Hydrogen production may help certain oil-producing countries diversify their sources throughout the energy transition, but it will not replace oil and gas. The transition from hydrocarbons to renewable energy will raise problems regarding energy supplies and sources across the world.
Oil and gas appear to be less abundant and consequently more expensive as a result of plankton collapse to the ocean floor.
Renewable power, on the other hand, may be created at the Earth’s surface using sun and wind energy. It is determined by global weather patterns rather than specific geological processes.
While this is good news for consumers, who may potentially create or buy inexpensive, renewable power wherever they go, it is poor news for oil-producing states, whose economies have become unduly reliant on the export of fossil fuels, with little success in diversification thus far.
However, in the transition to carbon neutrality, a petro-state may still be able to create energy.
The importance of hydrogen in energy conversion
While some activities, such as those in industry or certain modes of transportation, need a high-density energy source that can be readily stored and carried, hydrogen generation – an energy-dense gas that creates only water vapor when burnt – might be a lifesaver.
Due to rising demand in the industrial, energy, and transportation sectors, the International Energy Agency projects a 6-fold rise in hydrogen consumption by 2050 under a carbon-neutral scenario.
According to experts, this surge in demand will transform hydrogen from a local product derived from natural gas via a process known as methane steam reforming into a worldwide commodity.
Hydrogen sales already have a market worth of almost $179 billion, which is already greater than the yearly trade in liquefied natural gas.
According to the International Renewable Energy Agency, hydrogen sales are estimated to exceed $600 billion by 2050. ( IRENA ).
And petro-states—countries that rely heavily on oil and gas earnings for a major portion of their GDP—must try to break into this new market.
Energy Monitor noted on May 27 that oil-producing countries may take advantage of their existing energy infrastructure, qualified workforce, and strong commercial partnerships.
Because of the gas reserves, petro-states now have the potential to make low-carbon blue hydrogen, which is created by splitting a molecule of methane in natural gas using carbon capture and storage.
Many fossil fuel exporters, particularly the desert nations of the Middle East and North Africa, have significant renewable energy potential, which allows them to manufacture green, renewable hydrogen by separating water molecules using electrolysis powered by renewable energy.
According to Thijs van de Graaf, professor of energy policy at the University of Ghent in Belgium, these oil countries have reaped two benefits from their geological abundance.
There are some reservations concerning the use of blue hydrogen
The economic feasibility of blue hydrogen is seriously questioned. Because carbon capture technology needs a considerable amount of energy, much of the gas that might be converted to hydrogen would instead be used to fuel the capture process.
This will have an impact on the amount of hydrogen that can be generated, as well as profit margins.
According to Daniel Quiggin, a principal researcher at the UK-based Chatham House think tank, the energy penalty for CCS is a huge difficulty that is likely to be considerably larger than many companies would like to reveal.
According to Wood Mackenzie, the cost of carbon dioxide capture and storage will only decrease somewhat between now and 2050.
The present high gas costs in the aftermath of Russia’s invasion of Ukraine, according to Koygin, will boost the price of blue hydrogen generation.
In such market conditions, blue hydrogen’s inflated cost is unlikely to compete with green hydrogen’s considerably lower cost, which is impacted only as much by fossil fuels as power costs.
As technology advances and the cost of electrolyzer devices falls, green hydrogen is predicted to become more affordable.
Blue hydrogen assets, according to the director of global strategy at research company Bloomberg New Energy Finance, will grow more costly than their worth. From a climatic standpoint, there are concerns regarding the practicality of blue hydrogen.
According to Greg Mottet, associate director of the Sustainable Energy Supply Division of the International Institute for Sustainable Development’s Research Institute, CCS does not capture 100 percent of emissions.
Sequestration rates of less than 11% over 20 years and 20-31 percent over 100 years were found in a study of a carbon capture coal power plant and a DAC plant.
The supply chain and emissions connected with the operation of CCS equipment are to blame for the poor sequestration rate.
Potential for green hydrogen
Green hydrogen, which is almost carbon-neutral across its entire life cycle, offers a chance for petro-states.
According to Daniel Quiggin, a senior researcher at the UK-based think tank Chatham House, producing green hydrogen helps balance renewables in the energy grid and benefits from the ever-lower cost of renewables.
He went on to say that the solar energy resource in Africa and the Middle East, which is home to many oil-producing countries, is so vast that countries that are among the first to manufacture green hydrogen might gain a competitive edge.
Many oil-producing countries, on the other hand, have plans in place to take advantage of green hydrogen’s geographic advantage.
Projects involving hydrogen in oil-producing nations
The HELIOS Green Fuel Project, a $5 billion green hydrogen and green ammonia mega plant, was announced by Saudi Arabia in July 2020.
The project, which is expected to begin operations in 2025, will be totally powered by solar and wind energy.
The initiative is part of a $36 billion national hydrogen plan, with the kingdom’s $500 billion sovereign wealth fund as the major backer.
Saudi Arabia’s Crown Prince Mohammed bin Salman chairs the fund, which was built over decades using oil profits.
Oman is one of the other oil-producing countries with hydrogen plans, having launched several massive green hydrogen projects, the largest of which will use 25 GW of solar and wind energy.
The Canadian government, for its part, claims that the country is well-positioned to become a major worldwide exporter of clean fuels, with a goal of being the world’s third-biggest supplier of clean hydrogen by 2050.
Norway, which produces roughly a quarter of Europe’s gas, is likewise optimistic about blue-green hydrogen, with plans to store carbon beneath the seabed on the Norwegian shelf of the North Sea.
Chile, the world’s solar energy leader, announced a green hydrogen plan in 2020, aiming to build 5 gigawatts of electrolyzer capacity by 2025 and 25 gigawatts by 2030, with the objective of generating the world’s cheapest hydrogen by 2030.
By 2030, Australia wants to be a global leader in green hydrogen production and trading.
Germany, Japan, and Singapore are among the prospective markets for Australia.
According to a poll of 78 experts conducted by the International Renewable Energy Agency (IRENA), Australia is the country most likely to become a significant hydrogen producer.
Although there is more discourse about the usefulness of clean hydrogen in decarbonizing particularly tough industries, it still has a long way to go before it can play a significant role in the global energy system.
According to a new analysis issued by the International Energy Forum, hydrogen might play a big role in decarbonizing the global energy system, but the expansion would need substantial investment across the supply chain as well as government backing.
According to the paper reviewed by the Energy Research Unit, hydrogen is likely to play a significant role in areas where power is not available, such as heavy manufacturing, heavy road transport, and shipping.
The hydrogen market is still in its infancy, according to the analysis, and expansion across the whole supply chain is necessary.
demand for hydrogen
Despite rising by 53% in the last 20 years, worldwide hydrogen consumption reached 89 million tons per year in 2020, accounting for barely 1% of the global energy mix.
Oil refining consumes 42% of global hydrogen, whereas China consumes roughly 25% (23.9 million tons).
In the high expectations scenario, worldwide hydrogen consumption is predicted to climb to 567 million tons per year by 2050, according to the analysis.
Global consumption might reach 159 million tons by mid-century under the low estimates scenario, meaning a gap of 418 million tons per year between low and high forecasts.
Clean hydrogen consumption is expected to grow globally
After decarbonization goals became a primary priority for the government, interest in hydrogen has exploded in the last five years; more than 50 countries have formed or are in the process of developing national hydrogen strategies.
Over 500 large-scale hydrogen projects have been announced in the last two years, half of which were announced in the 12 months ending in April.
The European Union has increased the aim for low-carbon hydrogen supply for 2030 by four times, from 5.6 to 20.6 million tons per year, as part of REPowerEU’s strategy to minimize reliance on Russian energy.
What factors will restrict hydrogen’s future role?
Hydrogen possesses characteristics that make it a desirable energy carrier, but its potential expansion in energy transition plans is constrained.
The International Energy Forum asks for additional cost reductions and infrastructure expansion, citing a 35 percent drop in worldwide hydrogen investment from 2008 to 2018.
According to the report, the current cost of hydrogen faces several challenges. First, hydrogen is expensive based on energy content, and production from renewable electricity (between 3 and 8 dollars/kg) is currently much higher than fossil fuels (between 0.5 and 1.7 dollars) and natural gas with carbon capture technology (between $1 and $2).
The second issue with hydrogen is that it has a lower energy content than other fuels and energy, and the third issue is that it needs a lot of energy to produce.
The fourth issue is a lack of infrastructure, namely the capacity to store carbon and essential minerals, which necessitates large expenditures. However, lenders will want a guaranteed customer first, which creates a “chicken and egg” conundrum.
The fifth barrier to hydrogen’s adoption is public safety and acceptance; hydrogen is combustible and leaking.
What is the world’s response to challenges?
There are answers and keys to success, according to the International Energy Forum, the most significant of which are:
To begin, expand new supply chains to build a worldwide hydrogen market.
Second, hydrogen must shift from local to global markets, much as liquefied natural gas did in 1959 when the first shipment was made and the market became based on long-term contracts. It was only in the last decade that the market became more liquid, with quick purchases.
Similarly, the hydrogen economy will take decades to mature from a domestic to a worldwide market, while the rate of development will vary by area and industry.
Third, low-cost energy sources are needed to enhance hydrogen production centers, as well as technology, manufacturing capacity, and input prices.
Fourth, is the development of new infrastructure for transporting hydrogen, with the potential to mix into current natural gas flows in theory.
Fifth, increasing storage capacity is necessary to improve supply security. Although hydrogen storage is currently restricted in reality, its relevance will grow in order to sustain renewable energy’s intermittent nature.
Sixth, encourage international collaboration since creating a worldwide market for hydrogen involves international conversation and cooperation across borders, regions, and the public and commercial sectors.
