Hydrogen trade and investment flows will create new patterns of interdependence and change bilateral relations. A rapidly growing bilateral agreement suggests that these are different from his 20th-century hydrocarbon-based energy relationships. More than 30 countries and regions have hydrogen strategies that include import or export plans, indicating significant growth in cross-border hydrogen trade. Countries that have not previously engaged in energy trade are building bilateral relationships focused on hydrogen-related technologies and molecules. As economic relations between nations change, so can political dynamics.
Sources: BloombergNEF
Establishing a global clean hydrogen value chain will bring about geoeconomic and geopolitical changes. Green hydrogen in particular has emerged as a potential enabler to reduce emissions and achieve carbon neutrality without impeding economic and social development.
High financial risk. Current annual hydrogen sales represent a market value of approximately US$174 billion, already exceeding the annual liquefied natural gas (LNG) trade value.
Even if the use of hydrogen is limited to industrial processes and long-distance transport, its market potential is enormous. A single steel plant using hydrogen instead of fossil fuels to reduce iron would consume approximately 300,000 tons of hydrogen annually and house 5 gigawatts (GW) of electrolyser power (Mission Possible Partnership, 2021). The global capacity of electrolysers today is just over 0.3 GW. Global hydrogen sales could reach €600 billion by 2050, from dedicated renewable capacity and electrolysers to transport infrastructure, according to major investment banks (Goldman Sachs, 2020).
Hydrogen's innovative reach exceeds its estimated market value. It is best viewed as a universal fuel that can drive innovation across many different industries and sectors. Its geopolitical impact could follow steam-powered, electric, or internal-combustion patterns.
In their own way, these technologies have changed the machines and fuels that power much of modern civilization. Along the way, they have also influenced many aspects of human life, changed global trade patterns, and shaped the global balance of power.
The versatile nature of hydrogen allows it to be used in a wide range of applications. The diagram below shows the potential uses of hydrogen. Some of them will provide early-stage demand for hydrogen and help the industry take off.
A decarbonization strategy should be carefully managed to ensure that the selected technologies and solutions are deployed in the most efficient manner. Therefore, it is necessary to identify the applications where hydrogen can offer the greatest value from a wide range of options. Its production, transport and conversion require energy, increasing aggregate demand. Indiscriminate use could slow down the energy transition and dilute efforts to decarbonise the power sector. Hydrogen is therefore ideal for applications for which there are currently no viable alternatives. The chart below compares the potential end-uses for hydrogen and electricity-based solutions based on application size and maturity. Political attention should be given to more mature and centralized hydrogen solutions. This attention may include targeted research, planning and outreach. Transitioning to a truly sustainable economy is more than just switching energy sources and sustaining our current energy system. We need to develop more efficient, fairer and more just forms of energy use.
This includes reducing unnecessary energy consumption for many end-users and changing the current economic system based on continuously increasing consumption. Heavy industry, for example, could save 40% of its CO2 emissions by reusing steel, aluminium and plastic more effectively. Another example is the modal shift from short-haul flights to electrified trains if demand can be reduced.
Some of these new bilateral hydrogen deals involve countries with established energy trading ties. Japan, for example, imports crude oil from Saudi Arabia. The two countries are currently considering expanding trade ties to include blue ammonia. But other bilateral agreements conflict with existing energy trade flows. This applies, for example, to bilateral agreements and talks between Germany and Morocco, Namibia and the Netherlands, New Zealand and South Korea. Whether or not all of these hydrogen trade routes will materialize remains to be seen, but the potential for a whole new map of energy geopolitics is there. Several countries looking to import hydrogen and related zero-carbon fuels are already engaged in hydrogen diplomacy. Germany and Japan are pioneers in establishing new hydrogen trade ties, but other countries are following suit. Hydrogen diplomacy could become a staple of economic diplomacy in some countries.
Hydrogen is often viewed as a potential solution to energy security concerns. The oil price shocks of the 1970s and his early 2000s oil price surge drove an early wave of interest in hydrogen. There are good reasons for this. Clean hydrogen could enhance energy security in three key ways:
1) Reduce dependence on imports,
2) Reduce price volatility,
3) Increase the flexibility and resilience of the energy system.
Most of these benefits are associated with green hydrogen rather than blue. And many of these only happen when the market develops.
Energy security goes beyond availability and affordability to include sustainability and equity. For example, a program to import renewable hydrogen from countries where a large portion of the population does not have access to electricity, or where the grid still relies heavily on fossil fuels, could increase energy security for importers. It's hard to say "green" or " Sustainable".
Energy security must also be viewed in relation to the physical impacts of climate change. This is no small issue as our energy infrastructure is becoming increasingly vulnerable to climate change. For example, it is estimated that half of the world's LNG plants are at "very high risk" from destructive cyclones, while around 35% of refineries are located in high-risk areas. Many of his LNG plants and refineries around the world are located in coastal areas that are at risk of severe storm surges and coastal flooding. Hydrogen has the potential to increase fuel diversity and system resilience, but hydrogen plants, especially in low-lying coastal areas, can be vulnerable to climate change impacts such as storms, floods and droughts.
Most of the green hydrogen is been produced using solar energy, and waaree is playing an instrumental role in the transition.
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