Middle East's bold green hydrogen ambition needs 'quick action'

01 August 2022 Consultancy-me.com 4 min. read
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When it comes to green hydrogen, the Middle East is in pole position to emerge as a dominant player on the global stage, according to the views of 400 energy leaders in the region. But the region’s own optimism needs to be backed by real action, highlights a new report.

The report by Siemens Energy and strategic consultancy Roland Berger explores how the region is working towards its ambition of becoming a major supplier of sustainable energy to global markets.

Not surprisingly, much of the region’s focus goes to green hydrogen – the production of hydrogen from renewable energy (or from low-carbon power). Green hydrogen is considered by many as one of the key pillars of the energy transition, with the International Renewable Energy Agency predicting that hydrogen and its derivatives will be able to account for 12% of global energy consumption by 2050.

Green hydrogen for the world

Among the 400 energy experts surveyed by Siemens Energy and Roland Berger, the sentiment was not much different. “Green hydrogen is key for the energy transition,” summarizes Karim Amin, Executive Board Member at Siemens Energy.

The Middle East has the right cards to become a major exporter, in particular due to the availability of abundant and low-cost renewables, existing export infrastructure and the availability of massive financing resources.

Europe is earmarked as the top and logistically most feasible export opportunity. Demand for hydrogen in Europe is forecast to grow from its current level of 10 million tons a year to 20 million tons by 2030, and 95 million tons by 2050. Around half of this demand will be met by imports.

“Exporting green hydrogen to Europe presents a major economic prospect and the opportunity to gain geo-political significance in the global decarbonisation effort,” states Pierre Samaties, a Partner at Roland Berger.

The UAE and Saudi Arabia have been quick to spot the opportunity, and have crafted bold plans. The United Arab Emirates aims to capture 25% of the global market for hydrogen, while Saudi Arabia even aims to become the world’s largest supplier. Other countries in the region making notable progress are Oman and Egypt.

As it stands, a total of 46 green hydrogen projects are already underway in the Middle East and Africa. For the period to 2030, more than 40 investments of over $20 billion have so far been announced, as well as many more smaller projects.

“The development of green hydrogen is currently driven chiefly by hydrogen developers such as NEOM, ACWA Power, Masdar and OQ. These players are supported by the public sector, which is responsible for enabling factors such as hydrogen valleys, access to technology, clear regulation and the availability of human capital,” explains Samaties.

Gearing up

However, to meet demand and the region’s ambitions, the report emphasizes the need to ramp up production capacity. In doing so, the authors identify three key areas where action is needed: policy, funding and technological innovation.

“The success of the energy transition hinges on the existence of a clear, stable policy framework. Business and financial institutions need this solid basis on which to make their long-term and often irreversible investment decisions. Building the required infrastructure for decarbonising society also requires funding that is front-loaded at the development stage of projects,” states the report.

Technology meanwhile is required to drive more efficiency in hydrogen production (for example: to ensure that hydrogen an also decarbonise hard-to-abate sectors), better streamline and organise (international) energy flows across networks, and prepare the future energy grid for a greater share of intermittent renewable energies.

Nabil Alnuaim, Chief Digital Officer at Saudi Aramco, says: “Transitioning to hydrogen requires huge investment to develop technology, build projects and establish marketplaces that collectively contribute to a cleaner energy future. This coordinated effort by all stakeholders must be supported by policymakers to achieve success.”

With the cost of inaction rising by the day, Siemens Energy and Roland Berger call for concerted action. Christian Bruch, President and CEO, Siemens Energy, says, “Everyone gets [the burning platform for change] and has the same ambition, but we have an implementation problem, not an identification problem.”

Echoing the report’s recommendation, H.E. Suhail Al Mazrouei, the UAE’s Minister of Energy & Infrastructure, concludes: “We need to act, and we need to act quickly.”