Green Hydrogen: Fuel of the Future?

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In 2020, interest in ‘green’, or renewable, hydrogen has been skyrocketing. In early July, the EU Commission announced its goal to make hydrogen an intrinsic part of Europe’s integrated energy system by 2030. A month earlier, Nikola, a US start-up that manufactures hydrogen fuel cell and electric trucks, had joined the stock market, referring to itself as the world’s first zero-emission ‘big rig’ company. Reflecting considerable market optimism, Nikola’s valuation doubled weeks after its IPO, exceeding that of Ford Motors – although the company has yet to show positive cashflow.

In the Middle East as well, hydrogen is increasingly referred to as the region’s ‘new oil’. Indeed, it appears that with decreasing technology costs and abundant renewable energy resources, the MENA region is well-positioned to play an important role in the upcoming hydrogen transition. In early July, a flagship hydrogen project was announced by the Saudi company NEOM. Worth $5 billion, the Joint Venture aims to build and run a green hydrogen-based ammonia production facility. Once on stream, the plant will produce and export 650 tons of hydrogen per day, thereby reducing the world’s annual CO2 emissions by over three million tons per year.

Given Saudi Arabia’s focus on economic diversification, its investment in hydrogen is no mere ‘lip service’ to the environment. It forms an important part of the Saudi Vision 2030, specifically its clean energy and circular carbon economy strategy. NEOM’s CEO described building ‘the world’s largest renewable hydrogen project’ as an important milestone in ‘becoming a global leader in green hydrogen production and green fuels’.

While these goals are undoubtedly ambitious, their implementation depends on more than Saudi will power. Positive hydrogen developments elsewhere will be required to ensure worldwide demand, for instance, and provide the infrastructure needed to transport Saudi hydrogen across the globe.

There is much reason to believe in an imminent ‘hydrogen revolution’. While being the smallest chemical element yet discovered (consisting of a single proton and electron), hydrogen holds immense power. If combined with oxygen, it is capable of producing two to three times more energy than other fuels.

Moreover, it is abundantly available in water (H2O), hydrocarbons and other organic matter, and allows for speedy re-fueling. In fact, hydrogen’s fast filling time, and the fuel cell’s high efficiency, make it an important component in decarbonizing energy-expensive industries, such as cement and steel factories, and the transportation sector, including commercial trucking, trains, and busses. Hydrogen is particularly promising where previous electrification attempts have proven difficult, due to weak battery systems, for example, and long fueling times.

Given the great potential of hydrogen, the question arises why we have not built a fully fletched ‘hydrogen economy’ already? A key reason for the slow hydrogen development is a simple connectivity problem: for a green hydrogen project to be profitable, collaborative economies of scale must be established across an integrated hydrogen system (see graph below). Yet, thus far, hydrogen initiatives have been limited to individual actors in single sectors.

As a consequence, investments remain risky, as their profitability is tied to various other hydrogen products, whose provision is difficult to guarantee, especially in light of limited cross-sectoral collaboration.

Figure 1: The integrated hydrogen system requires cross-sectoral planning and investment.

Hydrogen Generation

While green hydrogen is generated through the electrolysis of water, blue hydrogen is produced by converting natural gas via a mechanism known as ‘steam methane reforming’, commonly used in the petrochemical industry.

Energy, chemical and other firms that contemplate building new clean hydrogen production plants have expressed concern over the lack of infrastructure required to transport, store and sell the hydrogen they produce.

The absence of hydrogen pipelines, storage facilities and retail stations make it almost impossible for these actors to sell their hydrogen at a profit. Moreover, the market demand for hydrogen is still in its infancy.

Original Equipment Manufacturers (OEMs)

OEMs play a critical role in the integrated hydrogen supply chain. OEMs, such as car manufacturers, help spark the knowledge and interest in hydrogen among end-users.

Likewise, OEMs such as GE and Siemens are crucial to the large-scale production of hydrogen, as they provide the hydrogen power generators required for future ‘green’ power stations. Moreover, without involving OEMs in the hydrogen system, we risk increasing purchase costs, as well as maintenance and insurance costs among end-users.

Hydrogen Policies (Government)

While many governments are eager to balance their economic and environmental mandates, they tend to prefer tried and tested policies and projects, such as carbon taxes and the removal of oil subsidies. This is unfortunate, as hydrogen offers a climate change solution that promises to not only reduce emissions but to diversify and grow national economies, including in the Middle East.

Given the necessity of an integrated investment and planning approach to hydrogen, it is crucial that governments take on a co-ordinating role. By bringing together and enabling stakeholders, governments may, in fact, serve as the ultimate catalyst that sparks a full-fletched and sustainable transition toward a hydrogen economy.

The Dutch ‘Hydrogen Valley’, which aims to create a complete hydrogen ecosystem in the north of the Netherlands by 2026, offers valuable insights into the challenges and successful implementation of an integrated hydrogen system. It hosts an entire hydrogen value chain: from production to distribution, storage, and local end-users.

Its success – and that of similar projects and government initiatives – is crucial to moving forward a green energy transition of significant scope and impact. While independent investments and initiatives constitute important contributions to the hydrogen turn, new coordinating mechanisms must be added to swiftly transform today’s momentum into a sustainable green energy future.

About the Author

Luai Nabil Luai Nabil
Luai is a business professional with over 12 years of diversified experience in the energy industry, mining, trade and light manufacturing.
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