In order for eco-friendly hydrogen to compete with conventional hydrogen, production prices must decrease, but transporting the ultralight fuel in large quantities remains a technical challenge.
Gulf countries are spending extensively in the development of green hydrogen plants, which are fueled by solar and wind energy and use electrolysers to separate water into oxygen and hydrogen.
Hydrogen is a carbon-free energy source, but the typical way of manufacturing hydrogen from natural gas or coal releases massive volumes of carbon dioxide (CO2) – according to the International Energy Agency, the industry produces more CO2 annually than Britain and Indonesia combined.
The European Commission estimates that the cost per kilogram of green hydrogen, which accounts for only 2% of worldwide hydrogen production, ranges from €2.50 to €5. The King Abdullah Petroleum Studies and Research Center (KAPSARC) estimates that grey, or hydrogen derived from fossil fuels, costs as little as $0.90/kg, whereas the $5 billion green hydrogen plant now under construction in Saudi Arabia is expected to produce the gas for $2.16/kg.
KAPSARC expects that this will decrease to $1.50/kg by 2030 as electrolyzer and renewable energy costs decrease.
Murray Douglas, head of hydrogen research at Wood Mackenzie, stated, “Those are bold ambitions; if you can reduce the price of hydrogen below $2/kg, it will begin to compete with natural gas in certain markets, particularly those with a tax on CO2 emissions.”
Blue hydrogen, which is produced using standard methods but stores the generated carbon dioxide, is a low-cost option that could enable Gulf companies to swiftly expand production capacity.
“Blue initiatives are contingent on the availability of gas supplies and gas prices,” stated Douglas.
Green and blue hydrogen require additional technological advancements in order to compete with grey hydrogen.
Douglas posed the question, “How much further can these (improvements) be taken?” “A great deal of intellectual property is being created, despite the fact that the corporations engaged are highly secretive. If electrolyser efficiency continues to increase and capital expenditures continue to decrease, your project’s profitability will hinge on procuring very low-cost power at a high load factor and high usage. If you’re able to do so, you’ll be able to become very competitive, but doing so is a significant issue for the industry.”
The Gulf appears to satisfy these criteria. According to Strategy&, the cost of producing solar, wind, and green hydrogen in the Gulf region is approximately one-third of the global average. As an example, solar panels in the Gulf receive twice as much sun energy as those in Northern Europe.
Nevertheless, further difficulties continue. Other difficulties exist. In order to transport significant volumes of hydrogen, which is the lightest element, it must be pressurized into a liquid or compressed gas, which is an expensive operation. The majority of green hydrogen projects, like Saudi’s mega-plant and Abu Dhabi’s smaller-scale initiative, aim to convert the gas into ammonia, which is cheaper and easier to transport.
“The industry is confident that hydrogen can become competitive at the point of production, even against fossil fuel alternatives,” said Douglas. “The problem is whether it can become competitive at the point of consumption.”
“This is where the uncertainties around transportation, storage, and distribution enter the equation. There is a market for ammonia, which is an advantage. We already know how to do it and how much it costs, but because ammonia shipping is a mature industry, costs are unlikely to decrease considerably.
“If they could figure out how to engineer liquified hydrogen, transportation costs would plummet, but there are significant obstacles to overcome – far greater than for liquefied natural gas (LNG), for example.”
Europe will undoubtedly be a big importer of Gulf-made green hydrogen. In May, the European Union established a goal for the EU to produce and import 10 million tonnes of green hydrogen annually by 2030. Hydrogen produced in North Africa might be delivered to Europe via pipelines. Converting existing gas pipelines is technically feasible, but its financial sustainability depends on a number of criteria unique to each destination market. In several European nations, officials may prefer to heat with electricity rather than natural gas.
