Hydrogen, one of the most common elements, holds the potential to transform the world’s energy system. Advances in electrolysis technology to produce hydrogen, along with lower-cost renewable energy, are introducing an age of abundant clean power that is based on “green hydrogen.” In the face of the dual shock of the global COVID-19 pandemic and the steep decline in oil prices, GCC countries need to act boldly now to capture the green hydrogen prize and secure future economic prosperity.
By 2050, green hydrogen could replace the equivalent of 10.4 billion barrels of oil equivalent (around 37% of today’s global oil production). The global export market for green hydrogen could be worth $300 billion yearly by 2050, creating some 400,000 jobs around the world in renewable energy and hydrogen production.
Hydrogen is used in a range of applications, from chemical manufacturing, to power generation, to heat for industrial processes. In the past, hydrogen production had steep environmental costs as the process generated large volumes of CO2. Today, new technologies can produce hydrogen through electrolysis, which separates water into hydrogen and oxygen. If electrolysis is powered by low-cost renewable energy, such as wind or solar power, it becomes a low-cost means of producing hydrogen. Green hydrogen can fill the need for traditional applications, be used as a transportation fuel, and be a means to power national energy grids.
GCC countries are ideally positioned to become market leaders in green hydrogen. They possess strong capabilities in generating renewable energy from solar and wind. Some facilities in the region are setting world records for the lowest-cost power generated through renewable resources. GCC countries also have abundant land that can be developed to build additional renewable generation plants—a key factor in meeting future hydrogen demand.
In addition, the GCC has readily available capital to invest in hydrogen infrastructure. Perhaps most important, it has limited domestic demand for hydrogen. Even using a sizable share of domestic production to build their industrial base, GCC countries can still export large volumes of hydrogen to other countries, which rely primarily on imported oil and natural gas (along with nuclear power in some cases).
The significant potential for green hydrogen is encouraging other countries—including China, Japan, and the U.S., along with potential exporters such as Australia, Canada, and New Zealand—to invest heavily in green hydrogen infrastructure. These countries already have a head start over their GCC competitors. To overtake them, and become global leaders in green hydrogen, GCC countries should take three steps:
All of this will require considerable investment. The cost of supplying enough green hydrogen for export globally in 2050 could be approximately $2.1 trillion. Of this total, $1 trillion is needed for building dedicated renewable energy capacity, $900 billion to create hydrogen conversion and export facilities, and $200 billion to develop water electrolysis facilities.
Although many countries have ambitious plans for green hydrogen, the GCC has unique advantages that could allow it to lead the hydrogen economy. It also has an incentive to move away from fossil fuels. By seizing the green hydrogen opportunity, GCC countries can maintain their energy dominance and lay the foundation for economic growth in a decarbonized world.
This article originally appeared in April 2020 on Arabian Business.