Why the UAE and Saudi Arabia will Make Ideal Partners for Countries Looking to Develop Green Hydrogen
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Why the UAE and Saudi Arabia will Make Ideal Partners for Countries Looking to Develop Green Hydrogen
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By Naam Chakravorty, Gulf Lead, and Saniya Syeda, Research Analyst, Botho Emerging Markets Group
November 25, 2022
Saudi Arabia and the UAE have ambitious plans to become the world's leading suppliers of hydrogen fuel. They will, however, also be ideal partners on green hydrogen projects being developed globally, particularly in areas with a lack of water. This is because green hydrogen production requires both renewable resources and a sizable amount of freshwater, and both Saudi Arabia and the UAE stand out as leaders in renewable energy and desalination.
The Gulf is well-positioned to lead the integration of renewable energy, desalination, and green hydrogen innovation
Among the technologies used to produce hydrogen today, the grey, blue, and green hydrogen production systems are the most advanced. Green hydrogen, which is the most sought-after, is produced using electrolysis to split water and renewable energy sources like solar and wind power. By 2040, 206 gigawatts or 30 million tons worth of green hydrogen projects are expected to be completed globally. This equates to the electrification of almost 154 million households. Because solar energy, which is currently the least expensive renewable source, will be used to manufacture green hydrogen, over 85% of this capacity will be built in places with abundant sunshine, including Spain, Chile, South Africa, Namibia, and Australia. However, many of these regions are water-stressed and would likely need to increase their desalination capacity to sustain green hydrogen installations. Similarly, desalination plants use a lot of energy, and in order for a project to be deemed clean, it would also need to use renewable energy sources. Only 1% of desalination facilities worldwide are powered by renewable energy, primarily in Australia and Spain. To successfully implement green hydrogen projects globally, combining knowledge and expertise in renewable energy, desalination, and hydrogen innovation is necessary. In this scenario, the Gulf countries would make ideal partners.
Gulf countries are realizing their potential to supply foreign markets with different types of hydrogen fuel. Since the hydrogen economy fits into the institutional and financial framework of the oil industry, it gives the Gulf countries a chance to keep their current economic and political power structures. The high diffusivity and flammability of hydrogen make its logistics very similar to oil and gas, giving the countries the added benefit of tapping into their decades of hydrocarbon experience. Furthermore, the UAE and Saudi Arabia have long championed the use of grey hydrogen, a byproduct of natural gas, as a feedstock in petrochemical plants, steel mills, and refineries. However, their attention towards cleaner forms of hydrogen, i.e., blue and green, has been much more nascent, and largely triggered by a strategic need to diversify their energy mix in light of environmental concerns-driven global trends and to offset their carbon emissions.
The UAE and Saudi Arabia are championing green hydrogen innovation as well as its enablers
Within the Gulf, the UAE and Saudi Arabia are at the forefront of green hydrogen innovation. And they have the means to pull it off. The access to abundant sunshine combined with their expertise in the use and development of renewable energy in and outside the region provides them with a competitive advantage over other players. The UAE’s capacity for renewable energy has seen the highest increase globally over the past decade, growing from only 13 MW in 2011 to 2,540 MW in 2020. The UAE is followed by Saudi Arabia, whose capacity increased from 3 MW in 2011 to 413 MW in 2020. The two countries have also been leading some of the biggest solar-powered hydrogen projects in the world. In July 2020, Saudi Arabia announced a $5 billion green hydrogen plant to be powered by renewables and built in the futuristic city of Neom. Jointly owned by Saudi Arabia’s ACWA Power and Air Products, the plant is expected to produce 650 tons of hydrogen by 2025 for export. Meanwhile, the UAE was the first country in the region to produce clean hydrogen using solar power through its “Green Hydrogen” project in a collaboration between Siemens Energy and the Dubai Electricity and Water Authority.
Adding to their solar prowess is the desalination expertise that both countries have deployed effectively for industrial, agricultural, and domestic uses. Historically, two of the biggest challenges facing commercial desalination have been the cost of production and its energy intensiveness. However, the two Gulf countries are moving quickly to plug these gaps. The Gulf, which utilizes 4% to 12% of its total energy consumption for desalinating water, has been increasingly turning to clean energy to fuel its desalination processes. For example, the Saudis announced a desalination plant powered entirely by renewable green hydrogen in 2020. Also, the two countries have been significant in cutting the cost of desalination by almost half in less than two years and making the technology more environmentally friendly. Dubai announced a world-record tariff for desalination of $0.28 at its Al-Hassyan IWP in 2020. Meanwhile, KSA’s Neom is racing to make the technology more sustainable than ever before as it looks to achieve zero liquid discharge and utilize the brine generated from desalination purposes for further mineral exploitation.
The UAE and Saudi Arabia are not only demonstrating their expertise individually in the three allied sectors for hydrogen production, but they have also been keen to combine these efforts to showcase the best-case commercialization of green hydrogen. For example, the Abu Dhabi-based startup Manhat is already helping to reduce the damage to the environment with its patented solar-powered water desalination products. In Saudi Arabia, universities and energy developers have signed MoUs to speed up hydrogen utilization in the transport sector.
This proactiveness is set to place the Gulf countries far ahead of their international peers in the hydrogen race. Both countries are fast demonstrating their competitive edge across the hydrogen value chain, be it in hydrocarbon-driven grey hydrogen or renewable-powered green hydrogen, both of which require desalinated water inputs. Their ability to excel in the allied sectors of hydrogen production, as well as their penchant to invest in new energy sources in emerging markets make the UAE and KSA ripe partners for international investments in the hydrogen space. This is especially true in the case of emerging markets in the Global South that are seeking energy diversification to power their economic growth and diversify their foreign investment partners.