With global emissions becoming an increasing concern, natural gas is perceived as being only part of the solution for a decarbonized future. For many, future-proofing the global energy economy really relies on creating a diverse energy mix, one in which hydrogen makes the answer that humanity is looking for.
From an economic perspective, hydrogen offers markets many lucrative opportunities. For the first time, markets are no longer required to have the advantage of having large amounts of oil and gas reservoirs in order to be energy-rich. All countries now have the opportunity to become net producers eventually if they adopt the right technologies, and hydrogen has made this all possible. But the question still lies in its economic feasibility, a complex issue that has had many experts doing extensive research into this promising new energy alternative.
Before examining the future of hydrogen, it is first necessary to track the progress of hydrogen in its current state. A study from PricewaterhouseCoopers titled “The Green Hydrogen Economy: Predicting the Decarbonisation Agenda of Tomorrow” summarizes the current state of the hydrogen economy as follows: “Right now, almost all hydrogen produced worldwide is ‘grey’ which means it is produced from natural gas. Without a price on carbon emissions, grey hydrogen is inexpensive (€1 to €2 per kilogram), but it compounds the challenge of improving environmental sustainability. Green hydrogen, in contrast, uses renewable electricity to power electrolysis that splits water molecules into hydrogen and oxygen. Because green hydrogen doesn’t require fossil fuels, it is a better long-term solution to help decarbonize economies. Yet green hydrogen—currently costing €3 to €8/kg in some regions—is more expensive than grey.”
In other words, the feasibility and growth of a healthy hydrogen market currently depend on maintaining a robust natural gas market. Green hydrogen would need to witness even more technological development in order for the production process to be less costly and emissions-intensive. For hydrogen to be economically feasible in the near-future, especially in the developing world, natural gas is an essential prerequisite that can nourish the birth of a new prosperous hydrogen economy.
In assessing economic feasibility, cost-efficiency is yet another factor that is not to be underestimated. High costs of production could prove as a significant hindrance to growth especially in the context of competitiveness in the global economy. Nonetheless, most studies reveal that hydrogen production looks like it has a promising outlook with the advancement of technologies and the discovery of more efficient, innovative production methods, especially in many of the major markets. According to the same study from PricewaterhouseCoopers, hydrogen production costs are projected to decline by an estimated 50% through 2030, followed by an additional gradual decline that will last until 2050. The same study projected that by 2050, green hydrogen production costs will be within the range of €1 per kg to €1.5 per kg in a number of regions, including the Middle East, Africa, Russia, China, the US, and Australia.
The study also indicated that, in terms of demand, hydrogen has a promising future moving forward with projections from the same study suggesting that it could vary from 150 to 500 million metric tonnes per year based on the trends of global climate action in addition to other key factors, such as sector activities, the exploitation of carbon-capture technologies, etc.
It is worth noting that growth in hydrogen demand will be limited by a number of factors, as emphasized by the study. As a trend in the market, hydrogen is still in its early stages of really becoming a fundamental part of the market. The study said “… current hydrogen projects under construction and in operation are, despite growing capacities, almost exclusively at pre-commercial phase and have limited electrolyser capacities, typically well below 50MW. Proposed plants have larger electrolyser capacities of 100MW or more, but those are still small compared to current grey hydrogen production plants.”
The lack of adequate infrastructure and its building cost will also prove to be a temporary hindrance to hydrogen growth. Economies that are seeking to decarbonize will need to focus their efforts on quickly finalizing all the necessary infrastructural projects in order for the hydrogen market to really take off.
“…. building the infrastructure for large scale hydrogen use, such as pipelines or export/ import terminals, will take many years—it takes seven to twelve years to plan and build a pipeline, for example. Ideally, the required infrastructure will be built in parallel to growing hydrogen demand at falling costs to ensure that by 2030 hydrogen can be traded and transported in necessary quantities,” the study said. “All medium and high ambition scenarios see a stronger hydrogen demand from 2030 and another strong increase from 2035 onwards.”
The inevitability of hydrogen becoming a significant part of the energy industry is both increasingly self-evident and critical for sustaining an adequate level of economic growth while reducing harmful emissions. Hydrogen is not only economically feasible to be a new fuel that will power up Egypt’s future, but it will also be a main attraction for investments from all over the world. This is all due to the Egyptian Ministry of Petroleum and Mineral Resources’ tireless efforts to promote green hydrogen as a catalyst for Egypt’s vision to become a regional energy hub. Though the growth of hydrogen is limited by costs, technological development, and the lack of sufficient infrastructure to sustain the desired production capacity, the economic feasibility in the long run is beyond doubt and Egypt is already ahead of the curve.