Investment in green hydrogen projects has been growing steadily over the last few years. With billions more being pumped into both public and private green hydrogen production, we are likely to see large growth in the market. But with most of the world’s hydrogen supply still powered by fossil fuels, it will take more than additional investment to unlock the fuel opportunity green hydrogen offers.

At Alfanar Projects, we believe in the potential of green hydrogen. In fact, we are actively helping to scale the technology. In August 2022, we signed an MoU to develop a green hydrogen facility in Sokhna, Egypt. Working alongside the General Authority of the Suez Canal Economic Zone, The Sovereign Fund of Egypt, the Egyptian Electricity Transmission Company, and the New and Renewable Energy Authority, the project will produce 100,000 tons of green hydrogen every year.

Projects like this are vital as this fuel source is going to become a viable part of the renewables mix. It is also a demonstration of the scale and complexity of the task at hand.

What is green hydrogen?

There is already a huge billion-dollar hydrogen market. The International Energy Agency (IEA) expects demand to hit over 500 million metric tons (MT) by 2050 – up from around 87 million in 2020. We believe that this is a conservative estimate, and the actual growth rate is set to be much higher. The problem is that in its current state, hydrogen production is very carbon intensive. In 2018, over 95% of the hydrogen produced was fossil-fuel based; and despite the current surge in interest, it is likely that only a tiny fraction of what is sold on the market today qualifies as ‘green’.

Traditionally, hydrogen is extracted by steam methane reforming (SMR) natural gas (grey hydrogen) which accounts for around three quarters of global hydrogen production. This equates to around 70 million tons and contributes to rising global emissions. Green hydrogen, on the other hand, is created through a chemical process known as electrolysis. An electrical current is used to separate water into its two constituent parts: hydrogen and oxygen. Providing the electricity used comes from a renewable source, the creation of green hydrogen emits no carbon dioxide into the atmosphere.

Adding hydrogen to the renewables mix

Green hydrogen is not a new development and there have been good reasons to be skeptical of its potential. Principally, the issues around technology and the high cost of production have acted to hit the brakes on widespread implementation.

But it looks like that is changing. As the supply and cost of renewable electricity continues to fall, the process of extracting hydrogen from water becomes less cost intensive. This, along with the growing sophistication of the technology involved, is spurring a renewed wave of global interest in the process.

• Saudi Arabia aims to become the world’s leading exporter of blue and green hydrogen by 2035, with NEOM announcing an ambitious 4 GW GH2 project producing 600 tonnes of green hydrogen per day for export, saving up to 5 million tonnes of CO2 emissions annually.
• The UAE targets 15 million tonnes of green hydrogen production by 2050.
• Egypt’s SCZONE has signed nine framework agreements with major international companies to establish projects for green hydrogen industries within the Sokhna zone.
• The European Union adopted two delegated acts in February 2023 with rules to define renewable hydrogen, and announced the first auctions of the European Hydrogen Bank for the end of 2023.
• Spain’s draft climate strategy sets a 11 GW electrolysis target for 2030, up from its initial 4 GW plan.
• India approved in January 2023 the National Green Hydrogen Mission with the aim of producing 5 Mt of renewable hydrogen by 2030 and of becoming a leading manufacturer of electrolyzers.
• The United Kingdom released in July 2022 its Low-Carbon Hydrogen Standard, and in February 2023 launched a consultation for a certification scheme. The first Electrolytic Allocation Round to support projects to produce hydrogen using electrolysis was launched, with the aim of awarding contracts by the end of 2023.
• Chile plans to reach 5 GW of hydrogen capacity operating by 2025 and by 2030 to produce green hydrogen for under $1.5/kg.

The United Nations, meanwhile, has launched the Green Hydrogen Catapult initiative to reduce the production cost of green hydrogen by around 50%-70% by 2030. It believes this can be achieved through a combination of economies of scale and optimizing system design, manufacturing, and power processes. If it all goes according to plan, the global economy could be looking at less than $2 per kilogram in under a decade.

And the benefits could be huge. The IEA estimates that completely ‘greening’ the worldwide production of hydrogen would save up to 830 million tons of CO2 every year. One of the core benefits of green hydrogen is just how storable and convertible to other derivatives it is. Unlike trying to transport electricity long distances, hydrogen can be shipped around the world with no energy loss. So, for example, green hydrogen could be produced using abundant solar power in the Sahara, transported by pipeline to North Africa, and shipped for use in Australia. It is this systematic potential of green hydrogen that signals its huge potential – and has both governments and businesses rushing to get involved.

How far are we away from widespread green hydrogen?

It will take a substantial amount of public and private investment across the world to scale the green hydrogen opportunity. The project in Sokhna that Alfanar Projects is involved in shows the significant level of public-private collaboration that is needed to get projects of this size off the ground. According to the IEA, an increasing number of countries have policies that support direct investment in hydrogen technologies, with around 50 targets, mandates, certifications, and policy incentives.

Most of these are focused on the transport and mobility space. But there is also a large opportunity when it comes to construction, public infrastructure, and agricultural solutions like fertilizers. Hydrogen could be blended into existing natural gas networks without the need for huge infrastructure changes where it could power industrial boilers or specialized fuel cells. The ability of hydrogen to be integrated into existing industry processes, infrastructure and value chains will be a key indicator of its success over the coming decades.

Let’s make it happen!

At Alfanar Projects, we want to share our expertise and insight when it comes to working on large-scale projects. This approach is going to be crucial for the world to be able to extract the full value of green hydrogen. We still have some way to go, but when initiatives like the Green Hydrogen Catapult as well as projects like the one we are part of in Egypt are a success, we will be significantly closer. The next decade will be really important for green hydrogen, and we are really excited to be part of it.