Hydrogen adds fuel to global energy transition

Even with the ongoing pressures of the pandemic, various political crises and high material prices, the world’s adoption of renewables continues at breakneck pace. While solar makes up the greatest proportion of new additions for 2022, hydrogen is an essential part of this sustainable mix.

Despite all the challenges of 2021, it was still a landmark year for renewables, totalling 295GW of new capacity added worldwide. Already in May, we’re on track for another record-breaking year in 2022, with a predicted 320GW to be added. To put this in perspective, this is nearly the entire energy demand of Germany, Europe’s leading economy.

However, there are still some storm clouds on the horizon, as tough times fall on renewables as well as hydrocarbon-based fuel sources.

The associated costs of renewable energy deployments are rising. New utility-scale PV and onshore wind plants have become 15-25% more expensive in 2022, thanks to sizeable increases in freight and raw materials costs. Fortunately, spiking prices for gas and oil mean that renewables remain competitive, not to mention the fact that they are increasingly attractive as a means towards achieving energy security for nations dependent on hydrocarbon imports.

Even with stronger solar adoption predicted for 2023, renewable power capacity added worldwide is expected to plateau somewhat, as this progress is offset by a 40% decline in hydropower expansion and only marginal gains in wind. 

Our coverage of hydrogen – specifically green hydrogen (hydrogen created sustainably) – in recent months has pointed towards the startling potential of this renewable energy source to reinvigorate global efforts for energy transition. The desire to decarbonize key sectors such as transportation, shipping, aviation, and manufacturing makes green hydrogen all the more attractive as a sustainable fuel source. As problems around storage and transport of hydrogen continue to be tackled with better solutions, the world draws closer to unlocking this potential.

Nowhere is this possibility more tantalising than in the Middle East. PwC’s recent study suggests that over the next three decades, MENA countries may collectively drive green hydrogen production up to 200 million tonnes per year, with the GCC nations providing most of the pulling power. This would generate an estimated $300 billion-worth, with around $200 billion likely to be exported globally by 2050.

As always, this appeal of this prospect goes beyond the immediate financials. The development of the Middle East as a green hydrogen hub would create lasting value by turning the region into an exporter of hydrogen expertise, knowledge and infrastructural development, alongside the end product itself. This would follow the path already being taken with solar, whereby leading ME nations are establishing themselves as net exporters of everything needed to drive solar capacity adoption worldwide. 

• Saudi Arabia has already committed to a target of producing 4 million tonnes by 2030, which would probably represent about 25% of the global market. 
• Masdar and Hassan Allam Utilities have agreed with the Egyptian state to develop green hydrogen production plants in the Suez Canal Economic Zone and on the Mediterranean coast. The target is 4GW by 2030, a key part of the drive to make renewable energy account for 42% of the country’s energy mix by that year.
• H2 Industries and Public Establishment for Industrial Estates Madayan will develop a $1.4 billion waste-to-hydrogen mega facility in Oman. It will use solid waste to generate green hydrogen and pure carbon dioxide, leading also to higher production of sustainable aviation fuel.

We say this every month, but the race for the world to transition to a clean energy future is well and truly on. Not only is the climate crisis deepening, so too are the geopolitical tensions that underline the need for energy security. As hydrocarbon energy prices skyrocket, the long-term benefits of securing renewable, reliable, homegrown energy become increasingly apparent. As ever, the Middle East is both strategically well placed and politically motivated to turn this renewable future from mere potential into tangible reality.