The rub of the green

The race for green hydrogen is set to heat up over the course of the decade as countries eager to meet their emissions targets, but lacking in renewable resources, look to import green energy in bulk. This is why, for the countries with the potential to meet that demand, Goldman Sachs has called green hydrogen a “once-in-a-generation opportunity”.

If this race were a 1500m foot race, a group of early frontrunners look to have set themselves apart from the pack, demoralising less ambitious competitors. Those frontrunners are Australia, Chile, and the MENA region, particularly the member states of the Gulf Cooperation Council (GCC).

First movers vs. fast followers

The 1500m is a race that often hinges on strategy, and the race for green hydrogen is shaping up to be a strategic race on a global scale. The frontrunners all have one thing in common, a wealth of renewable resources, particularly solar, and each have announced large-scale plans for green hydrogen/ammonia production. However, it may be that the nation which exerts too much effort too early, the “first mover”, will succeed only in breaking technological boundaries which competitors can take advantage of. In economics this advantage belongs to the “fast follower”, and in the case of green hydrogen, it may be that the “first mover” expends great effort to push down the prices of electrolyzers only for more canny competitors to utilise cheaper electrolyzer costs while also enjoying a capital cost advantage over the “first mover”.

At this stage of the race the “first movers” appear to be the members of the Gulf Cooperation Council (GCC), notably Saudi Arabia and Oman, the latter of which was recently announced by India-based Acme Solar as the location for a 3.5 GW green hydrogen project expected to be operational in 2022. Meanwhile, Australia’s political Climate Wars at the federal level continue to shoot the nation in the foot, though it is hard to see such a successful global exporter miss an opportunity for which, with its massive expanses of space for renewable resources, it seems almost designed for. However, it is Chile, which set very ambitious green hydrogen targets for itself early on, that seems to be losing faith in its own abilities.

Position is everything

The key to unlocking the green hydrogen economy is the cost of transport. The fact that ammonia is already a globally traded good means that many projects will trade their green hydrogen as green ammonia. The competitive advantage therefore belongs to the countries with geographical proximity to target markets, and since the biggest of those markets are Europe and East Asia, it may be that Chile is simply too distant to mount a real challenge. This is not to suggest that Chile’s green hydrogen race is run, only to say that Chile would not be the first nation chastened by the sheer expanse of the Pacific Ocean. That’s the rub of the green, or rather, the blue.

When it comes to transporting green ammonia to Japan and South Korea, Australia has a particular advantage, and Saudi Arabia has already sent a trial shipment of blue hydrogen to Japan. Of course, when it comes to Europe, North African nations such as Algeria and Morocco have a distinct geopolitical advantage and existing pipelines. However, much more political intent to realise North Africa’s green hydrogen potential, along with the stability for investors to make long-term commitments, is needed before these nations can be seen as part of the leading pack.

Dragon in the room

Of course, one cannot speak of green hydrogen without pointing out the dragon in the room, China, which has a willingness to invest heavily that may enable it to take a leading position in the green hydrogen race. Nevertheless, as has been seen in other climate-tech industries, solar being a prime example, the scaling effect of Chinese manufacturing may just be to everyone’s profit, especially if applied to electrolyzers.

A race of winners

With so many variables at play it is difficult to predict which of the frontrunners, if any, will cross the line in 2030 with a green hydrogen industry prepped to export for a market which Goldman Sachs estimates could reach €10 trillion by 2050. However, without it sounding like too much of a cop out, it may just be that the race for green hydrogen is a race of winners. This is for the salient fact that underlies the foundation of the race – demand.

After all, the real race is the race against the climatic clock, the race to cut global emissions by 2050. And the necessity of that task means that more and more nations are committing to net zero 2050 targets and committing to sourcing their energy from renewables. Given that geopolitical reality, the demand for green hydrogen is potentially inexhaustible, with enough business for Australia, Chile, the MENA nations and others to all become green hydrogen export superpowers. Green hydrogen is not a zero-sum game, and since the fuel is being touted as one of the keys to the global energy transition, then it is clear that if the industry can be established then everybody wins, particularly the planet itself.