Green hydrogen can help drive job recovery out of COVID-19 recession

BEIRUT — The green hydrogen export market could be worth $300 billion yearly by 2050, creating 400,000 jobs globally in renewable energy and hydrogen production, according to a new report by Strategy& Middle East, part of the PwC network.

The global demand for “green hydrogen,” produced with minimal carbon dioxide (CO2) emissions, could reach about 530 million tons (Mt) by 2050, displacing roughly 10.4 billion barrels of oil equivalent (around 37 percent of pre-pandemic global oil production).

Rapidly declining renewable energy costs and technological advances would enable hydrogen to become the medium of choice for transporting cheap clean energy across the globe. Furthermore, the COVID-19 pandemic has accelerated the trend toward decarbonization by reducing hydrocarbon demand substantially.

Opportunity for GCC countries to ramp up green hydrogen production

According to the Strategy& report, Gulf Cooperation Council (GCC) countries can ramp up production to boost domestic industries and utilize green hydrogen for export purposes. While other countries are also seeking to invest in green hydrogen, the export prospects of GCC countries are limited by large domestic demand that will probably consume most of their production. However, GCC countries can export much of their green hydrogen and still have adequate, low-cost renewable energy.

Dr. Raed Kombargi, partner with Strategy& and the leader of the firm’s energy, chemicals, and utilities practice in the Middle East, said: “Given the current situation and the decline in demand for hydrocarbons, GCC countries need to act decisively to capture this market with a three-phase plan. They should launch a commercial-scale pilot in partnership with leading electrolysis operating companies to build capabilities and start research and development. Second, they need to develop the right policies and regulations that will enable them to boost the domestic market. Finally, they need to build necessary export infrastructure and secure supply agreements with key export markets.”

Strategy& outlines a three-phased approach for GCC countries to capture the potential of green hydrogen:

1) Invest in commercial-scale pilots

Collaborate with leading electrolysis companies to develop a pilot project that pairs an electrolysis plant, a renewable energy plant, and a single source of domestic demand. The commercial-scale pilot will help policymakers develop domestic technical capabilities, identify local environmental challenges, and initiate R&D activities to develop potential mitigation measures — all in the context of real-world applications rather than theoretical scenarios.

2) Set national policies to boost domestic consumption

Once the pilot has shown that the technology is commercially viable, local governments can develop a comprehensive green hydrogen policy that includes:

• Establishing ambitious and realistic capacity targets that take into account domestic and global market trends,

• Defining governance and institutional frameworks

• Identifying key regulations that the government should develop to properly integrate hydrogen into the energy system

• Creating relevant funding models

3) Transition to exports

After production starts to exceed domestic demand, GCC governments can build the necessary infrastructure to export hydrogen as a cheap, clean power source.

With the right markets established, governments can then build the export terminal and infrastructure for shipping and pipeline channels. Developing that infrastructure will take time, so initial exports may take the form of energy-intensive intermediate commodities like ammonia and direct reduced iron. Over time, exporting countries can then shift to higher-value-added commodities.

Eventually, however, the green hydrogen company should then take the lead in signing supply agreements with key green hydrogen export markets. These should be based on an understanding of regional imbalances in hydrogen and which export markets are most accessible from the GCC compared to other exporters.

Dr. Shihab Elborai, partner with Strategy& Middle East added: “With the challenges posed by the global COVID-19 pandemic and concurrent steep decline in oil prices, GCC countries need to act boldly now to catch up and overtake countries such as China and Australia, who are exerting significant amounts of effort in hydrogen. For instance, the province of British Columbia in Canada is developing plans to produce approximately 1.5 Mt of Blue and green hydrogen by 2050 and generate export revenues of $15 billion. There is clearly an opportunity for GCC countries here.”

Green hydrogen demand is steadily increasing

With modern technology, the cost of producing green hydrogen will lead to benefits in a range of industries and advance the goal of making countries and companies more environmentally sustainable. This will apply to current applications of green hydrogen and new ones. As a result, the demand for green hydrogen is projected to grow significantly by 2050.

Dr. Yahya Anouti, partner with Strategy& Middle East said: “Advances in electrolysis technology and the falling cost of renewable energy are enabling the mass production of green hydrogen, which is more environmentally sustainable. These developments have altered the calculus for hydrogen and created a significant opportunity for countries to boost economic growth and move away from fossil fuels.”

“There are several countries that have ambitious plans for green hydrogen, however, GCC states have unique advantages that could allow them to lead the hydrogen economy. They also have an incentive to move away from fossil fuels. By seizing the green hydrogen opportunity, GCC countries can lay the foundation for economic growth in a decarbonized world and ensure their continued influence in the energy market,” concluded Ramzi Hage, principal with Strategy& Middle East. — SG


Source: https://saudigazette.com.sa/article/594240/BUSINESS/Green-hydrogen-can-help-drive-job-recovery-out-of-COVID-19-recession

 

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