Originally published in MIT tech review arabic

Once considered dead, dangerous, and economically noncompetitive, hydrogen has made a comeback, and quite a notable one. Some regions are betting heavily on it as the next trillion-dollar opportunity.

Up until a few years ago, most hydrogen developments came from the US and Europe, in particular England and Scotland. The Middle East however is gaining ground, emerging as a testbed for expanding green hydrogen investment and innovation, potentially ideally positioned to create green hydrogen at scale. The cost of producing solar, wind and green hydrogen in the Gulf for example, is about one third of the global average. And that has been noted. Saudi Arabia is building a $5 billion green hydrogen plant that will be the world’s largest from solar and wind. The latter is connected to the ambitious Neom project. Once complete, expected by 2025, it will be the largest renewable hydrogen-to-ammonia facility. It will equal the energy of 5 million barrels of oil per year.

For reference, the Kingdom currently produces about 12 million barrels per day. Hence the energy portfolio is still currently heavily favoring oil. Yet, the Neom facility is only one of the country's planned hydrogen facilities and mega projects. It is safe to say that the Kingdom is doubling down on its hydrogen ambitions and already manages to produce hydrogen at the lower end of the global range of $2 and $7 per kilogram globally. The King Abdullah Petroleum Studies and Research Center calculated that in the long term, $1 per kilogram could be possible. That would make Saudi green hydrogen by far the cheapest in the world.

Green hydrogen costs are likely to drop significantly resulting in a $600 billion investment opportunity. The Energy Transition Outlook forecasts an increase of hydrogen demand by a factor of 6 by the year 2050. A number that others put even higher. The International Renewable Energy Agency is predicting that hydrogen and its derivatives will be able to account for 12% of global energy consumption by 2050. These are numbers that have been noted and resulted in some incredible ambitions. Saudi Arabia’s Minister of Energy announced the goal of becoming the world’s largest hydrogen supplier. The UAE aims to capture about 25% of the global hydrogen market as a hub by 2023. Oman, Egypt and other Middle Eastern countries have all come up with large hydrogen plans. In a region undergoing massive transformations, hydrogen will play a key role. Although not mentioned directly in many of the national vision frameworks, it has become clear that it is playing a key role in the respective energy and economy diversification strategies.

Kickstarting, or accelerating, a hydrogen economy worldwide is exciting. It needs to add to and complement the other renewable energy sources. It must be stated that green hydrogen currently equals to just about 2% of global hydrogen production. And as some critics justly point out where hydrogen currently stands, it is far from perfect. Sowe have a long way to go. Grey hydrogen from gas for example and brown and black hydrogen from coal currently accounts for around 3% of all greenhouse gas emissions. That is equivalent to the CO2 emissions of the United Kingdom and Indonesia combined. Other critics mention that the green energy generated could better be used directly rather than having it converted to hydrogen. Blue hydrogen could be seen as an intermittent step where a direct green approach is not yet possible. Here, carbon capture and storage solutions are in place when using fossil fuels, to contain carbon emissions emitted from the production process. But such solutions have not been proven at scale.

Now we are forced to ask again: are we experiencing another hype around hydrogen?

The first hype cycle focused more on research that peaked in 2008.  Simon Bennet, technological analyst at the International Energy Agency has provided a hopeful parallel. The railway mania in the UK in the 1840s with stocks going sky high and thousands of miles of railway being proposed, also busted. At least, in the sense that around a third of the planned railway lines never needed to be completed as sufficient lines were already built satisfying travel needs. The lines supported the demand at a certain time. Bennet mentioned that “we might have a bubble, but you can argue that a bubble is necessary to consolidate an industry”. And this sector, in particular the green part of it, can certainly still use some consolidation and scale to make a true impact.

That hydrogen is back on the agenda can be seen as quite positive. Mainly because this time, Green Hydrogen’s focus and drive, its aim, is connected to the larger green transition. It is building within the accelerating wave of research and investment for the universal transition to a more renewables focused energy portfolio for countries and the world.

For the Middle East hydrogen is quite new. The first green hydrogen plant in the Middle East has started to be constructed as recently as November 2021 (in the UAE). For the Middle East the switch to diversify still is no easy one. Depending on the country, petrol still accounts for 60 to 95 percent of the national budget. The cashflow this provides has been a hurdle previously for an accelerated diversification switch. Previous diversification ambitions, however, have never been as explicit as now.

Yet, the Middle East with its superior energy return on investment, is uniquely positioned to get the global percentage of green hydrogen up significantly. In addition, the region benefits from vast funding which the oil and gas sector still provides these countries. The Sovereign Wealth Funds offer deep pockets. Examples are the Saudi Arabian Public Investment Fund, the Kuwait Investment Authority, and the Qatar Investment Authority with respectively 500, 700, and 450 billion USD under management.

The quick turnaround between opportunity identification and investment from these wealth funds shows a different relationship between the state and the market than their European counterparts, with the need to consider radical investments for the future emerging as common ground. Funding alone is not a competitive advantage; bold, long-term investments and infrastructure will drive the future of competitive advantage and differentiation for energy. That is happening both within the European region, along with the Middle East. The race is on.

The conclusion is here; green hydrogen has become a renewed force within the expanding global renewable energy push. Betting big on hydrogen is in the direct interest of the Middle East. Yet most uniquely, green hydrogen offers a potential space for cooperation among countries looking to diversify, as an opportunity for pre-competitive shared technological research. Shared research can accelerate diversification, improving the overall regional development opportunity.

The world is switching accelerated to sustainable energy sources. The switch will also help mitigate temperatures in a region that is already familiar with extremes. And ultimately, whatever shapes the global distribution of energy production shapes the organization of global power. Green hydrogen, one way or another, will bring more focus to the Middle East.