Bloomberg
Saudi Arabia’s daring plan to rule the $ 700 billion hydrogen market
(Bloomberg) – Sunburned expanse and steady winds in the Red Sea make the northwestern tip of Saudi Arabia the best real estate for what the kingdom hopes will become a global hub for green hydrogen. As governments and industries seek less polluting alternatives to hydrocarbons, the world’s largest crude exporter does not want to cede the burgeoning hydrogen business to China, Europe or Australia and lose a potentially massive source of revenue. It is therefore building a solar and wind-powered $ 5 billion plant, which will be one of the world’s largest green hydrogen producers when it opens in the proposed megacity of Neom in 2025. The task of transforming a piece of desert as large as Belgium into a metropolis. powered by renewable energy, Peter Terium, the former CEO of RWE AG, Germany’s largest utility industry, and Innogy SE, the energy for clean energy. Its performance will help determine whether a country that depends on petrodollars can switch to a supplier of non-polluting fuels. “I have never seen or heard anything of this dimension or challenge,” Terium said. “I’ve been spending my mind ‘from scratch’ for the last two years and now we’re very much in execution mode.” Hydrogen turns from a niche power source – used in Zeppelins, rockets and nuclear weapons – into big business, with the European Union alone $ 500 billion expanding its infrastructure. Major obstacles remain for gas becoming an important part of the energy transition, and skeptics point to the poor history of Saudi Arabia so far, which is taking advantage of what should be a competitive edge in renewable energy, especially solar, where there are many plans but few But countries are striving for position in a future world market, and hydrogen experts cite the kingdom as one to look at. The UK is hosting ten projects to heat buildings with gas, China is using fuel cell buses and commercial vehicles, and Japan is planning to use the gas in steelmaking. The US president’s climate envoy, John Kerry, has urged the local oil and gas industry to take advantage of hydrogen’s “giant opportunities”. That would mean a lot of potential customers for the plant called Helios Green Fuels. Saudi Arabia is set to become the world’s largest supplier of hydrogen – a market that could be worth as much as $ 700 billion by 2050, according to BloombergNEF. “You see a more diversified portfolio of energy exports that is more resilient,” said Shihab Elborai, a Dubai partner at Strategy & Consultant. “It is diversified against any uncertainties regarding the pace and timing of the energy transition.” Blueprints are drawn and strategies are announced, but these are still early days for the industry. Hydrogen is expensive to produce without emitting greenhouse gases, difficult to store and highly flammable. Green hydrogen is produced using renewable energy rather than fossil fuels. According to the International Agency for Renewable Energy, Saudi Arabia is a competitive advantage in its perpetual sunshine and wind, and large tracts of unused land, according to the International Agency for Renewable Energy. Helios’ cost is likely to be the lowest worldwide and could reach $ 1.50 per kilogram by 2030, according to BNEF. It is cheaper than hydrogen produced today from non-renewable sources. It is more expensive to produce renewable energy in Europe, and the expected demand from the continent during the implementation of a Green Deal will exceed its own supply, Terium said. The $ 1 billion plus stimulus package will try to make the continent carbon neutral. “They will by no means be able to produce all the hydrogen,” he said. “There just’s not enough North Sea or usable water for wind at sea.” Terium, a Dutchman, joined Neom in 2018 to design its energy, water and food networks. Its enthusiasm for technologies such as electric vehicles and digital networks has not been matched by Innogy investors, but by Neom fans. The most important of these is Crown Prince Mohammed bin Salman, the 35-year-old de facto ruler, who sees Neom as an example of no emissions that help transform society and the economy. The hydrogen plant is part of the vision. But while Neom’s $ 500 billion price question asks whether it will continue exactly as planned, the hydrogen effort does not depend on the overall success of the megacity. There are other challenges as well: the country supplies an eighth of the world’s oil supply, but its capacity for renewable energy is small by local standards, and it starts from zero with green hydrogen. The government is partnering with Acwa Power, a Saudi-based power developer owned in part by the kingdom’s sovereign wealth fund, and Air Products. and Chemicals Inc., a $ 58 billion company in Allentown, Pennsylvania, to build the green hydrogen plant. The trio split the cost of Helios, which will use 4 gigawatts of solar and wind power. “If the first gigawatt plant is used, we will have an advantage in developing further innovation,” said Terium. “It’s not going to be the end of the game.” To begin with, Helios will produce 650 tons of hydrogen per day by electrolysis – enough for the conversion to 1.2 million tons per year of green ammonia. Air Products will buy and return all the ammonia, which can be transported more easily than liquid or gaseous hydrogen, upon delivery to customers. Enough green hydrogen is produced to sustain about 20,000 city buses. There are about 3 million buses worldwide, and Air Products wants to be a mainstay in depots that switch to hydrogen, said Simon Moore, vice president of investor relations. ‘We are not going to wait until this project is launched in 2025. to think about extra capacity, ”he said. Fuel cell vehicles could capture as much as 30% of the bus fleet volume worldwide by 2050, with growth coming mainly from China and the European Union, according to BNEF. Moore did not want to identify Helios’ customers. Hydrogen initially costs more than polluting alternatives, but enough governments and businesses face strict carbon targets that the gas needs to achieve, Moore said. Thirteen countries have implemented hydrogen strategies and according to BNEF, another 11 of them are preparing. Germany has said it needs “enormous” amounts of green hydrogen, and hopes Saudi Arabia will be a supplier. “Saudi Arabia’s interest in investors leads us to believe that there is a good economic case for hydrogen, even at current prices,” said a spokesman for the Ministry of Energy. At the same time, the government is trying to use its own scarcity. currently generates less than 700 megawatts nationwide – less than 2% of Spain’s installed capacity.The country plans to supply half of its renewable energy needs by 2030, and there are also several projects in construction or start soon.The highly polluting practice reached a peak of four years in August, and according to critics, the energy used by the Neom plant should rather be diverted to the national grid, but the focus remains on exports. Petrostates will lose as much as $ 13 billion by 2040 due to climate change targets, and Saudi Arabia is among those most likely to be affected. ns 15,000 barrels of oil equivalent per day produce, almost not 9 million barrels crude pumps the kingdom daily. Nevertheless, the essential economic lifeline is an essential economic lifeline to find a way to prevent a share of the clean fuel market. “It’s being sponsored at the highest possible level, so if a project happens, it has to be that way,” Elborai said. this, feel free to visit us at bloomberg.com. Sign up now to stay ahead of the most trusted business news source. © 2021 Bloomberg LP