The Geopolitics of the Energy Transformation: The Hydrogen Factor

In this piece, I will attempt to summarize and paraphrase a comprehensive and detailed report, The Geopolitics of the Energy Transformation: The Hydrogen Factor, from the International Renewable Energy Agency (IRENA). For a full understanding, the reader is urged to study the report in full. Based on two surveys, the first to IRENA member countries had a response rate of 22%, the second to topical experts had a response rate of 48%.

From the survey results, it appears that most countries were already building networks and setting themselves up to be hydrogen exporters by 2050. Over 50% said their country preferred to use renewable energy to produce hydrogen; over 40% were agnostic; less than 5% were looking at using fossil fuels with carbon capture and storage (CCS).

They saw the main use for hydrogen in their economies being for transport of all forms — road, air, and maritime. Some saw a use for hydrogen in balancing the grid and some for industry applications.

Foreign relations will change as new bilateral trade relations are built around hydrogen. This will lead to a regionalization of energy relations and a decrease in the fossil fuel trade. It is expected that the hydrogen will be transported by pipeline (both refurbished gas pipelines and dedicated new-build), and by ships mainly as ammonia. 90% of this hydrogen will be renewable based.

The main barriers for a country to develop hydrogen policies and strategies were identified as the high costs of low-carbon hydrogen production and the lack of a dedicated infrastructure.

Over 60% of respondents expected changes in patterns of energy trade, leading to shifts in national and regional power. It appeared highly likely that energy intensive industry would relocate to areas of inexpensive energy production. Which countries are best placed to reap the benefits of this transition? The top five were identified as: Australia, Chile, Saudi Arabia, Morocco, and the USA.

Countries that are well positioned will have a high renewables endowment, plenty of available land, be close to markets, and have access to the sea. They will have strong government support, political stability, existing infrastructure, and be business friendly.

Electrolyzes are seen as the most important technology for success.

The biggest risks to achieving the hydrogen transition by 2050 are price, not enough renewable energy, and an unstable investment climate. The experts expect that a shift to green hydrogen will reduce air pollution and slow climate change but maybe increase water scarcity.

My thoughts: Some countries that are energy exporters will continue to be (Australia, Saudi Arabia, USA). Others will achieve greater prominence (Morocco, Chile). A lot depends on access to sun and wind. Some others might face upheaval due to stranded assets and loss of income (Russia). Applications in transport seem to be diminishing as battery/electric options are becoming cheaper (e.g., buses, locomotives). It is not clear if this will affect the transition, but it does reduce the applications for green hydrogen. 

Capital has long chased an inexpensive and well educated workforce. In the decades to come, it will be more about inexpensive and climate-friendly energy.