Hydrogen Economy: Designed to Deliver or Doomed for Failure?

The renewable energy system is at the threshold of a new era of abundance and cost that is bound to transform what we call ‘energy economics.’ Rapidly declining renewable energy costs coupled with technological advances has made it possible for researchers and analysts to posit hydrogen as a medium of choice for transporting cheap clean energy across the globe. Green hydrogen as most readers are aware is a clean energy source that can not only be stored for extended periods of time, but also transported over considerable distances.

It is on the background of the COVID-19 pandemic that the need for accelerated pathways to reduce hydrocarbon demanded that the focus shift to hydrogen as part of a broader trend toward decarbonisation.

Hydrogen by itself is an effective energy storage medium, an energy carrier, and not a primary source of energy. It has the potential to play a key role in a variety of applications which includes but is not restricted to fuel cell power generation and fuel cell enabled vehicles. Hydrogen is also a  cleaner source of energy to end-users, without the release of pollutants, particulates or even carbon dioxide.

Fuel cell technology needs to mature enough to play an economically viable role in the greater scheme of things. This would ensure that fuel cells and fuel cell vehicles pivot in their market shares and become worthy of competing with conventional power generation sources and transportation vehicles. This is where the concerns around hydrogen becoming the backbone of a global economy or even independent economies come under scrutiny.

Hydrogen economy relies on hydrogen as the commercial fuel that would deliver a substantial fraction of a nation’s energy and services but it must also be procured from domestic energy sources economically and in an environmental-friendly manner for the concerned country and the world at large to benefit from lower dependence on oil and coal as the major sources of energy. This will also lead to an improved environmental quality given the lower carbon emissions.

The ‘vision to reality’ journey of Hydrogen economy is at a crucial point in contemporary history with numerous technical, social, and policy challenges. The market demands clean and sustainable energy where fuel cells are not only clean and efficient but also flexible. The main concern here is comprehending the development stages of various fuel cell technologies.

According to a Grand View Research report, Hydrogen production globally was valued at over $120 billion USD and is expected to grow over 5% annually through 2028. The global hydrogen generation market size was valued at USD 129.85 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 6.4% from 2022 to 2030.

And this brings us to the Middle East belt, where the race for Hydrogen has only stepped up. Take Saudi Arabia for example which is hoping to give the world the largest Hydrogen project through NEOM. Eddy Ghanem, a principal at Arthur D. Little in Beirut while commenting on the outcome of NEOM says: “Upon completion, the availability of both solar and wind energy in Neom is expected to yield a combined electricity cost of $2-3 ct/Kwh, which will reduce the total cost of green hydrogen production to approximately $2/kg.”

In the UAE, the $3.9 billion Noor Energy 1 project is currently under construction in Dubai, part of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai which is also the first solar-driven green hydrogen-producing facility in the MENA region.

The Middle East’s green hydrogen market is set for a major boom in the coming decades, on the back of a global market that is set to reach $700 billion by 2050, according to a report by Arthur D Little. Hydrogen's rise in the Middle East comes on the heels of a global switch to a low-carbon economy. Oil exporters are gearing up for a world without crude, with hydrogen replacing it as the dominant energy, the source for new economies and global alliances centred around cleaner fuels.(we will discuss this in detail in a separate article on Hydrogen Diplomacy.)

Recently at the Dubai Expo, autonomous trucks fueled on hydrogen were launched. Given the surge in digital transactions and online shopping, mechanisms for tracking containers, monitoring vessels and connecting cargo boats with businesses are currently working to increase trade efficiency in the Middle East. According to Mashable, To introduce a layer of efficiency and speed into the supply chain, autonomous trucks are being driven into the region along with European markets so that more goods can be transferred with little human intervention.

According to figures from S&P Global, Green hydrogen would be cheaper to produce today than blue H2 across the sunny, oil-rich Middle East, and these figures have come in as early as February.  In a different assessment presented by UK-based Aurora Energy Research it was concluded that blue hydrogen — derived from natural gas using steam methane reformation with carbon capture and storage (CCS) — will probably be cheaper to produce in Europe than renewable H2 until the 2030s.

The cost of Hydrogen is the key to a sustainable Hydrogen Economy. For autonomous vehicles and for projects as big as NEOM, and hopefully, replicas of it that will eventually mushroom in different parts of the Middle East, economic security is key.

According to Recharge, The cheapest location for renewable H2 would be Qatar ($2.62/kg), followed by Saudi Arabia ($3.23/kg), Oman ($3.58/kg) and UAE ($4.51/kg) when using alkaline electrolysers, with prices for PEM electrolysers roughly $1/kg higher.

Egypt joined the list in 2021, with a major project under Siemens. Recharge reported that Siemens Energy CEO Christian Bruch commented that “Hydrogen has the capacity to significantly decarbonise industry and expand economic diversity. The development of a homegrown hydrogen ecosystem and value chain in Egypt has the potential to deliver a more sustainable and prosperous future for Egyptians”.

The pilot plant is slated to “help to drive early technology deployment, establish a partner landscape, establish and test regulatory environment and certification, setup off-take relations, and define logistic concepts”, said Siemens Energy.

According to Energy Connects, “Hydrogen vehicles require very little behavioural change versus current petrol or diesel refuelling - taking only a matter of minutes - a huge advantage for operators of high utilisation vehicles (not just heavy vehicles) that can’t afford to be idle for long periods of time.” Given this reality, it is obvious that the cost of hydrogen must be low for more end-users to contemplate investing in it.

Hydrogen will certainly play a role in a sustainable energy future. Research now claims that it will be retrieved from water by electrolysis. The requisite electricity for this process will be harvested from renewable energy sources. Hydrogen will thus become a carrier for electricity transport from sources to users.

Although many countries have ambitious plans for green hydrogen, the GCC states possess unique advantages that could enable them to become leaders of the hydrogen economy. They currently also have an incentive to move away from fossil fuels. Given the size and scale of the green hydrogen opportunity, GCC countries can lay the foundation for an upward trend in the economy curve as inch closer to a decarbonised world and ensure their continued influence in the energy market, one they have ruled for decades.

The burgeoning of a new Hydrogen empowered GCC economy has the potential to create a large demand for a qualified workforce. Universities will be compelled to include hydrogen studies at the under-graduate and post-graduate levels. Conversations between the different stakeholders could influence regulatory standards and frameworks.

The MENA Hydrogen Alliance Report confirms this at the end of its research study, “The GCC countries can seize this opportunity [Read: the need for 580 MT of Hydrogen by 2050] by deploying local large-scale production capacities and developing their hydrogen ecosystems. By doing so, they could generate annual revenues of USD ~70-200 bn and ~1 m jobs by 2050. In the short-term, the most attractive activity to localize for GCC countries are the electrolysers, which represents 20-40% of the total value chain cost.”

To unlock the full potential of the hydrogen economy, GCC countries must address four key enablers which is to set a clear direction for all key stakeholders with integrated hydrogen strategies; second,  GCC countries should develop hydrogen valleys to reduce production costs; third, GCC countries must develop international partnerships with key technology providers to build strategic leadership in hydrogen; and finally, GCC countries must prepare a qualified workforce needed to deploy the hydrogen economy across its wide value chain.

All in all, the future looks bright for the Middle East’s vision of an empowered Hydrogen Economy.