Current cost per kilogram of grey hydrogen:About USD 1
Cost per kilogram of green hydrogen:At least USD 4
The hydrogen future takes shape in the UAEApril 23, 2021
The UAE is positioning itself to become an international leader in the future hydrogen economy, which has an estimated USD 11-trillion market potential. With ADNOC and Masdar taking central roles and a series of hydrogen agreements made in early 2021, the country’s long-term hydrogen strategy is taking shape.
According to the Hydrogen Council, more than 30 countries have hydrogen roadmaps and as of February, there were 228 large-scale hydrogen projects announced across the value chain, with 85% of those located in Europe, Asia and Australia. These represent a USD 300-billion investment up to 2030, of which USD 80 billion can be considered mature.
Worldwide production of hydrogen has already reached 70 million tonnes per year, 96% of which is produced from steam reformation of fossil fuels. This so-called grey hydrogen has a carbon footprint of 830 million tonnes per year and costs about USD 1 per kilogram. Blue hydrogen, a technology under development, uses carbon capture and storage to remove around 50-70% of the CO2 emissions from grey hydrogen and costs at least USD 2 per kilogram.
On the other hand, green hydrogen is produced by electrolysers running off renewable energy and currently costs at least USD 4 per kilogram. When combusted, it produces only oxygen as a byproduct.
Green hydrogen has garnered the most interest and momentum since 86% of its cost comes from the electricity to power the electrolysers, so the continuous and rapid decline of the costs of wind and solar power is set to make this option cheaper in the future. The remaining 14% of the cost comes from the electrolysers, whose costs are also set to decline by 60-90% by 2030, particularly thanks to mass production in China.
These economic factors are pushing hydrogen as a valuable alternative for assisting the world in reaching the Paris Agreement targets. “We believe that hydrogen will play a significant role by 2050,” Francesco La Camera, director-general of the International Renewable Energy Agency, told The Energy Year, citing “growing investor and government appetite” for s share in the hydrogen market.
Moreover, hydrogen is now seen as the best solution to decarbonise energy-intensive sectors such as long-haul transportation, aviation, shipping and heavy industries such as steel, smelters, aluminium and petrochemicals. One reason is that it stores three times as much energy per unit of mass than conventional petrol.
THE GREEN PATH FORWARD: Technology will be key in making hydrogen a viable green energy option. For example, Siemens’ proton exchange member (PEM) electrolysis is poised to be a game changer. The advantage of PEM electrolysis compared to traditional alkaline electrolysis is that it is highly dynamic, and thus better suited to harvest volatile energy from solar and wind power. As well, PEM electrolysis has high efficiency at high power density, high product gas quality, low maintenance requirements and reliable operations.
Funding, particularly at the government level, is also set to play a decisive role in hydrogen’s future. “If you want hydrogen mobility, you need to start with projects that are driven and funded by the government,” Phillippe Peccard, managing director of Linde Gas & Engineering Middle East, told The Energy Year. “We can’t yet reach a level where those projects can be profitable by themselves. You need to drive it top-down.”
As of February 2021, governments worldwide had already committed USD 70 billion in public funding, and if they establish the right long-term regulatory frameworks and public support, tied to a continued decline in renewables costs and the rapid scale-up of value chains in electrolysis and carbon management, green hydrogen production could have a cost in the range of USD 1.4-2.3 per kilogram by 2030.
UAE IN THE LEAD: In this sense, the UAE is exceptionally placed to develop a leadership position in the hydrogen economy due to its industrial capacity across the energy value chain, its geographical advantages and growing local and export demand. As part of the UAE Energy Strategy 2050, the emirate aims to double the share of renewable energy in its energy matrix to 44%, while promoting energy efficiency and supply diversification.
“Economies like the UAE want to diversify away from hydrocarbons, and they can move to a new field or stay in the field and work to become an energy and technology exporter in the future,” Dietmar Siersdorfer, Siemens Energy’s Middle East and UAE managing director, told The Energy Year. “Hydrogen is that opportunity.”
ADNOC is taking the lead within this framework, aiming to build a “hydrogen ecosystem” that will help with its plan to reduce its greenhouse gas intensity by 25% in 10 years. ADNOC already produces around 300,000 tonnes of hydrogen annually for its downstream operations (for ammonia fertiliser, chemicals such as methanol and for removing impurities during oil refining) and intends to expand production to 500,000 tonnes, taking advantage of its vast natural gas production and reserves.
The NOC’s efforts will also open up partnership opportunities for companies that have developed capacity in this field, such as Worley. “One of our top focuses for future projects revolves around hydrogen,” Amru Alabidi, Worley’s managing director for the UAE and vice-president of operations in Iraq and North Africa, told The Energy Year. “We are, as others are, actively engaged in discussions with ADNOC on blue hydrogen.”
A WAVE OF INITIATIVES: Masdar, the renewable energy arm of Abu Dhabi’s Mubadala Investment Company, will also play a key role. With an extensive network of international technology and investment partners, the company has an active presence in 30 countries, investing in projects worth USD 14.3 billion and with a gross capacity of 5 GW. Masdar City – the UAE’s hub for technology, sustainability innovation and R&D – is uniquely placed for spearheading the country’s hydrogen economy.
Abu Dhabi Sustainability Week in January 2021 was filled with groundbreaking announcements that will establish the basis for the UAE’s hydrogen economy. The Abu Dhabi Hydrogen Alliance was established between ADNOC, Mubadala and ADQ. The alliance will develop a roadmap to accelerate the UAE’s adoption and use of hydrogen in utilities, mobility and industry, with the aim of positioning Abu Dhabi as an international leader in the supply of green and blue hydrogen.
Mubadala will explore green hydrogen opportunities and ADNOC will do the same with blue hydrogen and via expanding its current hydrogen production, whereas ADQ, with its investments in energy and utilities, will play a key role in the transition to clean energy while shaping key hydrogen clusters in the local economy, notably mobility and logistics.
Mubadala also signed an MoU with Siemens Energy with to create a strategic partnership to produce green hydrogen and synthetic fuels to power new hydrogen-based ecosystems supplied from the UAE, establish a UAE-based international synthetic fuels player, jointly advance technology and reduce the costs of green hydrogen and synthetic fuel production, and enable both companies to access emerging hydrogen markets.
2021 MOMENTUM: In January, ADNOC and the Ministry of Economy, Trade and Industry of Japan also signed an MoU for co-operation on fuel ammonia (a hydrogen carrier and zero-emissions fuel) and carbon recycling technologies.
Then in March, Mubadala formed a partnership with Italian gas group Snam – Europe’s biggest gas transport group – to carry out feasibility studies for joint investments and development initiatives in the hydrogen sector.
The momentum continued in April as ADNOC announced its interest in exploring the hydrogen market with India’s public and private sectors in light of India’s growing demand for energy and need for cleaner fuels.
However, the first concrete step within the UAE’s impressive and long-term hydrogen strategy will take place in Masdar City following an MoU signed in January between the Abu Dhabi Department of Energy, Etihad Airways, Lufthansa Group, Khalifa University, Siemens Energy and Marubeni Corporation for the establishment of a demonstrator plant. The plant will explore the development of green hydrogen, sustainable fuels and e-kerosene production for transport, shipping and aviation.