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A future global economy based on green hydrogen produced from
renewable electricity could ease geopolitical tensions by
diversifying energy supply sources across the globe, creating a
vastly different trade map from the current one in a fossil
fuels-dominated world, according to the International Renewable
Energy Agency (IRENA).
With oil and natural gas resources controlled by a limited
number of countries, fossil fuels are seen by many as connected to
geopolitical power, and their trade associated with tensions.
In the Geopolitics of the Energy
Transformation: The Hydrogen Factor report published last week,
the IRENA argued that more green hydrogen in the energy mix could
reduce conflicts between countries as renewable energy resources
are much more evenly distributed.
"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," IRENA Director-General Francesco
La Camera said in a statement accompanying the report. "With
international cooperation, the hydrogen market could be more
democratic and inclusive, offering opportunities for developed and
developing countries alike."
According to the report, countries should investigate how to
reduce their dependence on energy imports by producing and using
more green hydrogen at the expense of fossil fuels.
"Hydrogen can reduce energy import dependence by substituting
domestic resources for imported ones. If local wind, solar, hydro,
biomass or geothermal energy sources are tapped to produce
hydrogen, energy security would rise to the extent imported fuels
are displaced," said the IRENA, a 167-member intergovernmental
organization established to promote renewable energy.
Future landscape
Like many climate experts, IRENA researchers believe clean
hydrogen needs to replace large proportions of oil, gas, and coal
in the energy mix by 2050 for the world to cap global warming at
1.5 degrees Celsius.
Citing figures from the International
Energy Agency, the Organisation for Economic Co-operation and
Development's energy watchdog, the IRENA report said 120 million
metric tons (mt) of hydrogen are produced globally.
Nearly all of the volume is grey hydrogen, produced from fossil
fuels without emissions abatement. About 85% are consumed on-site
rather than traded in a wider market.
However, with more than 30 countries already
establishing national strategies to develop hydrogen markets in
their decarbonization efforts, the IRENA said international
hydrogen trade is set to grow considerably in the coming
decades.
"Falling renewable power costs and improving electrolyzer
technologies could make green hydrogen cost-competitive by 2030,"
the report said. "[Hydrogen] demand is expected to only take off in
the mid-2030s.… Cross-border trading of hydrogen will increase in
the 2030s."
By 2030, the IRENA expects green hydrogen—produced by
electrolysis of water using renewable electricity—to be cost
competitive against blue hydrogen, another type of clean hydrogen
made by gas reformers that are supported with carbon capture and
storage technology.
In its 1.5-degrees scenario, nearly 5,000 GW of hydrogen
electrolyzer capacity will be installed by 2050, compared with 300
MW today. The electricity required to produce hydrogen will reach
almost 21,000 TWh, close to current levels of global electricity
consumption.
The IRENA expects hydrogen production to amount to 613 mt by
2050, of which two-thirds are green hydrogen and the rest blue
hydrogen. Hydrogen and its derivatives will account for 12% of
final energy use, contributing 10% towards the CO2 emissions
reductions required to avert climate disasters.
In this scenario, about half of the hydrogen trade in 2050 is
likely to go through pipelines, including repurposed gas pipelines
that exist today. The other half would be transported by
vessels.
"With the costs of renewable energy falling, but those of
transporting hydrogen high, the emerging geopolitical map is likely
to show growing regionalization in energy relations," the report
said. "Renewables can be deployed in every country, and renewable
electricity can be exported to neighboring countries via
transmission cables."
Emerging hydrogen trade
Sources: IRENA, Natural Earth
The IRENA expects the global energy trade map to be redrawn in
the hydrogen economy. According to its estimates, the regions with
the best potential in producing green hydrogen below $1.50/kg by
2050 are: Sub-Saharan Africa, which can produce up to 2,715
exajoules (EJ); the Middle East and North Africa, 2,023 EJ; North
America, 1,314 EJ; Oceania, 1,272 EJ; and Latin America, 1,114
EJ.
"Countries with an abundance of low-cost renewable power could
become producers of green hydrogen, with commensurate geoeconomic
and geopolitical consequences," the report said.
"Green hydrogen could be most economical in locations that have
the optimal combination of abundant renewable resources, space for
solar or wind farms, and access to water, along with the capability
to export to large demand centers. New power nodes could arise in
places that exploit these factors to become centers of hydrogen
production and use."
Among the major exporters of fossil fuels, the IRENA said
Australia, Saudi Arabia, and the US can also become hydrogen
exporters due to their production potential. These countries would
likely produce large volumes of hydrogen from natural gas, with
carbon capture offsetting the emissions.
Other the other hand, some net energy importers like Chile,
Morocco, and Namibia could become exporters due to their abundant
renewable resources. "For these countries, a green hydrogen
transformation represents a complete reversal of fortune," the
report added. "Countries that succeed in becoming major exporters
of green hydrogen and derived fuels also stand to gain in
geostrategic importance."
Hydrogen diplomacy
The IRENA observed that countries poised to require overseas
hydrogen to meet domestic demand—like Japan, South Korea, and
some European nations—are ramping up their efforts in securing
future supplies.
"Hydrogen diplomacy is becoming a standard fixture of economic
diplomacy in several countries. Access to hydrogen is often seen as
an element of energy security and overall national resilience," the
report said.
In one example, Germany has concluded bilateral hydrogen deals
with a wide range of potential hydrogen suppliers, including
Australia, Chile, Morocco, Namibia, Tunisia, and Ukraine. The
federal government has also provided €900 billion ($1.03 billion)
to the H2Global Foundation, an
industry body tasked with buying hydrogen products aboard and
re-selling them in Europe.
"Germany promotes dialogues in particular with fossil fuel
exporters about challenges and opportunities inherent in an energy
transition towards a greener and more sustainable economy," German
Minister of State for Europe and Climate Anna Lührmann told the
IRENA Assembly 15 January.
"If Europe and others managed to substitute fossil fuels [with]
CO2-neutral hydrogen, this will have profound consequences for the
global markets of fossil fuels. For a foreign policy point of view,
it is essential to consider and mitigate security and economic
risks," she added.
Reduced geopolitical risks
In the IRENA's view, hydrogen trade is unlikely to become
weaponized and cartelized like oil and gas as new classes of net
importers and exporters emerge.
"This is because hydrogen can be produced from many primary
energy sources and in a wide variety of places worldwide.… It is a
manufactured product rather than a raw material or energy source,"
the report said. "Green energy trade flows are unlikely to lend
themselves as easily to geopolitical influence as oil and gas."
The IRENA said trade relations in oil and gas markets have
largely been shaped by geology, with hydrocarbon reserves
concentrated in a limited number of countries, and 80% of the
world's population living in net countries that are importers of
fossil fuels.
This has made it easier for major producers to exert their
geopolitical influence. Mired in the conflicts over Ukraine with
the West, Russia was recently accused by the IEA of
undersupplying gas to Europe during this winter. The country has
also formed the OPEC+ with OPEC and some other producers to
influence the oil market.
In contrast, the IRENA said every country has renewable
resources, even though some are stronger in wind or solar while
others in better positions to develop hydropower or geothermal
energy.
"Since renewable energy is ubiquitous, countries may gain the
flexibility to choose preferred trading partners in the clean fuel
markets of the future," the report said.
Worries remain
However, there are still some potential flashpoints in the
future hydrogen economy.
Speaking to the Assembly, IHS Markit Vice Chairman Daniel Yergin
suggested many energy firms that produce grey hydrogen today may
want to stay in the business by adopting carbon sequestration
technology.
"Big industrial companies see this is a role that they can
play," Yergin said. "There is a large hydrogen business today that
involves oil and gas and companies.…They have the capabilities [in
handling hydrogen]."
Even in IHS Markit's "Green Rules" scenario where countries
tighten emissions regulations, analysts expect almost 43% of global
hydrogen production to come from fossil fuels in 2050, mostly from
natural gas.
The IRENA report, however, said the geopolitical benefits in a
hydrogen economy mainly result from a dominant role of green
hydrogen. "Conversely, blue hydrogen would follow the patterns of
gas markets, resulting in import dependencies and market
volatilities," the report said.
In the early stages of a hydrogen market, the IRENA expects
countries to compete for technology leadership and set emission
standards, which could give rise to tensions. "Setting standards
could be an arena for geopolitical competition or international
co-operation.… Countries have an incentive to set standards to
maintain their competitive advantages," the report said.
Separately, potential importers have incentives to establish
trade practices as they enter the market. The EU has sought to
mainly import hydrogen in euros in the future.
"The currencies and pricing mechanisms that take hold in the
emerging market are likely to have considerable geopolitical
effects," the IRENA said.
"The currency chosen will be positioned to become a global
benchmark as the market expands. Those associated with that
currency will to some degree be sheltered from exposure due to
fluctuating import costs," it added.
The IRENA urged countries to work together rather than create
rivalry in the embryonic market.
"Much can be gained with strong international cooperation and
constructive political and economic engagement. Governments have a
unique opportunity today to shape the advent of hydrogen, avoid the
flaws and inefficiencies of current systems, and influence
geopolitical outcomes," according to the report.
"International cooperation will be essential to effectively
navigate the unknowns, mitigate risks and overcome obstacles in the
years ahead."
Posted 17 January 2022 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability