The rapid growth of the global hydrogen economy can bring significant geoeconomic and geopolitical shifts, giving rise to a wave of new interdependencies, according to a new analysis by the International Renewable Energy Agency (IRENA).
The report entitled Geopolitics of the Energy Transformation: The Hydrogen Factor sees hydrogen changing the geography of energy trade and regionalising energy relations, hinting at the emergence of new centres of geopolitical influence built on the production and use of hydrogen, as traditional oil and gas trade declines.
IRENA estimates hydrogen to cover up to 12 per cent of global energy use by 2050. Current annual hydrogen sales represent a market value of approximately 174 billion US dollars, which already exceeds the value of annual trade in liquefied natural gas (LNG). Thus, growing trade and targeted investments are likely to boost economic competitiveness and influence the foreign policy landscape.
“Hydrogen could prove to be a missing link to a climate-safe energy future”, said Francesco La Camera, Director-General of IRENA. “Hydrogen is clearly riding on the renewable energy revolution with green hydrogen emerging as a game-changer for achieving climate neutrality without compromising industrial growth and social development. But hydrogen is not a new oil. And the transition is not a fuel replacement but a shift to a new system with political, technical, environmental and economic disruptions.”
“It is green hydrogen that will bring new and diverse participants to the market, diversify routes and supplies and shift power from the few to the many,” he added. “With international co-operation, the hydrogen market could be more democratic and inclusive, offering opportunities for developed and developing countries alike.”
The democratic side of hydrogen
IRENA estimates that over 30 per cent of hydrogen could be traded across borders by 2050 and countries that have not traditionally traded energy are now establishing bilateral energy relations around hydrogen. Especially, those most able to generate cheap renewable electricity will be best placed to produce competitive green hydrogen. For example, countries such as Chile, Morocco and Namibia which today are net energy importers, are set to emerge as green hydrogen exporters.
“Among these new participants, CEE countries may find an important role, especially in the context of regional trade of green hydrogen,” Mr La Camera tells CEENERGYNEWS.
While oil is a prerogative of a few countries, solely depending on their geographic position, renewables can be deployed everywhere and renewable electricity can be exported to neighbouring countries via transmission cables. Over time, also hydrogen could become an internationally traded commodity with two main modes of being transported across borders: pipelines and ships, with distance and volume determining which mode is cheapest.
The EU hydrogen corridor and Russia’s big goal
Transportations’ modes are indeed an important characteristic that must be taken into account. In fact, IRENA has reminded us that having access to abundant renewables is an asset in the clean hydrogen race, but it might not be enough. Many other factors come into play, including existing infrastructure and the current energy mix, along with the cost of capital and access to necessary technologies. In this regard, some existing natural gas pipelines, with technical modification, could be repurposed to carry hydrogen.
There are about 4,600 kilometres of dedicated hydrogen transmission pipelines operating in north-western Europe, Russia and the United States.
In particular, Russia aims to become one of the world’s largest exporters of clean hydrogen, mainly the blue variant. In the words of Prime Minister Mikhail Mishustin, “hydrogen energy will reduce the risks of losing energy markets.” By 2030, Russia aims to account for 20 per cent of the global hydrogen market, which is larger than its current share of the natural gas market. By the middle of the century, the country foresees exporting up to 50 million tonnes of hydrogen, bringing an additional 23-100 billion US dollars to the annual budget.
And the country is clearly moving in this direction already. Earlier in January, LUKOIL and Rosatom Overseas agreed to cooperate in the production and supply of green hydrogen for PETROTEL-LUKOIL, a refinery located in Romania. The plan is to construct a green hydrogen production unit at the refinery to reduce CO2 emissions in operations and obtain the government’s support for the project at the national and European levels. It is again ROSATOM that in April 2021 signed a strategic cooperation agreement with the EDF Group, the world leader in low-carbon energy solutions to develop green hydrogen in Russia and Europe.
Other CEE players
Although Russia’s potential is already quite big, many other countries from the CEE region are already working in the same direction, setting the idea of a hydrogen network of 39,700 kilometres to be developed by 2040. Furthermore, four leading Central European gas infrastructure companies (Slovakia’s gas TSO EUSTREAM, the Gas TSO of Ukraine, Czech TSO NET4GAS and leading German TSO OGE) have joined forces to develop a hydrogen highway through Central Europe: the programme envisages the transport of hydrogen from promising future major hydrogen supply areas in Ukraine to Germany and the EU via Slovakia and the Czech Republic.
Poland, the fifth producer of hydrogen in the world and the third in the European Union is also committing to the hydrogen economy: representatives of the government, business community, science and business environment units signed a Sectoral Agreement for the production, transmission, storage and use of hydrogen. More concretely, last June, the ORLEN Group launched HYDROGEN EAGLE, an investment program to develop an international chain of hydrogen hubs powered by renewable energy sources.
The hydrogen economy: different stages
The geopolitics of clean hydrogen will likely play out in different stages and the report sees the 2020s as a big race for technology leadership.
The OECD countries account for the vast majority of patents in the field of hydrogen. Japan dominates fuel cell research, holding almost 40 per cent of all patents; Europe leads in hydrogen production (primarily electrolysers) and hydrogen storage technologies. Fuel cells account for about 41 per cent of all hydrogen-related patents, but the fastest growth in recent years has been recorded in other areas, such as production and storage.
On the other hand, demand is expected to only take off in the mid-2030s. By that time, green hydrogen will cost-compete with fossil-fuel hydrogen globally.
The main obstacles today
Cost is indeed one of the main barriers preventing clean hydrogen from making a larger contribution to the energy transformation, being still higher compared to carbon fuels. Not only the cost of production but the costs of transporting, converting and storing hydrogen are also high. Adopting clean hydrogen technologies for end uses can be expensive and carbon capture and storage (CCS) is yet to be deployed at scale.
Also, some technologies in the hydrogen value chain required for decarbonisation still have a low level of technological readiness and need to be proven at scale. For instance, gas turbines that operate exclusively with hydrogen are not currently available off the shelf. Furthermore, renewable electricity might now be sufficient: by 2050, the production of hydrogen with electrolysers may consume close to 21,000 terawatt-hours (TWh), which is almost as much electricity as is produced globally today. Thus, as more end-use sectors are electrified, a lack of sufficient renewable electricity may become a bottleneck for green hydrogen.
Finally, there is still a lot of policy and regulatory uncertainty: although over 140 countries have pledged to achieve net-zero emissions within the coming decades, the speed with which these goals will be achieved remains uncertain. It is true that in 2017, just one country (Japan) had a national hydrogen strategy, while today, more than 30 countries have developed or are preparing hydrogen strategies. However, stable, long-term policy frameworks are needed to support development and deployment at scale, as well as standards and certification as countries lack institutionalised mechanisms to track the production and consumption of any shade of hydrogen and identify its characteristics.
Ensuring energy independence
Overall, hydrogen has often been seen as a potential remedy for energy security concerns. The oil price shocks of the 1970s and the peak oil prices of the early 2000s drove earlier waves of interest in hydrogen. As highlighted by IRENA, clean hydrogen could bolster energy security in three major ways: by reducing import dependence, mitigating price volatility and boosting energy system flexibility and resilience. Most of these benefits are associated with green hydrogen, while, conversely, blue hydrogen would follow the patterns of gas markets, resulting in import dependencies and market volatilities.
Defining clear rules for hydrogen, investing in technologies today could lead to geopolitical competition or open a new era of enhanced international cooperation. CEE countries have the potential to emerge on this new map of power, exploiting nature-given resources, like the sun and the wind. But, as the past two years of a global pandemic and climate change-induced events have shown us, cooperation rather than competition must be a key part of every countries’ ambitious strategy.