GCC swaps oil for 'green hydrogen' in new project proposals
Looking to diversify their oil-based economies, the Gulf Cooperation Council (GCC) states have been exploring the field of renewable energy and lately, the focus has switched to ‘green hydrogen’ as it is ‘clean energy' and suits climate change goals. Even though the market for green hydrogen is small right now and most projects are in the initial phases, it is in the spotlight.
According to a Hydrogen Projects Database maintained by the International Energy Agency, almost 320 green hydrogen production demonstration projects have been launched globally, and new projects are being added on almost a weekly basis.
Partnering with Siemens, the United Arab Emirates (UAE) became the first producer of green hydrogen in the region with the inauguration of its ‘industrial scale, solar-driven green hydrogen facility in the Middle East and North Africa” in Dubai last month. Even though it is a modest beginning as the pilot project can fuel just a hundred cars, a new trend has been set for the GCC.
"Even though the market for green hydrogen is small right now and most projects are in the initial phases, it is in the spotlight"
Based at a DEWA testing facility at the Mohammad bin Rashid Al Maktoum solar park, the plant has major advantages as the United Arab Emirates gets a lot of sunshine and is a major producer of crude and gas. And further down the road, the UAE could even become an exporter of green hydrogen.
According to Siemens Energy CEO Christian Bruch, solar power provided from the park will have a production capacity of 5000 megawatts by 2030 and he says that “It will be, it should be, one of the key future commercial models in the UAE and the wider region, to be also, in future, an energy exporter for the world.”
Likewise, Saudi Arabia plans to develop green hydrogen and it announced in July last year that its $500 billion worth futuristic city of NEOM would have “the largest green hydrogen plant in the world’, the Kingdom also made its entry. Having launched a $5 billion worth 4-gigawatt plant named Helios at the NEOM site near the Red Sea coast, Saudi developer ACWA Power is partnering with an American company Air Products and Chemicals.
Operational by 2025, this project would produce around 1.2 million tonnes of green ammonia every year and it could become the first hydrogen valley in the MENA region. Encouragingly, there are buyers already and Germany inked an agreement with Saudi Arabia this year for the processing, manufacturing and transporting of green hydrogen.
In fact, Saudi Energy Minister AbdulAziz bin Salman has stated that the Kingdom would like to sell hydrogen to more European countries and become a global exporter and producer of green and blue hydrogen, even building a pipeline of liquified hydrogen is on the cards.
Next, Oman plans a $2.5 billion green ammonia and hydrogen project at Duqm along with a green hydrogen plant powered by 25 GW of renewable energy. Having signed an MoU with Acme Holdings in March 2021, Oman will be setting up a facility with the capacity to produce up to 2200 metric tonnes of green ammonia per day.
Also, Oman’s state-owned company OQ and Hong Kong-based green fuels developer Intercontinental Energy and Kuwait’s EnerTech plan another green hydrogen plant which will be powered by 25GW of renewable energy. Having identified an area in the central Al-Wusta governorate, this consortium is monitoring its feasibility.
Meanwhile, Qatar has carried out several feasibility studies and pilot projects for blue and green hydrogen. In these efforts, Doha has been supported by the European Union which has funded and created an EU-GCC clean energy network to facilitate its plans to switch over to alternate energy means from oil.
Notably, exporting to China, Singapore, Germany, Japan and South Korea, Qatar is the world’s fifth-largest hydrogen exporter and it had sales worth $520 million in 2019.
"The challenge for Gulf suppliers is that while blue hydrogen is currently more cost effective, Europe is focused on green hydrogen to promote its energy transition agenda"
Mainly, it is Europe that will be a lucrative market for hydrogen suppliers in the Middle East as the European Union has announced an ambitious green hydrogen energy strategy for 2030.
Discussing the prospects of hydrogen exports for the GCC states with The New Arab, Prof. Michael Tanchum, a senior fellow at the Austrian Institute for European and Security Policy (AIES), stressed the need to switch to green hydrogen as, “The European Union as a whole, along with its leading member states have embarked on grand hydrogen strategies, as exemplified by Germany's rolling out its $11 billion national hydrogen strategy a year ago. The EU and its member states are looking to import hydrogen to meet their requirements.
The challenge for Gulf suppliers is that while blue hydrogen is currently more cost-effective, Europe is focused on green hydrogen to promote its energy transition agenda. Unless new carbon sequestering technologies can turn blue hydrogen sufficiently green by EU standards, producers in the Gulf and North Africa might have to rethink their own sectors.”
Mainly, there are three types of hydrogen energy, grey, blue and green.
Mostly used for industrial purposes even now, ‘grey’ hydrogen has major drawbacks as being derived from natural gas, it produces large volumes of CO2.
Then ‘blue’ hydrogen is more environmentally friendly but only if the CO2 can be captured and disposed of correctly.
Green hydrogen is produced via electrolysis, the process of separating water into hydrogen and oxygen, and when made from renewable sources such as wind or solar energy, it results in zero-carbon hydrogen but it is prohibitively expensive at present. However, as per the December 2020 report by the International Renewable Energy Agency, costs are expected to decrease greatly in the next few years.
However, according to new research named “The Potential for Green Hydrogen in the GCC Region’” and produced by Dii Desert Energy and Roland Berger, GCC countries could generate revenues from $120 billion to $200 billion by the year 2050 with the export of green hydrogen and its derivatives like green ammonia and clean fuels to markets in both Asia and Europe.
Highlighting the main points of the report, Vatche Kourkejian, a partner at Roland Berger, has explained that, “The GCC region is on the verge of a new era similar to the discovery of oil decades ago. In our joint study with Dii Desert Energy, we showcase the huge potential that green hydrogen pauses for the GCC region and the opportunity to continue being the main energy supplier to the world in a sustainable manner.
The study looks at green hydrogen’s job creation potential as well as the opportunities for localization of parts of the value chain, which would be transformative for the region’s economy and drive for diversification.”
"To avoid a climate catastrophe, we need to achieve “net zero” emissions by 2050 and accelerate the transition to clean energy"
With competitive advantages such as abundant solar and wind resources, the long-term cost could fall to just $1.5-2 per kg. Having adequate funding and export infrastructure available, a lot can happen in the GCC region in 2050.
The world faces the challenge of maintaining economic growth while reducing and mitigating the effects of CO2 and other greenhouse gas emissions. To avoid a climate catastrophe, we need to achieve “net-zero” emissions by 2050 and accelerate the transition to clean energy. Experts and policymakers are increasingly looking to the use of hydrogen as a potentially game-changing technology.
Sabena Siddiqui is a foreign affairs journalist, lawyer and geopolitical analyst specialising in modern China, the Belt and Road Initiative, Middle East and South Asia.
Follow her on Twitter: @sabena_siddiqi