Key conditions for the establishment of $700 billion H2 economy

Green hydrogen (H2) has risen to the top of policymakers’ and industry players’ agendas, owing to global decarbonization initiatives and potential economic prospects. Although ambitious objectives are already being sought through linked initiatives, the green H2 economy‘s potential are dependent on a number of factors including policy, supply, infrastructure, and demand. In their newest study, Paving the Way for Green Hydrogen: Key Considerations for Green H2 Deployment, Arthur D. Little expresses this opinion. The document explores the future role of green H2, focusing on prospective use cases and the next steps required for effective implementation.

“Decarbonization has been raised again on top of world’s agenda and countries are actively seeking to lower emissions and transition to clean energy sources,” explained Carlo Stella, Partner at Arthur. D Little Middle East. “The 2015 Paris Agreement has instigated widespread action, with leaderships encouraging technology-backed decarbonization in the years since. Green Hydrogen has been identified as a key technology to bridge decarbonization ambitions, if the basic conditions and some pressing requirements are met in the short term.”

Green hydrogen helps reduce economic dependency on hydrocarbons and adds to economic development and diversification of energy supply, and several countries in the Middle East, particularly Saudi Arabia and the United Arab Emirates, are presently investigating potential in this sector. Furthermore, international policy and bilateral agreements are increasing the relevance of the green H2 economy. Saudi Arabia established a strategic green hydrogen development collaboration with Germany in 2021 to create, process, utilise, and transport clean hydrogen, marking a significant step forward in the Kingdom’s efforts to produce more green hydrogen. In the United Arab Emirates, a green H2 project was launched in May at the Mohammed bin Rashid Al Maktoum Solar Park in Dubai. The project is the first solar-driven green H2 generating plant in the Middle East and North Africa (MENA) area, and it was developed in partnership with Dubai Electricity and Water Authority (DEWA), Expo 2020 Dubai, and Siemens Energy.

“Strategic alliances are certain to be impactful as countries and industry players work together to realize their shared and mutual green H2 objectives,” revealed Eddy Ghanem, Principal at Arthur D. Little Middle East. “That being said, the complex nature of green H2 production cannot be overlooked, and having dual sources of renewable energy is another necessity for sustained decarbonization success.”

While many places have plenty of single renewable energy sources, only a handful are now able to fulfil the minimal standards for several sources. One such project is NEOM in Saudi Arabia, which is building the world’s largest green H2 plant. The availability of both solar and wind renewable energy in NEOM is projected to result in a combined electricity cost of USD 2-3 ct/Kwh once completed, bringing the overall cost of green H2 generation down to around USD 2/kg.

Three conditions are necessary for the success of green hydrogen generation projects, according to the outputs of ‘Paving the way for green hydrogen: Key considerations for green H2 deployment emphasises’: cost-competitive production, production and supply reliability, and risk hedging to attract investors. Potential hydrogen demand is also looked at, and decision-makers are given useful information on possibilities, risk mitigation, and other risks and circumstances connected to policies and infrastructure.

“Although green H2 projects are being pursued and more investments finalized, this momentum can only continue if thriving conditions are secured in the areas of policy, supply, infrastructure, and demand,” concluded Carlo Stella. “Through a collective effort based on transparency, collaboration, and innovation, interested parties can deliver on companies and countries decarbonization commitments, successfully deploying green H2 to usher in a new chapter of renewable energy transformation.”