A combination of hydrogen produced from hydrocarbons and renewable sources will help the world meet its energy needs and fuel industrial, transport and power sectors in the future as economies continue to pursue their net-zero goals.
In the more immediate future, however, hydrogen produced from fossil fuels is more likely to dominate as it is a “lower cost” solution, top executives from Saudi Aramco and British energy giant BP told an online panel discussion at the Energy Intelligence Forum on Thursday.
“It is not going to be either blue or green hydrogen, it is going to be a combination [as] the economic optimal is not in one particular technology,” Ahmad Al Khowaiter, chief technology officer at Saudi Aramco, said. “There is an advantage today in fossil fuel-based hydrocarbons because it is what is available today and there’s [only] incremental capital required to produce hydrogen at scale.”
Hydrogen is considered a critical fuel of the future and interest in the low-carbon alternative is gaining momentum as the world explores its potential for the industrial, power generation and transportation sectors to cut emissions and meet their global targets of carbon neutrality.
State-controlled Saudi Aramco, the world’s biggest oil exporter, also recognises much promise in electrolysis-based low-carbon hydrogen through renewable sources. As the industry scales up, “we do expect it to be become much more competitive” in the next few years, Mr Al Khowaiter said.
BP, which is transitioning from an oil and gas company to an integrated energy firm with renewables in its portfolio, is focusing on both blue and green hydrogen projects, said Louise Jacobsen Plutt, BP’s senior vice president for hydrogen and carbon capture utilisation and storage businesses.
“In Europe, there are countries that are making selection in terms of whether they want to use blue hydrogen or green hydrogen,” Ms Plutt said.
BP is working on green hydrogen projects in Germany and in the Netherlands, while in places such as the UK, it is a combination of both blue and green as the state policy is geared towards both.
“It all is about picking the best solution for an area based on what customers want and governments support,” she said.
Globally, the hydrogen industry is expected to grow to $183bn by 2023, from $129bn in 2017, according to Fitch Solutions. French investment bank Natixis has estimated that investments in hydrogen will exceed $300bn by 2030.
Hydrogen, which is being tested as an alternative to fossil fuels in the transport sector, can help slash greenhouse gas emissions from the hydrocarbons sector by 34 per cent, according to BloombergNEF.
Many oil-exporting nations, such as the UAE and Saudi Arabia, are developing the clean fuel for domestic consumption and exports. Earlier this year, three Abu Dhabi-backed entities – Mubadala Investment Company, Abu Dhabi National Oil Company and holding company ADQ – formed an alliance to develop a hydrogen centre.
On Thursday, the UAE announced Dh600bn ($163bn) of investments in clean and renewable energy sources in the next three decades as part of its 2050 net-zero agenda.
However, currently, global production of low-carbon hydrogen is minimal as it has yet to become cost competitive with fossil fuels to be produced at scale and to be used in industry and transportation sectors.
To kick-start the market to achieve scale, hydrocarbon-based hydrogen can be the stepping stone, Mr Al Khowaiter said.
“We already have the facilities and technology. It’s mature and ready to go,” he said.
The International Energy Agency (IEA) said governments around the world are increasingly investing in hydrogen projects, but they need to do more to reduce costs and encourage wider use of the clean fuel across sectors.
“It is important to support the development of low-carbon hydrogen if governments are going to meet their climate and energy ambitions,” Fatih Birol, the IEA’s executive director, said at the time.
Panellists at the Energy Intelligence Forum said there are “good messages from stakeholders” but more support is needed for the development of technologies and subsequently a global market for the low-carbon fuel.
“There is no argument in terms of the support required to really kick-start the low-carbon ecosystem," Ms Plutt said.
“The good news is we do see signs of momentum in that space. The regulatory environment is increasingly turning in favour of clean energy.
“But what we would like to see is a regulatory environment that enables hydrogen to be an integral part of the transition”, which will help develop and sustain the world's low-carbon hydrogen market, she added.