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2020-05-03
Middle East Gathers Momentum for a Clean Energy Future
We all know that a new energy future is coming to the Middle East. Both governments and businesses have been preparing for decades to make the transition from a hydrocarbon-dominated global energy market to a much cleaner, more diverse one where renewable and other alternative energy sources provide the bulk of our supply.
This transition is of particular importance to the region because so much of the Middle East owes its economic strength to its immense reserves of oil and natural gas. Indeed, hydrogen and energy have a long-shared history, having powered the first internal combustion engines over 200 years ago and then becoming an integral part of the modern refining industry.
Hydrogen is light, storable, and energy-dense, producing no direct emissions of pollutants or greenhouse gases. For hydrogen to make a significant contribution to clean energy transitions, it must be adopted in sectors where it is almost completely absent, such as transport, buildings and power generation.
The Middle East region can tap into the vast potential of hydrogen for a more sustainable and secure energy future. An IEA report entitled ‘The Future of Hydrogen: Seizing Today’s Opportunities’ finds that clean hydrogen is currently receiving strong support from governments and businesses, with government policies and private and public projects expanding rapidly.
Clean, Secure, Affordable Energy
The Future of Hydrogen report provides an extensive independent survey of hydrogen laying out the ways in which hydrogen can help to achieve a clean, secure and affordable energy future, and how we can go about realising its potential.
The policies of Middle East countries directly support investment in hydrogen technologies, targeting an increasing number of sectors (around 50 today) with mandates and policy incentives in place to support hydrogen directly, mostly for transport. Over the past few years, Middle East governments spending on hydrogen energy research, development and demonstration has risen significantly, even having already peaked in 2008.
Hydrogen can be extracted from fossil fuels, biomass and water, or from a mixture. Natural gas currently accounts for three-quarters of global hydrogen production at 70 million tonnes annually, or 6 per cent of natural gas use. Gas is followed by coal, due to its dominant role in China, while a small fraction is produced from the use of oil and electricity.
Gas prices and capital expenditure are the two most important cost factors in hydrogen production, with fuel accounting for between 45-75 per cent of production costs. Low gas prices in the Middle East, Russia and North America ensure some of the lowest hydrogen production costs, while gas importers like Japan, Korea, China and India have higher gas import prices translating into higher hydrogen production costs.
Today less than 0.1 per cent of dedicated hydrogen production comes from water electrolysis, but with the declining cost of renewable electricity, in particular from solar PV and wind, there is growing interest in electrolytic hydrogen. Producing all of today’s dedicated hydrogen output from electricity would result in an electricity demand of 3,600 TWh, more than the total annual electricity generation of the European Union.
Dedicated renewable or nuclear electricity generation thus offers an alternative to the use of grid electricity for hydrogen production.
Key Uses for Hydrogen
Hydrogen Tackling Energy Challenges: Hydrogen can be used to improve air quality and strengthen energy security by decarbonising many sectors, such as long-haul transport, chemicals, iron and steel, even though it is difficult to reduce emissions meaningfully. Despite ambitious international climate goals, global energy-related CO2 emissions reached an all-time high in 2018 while outdoor air pollution remains a pressing problem, with around 3 million people dying each year.
Hydrogen is Versatile: The technologies available today enable hydrogen to produce, store, move and use energy, while a wide variety of fuels produce hydrogen, including renewables, nuclear, natural gas, coal and oil. Like liquefied natural gas (LNG), hydrogen can be transported as a gas by pipelines or in liquid form by ships, transformed into electricity and methane to power homes or feed industry, as well as providing fuel for cars, trucks, ships and planes.
Hydrogen Raises Renewables’ Contribution: Renewables demonstrate variable output from solar photovoltaics (PV) and wind, with availability not always well matched with demand. Hydrogen is amongst the best options for storing energy from renewables and a lowest-cost option for storing electricity over days, weeks or even months, while hydrogen and hydrogen-based fuels can transport energy from renewables over long distances, from regions with abundant solar and wind resources, such as Australia or Latin America, to distant energy-hungry cities.
No More False Starts: The recent successes of solar PV, wind, batteries and electric vehicles demonstrate the potential to build clean energy industries, while hydrogen’s versatility is now attracting stronger interest in the Middle East. Support from governments importing and exporting energy, along with renewable electricity suppliers, industrial gas producers, electricity and gas utilities, automakers, oil and gas companies, major engineering firms and cities, helps foster new technological and industrial development and creates skilled jobs.
Wider Use of Hydrogen: Hydrogen is mostly used in oil refining and fertiliser production, but to make a significant contribution to clean energy transition, it must be adopted in sectors such as transport, buildings and power generation.
Challenges in Hydrogen Usage
Several challenges exist for clean, widespread hydrogen use:
1. Costly Low-carbon Hydrogen Production. IEA analysis finds the cost of producing hydrogen from renewable electricity could fall 30 per cent by 2030 from declining renewable costs and scaling-up of hydrogen production. Fuel cells, refuelling equipment and electrolysers (producing hydrogen from electricity and water) can benefit from mass manufacturing.
2. Slow Development of Hydrogen Infrastructure. Consumer hydrogen prices are highly dependent on the number of refuelling stations, how often they are used and how much hydrogen is delivered daily. Planning and coordination are required to bring together national and local governments, industry and investors.
3. Entirely Supplied from Gas and Coal. While hydrogen already has industrial scale in the Middle East, its global production releases annual CO2 emissions equivalent to Indonesia and the United Kingdom combined. Harnessing this existing scale for a clean energy future requires the capture of CO2 from hydrogen production from fossil fuels and greater supplies of hydrogen from clean electricity.
4. Regulations Limit Clean Development. Government and industry should work together to ensure existing regulations are not a barrier to investment. Trade will benefit from common international standards for transporting and storing large volumes of hydrogen safely and tracing the environmental impact of different hydrogen supplies.
Four IEA Recommendations
The IEA has identified four mutually reinforcing, near-term opportunities to help hydrogen achieve the necessary scale, bring down costs and reduce risks for governments and the private sector:
1) Make industrial ports nerve centres for scaling-up clean hydrogen use. Much of the refining and chemicals production using fossil-fuel-based hydrogen is concentrated in coastal industrial zones, such as the North Sea in Europe, the Gulf Coast in North America and southeastern China. Plants shifting to cleaner hydrogen production would drive down costs, while fuelling ships and trucks serving the ports can power other nearby industrial facilities, like steel plants.
2) Build on infrastructure like natural gas pipelines. Introducing clean hydrogen to replace just 5 per cent of countries’ natural gas supplies would significantly boost hydrogen demand and drive down costs.
3) Expand hydrogen in transport. Powering high-mileage cars, trucks and buses to carry passengers and goods can make fuel-cell vehicles more competitive.
4) Launch the first hydrogen shipping routes. The international hydrogen trade needs to start soon to impact upon the Middle East’s energy system.
Factors Favouring the Middle East
The Middle East will become pivotal in the production and global distribution of hydrogen, well-placed to leverage a different set of abundant natural assets – namely, sunshine and wind. Hydrogen is increasingly seen as an essential component of the Middle East’s energy future, with the IEA calling for governments to support the growth of hydrogen production and utilisation in order to supply the rampant demand for electricity:
Burgeoning global demand for hydrogen. Demand has tripled since 1975, 6 per cent of all natural gas and 2 per cent of coal now goes to hydrogen production.
Optimal shipping lane and port access. The Middle East’s enviable geographic position before the lucrative markets of Europe and Asia remains the hinge between these continents, while its highly-advanced logistical infrastructure makes it ideally placed for expanding hydrogen shipping trade.
Declining solar PV and wind costs. Generation costs continue to decline, with the electrolysers added to the Middle East’s renewable production providing a low-cost supply option for clean hydrogen.
Supportive government and legislative bodies. The Middle East’s governments and regulatory organisations have shown understanding of the need for swift and decisive support for transition to a cleaner energy future.
Going Green with Hydrogen
Most hydrogen produced today utilises hydrocarbons in the process, requiring its production to become cleaner as the sector expands. As solar PV and wind-based electricity costs keep tumbling, the growing interest in ‘green’ electrolytic hydrogen may prove to be the right direction for the industry’s investment and support.
If cleaner hydrogen production expands significantly, then the Middle East could very quickly find itself as the base of operations for a clean hydrogen industrial revolution, given its increasing access to what will likely become the cheapest energy resource in the world.
SPOTLIGHT PROJECT: Fukushima Hydrogen Energy Research Field (FH2R)
In 2019, a coalition of Japanese companies announced the completion of FH2R, the world's largest-class hydrogen production plant. Capable of producing up to 1,200 Nm3 of hydrogen per hour through the use of 20-MW of solar power, this facility is an initial realisation of the vast potential of green hydrogen.
Although it is already highly sustainable, with further refinements the entire cycle from generation to use of hydrogen supply systems is expected to become completely CO2-free in the near future. This project should serve as a preview of what the Middle East may be capable of producing at an even greater scale, once hydrogen production facilities are married to new and existing large-scale renewable sites.
A Green, Natural Revolution
Predictions from the IEA suggest that, in the long term, most of the Middle East should be able to offer hydrogen production costs of between 2.2-1.8 US$ per kgH2, which are very much at the lower end of the costs scale. Although it is difficult to predict exactly how and when the majority of hydrogen production will transition from coal and gas to water electrolysis, manufacturers and distributors agree that this is a destination they are eager to reach.
The end result would thus constitute extremely sustainable yet cost-effective energy production able to achieve the viable scale required to supply significant portions of global energy demand, making the pursuit of green hydrogen too important to ignore, particularly for the world’s biggest renewables hub. As we continue to see hydrogen demand rise, and the costs associated with the generation of renewable energy fall, the formula for the Middle East taking the reins on green hydrogen production seems to be writing itself.
With its optimal geographic position for facilitating shipping, low gas prices and rapidly declining costs in the production of renewable solar PV and wind energy, the Middle East is well positioned to become a global leader in the production and distribution of cleaner, greener hydrogen.
International cooperation is vital to accelerating the growth of versatile, clean hydrogen around the world. If governments work to scale up hydrogen in a coordinated way, then this can help to spur investments in factories and infrastructure to bring down costs and enable the sharing of knowledge and best practices.
Trade in hydrogen will also benefit from common international standards. As the global energy organisation that covers all fuels and all technologies, the IEA will continue to provide rigorous analysis and policy advice to support international cooperation and conduct effective tracking of progress in the years ahead.
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