Breakthrough of hydrogen technologies until 2030: chances and risks for Gulf countries, international policy implications

Abstract

The year 2018 saw the emergence of a broad social movement demanding stringent policies for climate change mitigation in Europe and other world regions. Widespread meteorological extreme events consistent with rapid global warming are stoking this movement. Especially in Europe, it has already changed the political landscape in a number of countries as green parties have scored record votes. Therefore, policymakers in many countries are sharpening their emission reduction targets for 2030 and 2050. At the same time, strong interest in an integrated hydrogen economy is emerging, where hydrogen would become a key fuel for transportation, industrial uses and even electricity generation. Countries as diverse as Australia, China, European Union (EU) member states and Japan are embarking on far-reaching strategies for a hydrogen economy, starting with the support of fuel- cell electric vehicles (FCEVs) but reaching beyond the transport sector. Hydrogen production technologies are manifold: feedstocks include fossil fuels and renewable electricity. At present, the costs of ‘green’ hydrogen, which is produced with renewable electricity, are still about five times higher than those of gas or coal-based hydrogen. An expansion of green hydrogen production, however, is likely to close the gap within less than a decade. Especially promising are emerging technologies that allow to use hydrogen as a fuel in existing thermal power plants without major refurbishment. The Gulf region faces a significant risk of oil exports becoming squeezed by a successful hydrogen revolution in the next decades. At the same time, Gulf countries are blessed with abundant solar energy resources that can easily be used for green and low-cost hydrogen production at large scale. Therefore, it is recommended that they proactively participate in this revolution, also given the region’s long experience with pipeline and ship transport of other flammable materials. Early movers are likely to benefit from scale effects and become leaders in the market, especially if there are lock-in effects for hydrogen supply chains – i.e. hydrogen importing countries wanting to continue to procure from suppliers with which they have long-term experience. The UAE is already a leader in the Middle East with the first solar hydrogen electrolysis plant under construction in Dubai and a fledgling FCEV fleet. Given its success in bringing down the cost of solar, the UAE would be in an excellent position to achieve the lowest global cost of green hydrogen production. With both the World Expo hosted by Dubai and the G20 presided by Saudi Arabia in 2020, the UAE could leverage either of these platforms to establish, and host, a high-profile International Hydrogen Economy Initiative (IHEI). This initiative could serve as a policy coordination tool between hydrogen importers and exporters, initially focusing on accelerating interactions between the Gulf region – a potential supplier – and Japan and the EU who both are likely to become key hydrogen importers in the next decade based on their self-defined energy policy targets.