage technologies, including sorbents, metal hydrides, and chemical hydrogen storage materials, with properties having the potential to meet DOE hydrogen storage targets. However, stationary applications are much less critical than portable applications as their footprint of compressed gas tanks is simple and cheaply acquired (Tarasov et al., 2021).

How is hydrogen stored?

Figure 1: retrieved from.https://www.energy.gov/sites/default/files/styles/full_article_width/public/fcto_storage_tree_chart2.png?itok=bbg2lBYZ

Recommendations

In the contemporary world, the storage techniques and options that are most reliable are based on hydrogen gas. For instance, researchers have suggested that the best way to use hydrogen is primarily using it at its production site. If hydrogen is used where it is produced, there is no reason to store hydrogen in any other way. Domestic users whose operations are within the jurisdiction of the resource production site best use this option. However, the production and storage of hydrogen for exportation to other countries that lack the resources to produce locally naturally lead to the implementation of various chemical compound-based storage methods. Chemical compound storage methods are more conducive as they are less expensive and do not require a specific infrastructure (Mouli-Castillo et al., 2021). Suppose the hydrogen is being stored to be used locally or in areas that are geographically near the production area. In that case, storing gaseous or liquid hydrogen in special gas cylinders is recommended. This method is applicable for storage of both short distances as well as for short-term use. However, hydrogen is being stored. It is also conceivable to use old oil shale mines for long-term storage. Oil shales are underground rock formations that have petroleum trapped in them. Other hydrogen storage options include storing them as a chemical compound, such as ammonia or methanol. This is because methanol and ammonia are highly valued in the chemical industry. In addition, hydrogen stored in these compounds can be exported to very long distances. Value chains also play an essential role in the storage of hydrogen. Therefore, whichever technology Is used to store hydrogen should consider the entire value chain to understand where the hydrogen will be used adequately, what quantity of hydrogen will be used, and how the hydrogen will be used (Wijayanta et al., 2019).

There are several ways to transport hydrogen. Studies show that factors such as cost, the practicality of hydrogen, and the distance the hydrogen is being transported play a vital role in the mode of transportation used. For shorter distances, this is determined by the number of kilometers; if the kilometers are only a few hundred kilometers, and if the quantity of hydrogen being transported is equally smaller, then it is recommended to transport hydrogen in its pure form by using heavy goods vehicles (Zhang et al., 2022). Hydrogen’s pure form can be either in gaseous or liquid form. However, when the quantity of hydrogen increases and the transportation distance is also more significant, it attracts other modes of transport that are more advanced. For example, large quantities of hydrogen can be transported in pipelines for a distance of up to 1,500 kilometers more efficiently and quickly. However, distances that are longer than 1,500 kilometers also use other transportation modes. Experts have established that it is more reasonable to transport hydrogen using hydrogen chemical carriers such as ammonia, LOHC, and other existing natural gas. It can also be transported in oil or similar infrastructure (Zhang et al., 2022). Therefore as elaborated in this analysis, the modes of transporting hydrogen vary from Heavy trucks which transport clean hydrogen t the use of pipelines. All these modes are relatively simple and cost-effective, as they are readily available. The choice of the most suitable mode of transport depends on the distance, the volume of hydrogen transported, and the final consumption.

According to the assessment of the BMC factors of hydrogen storage and distribution, it has been established that the chemical industry and transport sectors can be the main sectors of hydrogen penetration. However, in the chemical industry, the main requirements will be ammonia and methanol, and therefore this continues to generate the need for rapid deployment of green hydrogen infrastructure. This need is predicted to increase as soon as the revival of the ammonia industry and new plants of the methanol industry are constructed in the specified regions within the industry. Businesses intending to invest in the storage and distribution of hydrogen can therefore install the methanol plants adjacent to the oil shale power plants or biogas plants. This is because this is where the significant sources of CO2 can be captured and efficiently utilized further as value-added methanol. Some developments in the emission trading system (ETS) and carbon taxation have enhanced this industry’s attractiveness (Zhang et al., 2022). According to research, the necessary CO2 required for the industry’s potential hydrogen penetration will be available at cheap rates. The transportation sector also increases the value of the hydrogen storage and distribution sector as the public procurement of hydrogen buses, freight locomotives, ferries, and passenger trains can rapidly boost the hydrogen economy. The characteristics of Hydrogen cars such as the FCEVs and hydrogen trucks enhance them enough to receive rapid public and commercial acceptance once governmental incentive policies are developed (Ratnakar et al., 2021).

Conclusion

In conclusion, it has been established that the penetration of the hydrogen storage and distribution industry is significant to some major industries, such as transportation and chemical. Therefore, the potential of high returns for investors is guaranteed in the current market and future due to hydrogen’s role in the renewable energy sector. The definition of the hydrogen value propositions shows that this industry will provide solutions to the global energy crisis and the resulting implications of the Russian-Ukraine war on the world.

References

Braun, A.T., Schöllhammer, O. and Rosenkranz, B., 2021. Adaptation of the business model canvas template to develop business models for the circular economy. Procedia Cirp99, pp.698-702.

Mehrjerdi, H. and Hemmati, R., 2020. Wind-hydrogen storage in distribution network expansion planning considering investment deferral and uncertainty. Sustainable Energy Technologies and Assessments39, p.100687.

Mouli-Castillo, J., Heinemann, N. and Edlmann, K., 2021. Mapping geological hydrogen storage capacity and regional heating demands: An applied UK case study. Applied Energy283, p.116348.

Peschel, A., 2020. Industrial perspective on hydrogen purification, compression, storage, and distribution. Fuel cells20(4), pp.385-393.

Ratnakar, R.R., Gupta, N., Zhang, K., van Doorne, C., Fesmire, J., Dindoruk, B. and Balakotaiah, V., 2021. Hydrogen supply chain and challenges in large-scale LH2 storage and transportation. International Journal of Hydrogen Energy46(47), pp.24149-24168.

Singh, R., Singh, M. and Gautam, S., 2021. Hydrogen economy, energy, and liquid organic carriers for its mobility. Materials Today: Proceedings46, pp.5420-5427.

Tarasov, B.P., Fursikov, P.V., Volodin, A.A., Bocharnikov, M.S., Shimkus, Y.Y., Kashin, A.M., Yartys, V.A., Chidziva, S., Pasupathi, S. and Lototskyy, M.V., 2021. Metal hydride hydrogen storage and compression systems for energy storage technologies. international journal of hydrogen energy46(25), pp.13647-13657.

Wijayanta, A.T., Oda, T., Purnomo, C.W., Kashiwagi, T. and Aziz, M., 2019. Liquid hydrogen, methylcyclohexane, and ammonia as potential hydrogen storage: Comparison review. International Journal of Hydrogen Energy44(29), pp.15026-15044.

Zhang, C., Cao, X., Bujlo, P., Chen, B., Zhang, X., Sheng, X. and Liang, C., 2022. Review the safety analysis and protection strategies of fast-filling hydrogen storage system for fuel cell vehicle application. Journal of energy storage45, p.103451.

 

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