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Colour-coding the UAE’s hydrogen transformation
While green finance is accelerating economic diversification and job creation in the region and has the potential to attract foreign direct investment, the UAE’s Hydrogen Vision augurs well for a diverse energy landscape
File photo: AFP
As the world shifts towards a sustainable future, the colours of hydrogen – from grey to blue to green – reflect the dynamic changes in our energy landscape. Almost all hydrogen, amounting to roughly 90 million tonnes per year (mtpa), currently used is grey. However, as the push for cleaner energy grows, the demand for grey hydrogen will decrease even as green hydrogen becomes more cost-effective and its demand increases.
The concept of green hydrogen, produced through electrolysis powered by renewable energy sources, has been around for several decades. However, its widespread use and commercial viability have gained momentum more recently, particularly as countries seek to decarbonise their economies and transition away from fossil fuels.
Some countries have been instrumental in advancing green hydrogen technology and driving its adoption globally. Germany has invested heavily in research and development, Denmark has established hydrogen hubs, Japan is seeking to establish a hydrogen supply chain, and Australia is exploring the potential of green hydrogen as an export commodity.
These countries are laying the foundation for a hydrogen economy that offers environmental benefits and economic opportunities through collaborative efforts and strategic investments. Last month’s Green Hydrogen Summit in Abu Dhabi brought together stakeholders to cover important issues. Discussions focused on the utilisation of hydrogen across various regions, including the UAE, Europe, the US, and Asia. They explored its applications in sectors like steel and transportation and strategies to enhance the financial attractiveness of hydrogen projects.
Management consulting firm McKinsey projects clean hydrogen demand to increase to between 125 and 585 mtpa by 2050. “After 2025, nearly all new hydrogen production coming online is expected to be clean hydrogen. This coincides with the start of the expected phaseout of grey hydrogen, driven by the growing cost competitiveness of clean hydrogen and commitments to decarbonize,” McKinsey’s Global Energy Perspective 2023 report claimed.
According to this report, until 2030, clean hydrogen uptake is projected to be driven by existing applications switching from grey to blue and green hydrogen.
Between 2030 and 2040, “the uptake of hydrogen in new applications without existing demand is expected to drive the increase in clean hydrogen demand.” This demand can be divided into sectoral, export, and industrial categories, each with its own varying set of dynamics.
PwC’s Middle East Economy Watch April edition claims a massive investment is underway across the GCC in renewable energy, green hydrogen, and other sustainable projects. These projects require “substantial financing,” suggesting that the sector will grow in the coming years. It also adds that the region has made significant progress toward green hydrogen projects and that a stronger focus is discernible around sustainability and the “greening of the economy.”
This is where the UAE’s mission — to become a top global producer of low-carbon hydrogen — comes into the picture. The country intends to do so by leveraging both “engineered and natural advantages". This is what success in this domain looks like for the UAE’s Hydrogen Strategy: “As a nation committed to advancing its economy, hydrogen is considered one of the low-carbon solutions to unlocking value for the UAE and driving sustainable outcomes across industries and communities.”
While green finance is accelerating economic diversification and job creation in the region and has the potential to attract foreign direct investment, the UAE’s Hydrogen Vision augurs well for a diverse energy landscape. It makes the country well-positioned to develop a low-carbon hydrogen supply chain and hasten its transition to clean energy.
As with all strategising, a set of challenges are on the way. In the case of the UAE, they would hover around resilient living and growing the talent pool. The good news is that the country already recognizes the challenge of delivering low-carbon hydrogen as a competitive fuel and a globally traded commodity. It is also aware of the micro-challenges, such as suitable and safe locations for fuel storage and bunkering facilities. Challenges associated with efficiency, scalability, and costs are always moving goalposts.
The global shift in energy dynamics also has a geographical dimension, making this region all the more relevant. For instance, Asia is expected to experience the highest hydrogen demand by 2050. However, given that the continent may not generate sufficient hydrogen to satisfy its increasing needs, the region could depend on hydrogen imports from areas like Oceania or the Middle East.
The UAE’s National Hydrogen Strategy summarizes its transformative journey: “The success of the hydrogen economy and the value captured by the UAE hinges on its ability to innovate at the national level.” While that is a reasonable goal, another mission goes alongside this commitment. The UAE’s National Net Zero Pathway targets interim carbon reduction of 18 percent and 60 percent by 2030 and 2040, respectively, and becoming net zero by 2050. Hydrogen, of the “green color,” will play a critical role in achieving this objective.
Ehtesham Shahid is an editor and researcher based in the UAE. X: @e2sham.
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