Appendix C. Existing Hydrogen Production Capacity

An estimate of U.S. hydrogen production capacity in 2003 and 2006 is provided in Table C.1. U.S. hydrogen production capacity is subdivided into “on-purpose” and “byproduct” production capacity, with the on-purpose capacity further classified as “captive” and “merchant” production capacity.

Refinery activities are estimated to account for 65 percent of hydrogen production capacity. Adding the hydrogen production capacity at ammonia and methanol production plants to the hydrogen production capacity associated with oil refineries brings the share of hydrogen production capacity related to petroleum refining and petrochemical production up to 92 percent. Indeed, the share of petrochemical production capacity has declined as higher natural gas prices have led to a 35-percent reduction in ammonia production capacity and a 44-percent reduction in ammonia production between 1999 and 2006.⁹⁹, ¹⁰⁰ Over the same time period, methanol production capacity has also declined, by 86 percent, with only four facilities remaining in operation in 2006.¹⁰¹ Two of those facilities were removed from service during the first half of 2007.

As indicated in Table C.1, existing hydrogen production capacity is from either technology dedicated to producing hydrogen “on-purpose” or as a byproduct from processes dedicated to producing some other product. Of the on-purpose hydrogen production technologies, the three major processes are reforming, partial oxidation and electrolysis. Byproduct production of hydrogen occurs in catalytic reforming of crude oil and other refinery processes and in chlor-alkali processes for chlorine and alkali production. As shown in Figure C.1, hydrogen production capacity exists across the United States.

Chlor-Alkali By-Product Production Capacity

The byproduct production of hydrogen gas is of interest because the estimated 389 thousand metric tons of hydrogen annually produced from chlor-alkali processes alone are equivalent to the annual fuel consumption of 1.9 million light-duty hydrogen vehicles. The process itself involves the electrolysis of salt water which, in combination with other process steps, splits salt (NaCl) in solution into sodium hydroxide (NaOH), chlorine gas and hydrogen gas. In this process, hydrogen is a byproduct. In some facilities, approximately 10 percent of the hydrogen produced is used on site to produce hydrochloric acid (HCl), while larger portions are either sold to third-party marketers of hydrogen gas for further purification and distribution. Some facilities also combust hydrogen on site to meet steam and power production needs. Some chlorine producers may produce excess hydrogen gas that is either vented¹⁰² or flared and thus could be a source of supply, potentially at a low cost for nearby consumers such as hydrogen dispensing stations. Additionally, the fraction of hydrogen byproduct that is currently used as process heat at some facilities (perhaps up to 40 or 50 percent of the total) could be available as an additional source of supply. The minimum cost related to that potential additional supply would likely be the substitute fuel that would be used for process heat. In most cases that substitute fuel would be natural gas. Thus, for this portion of the hydrogen byproduct, the minimum value would be $1.49 per kilogram at a delivered natural gas price of $11 per million Btu (excluding purification and distribution).¹⁰³ The portion of hydrogen that is sold to marketers would have a different, and likely higher, opportunity cost associated with its pricing.

Approximately 70 percent of the United States chlor-alkali production capacity is in the Gulf Coast region.¹⁰⁴ There are plants located throughout the United States, but a major shift of capacity away from the chemical industry hub in the Gulf Coast would likely to be costly and occur slowly.

Oil Refinery Hydrogen Production Capacity

Currently, the largest sources of hydrogen production capacity in the United States are associated with the nation’s 145 operating oil refineries and 4 idle refineries. The refineries consist of a complex system of chemical processes such as hydrocracking, reforming, hydrotreating, and other processes in which crude oil and hydrocarbon compounds are distilled, processed and blended into a wide array of products. There are four primary sources of hydrogen at refineries: catalytic reforming, on-site hydrogen production, purchases from merchant plants, and byproduct production from other refinery processes.

Many refineries augment their catalytic reformer system’s capacity to produce hydrogen with a separate, on-site hydrogen plant. EIA’s 2007 Refinery Capacity Report, EIA-820, shows 89 refiners, or about 61 percent, having on-site hydrogen production capacity. This capacity amounts to 3,100 million standard cubic feet (SCF) of hydrogen per day or the equivalent of 2.723 million metric tons of hydrogen per year.

Some refineries purchase hydrogen from merchant suppliers. The merchant suppliers may operate a hydrogen plant adjacent to the refinery and supply the gas “through-the-fence”. In other cases, the refinery is connected to a large hydrogen supply pipeline that the merchant operates. EIA estimates that the merchant-supplied hydrogen production capacity related to refineries was about 1,264 thousand metric tons per year in 2006 as shown in Table C.1.

As illustrated in Figure C.2, the refinery demand for hydrogen is increasing in order to satisfy the growing demand for hydrocarbon transportation fuels and the tightening environmental restrictions on vehicle exhaust emissions. Since 1982, there has been a 59-percent expansion of onsite refinery-owned hydrogen plant capacity—an average growth rate of about 1.2 percent per year. Prior to 2006 the United States hydrogen industry had been growing at a rate of about 7 to 10 percent per year¹⁰⁵ and is projected to grow another 40 percent over the next five years.¹⁰⁶ Within the refinery sector, the near-term average annual growth rate of hydrogen consumption is projected to be about 4 percent per year.¹⁰⁷ The merchant share of hydrogen to refineries is estimated to grow at an annual rate of about 8 to 17 percent per year. ^{108, 109}

Other Hydrogen Production Capacity

Other producers and consumers of hydrogen include ammonia plants, methanol production facilities, brine electrolysis facilities that produce chlorine, hydrogen and bleach, and other smaller facilities. Ammonia and methanol facilities have experienced steady closures or declining production since 2000 because of steadily increasing natural gas prices.^{110, 111}

Notes