Hydrogen could alter global trade, energy relations by 2050 

Global trade and energy relations among countries and regions appear to be heading for a serious upending if the findings in a research report by International Renewable Energy Agency (IRENA) based on developments around  what it called ‘green hydrogen’ begin to unfold.

According to IRENA, there has been rapid growth in the global hydrogen economy space which it said can bring

significant geo-economic and geopolitical shifts, adding that this can give rise to a wave of new interdependencies.

The report, “Geopolitics of the Energy Transformation: The Hydrogen Factor”, sees hydrogen changing the geography of energy trade and regionalising energy relations, which could lead to an emergence of new centres of geopolitical influence built on the production and use of hydrogen, as traditional oil and gas trade declines.

The IRENA report estimates that driven by the climate urgency and countries’ commitments to net zero, hydrogen will cover up to 12 percent of global energy use by 2050.

The agency notes that growing trade and targeted investments in a market dominated by fossil fuels and currently valued at $174 billion is likely to boost economic competitiveness and influence the foreign policy landscape with bilateral deals diverging significantly from the hydrocarbon relationships of the 20th century.

Francesco La Camera, director-general of the agency, said, “Hydrogen could prove to be a missing link to a climate-safe energy future,” and adds that,“Hydrogen is clearly riding on the renewable energy revolution with green hydrogen emerging as a game changer for achieving climate neutrality without compromising industrial growth and social development. But hydrogen is not a new oil. And the transition is not a fuel replacement but a shift to a new system with political, technical, environmental, and economic disruptions.”

La Camera specifically states that it is ‘green hydrogen’ that will bring about these new and diverse participants to the market, diversifying routes and supplies and shifting power from the few to the many, adding that with international cooperation, the hydrogen market could be more democratic and inclusive, offering opportunities for developed and developing countries alike.

The analysis shows an estimate of over 30 percent of hydrogen being traded across borders by 2050, a higher share than natural gas today, with countries that have not traditionally traded energy before establishing bilateral energy relations around hydrogen.

“As more players and new classes of net importers and exporters emerge on the world stage, hydrogen trade is unlikely to become weaponised and cartelised, in contrast to the geopolitical influence of oil and gas,” IRENA notes.

The renewable energy agency also notes that cross-border hydrogen trade will grow considerably with over 30 countries and regions planning for active commerce already, adding that some countries that expect to be importers are already deploying dedicated hydrogen diplomacy such as Japan and Germany.

Besides, it also observed that fossil fuel exporters are increasingly considering clean hydrogen an attractive way to diversify their economies, and cites the examples of Australia, Oman, Saudi Arabia and the United Arab Emirates.

But it notes that broader economic transition strategies are required as hydrogen will not compensate for losses in oil and gas revenues.

Delving into the nature of the disruption expected, IRENA states: “The technical potential for hydrogen production significantly exceeds estimated global demand. Countries most able to generate cheap renewable electricity will be best placed to produce competitive green hydrogen. While countries such as Chile, Morocco, and Namibia are net energy importers today, they are set to emerge as green hydrogen exporters. Realising the potential of regions like Africa, the Americas, the Middle East, and Oceania could limit the risk of export concentration, but many countries will need technology transfers, infrastructure and investment at scale.”

On the geopolitics of clean hydrogen disruption, IRENA said this will likely play out in different stages, with its report seeing the 2020s as a big race for technology leadership, adding, however, that demand is expected to only take off in the mid-2030s.

According to the report, by that time, green hydrogen will cost-compete with fossil-fuel hydrogen globally, and that this is poised to happen even earlier in countries like China, Brazil and India.

IRENA stated that green hydrogen was already affordable in Europe during the 2021 spike in natural gas prices,  and added that refurbishing natural gas pipelines is likely to further boost demand and facilitate hydrogen trade.

“Countries with ample renewable potential could become sites of green industrialisation, using their potential to attract energy-intensive industries. Furthermore, having a stake in the hydrogen value chain can boost economic competitiveness. The manufacturing of equipment like electrolysers and fuel cells in particular could drive business. China, Japan and Europe have already developed a head start in the production, but innovation will shape the current manufacturing landscape further,” IRENA stated.

It also stated that green hydrogen may strengthen energy independence, security, and resilience by cutting import dependency and price volatility and boosting flexibility of the energy system, but noted that the raw materials needed for hydrogen and renewable technologies could draw attention to material security.

“Shortages and price fluctuations could reverberate through hydrogen supply chains and negatively affect cost and revenues,” IRENA stated.

IRENA also drew attention to the fact that shaping the rules, standards and governance of hydrogen could lead to geopolitical competition or open a new era of enhanced international cooperation.

“Assisting particularly developing countries to deploy green hydrogen technologies and advance hydrogen industries could prevent the widening of a global decarbonisation divide and promote equity and inclusion, creating local value chains, green industries, and jobs in renewable-rich countries,” states IRENA.