Gulf states start green hydrogen revolution

The world is watching a gulf state revolution. Green hydrogen revolution, of course.

UAE opened Gulf’s first “green hydrogen” facility in 2021. A $5bn green-hydrogen project by KSA-based ACWA Power is nearly funded. Oman, which has fewer and more expensive oil reserves than its neighbors, is considering investing $30 billion in the world’s largest hydrogen production. It even created a state-owned corporation to provide green-hydrogen project concessions in its special economic zones.

Gulf states also want to expand. UAE-owned Masdar is investing $10 billion in a green hydrogen effort in Egypt, creating 4 gigawatts (GW) of green hydrogen and renewables projects in Azerbaijan, and backing a northern England green hydrogen startup.

ACWA Power proposes billions in green hydrogen projects in Egypt, South Africa, and Thailand. Saudi Arabia and the UAE want 25% or more of the clean hydrogen export market by 2030.

Green hydrogen? Green hydrogen (GH2) is the next important step in the shift from fossil fuels to environmentally friendly fuels. Green hydrogen is unique because it can provide climate-neutral fuel and power hard-to-decarbonize industries like steel manufacturing, aviation, and shipping.

Green hydrogen is produced by electrolyzing water using sustainable energy like solar or wind power. Electricity splits water molecules into hydrogen and oxygen, releasing oxygen into the atmosphere and storing hydrogen for fuel.

Hydrogen extracted using renewable energy is green and emits no CO2. Hydrogen fuel yields 33.33 kWh/kg, while gasoline and CNG create 12 and 14.7 kWh/kg, respectively. A kilogram of hydrogen can power a fuel cell vehicle for 100 to 131 kilometres, compared to 16 kilometres for gasoline.

However, green hydrogen is far from ready. Low-emission hydrogen output was less than 1 Mt in 2021, mostly from fossil fuel facilities with carbon capture, use, and storage (CCUS)

Challenges

Green hydrogen as a fuel and energy source faces many obstacles. Cost is the major obstacle to green hydrogen adoption. Green hydrogen costs more than fossil fuel hydrogen.

GH2’s exorbitant cost prevents industrial application. Despite using a lot of hydrogen, many steel and chemical companies are reluctant to move to GH2. In capital-intensive businesses with low profit margins, green products compete with cheaper grey ones.

Grey hydrogen from steam methane reforming costs $3.30 per kilogram, while green hydrogen was $3.80–$5.80/kg before the Ukraine war. Technology and economies of scale should lower costs. Green hydrogen production prices should drop to $2/kg by 2030 assuming investment trends continue.

Green hydrogen fuel infrastructure is also lacking. Hydrogen fuel stations, storage, and vehicles are lacking. This requires significant investment.

The Electricity Transitions Commission (ETC) estimates that hydrogen-based decarbonization of energy and other industries will cost over $15 trillion by 2050.

The ETC estimates that by 2050, green hydrogen generation will require 30,000 TWh of carbon-free power in addition to the 90,000 TWh needed for decarbonisation.

The electricity supply and hydrogen generation will require $15 trillion in investments, peaking at $800 billion per year in the late 2030s.