Hydrogen: An Option for Fueling the Energy Transition

Climate change and net-zero commitments rapidly accelerate the global transition from fossil fuels to clean energy. With that, the race is on to adopt clean energy technologies to decarbonise the global economy. Its abundant nature in the atmosphere and the absence of emissions when burnt positions hydrogen to be considered an option for fueling the energy transition.

Countries in the race to become hydrogen superpowers include India, Japan, South Korea, China, the United States, and the European Union. In addition, net importers of energy such as Morocco, Namibia, and Chile are also emerging as exporters of green hydrogen. According to the World Economic Forum, hydrogen could account for up to 12% of global energy use.

In July 2020, Air Products, an industrial gases company, together with ACWA Power, and Neom, Saudi Arabia’s future planned eco-city, announced an agreement for one of the world’s largest green hydrogen projects, a 2GW electrolysis plant. The facility would produce hydrogen for further synthesis into ammonia. Air Products’ strategic partner, thyssenkrupp, was selected to engineer the plant based on their large-scale alkaline water electrolysis module which would be powered by 4GW of solar and wind. This project positively affects hydrogen as an option for fueling the energy transition.

Although Saudi Arabia is still making investments to increase its crude-production capacity, hydrogen is crucial for its energy transition strategy. Its current focus is to increase market share in blue hydrogen in the form of blue ammonia.

In 2020, Saudi Aramco, the state oil firm, gave the world’s first demonstration of blue ammonia supply chains when it shipped forty tons of blue ammonia to Japan. This reaffirms views that existing technology solutions and infrastructure can provide cost-effective and scalable low emission solutions. Moreover, the firm’s exploits have provided an opportunity to be replicated worldwide, especially in countries rich in fossil fuel reserves, such as Nigeria. Could this be a potential pathway for African oil-producing countries to adopt?

However, despite its potential, blue hydrogen production is under scrutiny as a tactic for the fossil fuel industry to delay the energy transition and maintain its long-established infrastructure and processes.

Nonetheless, a strategy is required to determine what role hydrogen would play in the energy transition, and this must be uniquely tailored for developing nations. Though green hydrogen has great potential as a transition fuel, high production costs hamper its progress. Economic viability relies on the availability of low cost, low carbon energy, an increase in a specialised workforce, and early identification of willing off-takers. 

Saudi Arabia’s project presents a model that Nigeria, with its ample renewable resources could emulate. The first step would be the creation of a hydrogen policy which would support the production of other sources of hydrogen along with green.

The United Kingdom, for example, in 2021, published its hydrogen strategy, which sets out a “twin-track approach” to support green and blue hydrogen production. In the same year, the U.S. government passed the Infrastructure Investment and Jobs Act. The Act contained a $9.5 billion budget to boost clean hydrogen development. One of the country’s targets is to cut the cost of clean hydrogen to $1 per 1 kg in 1 decade.

However, different factors affect the enabling policies required to stimulate a hydrogen-driven economy, e.g., the effect of removing fossil fuel subsidies on investments in carbon-free solutions. With enabling policies in place, pilot projects would be needed to explore deployment opportunities. A public-private partnership model could be adopted to decrease associated risks. Government support for the model could include commercial licenses issued to developers, development of improved grid-scale renewable energy markets and tax waivers on associated equipment.

Another crucial step is the development of supporting infrastructure. Product off-takers are critical to ensure economic viability, as seen in the Neom project, where Air Products also serves as the hydrogen off-taker and in Saudi Aramco’s leverage of its existing supply chain network and logistics solutions for blue ammonia shipping. In India, policymakers are considering legislation that requires oil refineries and fertiliser plants to use a minimum quota of green hydrogen in their industrial processes Large scale adoption of hydrogen provides an opportunity for decarbonising sectors such as transportation, chemical and agriculture. In addition, it can support the increase of variable renewables in national power grids and allow flexibility due to its ability to be stored long term.