• April 15, 2024
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Shifts in the value of trade in energy commodities, 2020 to 2050

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.

Hydrogen Demand Estimated by 2050

Hydrogen Demand Estimated by 2050
Sources: BloombergNEF

A Geopolitics Standpoint of Clean/Green Hydrogen

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.

Role of hydrogen in the Energy Transition

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.

Potential uses for clean hydrogen

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.

Clean hydrogen policy priorities

Bottlenecks to scale Hydrogen-based Energy Transition

 Main perceived barriers to develop hydrogen policies and strategies

  • Cost: The cost of clean hydrogen, especially green hydrogen, remains high compared to high-carbon fuels. Not only are the production costs high, but so are the costs of transporting, converting and storing hydrogen. Deploying clean hydrogen technologies for end-use applications can be expensive, and CCS has yet to be deployed on a large scale.
  • Technological maturity: Some technologies in the hydrogen value chain required for decarbonization are still technically immature and need to be proven at scale. There are currently no off-the-shelf gas turbines that run solely on hydrogen, and only one prototype vessel, hers, is capable of transporting liquid hydrogen for sea trade.
  • Efficiency: Hydrogen production and the conversion result in significant energy losses at every stage of the value chain including production, transport, conversion and use. In addition, blue hydrogen production is energy intensive and contributes to total energy demand.
  • Adequate renewable electricity: By 2050, the production of hydrogen by electrolysers could consume about 21,000 TWh, about the same amount of electricity produced worldwide today. The lack of sufficient renewable power could become a bottleneck for green hydrogen as more end-use sectors are electrified.
  • Political and regulatory uncertainty: More than 140 countries have committed to achieving net zero emissions within the next few decades, but the speed at which these targets are met remains Uncertain. A stable long-term policy framework is required to support development and deployment at scale.
  • Standards and Certification: Countries lack institutionalized mechanisms to track the production and consumption of each stage of hydrogen and to identify its characteristics (e.g. origin and life cycle emissions). Furthermore, hydrogen is not included in official statistics of total final energy consumption, and the economic value of clean hydrogen's contribution to reducing emissions is not recognized.

Hydrogen Deals between countries as of 2021. 

Hydrogen Deals between countries as of 2021

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.

Energy Security scenario with Hydrogen

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. 

How Waaree can help?

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How Waaree can help

Waaree Energies Ltd. is the flagship company of Waaree Group, founded in 1989 with headquarters in Mumbai, India. It has India's largest Solar panel manufacturing capacity of 5GWs at its plants in Surat and Umbergaon in Gujarat. Waaree Energies is amongst the top players in India in Solar Panel Manufacturing, EPC Services, Project Development, Rooftop Solutions, and Solar Water Pumps and is also an Independent Power Producer. Waaree has its presence in over 380 locations nationally and 20 countries internationally. Step on to your cleaner journey by contacting us at 18002121321 or mail us at waaree@waaree.com
 

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