Although key barriers remain, the worldwide potential of hydrogen is vast. Some estimate an investment pipeline of $300 billion, with hydrogen possibly supplying 18% of global energy by 2050. The Gulf States are particularly well placed to capitalise as producers and exporters of clean hydrogen.
The reasons for this lie in the natural characteristics of the region and the commercial features of the economies within. Many of the Gulf States have abundant and low-cost land, existing power expertise, an active international investment environment, and ideal renewable generation technical conditions (long hot days and windy nights). States like the UAE have also demonstrated the ability to push down PV prices through management of public procurement, promoting tenders and driving increased competition. The result is a distinct competitive edge over other green hydrogen producers, for whom the cost of the renewable energy required for electrolysis is frequently prohibitive.
Blue hydrogen is produced from natural gas through a process called steam reforming while utilising carbon capture and storage. While scaling up green hydrogen production, blue hydrogen might complement the advantages of the Gulf as an ideal bridging technology. Substantial and low-cost natural gas supplies, existing industrial gas facilities and extensive gas grids suitable for adaption would all allow for quicker and easier implementation.
Export markets for sustainable hydrogen are available. Most prominently the European block has high energy usage, relatively high domestic production costs and ambitious commitments in pivoting towards cleaner fuels. The European Commission have indicated that hydrogen is to become a key pillar of the European Green Deal and their hydrogen strategy involves aggressive growth and investment. For many countries like Germany, which imported 72% of their primary energy in 2019, this expansion will mean substantial imports.
However, the challenges to be overcome are formidable. Hydrogen is volatile and while conversion to ammonia offers easier shipping possibilities, it involves energy costs and conversion losses. No major pipeline to Europe exists and construction would require massive investment and negotiating a route through politically difficult terrain. Electrolysers and infrastructure remain expensive and time-consuming to roll out. With massive capital investment required and traditional fossil fuels still profitable, regulation and incentives may be necessary to meet sustainable hydrogen potential. At present, the developing hydrogen market in the Gulf is not subject to any specific regulatory or legal framework.
GCC Governments have a range of potential regulatory tools at their disposal, should they choose to use them, and an effective blend of positive steps promoting targeted growth, against negative measures which devalue undesirable courses of action could be calculated by each state. States could level the playing field by imposing carbon pricing or transitioning existing subsidies across from fossil fuels. Investment and expertise could be enticed by affordable finance from institutions like the Dubai Green Fund, or by governments publishing hydrogen strategies or export and production targets.
Long-term technological expertise may be prioritised through supporting hydrogen research and development projects and investing in educational subsidies and scholarships. Governments could put themselves in position to capitalise on green and blue hydrogen exports with safety and quality regulations for production and infrastructure and a reliable system for certification of origin. Each state will have their own priorities, strengths and preferences and so will apply a different mixture of measures. Some may well proceed with limited regulatory intervention, relying on the market.
However, unlocking the crosscutting potential of hydrogen as a global fuel, a crucial export for decarbonising industry, heating and transport and a pillar of the Gulf’s green transition will require significant investment and focus on resolving key challenges. It seems likely that the most successful economies will be those where the public and private sectors move forward together.