Hydrogen is set to change the geography of energy trade, regionalise energy relations and result in new centres of geopolitical influence, a report has claimed.
On 15 January, the International Renewable Energy Agency (IRENA) published Geopolitics of the Energy Transformation: The Hydrogen Factor, where it estimated hydrogen to cover up to 12% of global energy use by 2050, with over 30% of hydrogen traded across borders – a higher share than natural gas today. Over 30 countries and regions are already planning for active commerce today.
There are some countries, expecting to be importers, that are already deploying dedicated hydrogen diplomacy – Japan and Germany – while fossil fuel exporters are increasingly looking to clean hydrogen as an attractive way to diversify their economies, such as Australia, Oman, Saudi Arabia and UAE. Broader economic transition strategies will be required as hydrogen will not compensate for losses in oil and gas revenues, it added.
Technical potential for hydrogen production also significantly exceeds the estimated global demand, with the report highlighting how those most able to generate cheap renewable electricity will be best placed to produce competitive green hydrogen. The likes of Chile, Morocco and Namibia, who are net energy importers today, will become green hydrogen exporters. Realising the potential of regions such as Africa, the Americas, Middle East and Oceania would limit the risk of export concentration. Many countries will need technology transfers, infrastructure and investment at scale for this to become a reality, however.
In terms of how the geopolitics of clean hydrogen will play out, it said the 2020s will be a “big race” for technology leadership, before demand takes off in the mid-2030s. Green hydrogen will cost compete with fossil fuel hydrogen globally by that time, though this will happen even earlier in countries such as China, Brazil and India. Green hydrogen already became affordable in Europe during the 2021 spike in natural gas prices.
Countries with ample renewable potential will become sites of green industrialisation, it continued, using this potential to attract energy intensive industries. Economic competitiveness can be boosted by having a stake in the hydrogen value chains. It noted China, Japan and Europe already have a head start in the production of equipment, but innovation will shape the manufacturing landscape further. It further mapped out how green hydrogen could strengthen energy independence, security and resilience by cutting import dependency and price volatility, and boosting flexibility of the energy system.
Shaping the rules, standards and governance of hydrogen could lead to geopolitical competition or open up a new era of enhanced international cooperation. International cooperation will be key to devising a transparent hydrogen market that can contribute to climate change efforts in a meaningful manner, while supporting the advancement of renewable energy and green hydrogen in developing countries will be crucial to preventing a widening of a global decarbonisation divide and promote equity and inclusion, creating local value chains, green industries and jobs in renewable-rich countries.