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Saudi Arabia, UAE and Egypt pivot in direction of hydrogen exports [Gas In Transition]
The vitality disaster that began in 2021 and the conflict in Ukraine are accelerating the vitality transition, creating large curiosity in hydrogen. Furthermore, excessive pure fuel costs have improved the economics of inexperienced hydrogen dramatically, spurring elevated funding.
The European Fee (EC) revealed its Hydrogen technique for a climate-neutral Europe in July 2020. It units out a roadmap for establishing and scaling up worth chains to supply inexperienced hydrogen, and envisages hydrogen offering as a lot as 14% of Europe’s vitality combine by 2050.
Occasions in Ukraine have solely elevated the EU’s hydrogen aspirations, outlined in a brand new plan, REPowerEU, launched on March 8. On this plan, the EU elevated its goal for hydrogen manufacturing from 5mn metric tons/12 months to 20mn mt/yr by 2030, which would require about 1,000 TWh of renewable vitality – virtually twice the quantity generated within the EU immediately. An astonishing 10mn mt/yr must be imported. That is a part of measures to scale back the EU’s fuel consumption by 30% by then.
Nevertheless, some nations have expressed concern that the EU may find yourself changing one exterior dependency, fuel, with one other, imported hydrogen.
The EU plans to make use of hydrogen not simply to decarbonise Europe, but additionally to make sure vitality safety. The best demand for inexperienced hydrogen is anticipated to be within the industrial, aviation and heavy-duty transport sectors. However a large scale-up is required to make a distinction. This can require public-private partnerships and financial incentives.
In an effort to kickstart the sector, mandates could also be wanted on the minimal hydrogen use in sure industries. Earlier than the market can emerge, nevertheless, Europe first wants LNG to interchange Russian fuel within the nearer time period. However many LNG suppliers are in search of long-term contracts and are reluctant to commit, given Europe’s insistence that decarbonisation means declining want for fuel because the world approaches 2030, and past. To alleviate these issues, Frans Timmermans, the EU’s local weather chief, advised the European Parliament on April 28 that the EC “is providing long-term partnerships that will begin with a provide of LNG and find yourself within the hydrogen economic system.” With out spelling out how this could work, and through what time-frame, at this stage it’s only a nebulous assertion. As one MEP put it, “I’ve a sense that we’re fleeing right into a daydream of what hydrogen can do for us.”
Timmermans additionally mentioned that he envisions a hydrogen economic system across the Mediterranean producing and exporting surplus hydrogen in ammonia type to Europe. Undoubtedly, if this works it’s going to carry these nations and Europe nearer collectively.
With solely about 1% of the worldwide hydrogen manufacturing being inexperienced, the problem for manufacturing at this scale shall be land availability to deploy renewables and ample photo voltaic/wind renewable assets. That’s the place the Center East – North Africa (MENA) and East Med areas are available in. European Fee (EC) president Ursula von der Leyen outlined a plan to attain this in November 2021. It entails “scaling up the know-how, establishing worldwide collaboration, and partnering with trade and researchers”, and investing in MENA’s hydrogen sector, thus “creating a brand new hydrogen market between the 2 shores of the Mediterranean.”
Gaseous fuels will contribute roughly 20% of Europe’s remaining vitality consumption by 2050. However inside this, unabated pure fuel consumption shall be decreased drastically and shall be changed by renewable and low-carbon gases, 40% of which shall be hydrogen – and, more and more, inexperienced hydrogen.
Though it is a confirmed know-how, it nonetheless requires additional growth for the secure storage and transportation of hydrogen. In an effort to speed up this, the EU launched a €2bn ($2.1bn) partnership with the trade in November 2021 to advertise the researching and growth of inexperienced hydrogen. The EU’s Match-for-55 package deal offers the premise to attain transformational change, with the required regulatory framework now being put in place by the EC.
Worldwide, greater than 75 nations have introduced plans and methods for hydrogen growth. There have been 75 new undertaking bulletins in Q1 2022 alone, totalling 11.1mn mt/yr of recent capability, with the lion’s share discovered within the US (see determine 1). By 2050, it’s forecast that the worldwide hydrogen market could possibly be value $600bn, offering as a lot as 12% of the world’s vitality wants by then.
The EC is proposing preferential tax charges to advertise using renewable and low-carbon hydrogen in a brand new Power Taxation Directive. The EC revealed its revised Renewable Energies Directive (RED-II) proposals in July 2021. But it surely now proposes to replace these to incorporate a rise within the renewables goal from 32% now to 40% by 2030. This may translate to 60-65% renewables in electrical energy manufacturing by 2030. As well as, a extra formidable binding goal has been set to scale back remaining and first vitality consumption by 36% to 39% over the identical interval.
The EC expects that implementation of such insurance policies will result in demand for inexperienced electrical energy rising dramatically, to the extent that it’s unlikely that it may be provided totally from inside the EU. Equally, it isn’t sure that the EU will be capable of safe adequate provides internally to fulfill the forecast demand for hydrogen. Germany has recognised this and has taken the lead in securing hydrogen provide offers, together with with MENA nations.
These are prone to require interconnectivity and imports from areas with excessive renewables potential – wind and photo voltaic – akin to MENA and the East Med. They’re nicely positioned to supply very competitively each inexperienced and blue hydrogen. Additionally they have massive pure fuel reserves and potential for CCS. These components make these areas main hotspots for the growing hydrogen economic system.
Nevertheless, excessive fuel costs now, and sure for the remainder of the last decade, are weakening the economics of blue hydrogen.
With vitality transition away from oil and fuel gaining momentum, these nations are prioritising growth of a hydrogen manufacturing trade. There are already initiatives in place to supply inexperienced hydrogen in Saudi Arabia and the UAE, not only for export to Europe and Asia, but additionally for inside consumption. In actual fact Europe must compete with Asia to safe such exports.
Egypt
The nation with the best potential within the East Med area to reply to Europe’s hydrogen wants is Egypt. It’s placing collectively a low-carbon hydrogen technique with the assistance of the EBRD that features assessing current and potential hydrogen manufacturing. EBRD may also assist conduct a regulatory evaluation and evaluation of the modifications wanted to assist the event of hydrogen provide and export chains in Egypt.
The Egyptian authorities is anticipated to announce a $40bn hydrogen technique this 12 months, which is able to embrace a manufacturing capability of 1,400 MW by 2030. With no less than 5 identified lively inexperienced hydrogen initiatives underneath growth, progress is already being made.
Egyptian overseas minister Sameh Shoukry and Frans Timmermans agreed on April 10 to strengthen cooperation on LNG and inexperienced hydrogen provides between Europe, Africa and the Gulf by growing a Mediterranean Inexperienced Hydrogen Partnership.
In March Norwegian renewables agency Scatec introduced settlement to construct a 1mn mt/yr inexperienced ammonia facility, with a plan to extend it to 3mn mt/yr, on the Egyptian Pink Sea port of Ain Sukhna
The UAE’s Abu Qir Fertilisers already produces about 1.2mn mt/yr of ammonia at crops close to Alexandria. In March it mentioned that it was finding out a undertaking to supply inexperienced hydrogen and inexperienced ammonia in collaboration with TotalEnergies.
A number of different potential hydrogen initiatives have been introduced in Egypt this 12 months, together with a 0.39mn mt/yr inexperienced ammonia plant within the Suez Canal Financial Zone (SCEZ) by EDF and UAE-based Zero Waste, one other by the UAE’s AMEA Energy, and a deal by the UAE’s Masdar and Egypt’s HAU to supply 0.48mn mt/yr of inexperienced hydrogen at SCEZ.
With its increasing renewable vitality capability – focused to succeed in 42% by 2035 – Egypt considers this to be a possibility to change into a frontrunner within the area for the manufacturing, use and export of inexperienced hydrogen and ammonia. It already has one of many largest photovoltaic parks on the planet, the Benban photo voltaic complicated, which has a complete capability of 1,800 MW.
Saudi Arabia
As a part of its push to diversify from oil revenues, Saudi Arabia needs to change into a frontrunner in hydrogen manufacturing, primarily to make sure its future financial safety, as envisioned in its Saudi Imaginative and prescient 2030. It has been very proactive in growing a hydrogen trade, each for inside use and for export. Its goal is to draw greater than $36bn investments underneath its Nationwide Hydrogen Technique and produce about 4mn mt/yr of hydrogen by 2030.
Primarily based on its hydrocarbon assets and CCS potential, Saudi Arabia is nicely positioned to supply and export commercially aggressive blue hydrogen, with the lead taken by Saudi Aramco. However the nation additionally has an enormous solar energy capability. In July 2020, it introduced a $5bn inexperienced hydrogen/ammonia plant in Neom metropolis with a capability of 1.2mn mt/yr of inexperienced ammonia. That is anticipated to start out operations in 2026. Will probably be powered by 4 GW of photo voltaic and wind vitality. A remaining funding resolution (FID) is anticipated in June, with completion in 2026.
This was adopted by the primary ever export of blue ammonia in September 2020 to Japan. A 12 months later UAE adopted this with its personal first cargo of ammonia.
UAE
In assist of its net-zero by 2050 commitments, UAE has embarked into the event of low-carbon enterprise, together with hydrogen. Like Saudi Arabia, it advantages from ample hydrocarbons, aggressive photo voltaic PV and large-scale CCS. On this context it intends to construct its renewables firm Masdar into one of many world’s largest clear vitality companies.
UAE’s goal, declared at COP26 in November 2021, is to seize 25% share of the worldwide marketplace for low-carbon hydrogen by 2030. That is embodied within the Emirates’ Hydrogen Management Roadmap established to assist native industries to develop aggressive hydrogen for export.
In Could 2021, Siemens inaugurated the “first industrial-scale, solar-driven inexperienced hydrogen facility within the Center East and North Africa” in Dubai in partnership with DEWA.
In December 2021, Engie and Masdar signed an settlement to “discover the co-development of a UAE-based inexperienced hydrogen hub” with an electrolyzer capability of two,000 MW, backed up by $5bn funding.
ADNOC can also be designing a 1mn mt/yr ammonia plant in Ruwais that can feed on blue hydrogen, with a goal start-up date of 2025. It’s already producing over 0.3mn mt/yr of hydrogen and plans to extend this to 0.5mn mt/yr.
The UAE can also be forming partnerships with different nations, akin to Japan, South Korea and Germany, to assist growth of its hydrogen economic system. On this context, German vice-chancellor Robert Habeck was in Abu Dhabi on March 20-21 to signal hydrogen cooperation agreements. Because of these offers, the primary blue hydrogen is anticipated to be shipped to Germany in 2022. ADNOC has additionally signed an settlement with the logistics operator of the port of Hamburg to create a transport chain for blue ammonia and agreements to discover transport of hydrogen utilizing Liquid Natural Hydrogen Service (LOHC) know-how.
Transporting hydrogen
Hydrogen faces not solely huge manufacturing challenges however it’s also tough to retailer and transport. It stays virtually prohibitively costly. The most affordable technique to transport inexperienced hydrogen from the East Med to Europe is by subsea pipeline.
Cornelius Matthes, CEO of Dii Desert Power, a Dubai-based public-private sector affiliation that promotes renewable vitality growth, notes that to actually launch a Center East/East Med hydrogen economic system, we want a pipeline connecting the japanese Mediterranean with Europe.
A big diameter pipeline able to carrying hydrogen could possibly be a breakthrough for the area that has large manufacturing potential. Solely pipelines will be capable of meet the huge hydrogen demand foreseen in Europe.
This may be a €15+ bn undertaking and placing it in place would require daring authorities/trade commitments, with European Funding Financial institution (EIB) involvement.
In the mean time, in March Italy’s SNAM dedicated to take a position $250mn in ADNOC’s pipelines. They plan to have a system of hydrocarbons and hydrogen working in parallel, with the intention of enabling a seamless shift from the primary to the latter.
Eni and SNAM additionally arrange a partnership on fuel pipelines from Algeria to Italy. The aim of that is to make sure the safety of pure fuel provide between the 2 nations and allow potential growth initiatives inside the hydrogen worth chain from North Africa.
With Eni and SNAM taking the lead, Italy is nicely positioned to behave as a hydrogen-bridge between Center East/East Med nations and Europe.
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