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Geopolitics of the

Energy Transformation

The Hydrogen Factor

Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced,

printed and/or stored, provided that appropriate acknowledgement is given of IRENA as the source

and copyright holder. Material in this publication that is attributed to third parties may be subject to

separate terms of use and restrictions, and appropriate permissions from these third parties may need

to be secured before any use of such material.

Citation IRENA (2022), GeopoliticsoftheEnergyTransformationTheHydrogenFactor,

International Renewable Energy Agency, Abu Dhabi.

ISBN 978-92-9260-370-0

Available for download: wwwirenaorgpublications

For further information or to provide feedback: info@irena.org

ABOUT IRENA

The International Renewable Energy Agency (IRENA) is an intergovernmental organisation that supports

countries in their transition to a sustainable energy future and serves as the principal platform for

international co-operation, a centre of excellence and a repository of policy, technology, resource and

ﬁnancial knowledge on renewable energy. IRENA promotes the widespread adoption and sustainable

use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and

wind energy, in the pursuit of sustainable development, energy access, energy security and low-carbon

economic growth and prosperity.

wwwirenaorg

DISCLAIMER

This publication and the material herein are provided “as is”. All reasonable precautions have been

taken by IRENA to verify the reliability of the material in this publication. However, neither IRENA nor

any of its ocials, agents, data or other third-party content providers provide a warranty of any kind,

either expressed or implied, and they accept no responsibility or liability for any consequence of use of

the publication or material herein.

The information contained herein does not necessarily represent the views of all Members of IRENA. The

mention of speciﬁc companies or certain projects or products does not imply that they are endorsed

or recommended by IRENA in preference to others of a similar nature that are not mentioned. The

designations employed and the presentation of material herein do not imply the expression of any

opinion on the part of IRENA concerning the legal status of any region, country, territory, city or area

or of its authorities, or concerning the delimitation of frontiers or boundaries.

Foreword

FOREWORD

Francesco

La Camera

Director-General

International Renewable

Energy Agency

The accelerating deployment of renewables has set in motion a global energy transformation with far-

reaching geopolitical implications. The report “A New World”, released in 2019 by IRENA’s Global Commission

on the Geopolitics of the Energy Transformation, was the first foray into this area. It highlighted how the

advent of a new energy age would reshape relations between states and communities and bring about a

“new world” of power, security, energy independence and prosperity.

Given the fast pace of change, it is critical to monitor the geopolitical drivers and implications of the transition,

stay abreast of developments and play an active role in shaping the future. In 2020, the IRENA Assembly

requested the Agency to advance this work under the Collaborative Framework* on the Geopolitics of the

Energy Transformation. Hydrogen was identified as a prominent area for further analysis, given the recent

surge of interest. Several times in the past, hydrogen attracted much attention but remained a niche in the

global energy discourse. Today, the policy focus is unprecendented, given its central role for decarbonisation

of harder-to-abate sectors.

There are still many uncertainties about how the hydrogen market will develop, who will emerge as

market leaders, and what the geopolitical implications may be. In writing this report, IRENA provides an

informed analysis about how these uncertainties could play out. Much will depend on the policy frameworks

governments put in place, including the incentives they choose against a backdrop of the social and

economic consequences of a global pandemic, the increasingly evident climate impacts and the urgency to

decrease the gap between the haves and have-nots.

IRENA’s World Energy Transitions Outlook envisages it could meet up to 12 percent of final energy

consumption by 2050. To achieve this, it will be essential to set the priorities right, especially early on, while

markets are developing and costs are high. And hydrogen’s positive contribution to climate and development

efforts will be ensured only with transparent and credible rules and standards and a coherent system

that transcends national, regional and sectoral boundaries. Crucially, with international co-operation, the

emerging hydrogen market has the potential to be both decentralised and inclusive, with opportunities for

developed and developing countries alike.

We have a long way to go. For example, just as the UN Climate Conference

kicked off in Glasgow in October 2021 an energy crisis took hold of global

energy markets. The volatility of oil and gas prices triggered a range of

emergency measures to reduce the impacts on producers and consumers

worldwide. These are a stark reminder of the persistent centrality of fossil

fuels to the geopolitics of energy. They also underscore the urgency of the

move to resilient energy systems, aligned with the climate and development

imperatives set out in the Paris Agreement and the Agenda 2030.

Today, governments have a unique opportunity to shape the advent

of hydrogen, by contributing to the design of markets supportive of the

energy transformation while avoiding existing limitations and inefficiencies,

reducing inequalities, and influencing geopolitical outcomes towards

cleaner and fairer energy systems. The challenges are many, but so are

the opportunities. I hope that this report will help policy makers and

stakeholders effectively navigate the unknowns, mitigate risks and

overcome obstacles in the years ahead.

* IRENA Collaborative Frameworks are platforms for public, private, and other actors to exchange experience, deepen

analytical work and promote international cooperation on energy transitions.

/118

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GeopoliticsoftheEnergyTransformationTheHydrogenFactor©IRENA2022Unlessotherwisestated,materialinthispublicationmaybefreelyused,shared,copied,reproduced,printedand/orstored,providedthatappropriateacknowledgementisgivenofIRENAasthesourceandcopyrightholder.Materialinthispublicationthatisattributedtothirdpartiesmaybesubjecttoseparatetermsofuseandrestrictions,andappropriatepermissionsfromthesethirdpartiesmayneedtobesecuredbeforeanyuseofsuchmaterial.Citation:IRENA(2022),GeopoliticsoftheEnergyTransformation:TheHydrogenFactor,InternationalRenewableEnergyAgency,AbuDhabi.ISBN:978-92-9260-370-0Availablefordownload:www.irena.org/publicationsForfurtherinformationortoprovidefeedback:info@irena.orgABOUTIRENATheInternationalRenewableEnergyAgency(IRENA)isanintergovernmentalorganisationthatsupportscountriesintheirtransitiontoasustainableenergyfutureandservesastheprincipalplatformforinternationalco-operation,acentreofexcellenceandarepositoryofpolicy,technology,resourceandfinancialknowledgeonrenewableenergy.IRENApromotesthewidespreadadoptionandsustainableuseofallformsofrenewableenergy,includingbioenergy,geothermal,hydropower,ocean,solarandwindenergy,inthepursuitofsustainabledevelopment,energyaccess,energysecurityandlow-carboneconomicgrowthandprosperity.www.irena.orgDISCLAIMERThispublicationandthematerialhereinareprovided“asis”.AllreasonableprecautionshavebeentakenbyIRENAtoverifythereliabilityofthematerialinthispublication.However,neitherIRENAnoranyofitsofficials,agents,dataorotherthird-partycontentprovidersprovideawarrantyofanykind,eitherexpressedorimplied,andtheyacceptnoresponsibilityorliabilityforanyconsequenceofuseofthepublicationormaterialherein.TheinformationcontainedhereindoesnotnecessarilyrepresenttheviewsofallMembersofIRENA.ThementionofspecificcompaniesorcertainprojectsorproductsdoesnotimplythattheyareendorsedorrecommendedbyIRENAinpreferencetoothersofasimilarnaturethatarenotmentioned.ThedesignationsemployedandthepresentationofmaterialhereindonotimplytheexpressionofanyopiniononthepartofIRENAconcerningthelegalstatusofanyregion,country,territory,cityorareaorofitsauthorities,orconcerningthedelimitationoffrontiersorboundaries.2ForewordFOREWORDFrancescoLaCameraDirector-GeneralInternationalRenewableEnergyAgencyTheacceleratingdeploymentofrenewableshassetinmotionaglobalenergytransformationwithfar-reachinggeopoliticalimplications.Thereport“ANewWorld”,releasedin2019byIRENA’sGlobalCommissionontheGeopoliticsoftheEnergyTransformation,wasthefirstforayintothisarea.Ithighlightedhowtheadventofanewenergyagewouldreshaperelationsbetweenstatesandcommunitiesandbringabouta“newworld”ofpower,security,energyindependenceandprosperity.Giventhefastpaceofchange,itiscriticaltomonitorthegeopoliticaldriversandimplicationsofthetransition,stayabreastofdevelopmentsandplayanactiveroleinshapingthefuture.In2020,theIRENAAssemblyrequestedtheAgencytoadvancethisworkundertheCollaborativeFrameworkontheGeopoliticsoftheEnergyTransformation.Hydrogenwasidentifiedasaprominentareaforfurtheranalysis,giventherecentsurgeofinterest.Severaltimesinthepast,hydrogenattractedmuchattentionbutremainedanicheintheglobalenergydiscourse.Today,thepolicyfocusisunprecendented,givenitscentralrolefordecarbonisationofharder-to-abatesectors.Therearestillmanyuncertaintiesabouthowthehydrogenmarketwilldevelop,whowillemergeasmarketleaders,andwhatthegeopoliticalimplicationsmaybe.Inwritingthisreport,IRENAprovidesaninformedanalysisabouthowtheseuncertaintiescouldplayout.Muchwilldependonthepolicyframeworksgovernmentsputinplace,includingtheincentivestheychooseagainstabackdropofthesocialandeconomicconsequencesofaglobalpandemic,theincreasinglyevidentclimateimpactsandtheurgencytodecreasethegapbetweenthehavesandhave-nots.IRENA’sWorldEnergyTransitionsOutlookenvisagesitcouldmeetupto12percentoffinalenergyconsumptionby2050.Toachievethis,itwillbeessentialtosettheprioritiesright,especiallyearlyon,whilemarketsaredevelopingandcostsarehigh.Andhydrogen’spositivecontributiontoclimateanddevelopmenteffortswillbeensuredonlywithtransparentandcrediblerulesandstandardsandacoherentsystemthattranscendsnational,regionalandsectoralboundaries.Crucially,withinternationalco-operation,theemerginghydrogenmarkethasthepotentialtobebothdecentralisedandinclusive,withopportunitiesfordevelopedanddevelopingcountriesalike.Wehavealongwaytogo.Forexample,justastheUNClimateConferencekickedoffinGlasgowinOctober2021anenergycrisistookholdofglobalenergymarkets.Thevolatilityofoilandgaspricestriggeredarangeofemergencymeasurestoreducetheimpactsonproducersandconsumersworldwide.Theseareastarkreminderofthepersistentcentralityoffossilfuelstothegeopoliticsofenergy.Theyalsounderscoretheurgencyofthemovetoresilientenergysystems,alignedwiththeclimateanddevelopmentimperativessetoutintheParisAgreementandtheAgenda2030.Today,governmentshaveauniqueopportunitytoshapetheadventofhydrogen,bycontributingtothedesignofmarketssupportiveoftheenergytransformationwhileavoidingexistinglimitationsandinefficiencies,reducinginequalities,andinfluencinggeopoliticaloutcomestowardscleanerandfairerenergysystems.Thechallengesaremany,butsoaretheopportunities.Ihopethatthisreportwillhelppolicymakersandstakeholderseffectivelynavigatetheunknowns,mitigaterisksandovercomeobstaclesintheyearsahead.IRENACollaborativeFrameworksareplatformsforpublic,private,andotheractorstoexchangeexperience,deepenanalyticalworkandpromoteinternationalcooperationonenergytransitions.3GeopoliticsoftheEnergyTransformationTABLEOFCONTENTSForeword................................................03Acknowledgments.........................................09SUMMARYFORPOLICYMAKERS...........................10INTRODUCTION.......................................181.1Thedawnofcleanhydrogen................................181.2Geopoliticalsignificanceofcleanhydrogen.....................211.3Objectivesofthereport..................................22THEROLEOFHYDROGENINTHEENERGYTRANSITION................................242.1Whatishydrogen?......................................242.2Mainproductionpathways.................................262.3Hydrogenapplicationsandprioritysetting.....................292.4Barrierstoscalinguphydrogen..............................312.5Prospectsforinternationalhydrogentrade.....................33REDRAWINGTHEGEOPOLITICALMAP...............383.1Policyfront-runnersandleadingmarkets......................393.2Anewclassofenergyexporters............................453.3Transitionpathwayforfossilfuelproducers....................493.4Riseofnewtechnologyleaders.............................553.5Industrialdevelopmentinrenewables-richcountries..............650102034©cokada/istockTheHydrogenFactorTRADE,SECURITY,ANDINTERDEPENDENCE.........684.1Anewgeographyoftrade.................................704.2Shapingtherulesofthegame..............................744.3Hydrogendiplomacy.....................................764.4Shiftsinpoliticalrelations.................................784.5Greaterenergysecurity...................................814.6Traderisksandvulnerabilities..............................85THEROOTCAUSESOFGEOPOLITICALINSTABILITY–ANDHYDROGEN’SROLEINADDRESSINGTHEM....925.1Socio-politicaltransformations.............................935.2Climatechange,waterstressandfoodinsecurity................965.3Hydrogenandthedevelopingworld.........................102POLICYCONSIDERATIONSANDTHEWAYFORWARD.................................104References.............................................108Tableofcontents0405065GeopoliticsoftheEnergyTransformationLISTOFFIGURESFigureS.1Shiftsinthevalueoftradeinenergycommodities,2020to2050......................11FigureS.2Anexpandingnetworkofhydrogentraderoutes,plansandagreements...............12FigureS.3Cleanhydrogenpolicypriorities........................................................14Figure1.1Estimatesforglobalhydrogendemandin2050........................................20Figure2.1Hydrogenconsumptionin2020........................................................25Figure2.2Selectedcolour-codetypologyofhydrogenproduction...............................26Figure2.3Potentialusesforcleanhydrogen......................................................29Figure2.4Cleanhydrogenpolicypriorities.......................................................30Figure2.5Mainperceivedbarrierstodevelophydrogenpoliciesandstrategies..................32Figure2.6Worldsolartechnicalpotential.........................................................33Figure2.7Worldwindtechnicalpotential.........................................................34Figure2.8Costefficiencyoftransportoptionswhenconsideringvolumeanddistance.........35Figure2.9Anexpandingnetworkofhydrogentraderoutes,plansandagreements................37Figure3.1Hydrogenstrategiesandthoseinpreparation,October2021............................39Figure3.2Averageannualfundingpotentiallyavailableforhydrogenprojects,2021-2030..............................................................................42Figure3.3CleanhydrogenprojectsandinvestmentasofNovember2021........................43Figure3.4TechnicalpotentialforproducinggreenhydrogenunderUSD1.5/kgby2050................................................................................45Figure3.5Impactofcostassumptionsonhydrogenproductionofselectedcountries............47Figure3.6Strandedassetriskformajornetfossilfuelexporters,2019...........................50Figure3.7Expertviewsonhydrogenstrategiesandimpactsforoilandgasproducers...........51Figure3.8Expertviewsonfuturehydrogenrevenuesandmarketstructure......................54Figure3.9Technologyleadershipopportunitiesingreenhydrogenvaluechains.................55Figure3.10Geographicdistributionofhydrogen-relatedpatentfamilies,2010-2020..............56Figure3.11Flowofinventionsinhydrogentechnology,2010-2020................................58Figure3.12Estimatedmarketpotentialforhydrogenequipmentandcomponents,2050..........59Figure3.13Estimatedglobalelectrolysermanufacturingcapacity2021-2024,basedoninvestmentplans..............................................................61Figure3.14Fuelcellsales,byregionofadoption,2016-2020......................................636GREENHYDROGENTableofcontents©DilokKlaisataporn/istockTheHydrogenFactorLISTOFFIGURES(continued)Figure4.1IRENAMemberviewsonimplicationsofhydrogenonforeignpolicyby2030.........69Figure4.2Shiftsinthevalueoftradeinenergycommodities,2020to2050.....................70Figure4.3Globalmapofnaturalgastransmissionpipelines......................................73Figure4.4PossiblehydrogenroutesacrossAfricaalongexistingandfuturetrans-Africanhighways.................................................................75Figure4.5SelectedcountrybilateraltradeagreementsandMOUs,announcedasofNovember2021...................................................................77Figure4.6Theworld’s20largestannouncedgiga-scalegreenhydrogenprojects................87Figure4.7Topproducersofcriticalmaterialsinelectrolysers......................................91Figure5.1Expertviewsonhydrogen’simpactonselectedsustainabledevelopmentoutcomesby2050.......................................................93Figure5.2Countriesinwhichgreenhydrogencouldpossiblybecomecheaperthanbluehydrogen,byyear............................................................94Figure5.3Waterconsumptionofhydrogenin2050comparedwithselectedsectorstoday.................................................................98Figure5.4Heatmapofwaterstresslevels........................................................997©MarsYu/istockGeopoliticsoftheEnergyTransformationLISTOFTABLESTable2.1Mainelectrolysertechnologycomparison................................................28Table3.1Historicexamplesoflarge-scaleelectrolysishydrogenproductionplants................60Table3.2Theeconomicsofindustriallocationchoice..............................................66Table5.1Sevenwaysinwhichclimatechangethreatensstability..................................96LISTOFBOXESBox1.1Keytermsusedinthisreport..............................................................19Box1.2Keyprojectionsofhydrogenuseby2050inIRENA’s1.5°Cscenario......................23Box2.1Whatisanelectrolyser?..................................................................28Box2.2Geopoliticsofhydrogensurveys.........................................................32Box2.3Threemainwaystotransporthydrogenbyship..........................................36Box3.1Earlyadopters?Hydrogenvisionsinselectedfront-runnercountriesandregions........40Box3.2HydrogenprojectsinAfrica..............................................................44Box3.3Theimportanceofcapitalcostassumptionsforhydrogentradeprojections.............46Box3.4Fromenergyimportertoexporter?Hydrogenactivitiesinselectedfossil-fuelimportingcountrieswithgreenhydrogenexportpotential...............................48Box3.5Pivotingtohydrogen?Hydrogenstrategiesofselectedfossil-fuelexportingcountries.......................................................................52Box4.1InfrastructureopportunitiesforAfricaintheshippingsector............................72Box4.2Theemergenceofhydrogendiplomacy..................................................79Box4.3Mitigatingvolumeandpriceriskinhydrogentrade:lessonsfromthedevelopmentoftheliquefiednaturalgasmarket.......................868ACKNOWLEDGEMENTSThisreporthasbeendevelopedundertheguidanceofElizabethPressandauthoredbyThijsVandeGraaf(IRENAconsultantandleadauthor),HeribBlanco,EmanueleBiancoandWaimanTsang.RabiaFerroukhiandDolfGielenprovidedexpertguidanceandoversight.ValuablecontributionswereprovidedbyIRENAcolleagues:RolandRoesch,FranciscoBoshell,FrancescoPasimeni,PaulKomor,AnastasiaKefalidou,ClaireKiss,EmanueleTaibi,UteCollier,KathleenDaniel,ImenGherboudj,BarbaraJinks,JeffreyLu,StefanoMarguccioandKellyRigg(IRENAconsultant).Manygovernmentofficialsandinternationalexpertsalsoprovidedinputandrevieweddraftsofthereport.Theircommentsandsuggestionswereofimmensevalue.TheyincludeRonnieBelmans(KULeuven),LeonardoBeltrano(ColumbiaCenteronGlobalEnergyPolicy),PeterBetts,KingsmillBond(CarbonTracker),HugoBrouwer(MinistryofForeignAffairs,Netherlands),MelindaCrane,MatthiasDeutsch(AgoraEnergiewende),GonzaloEscribano(RealInstitutoElcano),HanFeenstra(MinistryofEconomicAffairsandClimatePolicy,Netherlands),LisaFischer(E3G),GniewomirFlis(AgoraEnergiewende),JonathanGaventa(E3G),HansOlavIbrekk(MinistryofForeignAffairs,Norway),RuudKempener(Directorate-GeneralforEnergy,EuropeanCommission),HolgerKlitzing(FederalForeignOffice,Germany),JamesMnyupe(OfficeofthePresident,Namibia),PaulMunnich(AgoraEnergiewende),AlejandroNuñez-Jimenez(HarvardUniversityandETHZurich),IndraOverland(NUPI),KarstenSach(MinistryfortheEnvironment,Germany),BeatrixSchmuelling(MinistryofClimateChangeandEnvironment,UnitedArabEmirates),GriffinThompson(LoyolaUniversityChicago),NikosTsafos(CSIS),TatianaUlkina(SNAM),CobyvanderLinde(Clingendael),KirstenWestphal(H2GlobalStiftung),RalfVermeer(MinistryofForeignAffairs,Netherlands)andFrankWouters(RelianceIndustries).ThisreportalsobenefittedfromIRENA’sCollaborativeFrameworkonGeopoliticsofEnergyTransformation,whichmetontwooccasionstodiscussthetopic.Manyexpertsalsoparticipatedinsurveysthatinformedthereport’sdevelopmentandprovidedvaluablecomments.TheyincludeiMarcoBaroni,ErinM.Blanton,NoamBoussidan,JamesBowen,MichaelBradshaw,AndyCalitz,KilianCrone,FernandodeSisternes,ChristianDownie,ReshmaFrancy,JulioFriedmann,ArunabhaGhosh,MarcoGiuli,ChrisGoodall,MariaA.Gwynn,LiorHerman,WouterJacobs,SohbetKarbuz,ThierryLepercq,RobinMills,EleonoraMoro,MonicaNagashima,MichelNoussan,MostefaOuki,JorgePena,CédricPhillibert,RainerQuitzow,AurangzebQureshi,AlisonReeve,BarisSanli,MassimoSantarelli,RobertoSchaeffer,DanielScholten,RossanaScita,RadiaSedaoui,AdnanShihabeldinandTomSmolinka.Thepublication,communicationsandeditorialsupportwereprovidedbyStephanieClarke,DariaGazzola,NIcoleBockstallerandDamianBrandy.Thereportwascopy-editedbyStevenB.Kennedy.Thegraphicdesignwasdonebyweeks.deWerbeagenturGmbH.IRENAisgratefulforthegeneroussupportoftheFederalForeignOfficeofGermany,andtheMinistryofForeignAffairsofNorwaywhichmadethisreportpossible.iThosethatarelistedherereflecttheexpertsthathaveconsentedtobeingnamed.TheHydrogenFactorAcknowledgements9Theongoingenergytransitionisunprecedentedduetoitsscaleandtheprofoundimpactontheestablishedsocio-economic,technological,andgeopoliticaltrendsaroundtheworld.Renewables,incombinationwithenergyefficiency,nowformtheleadingedgeofafar-reachingglobalenergytransition.Thistransitionisnotafuelreplacement;itisashifttoadifferentsystemwithcommensuratepolitical,technical,environmental,andeconomicdisruptions.Thecentralquestionthisreportaddressesiswhetherandtowhatextenthydrogenexacerbatesormitigatesthesedisruptionsandinwhatways.Hydrogen,untilnowthemissingpieceofthecleanenergypuzzle,islikelytofurtherdisruptenergyvaluechainsincomingyears.Theclimatechangeimperativehasbeenthemaindriveroftherenewedpolicyfocusonhydrogen.IRENA’s1.5°Cscenarioenvisagesthatcleanhydrogen1couldmeetupto12%offinalenergyconsumptionby2050.Majorityofthiswouldbeproducedusingrenewables,withtherestfromgasandcarboncaptureandstorage.Hydrogenislikelytoinfluencethegeographyofenergytrade,furtherregionalisingenergyrelations.Withthecostsofrenewableenergyfalling,butthoseoftransportinghydrogenhigh,theemerginggeopoliticalmapislikelytoshowgrowingregionalisationinenergyrelations.Renewablescanbedeployedineverycountry,andrenewableelectricitycanbeexportedtoneighbouringcountriesviatransmissioncables.Inaddition,hydrogencanfacilitatetransportoftheenergyrenewablesproduceoverlongerdistancesviapipelinesandshipping,thusunlockinguntappedrenewableresourcesinremotelocations.Someexistingnaturalgaspipelines,withtechnicalmodification,couldberepurposedtocarryhydrogen.Countrieswithanabundanceoflow-costrenewablepowercouldbecomeproducersofgreenhydrogen,withcommensurategeoeconomicandgeopoliticalconsequences.Greenhydrogencouldbemosteconomicalinlocationsthathavetheoptimalcombinationofabundantrenewableresources,spaceforsolarorwindfarms,andaccesstowater,alongwiththecapabilitytoexporttolargedemandcentres.Newpowernodescouldariseinplacesthatexploitthesefactorstobecomecentresofhydrogenproductionanduse.Thehydrogenbusinesswillbemorecompetitiveandlesslucrativethanoilandgas.Cleanhydrogenwillnotgeneratereturnscomparabletothoseofoilandgastoday.Hydrogenisaconversion,notanextractionbusiness,andhasthepotentialtobeproducedcompetitivelyinmanyplaces.Thiswilllimitthepossibilitiesofcapturingeconomicrentsakintothosegeneratedbyfossilfuels,whichtodayaccountforsome2%ofglobalGDP.Moreover,asthecostsofgreenhydrogenfall,newanddiverseparticipantswillenterthemarket,makinghydrogenevenmorecompetitive.1Thepresentreportreferstothismixofgreenandbluehydrogenas“cleanhydrogen”.AlsoseeFigure2.2.GeopoliticsoftheEnergyTransformationSummaryforPolicymakers10Hydrogentradeandinvestmentflowswillspawnnewpatternsofinterdependenceandbringshiftsinbilateralrelations.Afast-growingarrayofbilateraldealsindicatesthatthesewillbedifferentfromthehydrocarbon-basedenergyrelationshipsofthe20thcentury.Morethan30countriesandregionshavehydrogenstrategiesthatincludeimportorexportplans,indicatingthatcross-borderhydrogentradeissettogrowconsiderably.Countriesthathavenottraditionallytradedenergyareestablishingbilateralrelationscenteringonhydrogen-relatedtechnologiesandmolecules.Aseconomictiesbetweencountrieschange,somighttheirpoliticaldynamics.FigureS.1Shiftsinthevalueoftradeinenergycommodities,2020to2050Source:IRENA(2022).AmmoniaBioenergyCoalElectricityGasHydrogenMethanolOil2050USD1.6trillion2020USD1.5trillionOilOilBHGasGasMethanolElectricityElectricityCoalAmmoniaBioenergyCoalElectricityGasHydrogenMethanolOil2050USD1.6trillion2020USD1.5trillionOilOilAmmoniaBioenergyMethanolHydrogenGasGasMethanolElectricityElectricityCoalTheHydrogenFactor11Hydrogendiplomacyisbecomingastandardfixtureofeconomicdiplomacyinseveralcountries.Accesstohydrogenisoftenseenasanelementofenergysecurity,andoverallnationalresilience,particularlyforindustrieswhereothersolutionsarenotfeasibleoruneconomical.Somecountriesthatexpecttobeimportersarealreadyengagedindedicatedhydrogendiplomacy.GermanyandJapanhavebeentrailblazers,butothercountriesarefollowingclosebehindthem.Potentialexportersaredeployingsimilarstrategies,withmanyincludinghydrogen–greenhydrogeninparticular–atthehighestlevelsoftheirdiplomacy.Fossil-fuelexportersconsidercleanhydrogenanattractivewaytodiversifytheireconomies.Manycurrentexportersarepivotingtocleanhydrogentodevelopnewexportindustries.Theycanleverageestablishedenergyinfrastructure,askilledworkforceandexistingenergytraderelations.Whilebluehydrogenseemslikeanaturalfit,manyfossil-fuelproducingcountrieshaveamplerenewablepotentialtoshiftdirectlytothegreenvarietyaswell.UnitedArabEmirates’HydrogenLeadershipRoadmapisexplicitlytakingsuchdualapproach,andseveralothersareexploringthispathincludingAustralia,OmanandSaudiArabia.Nevertheless,fossil-fuelproducersshouldcontinuetodevelopbroad-basedeconomictransitionstrategies,giventhathydrogenwillnotcompensateforlossinrevenues.ImporterNewroutesinplaceorunderdevelopmentExporterMoUsinplaceestablishingtraderoutesPotentialtraderouteexplicitlymentionedinpublishedstrategiesImportingregionExportingregionNorthAfricaAsiaPaciﬁcLatinAmericaEuropeFigureS.2Anexpandingnetworkofhydrogentraderoutes,plansandagreementsMapsource:NaturalEarth,2021Notes:Informationonthisfigureisbasedontheinformationcontainedingovernmentdocumentsatthetimeofwriting.Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesandnamesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.GeopoliticsoftheEnergyTransformation12Thetechnicalpotentialtoproducegreenelectricity–and,inturn,largeamountsofgreenhydrogen–exceedsestimatedglobaldemandbyseveralordersofmagnitude.Manycountrieshavedeclaredtheirambitiontobecomeexportersofhydrogen,limitingthelikelihoodofexportconcentration.Judgingbytheirstrategiesandgrowingbilateraldeals,evennetenergyimporterssuchasChile,MoroccoandNamibiaseempoisedtobecomegreenhydrogenexporters.However,thesupplyofhydrogenwillbeconstrainedbythepaceofdeploymentofcapitalandcostofproduction,particularlywherelong-termmarketsarenotassured.Africa,theAmericas,theMiddleEastandOceaniahavethehighesttechnicalpotentialforgreenhydrogenproduction.Theabilitytoproducelargevolumesoflow-costgreenhydrogen,however,varieswidely.Countrieswillhavetosettheirstrategiesinlightofbroadersocialandeconomicpriorities,includingtheabilitytodecarbonisetheirenergysystemsortackleenergyaccessandpoverty,currentlyprevailinginover80countriesworldwide.Havingaccesstoabundantrenewablesisanassetinthecleanhydrogenrace,butitmightnotbeenough.Manyotherfactorscomeintoplay,includingexistinginfrastructureandthecurrentenergymix,alongwiththecostofcapitalandaccesstonecessarytechnologies.Whetherthetechnicalpotentialcanberealisedwillalsodependonsoftfactorslikegovernmentsupport,theinvestmentclimateandpoliticalstability.Higherprojectfinancecostsdonotnecessarilyimpedeinvestmentincountrieswithhigherriskprofiles.Theupstreamoilandgassectorsshowthatwhererevenuepotentialissufficient,investmentwillflowindespitecountryrisk.Thesameshouldapplytocountriesshowingalow-costpotentialforgreenhydrogen.Therearelimits,ofcourse.Countriesinturmoil,someofwhichhavegreatpotential,areunlikelytobeabletorealiseinvestmentopportunitiesowingtotheimmenserisksofdoingbusinessinsuchlocations.TheHydrogenFactor13The2020scouldbecometheeraofabigracefortechnologyleadership,ascostsarelikelytofallsharplywithlearningandscaling-upofneededinfrastructure.Thegeopoliticsofcleanhydrogenislikelytoplayoutinseveralstages.Greenhydrogenisprojectedtostartcompetingwithblueoncostbytheendofthisdecade.ThisseemslikelytooccursoonerincountriessuchasChina(thankstoitslow-costelectrolysers),orBrazilandIndia(withcheaprenewablesandrelativelyhighgasprices).GreenhydrogenwasalreadymoreaffordablethangreyacrossEuropeduringthe2021spikeinnaturalgasprices.Buttheuptakewillgreatlydependonpredictabledemand,especiallyinhardertoabatesectorswherenoalternativesexist.ELECTRIFICATIONMaturityofhydrogensolutions(comparedwithotherdecarbonisationsolutions)DistributedapplicationsCentralisedapplicationsHYDROGENHIGHPRIORITYSeasonalstorageInternationalshippingSteelReﬁneriesLong-haulaviationHightemperatureheatingResidentialheatingMidtemperatureheatingUrbanvehiclesShort-termstorageRegionaltrucksShort-haulaviationLong-haultrucksFerriesTrains02468100,00,20,40,60,81,0LOWPRIORITYSources:IRENA(forthcoming-b).FigureS.3CleanhydrogenpolicyprioritiesGeopoliticsoftheEnergyTransformation14Cross-bordertradingofhydrogenwillincreaseinthe2030s,atpacewiththecost-competitivenessofgreenhydrogen.Acrossmanydecarbonisationscenarios,demandstartstotakeofffrom2035.IRENAenvisagesthattwo-thirdsofgreenhydrogenproductionin2050wouldbeusedlocally,andone-thirdtradedacrossborders.Pipelines,includingadaptednaturalgaspipelines,arelikelytofacilitatehalfofthistrade.Theotherhalfwouldbeloadedonshipsintheformofhydrogenderivatives,notablyammonia.Intheshorttomediumterm,countriesandregionscanasserttechnologyleadershipandshapetherulesofthegrowingmarket.Havingastakeinthehydrogenvaluechaincanboosteconomiccompetitiveness.Thedirecteconomicstakesarehigh,andthemarketpotentialisconsiderable.Inthelongrun,countrieswithamplerenewablepotentialcouldbecomesitesofgreenindustrialisation,usingtheirpotentialtoattractenergy-intensiveindustries.Equipmentmanufacturingoffersanopportunitytocapturevalueinthecomingyearsanddecades.Thehydrogenvaluechainisextensive,andthebulkofinvestmentwillbeneededforrenewablepower.Alongthisvaluechain,estimatespointtoaUSD50-60billionmarketpotentialforelectrolysersandaUSD21-25billionmarketforfuelcellsbythemiddleofthecentury.China,EuropeandJapanhavedevelopedastrongheadstartinproducingandsellingelectrolysers,butthemarketisstillnascentandrelativelysmall.Innovationandemergingtechnologiescanchangethecurrentmanufacturinglandscape.Anyformofhydrogenmaystrengthenenergyindependenceandresilience,butmostofthebenefitsstandtocomefromgreenhydrogen.Today,therearethreemainwaysinwhichhydrogencanbolsterenergysecurity:1)byreducingimportdependence,2)bymitigatingpricevolatilityand3)byboostingtheflexibilityandresilienceoftheenergysystem,throughdiversification.Mostofthesebenefitsareassociatedwithgreenhydrogen.Conversely,bluehydrogenwouldfollowthepatternsofgasmarkets,resultinginimportdependenciesandmarketvolatilities.Moreover,theexpectedcostreductioningreenhydrogenmeansthatinvestmentsinsupplychainsbasedonfossilfuels–especiallyassetsplannedtostayinoperationformanyyears–mayendupstranded.Therawmaterialsneededforhydrogenandrenewableenergytechnologiesarelikelytodrawmoreattentiontomaterialsecurity.Whilegeologicalsuppliesformostmineralsandmetalsarepresentlysufficient,marketscouldbecomeverytightowingtorapidlyrisingdemand,andthelongleadtimesofminingandrefiningprojects.Arelativelysmallshiftinsupplyordemandcancausesignificantpricefluctuations.Suchfluctuationscouldreverberatethroughhydrogensupplychainsandaffecttheoverallcostofequipment,alongwiththerevenuesofminersandexportersofrawmaterials.SupplychainproblemscausedbyCOVID-19arealsoinstructivewhenconsideringpossiblerisksbeyondthosealreadywell-known.TheHydrogenFactor15Hydrogentradeflowsareunlikelytobecomeweaponisedorcartelised.Thisisbecausehydrogencanbeproducedfrommanyprimaryenergysourcesandinawidevarietyofplacesworldwide.Indeed,itisamanufacturedproductratherthanarawmaterialorenergysource.Therefore,greenenergytradeflowsareunlikelytolendthemselvesaseasilytogeopoliticalinfluenceasoilandgas.Thatsaid,supplyshortagescouldarise,particularlyintheearlyyearsofhydrogentrade,whenthenumberofsuppliersislimitedandmosttradeisstillgovernedbybilateralarrangements.Shapingtherules,standardsandgovernanceforhydrogentradewillhaveasignificantimpactindeterminingwhichtechnologiesdominatefuturemarkets.Thesuccessofcleanhydrogenmarketshingesupontheabilitytosetcoherentandtransparentrules,standardsandnormstofacilitateitsdeploymentacrosscountries,regionsandsectors.Standardsaredesignedtoimprovethequality,safety,andinteroperabilityofvariousgoodsandservices.Atthesametime,divergentstandardscouldslowdownprogressandleadtomarketfragmentation,stirregulatorycompetition,anderecttradebarriers.Settingstandardscouldbeanarenaforgeopoliticalcompetitionorinternationalco-operation.Ultimately,allplayerscangainfromacoherentandtransparentglobalsystem.Certificatesoforiginrootedinatransparentandcredibleinternationalsystemwillbeneededtomonitorandmanagehydrogen’scontributiontoclimatechangeefforts.Transparencyinhowemissionsaremeasuredwillbeessential.Therearewell-knownrisksofcarbonlock-inifhydrogenstrategiesprolongfossilfueluseandhinderenergyefficiencyandelectrification.Robustandwell-thought-outpolicyframeworkscanhelpensurethathydrogeneffectivelycontributestoreducinggreenhousegasemissions.Pricetransparencyearlyonwouldsupporttherapidevolutionoftheglobalmarketinhydrogen.Thecurrenciesandpricingmechanismsthattakeholdintheemergingmarketarelikelytohaveconsiderablegeopoliticaleffects.Thecurrencychosenwillbepositionedtobecomeaglobalbenchmarkasthemarketexpands.Thoseassociatedwiththatcurrencywilltosomedegreebeshelteredfromexposureduetofluctuatingimportcosts.Forinstance,theEuropeanUnion,likelytobecomeoneofthekeyimportmarkets,seekstodenominateitsfuturehydrogenimportsineuros.Moreover,puttingapriceoncarbonmightbehelpful,orevennecessary,tomakegreenhydrogencompetitivewiththegreyvariantand,ultimately,withfossilfuels.Inthatsense,hydrogenmaybecomeembroiledinabroadersetofcarbontradewars.GeopoliticsoftheEnergyTransformation16Investmentdecisionsarelong-livedandtherisksofstrandedassetshigh,sofixedinfrastructureshouldbeassessedwithalong-termlogic.Everyinvestmentandplanningdecisionaroundenergyinfrastructuretodayshouldconsiderthatthegeographyofadecarbonisedeconomyislikelytobeverydifferentfromwhatcurrentlymakessense.Significantelectrificationofenduseswillreshapedemand.Onthesupplyside,renewablehydrogenproductionwilllikelyoccurinlocationsotherthantoday’soilandgasfields.Whilesomeoftheexistinginfrastructurecouldberepurposed,thetechnicalchallengesandeconomiccostsofsuchrepurposingshouldbeaccountedforfromtheoutset.Helpingdevelopingcountriesdeployhydrogentechnologiesearlyoncouldimproveenergysecurityforall,whilepreventingtheglobaldecarbonisationdividefromwidening.Adiversehydrogenmarketwouldreducesupplychainrisksandimproveenergysecurityforall.Accesstotechnology,training,capacitybuildingandaffordablefinancewillbekeytorealisingthefullpotentialofhydrogentodecarbonisetheglobalenergysystemandcontributetoglobalstabilityandequity.Establishinghydrogentraderelationscouldopennewpossibilitiestosetuplocalhydrogenvaluechains,stimulategreenindustriesandcreatejobsincountriesrichinrenewables.Globaleffortsshouldfocusontheapplicationsthatprovidethemostimmediateadvantagesandenableeconomiesofscale,particularlyinthecomingyears.Prioritisinghigh-demandapplicationsforwhichhydrogenisthebest—andperhapstheonly—alternativeismorelikelytobecost-effectiveandlesssusceptibletotherisksofnascentmarkets.Oneexamplecouldbesupportingandthenacceleratingashifttogreenhydrogeninindustrialapplicationswherehydrogenisalreadyused,suchasrefiningandtheproductionofammoniaandmethanol.Dependingonhowitisdeveloped,hydrogencouldhavebothpositiveandnegativeeffectsonsustainabledevelopment.Theconceptof“humansecurity”isoftenusedtodescribetherootcausesofgeopoliticalinstabilitytoaccountforthreatssuchasclimatechange,povertyanddisease,whichcanunderminepeaceandstabilitywithinandbetweencountries.Goingforward,itwillbeimportanttogaingreaterunderstandingofthemultidimensionalnatureofglobalthreatsandvulnerabilitiestoforeseeanddefusecertainrisksthatmaycomewiththedeploymentofhydrogenonamajorscale.TheHydrogenFactor17INTRODUCTIONCHAPTER1©atkwork/shutterstock.comGeopoliticsoftheEnergyTransformation0121.1THEDAWNOFCLEANHYDROGENInrecentyears,hydrogenhasrisenuptheagendaasapotentialmissingpieceofthecleanenergypuzzle.Agrowingnumberofcountriesnowhaveanationalhydrogenroadmaporstrategy,andasizeableportionoftheCOVID-19stimulusandrecoveryfundshavebeendedicatedtotheaccelerationofhydrogen.Atthe2021UnitedNationsClimateChangeConference(COP26)inGlasgow,32countriesandtheEuropeanUnion(EU)agreedtoworktogethertoacceleratethedevelopmentanddeploymentofcleanhydrogen(Box1.1)andensurethat“affordablerenewableandlow-carbonhydrogenisgloballyavailableby2030”(UNFCCC,2021).18BOX1.1KEYTERMSUSEDINTHISREPORT•Cleanhydrogenreferstobothgreenhydrogenandbluehydrogen.Althoughbothtypesmayplayaroleintheenergytransition,forthepurposeofthisreport,bluehydrogenwasconceptualisedas“clean”wheremethaneemissionsareextremelylowandwithveryhighcarboncapturerates.•Low-carbonhydrogenreferstobluehydrogenthatdoesnotmeettheemissionstandardsaboveandtohydrogenmadewithgrid-poweredelectrolysiswherethegridisnotdecarbonised.•Hydrogenderivativesrefertothedownstreammoleculesintowhichhydrogencanbeconverted(e.g.ammonia,methanol,syntheticfuels).Whentheseproductsareproducedwithhydrogenfromelectrolysis,theyareknownas“Power-to-X”products.•Syntheticfuelsrefertoavarietyofgaseousandliquidfuelsproducedfromhydrogenandcarbon,includingsynthetickerosene,syntheticdieselandothers.Whenhydrogenisproducedbyelectrolysis,thesefuelsarealsoreferredtoas“powerfuels”or“e-fuels”.Theycanbeusedas“drop-in”fuels,astheycanbeusedinconventionalenginesandfuelsupplyinfrastructure.TheHydrogenFactor01IntroductionHydrogenhasspurredmultiplewavesofinterestinthepastwithoutsignificantimpact.Twofactorsmakethistimedifferent.First,governmentsworldwidehaveralliedbehindthetargetofnetzeroemissionsbythemiddleofthiscentury(Blacketal.,2021).Havingareasonablechanceoflimitingglobaltemperatureriseto1.5°C,thegoallaidoutinthe2015ParisAgreement,requiresreachingnetzeroemissionsby2050(IPCC,2021).Todoso,allsectorsoftheeconomyneedtocuttheiremissions,includingheavyindustryandlong-haultransport,wherelimitedsolutionsexist.Hydrogenhasemergedasakeyoptionforreducingemissionsinthesesectors.Second,theplummetingcostsofrenewablesandelectrolysersareimprovingtheeconomicattractivenessof"green"hydrogen–thatis,hydrogenproducedthroughtheelectrolysisofwaterpoweredbyrenewableelectricity.Theincreasingshareofvariablerenewables,suchaswindandphotovoltaic(PV)solarpower,alsocreatesdemandforflexibilityandstorage,whichhydrogencanhelpdeliver.Greenhydrogencanthuscomplementandextendtheongoingrevolutioninrenewableelectricity.Asaresultofthesefactors,hydrogenandhydrogen-basedfuelsarenowprojectedtomeetasizeableshareoffinalenergydemandin2050,upfromvirtuallynothingtoday(Figure1.1).Inalloftheseprojections,current“grey”hydrogenproduction(basedonfossilfuels)iscompletelyphasedout,andgreenhydrogenisthedominantproductionpathway,complementedby“blue”hydrogen,whichisbasedonfossilfuelswithcarboncaptureandstorage(CCS).19©Audioundwerbung/shutterstock.comGeopoliticsoftheEnergyTransformationFigure1.1Estimatesforglobalhydrogendemandin2050Sources:BloombergNEF(2021a);ETC(2021);HydrogenCouncil(2021);IRENA(2021a);IEA,(2021a).Notes:TheInternationalEnergyAgencyrefersto“fossil-basedwithCCUS”(carboncapture,utilisationandstorage)and“electrolysis-based”hydrogen.TheHydrogenCouncilprojectsthat60-80%ofhydrogenproductionwillberenewablesbased,withtherest“low-carbon”,whichitdefinesas“hydrogenproducedfromenergysourcesofnon-renewableoriginwithacarbonfootprintbelowadefinedthreshold”.Currenthydrogenproductionincludeshydrogencreatedasby-productfromotherprocesses.7006005004003002001000Hydrogenproduction(Milliontonnes)202020502050IEANetZeroScenario2050ETCSupply-sidedecarbonisationonlyscenario2050BNEFGreenScenario2050HydrogenCouncilIRENA1.5°CscenarioCurrenthydrogenproductionGreenhydrogenBluehydrogenGreyhydrogenPercentofﬁnalenergydemandElectrolysis-basedhydrogen0%12%13%18%22%22%20GREENHYDROGEN©Jayjune69/shutterstock.comTheHydrogenFactor01Introduction1.2GEOPOLITICALSIGNIFICANCEOFCLEANHYDROGENBuildingupglobalcleanhydrogenvaluechainswillbringgeoeconomicandgeopoliticalshifts.Mostnotably,greenhydrogenisemergingasapotentialgamechangerforreducingemissionsandachievingclimateneutralitywithoutstymyingeconomicandsocialdevelopment.Theeconomicstakesarehigh.CurrentannualhydrogensalesrepresentamarketvalueofapproximatelyUSD174billion,whichalreadyexceedsthevalueofannualtradeinliquefiednaturalgas(LNG).2Evenifhydrogen’suseislimitedtoindustrialprocessesandlong-distancetransport,itsmarketpotentialisenormous.Asinglesteelplantusinghydrogenratherthanfossilfueltoreduceironwouldutiliseabout300000tonnesofhydrogenannually,absorbingtheoutputof5gigawatts(GW)ofelectrolysers(MissionPossiblePartnership,2021).Globalelectrolysercapacitytodaystandsatjustover0.3GW.Accordingtomajorinvestmentbanks,by2050,globalsalesofhydrogencouldbeworthUSD600billion(FinancialTimes,2021),andthevaluechainsofgreenhydrogencouldbecomeaUSD11.7trillioninvestmentopportunityoverthenext30years,3coveringeverythingfromdedicatedrenewablecapacityandelectrolysers,totransportinfrastructure(GoldmanSachs,2020).Hydrogen’stransformativereachgoesbeyonditsestimatedmarketvalue.Itisbestthoughtofasageneral-purposeenergycarrierthatcanfosterinnovationacrossmanydifferentindustriesandsectors.Itsgeopoliticalimpactmightfollowthepatternsofsteampower,electricity,ortheinternalcombustionengine.Eachintheirownway,thesetechnologieshavetransformedthemachinesandfuelsonwhichmuchofourmoderncivilizationruns.Intheprocess,theyhavealsoaffecteddifferentaspectsofhumanlife,alteredglobaltradepatterns,andshapedtheglobalbalanceofpower.Whilethesetechnologieshavebroughtmanybenefitstohumankind,thebenefitshavenotbeenfairlydistributed.Theyhavethereforesaddledsocietieswithnewexternalitiesandglobalchallenges.2ThevalueofglobalLNGtradestoodatUSD143billionin2019(UNComtrade,2021).3Includesrenewablepower,hydrogenpowerplants,electrolysersandgaspipelinereconfiguration.21©imaginima/istockphoto.comGeopoliticsoftheEnergyTransformationComparedtotheseepoch-definingtechnologies,cleanhydrogen’simpactwilllikelybesmaller,butitshouldnotbebrushedasidetooquickly.Behindthesimplechemicalformulaofhydrogengas(H2),liesanentiresystemofinfrastructuretoproduce,transport,convertandusehydrogen.Suchasystemcouldcreatenewconnectionsbetweenthepreviouslyseparatedenergysectorsofpower,heat,andmobility.Itcouldfosterpartnershipsthattranscendtraditionalindustryboundaries.Moreimportantly,thepushtodevelopcleanhydrogenasamajorenergycarrierislikelytodisruptcurrentenergyvaluechainsandcreateopportunitiesformorecountriestoplayasignificantrole.Eventually,itmightevenleadtoanentirelyneweconomicgeographyofindustrialactivity.Thegeopoliticsofcleanhydrogenislikelytoplayoutindifferentstages.The2020scouldbetheeraofthebigracefortechnologyleadership,withcostsfallingsignificantlyandrapidscalingupoftherequiredinfrastructure.Inmanylocations,greenhydrogenissettocompeteoncostswithblueby2030(IRENA,2020a).Acrossmanydecarbonisationscenarios,demandstartstotakeofffrom2035(WorldEnergyCouncil,2021).Duringthisperiod,internationaltradeofhydrogenandderivativescouldgrowsignificantly,althoughinitialtradingroutesmightbeestablishedearlier(Rametal.,2020).1.3OBJECTIVESOFTHEREPORTThisreportprovidesacomprehensiveanalysisofthegeopoliticaldriversandpotentialconsequencesofthedevelopmentofcleanhydrogenvaluechains.Acentralthemearoundwhichthisreportisbuiltistheconceptof‘disruption’.Wearewitnessingtransformationsinmanyaspectsofeconomiesandsocieties,rangingfromenergysystems,climatechange,technologicaltrajectories,geopoliticalrelationships,andtradeandinvestment.Giventheturbulenceofpolitical,technical,environmental,andeconomicsystems,thecentralquestionthisreportaddressesiswhether,andtowhatextent,hydrogenexacerbatesormitigatesthesedisruptions,andwhobenefitsormaybedisadvantagedbythesedevelopments.Thegoalofthisreportisnotonlytodescribehowhydrogencandisruptfutureenergysystems,butalsoofferinsightsintohowcountriesandstakeholderscanprepareforpositiveornegativedisruptions.22©bagi1998/istockphoto.comTheHydrogenFactor01IntroductionThepossiblepathwayonwhichcleanhydrogenmightevolvestillinvolvesmanyuncertainties.Thisreportisthereforeahorizonscanningexercisethatisexploratoryinnature.The1.5°CscenariooftheInternationalRenewableEnergyAgency(IRENA),asdepictedintheAgency'sWorldEnergyTransitionsOutlook(WETO),isusedasabaselinefortheanalysis(Box1.2)(IRENA,2021a).However,thisreportfocusesnotonlyonthegeopoliticalimplicationsofadefinedhydrogenpathway,butalsoonthewaysinwhichdifferentactorsareactivelytryingtoshapemultiplepotentialpathwaysforthedevelopmentofhydrogen.Twosurveyswereconductedtoinformtheanalysisinthisreport(Box2.2).OnepolledIRENAMembers,4theotheragroupoftopicalexperts.ThereportalsodrawsonthesubstantialbodyofworkthatIRENAhasalreadycarriedoutonhydrogenandrelatedtopics,fromtechnical,economicandpolicyperspectives.Itfurtherdrawsontheworkofexpertsworldwide,includingthoseparticipatinginIRENA’sCollaborativeFrameworkontheGeopoliticsofEnergyTransformation.Thisreportreflectsonmanyofthekeythemescoveredbythe2019GlobalCommissionreport(IRENA,2019a),includingtechnologyleadership,energysecurityandshiftingtradepatterns,amongothers.Itoutlinespolicyconsiderationsforgovernmentsandotheractorstohelpmitigatethegeopoliticalrisksandcapitaliseonopportunities.BOX1.2KEYPROJECTIONSOFHYDROGENUSEBY2050INIRENA’S1.5°CSCENARIO•Hydrogenanditsderivativesaccountfor12%offinalenergyuseand10%ofcarbondioxide(CO2)emissionsreductions.Theyplayanimportantroleinharder-to-decarbonise,energy-intensivesectorslikesteel,chemicals,long-haultransport,shippingandaviation.Hydrogenalsohelpsbalancethesupplyofanddemandforrenewableelectricityandservesaslong-termseasonalstorage.•Some5000GWofhydrogenelectrolysercapacityareneeded,upfromjust0.3GWtoday.•Theelectricitydemandtoproducehydrogenreachescloseto21000terawatthours(TWh),almostthelevelofglobalelectricityconsumptiontoday.•Theproductionofgreenhydrogenanditsderivativeswilluse30%ofthetotalelectricitydemandin2050.•Atleasttwo-thirdsoftotalproductionisgreenhydrogen,withtherestcomingfrombluehydrogen.4IRENAMembershipconsistedof164countriesandtheEuropeanUnionatthetimethesurveywasconductedinJuly2021.23THEROLEOFHYDROGENINTHEENERGYTRANSITIONCHAPTER2©remotevfx.com/shutterstock.comGeopoliticsoftheEnergyTransformation2.1WHATISHYDROGEN?Hydrogenistheoldest,lightestandmostabundantelementintheuniverse.Itisnaturallypresentinmanycompounds,includingwaterandfossilfuels.Hydrogengasisusedmainlyasafeedstockforthe(petro)chemicalindustry:crudeoilrefining,ammoniasynthesis(primarilyforfertiliserproduction)andmethanolproductionforawidevarietyofproducts(includingplastics).Around120milliontonnesofhydrogenisproducedglobally,two-thirdsofwhichispurehydrogenandone-thirdofwhichisamixturewithothergases(IEA,2019a).Chinaistheworld’slargestproducerandconsumerofhydrogen(Figure2.1).Itproducesalmost24milliontonnesofpurehydrogenperyear,accountingfornearlyone-thirdofdedicatedglobalproduction.Hydrogencanalsobeusedasafuel.Whenburned,itcangenerateheatofmorethan1000°CwithoutemittingCO2.5Further,hydrogencanalsobeusedinfuelcells,whereitchemicallyreactswithoxygentoproduceelectricitywithoutemittinganypollutantsorgreenhousegases.Theonlyby-productofthischemicalreactioniswatervapour.025WhileburninghydrogendoesnotemitanyCO2,itdoesleadtoemissionsofnitrousoxide,whichisamajorairpollutant.2402TheroleofhydrogenintheenergytransitionTheHydrogenFactorFigure2.1Hydrogenconsumptionin2020(milliontonnesperyear)Mapsource:NaturalEarth,2021Note:Valuesarederivedfromcurrentproductionofammonia,methanol,refininganddirectreducedironforsteel.Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesandnamesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.ChinaUnitedStatesofAmericaIndiaRussianFederationEU27+UnitedKingdomIran(IslamicRepublicof)SaudiArabiaCanadaJapanIndonesiaTrinidad&TobagoEgyptRepublicofKoreaRestoftheworld15.711.37.26.45.83.63.42.51.71.51.51.41.323.925GeopoliticsoftheEnergyTransformation2.2MAINPRODUCTIONPATHWAYSDespiteitsabundanceonEarth,hydrogendoesnotexistnaturallyinitspureforminlargequantities.Therearenovastdepositsofhydrogeninthegroundthatcanbeextracted.6Hydrogenisfoundalmostexclusivelyincompounds,notablywatermolecules(hydrogenandoxygen)andfossilfuels(hydrogenandcarbon).Hydrogencanbereleasedfromthesecompounds,butdoingsorequiresenergy.Acolour-codesystemiscommonlyusedtorefertodifferenthydrogenproductionmethods(Figure2.2).Mosthydrogentodayis“grey”hydrogen,whichisproducedusingfossilfuels,notablythroughsteammethanereformingofnaturalgasorgasificationofcoal.7Thesefossilfuel-basedproductionmethods,whichaccountfor95%oftoday’shydrogensupply,resultinasubstantialCO2footprintandarenotcompatiblewithmovingtowardsnetzeroemissions.6SomepocketsofhydrogengascanbefoundintheEarth’scrust.Knownasnatural,orgoldhydrogen,thepuregascouldintheorybeextractedinasimilarwayasoilandgas.CompaniesaredrillingforsuchresourcesinplacessuchasFrance,MaliandtheUnitedStatesofAmerica.Thistypeofhydrogenremainsageologicalcuriosity,however,andconstitutesanon-renewablesourceofenergy(Prinzhofer,CisséandDiallo,2018;Zgonnik,2020).7Thiscategoryissometimesfurtherdividedinto"grey"fornaturalgas,“brown”forlignite,and“black”forbituminouscoal.Inthisreport,however,greyreferstofossil-fuelbasedproductioningeneral.Figure2.2Selectedcolour-codetypologyofhydrogenproductionNote:a)CO2-eq/kg=carbondioxideequivalentperkilogramme;b)Forgreyhydrogen,2kgCO2-eq/kgassumedformethaneleakagefromthesteammethanereformingprocess.c)Emissionsforbluehydrogenassumearangeof99.8%and68%capturerate.ProcessEnergysourceEstimatedemissionsfromtheproductionprocessaGREENElectrolysisGREYReformingorgasiﬁcationReforming:9–11bGasiﬁcation:18–20FossilfuelsBLUEHYDROGENHYDROGENHYDROGENReformingorgasiﬁcationwithcarboncaptureFossilfuelsRenewableelectricity0.18–6.1c026©luchschenF/shutterstock.com02TheroleofhydrogenintheenergytransitionTheHydrogenFactorTwomainroutesareunderconsiderationtoreplacegreyhydrogenwithacleanformofproduction:greenandbluehydrogen.Greenhydrogenproductionisfullyconsistentwiththenetzeroroute.Itreliesontechnologiesthathavelongbeenwellknown,basedonwaterelectrolysis(Box2.1)poweredbyrenewableelectricity.Currently,hydrogenproductionfromrenewablesourcesislimited,butthisissettochangewiththeglobalfocusonitspotential.BluehydrogenisproducedfromfossilfuelswithCCS.RetrofittingCCStogreyhydrogenproductionfacilitieswouldallowcontinueduseoftheseassetswithlowergreenhousegasemissions.However,bluehydrogenreliesonfossilgas,whichbringsrisksofupstreamormidstreamleakagesofmethane,amuchmorepotentgreenhousegasthanCO2.Bluehydrogencanthusyieldverylowgreenhousegasemissions,onlyifmethaneleakageemissionsdonotexceed0.2%,8withcloseto100%carboncapture.Suchratesarestilltobedemonstratedatscale(Baueretal.,2021;HowarthandJacobson,2021;IEA,2021b;IRENA,2020b;Saunoisetal.,2016).Bluehydrogenhasotherlimitationsthathaverestricteditsdeployment.Itusesfossilfuels,exposingittopricefluctuations,suchasthepricespikeinlate2021inmanypartsoftheworld,notablyAsiaandEurope(Collins,2021a),anddoesnotsupportthegoalsofclimateresilienceorenergysecurity.ItalsoaddsCO2transportandstoragecostsandrequiresmonitoringofstoredCO2.However,ifbluehydrogenmeetsstrictemissionscriteria,itcouldplayanimportantroleinscalinguphydrogenvolumesintheshort-to-mediumtermanddrivethedevelopmentofrelatedinfrastructureandtechnologiesalongthevaluechain.Moreover,bluehydrogencouldofferadditionalflexibilityinthehydrogenmarket.Inthelongrun,however,greenhydrogenisazero-carbonsolutionandshouldthereforebetheendgame.Otherlow-carbonpathwaysforhydrogenproductionexist.Oneoptionis“turquoise”hydrogen,whichreliesonpyrolysisofmethane(naturalgas),whichdoesnotemitCO2.Theonlyby-productofthisprocessisthesolidmaterial“carbonblack”,forwhichthereisanexistingmarket,albeitarelativelysmallone.Anotheroptionis“pink”hydrogen,fromnuclearelectricity.AthirdisbiomassgasificationwithCCS,whichcanresultinnegativeCO2emissions.Noneofthesetypesofhydrogenisincludedinthisreport,whichgivesprioritytomoredevelopedproductionmethods.8ThisthresholdisinlinewiththetargetsetbytheOilandGasClimateInitiative(Agora,2021).27GeopoliticsoftheEnergyTransformationBOX2.1WHATISANELECTROLYSER?Electrolysisisthechemicalprocessthatproduceshydrogenfromwaterandelectricity.Electrolysers–devicesthatcansplitwaterintooxygenandhydrogen–wereinventedover200yearsago.Multiplewaterelectrolysertechnologiesexist.Fourofthemholdpromise:alkaline,protonexchangemembrane(PEM),solidoxideelectrolysercells(SOEC)andanionexchangemembrane(AEM).AlloftheinstalledelectrolysercapacityuseseitheralkalineorPEMtechnologies.AEMelectrolysersarestillrelativelynewandhavelimiteddeployment;theirpotentialadvantageslieinthefactthattheyusenopreciousmetalsanduseamembranethatislessexpensivethanthatusedforPEM.Table2.1MainelectrolysertechnologycomparisonSources:IRENA(2020a,2020b).TypeCommercialStatusConsiderationsAlkalineMature•Simplesystemdesign.•Haveotherapplicationswithexistingsupplychainthatcanbescaledup.•Slowerdynamicresponse;lesssuitedforvariablerenewableenergy(VRE)support.Protonexchangemembrane(PEM)Commercial,fastgrowth•Platinumandiridiumarerequired.Currentglobaliridiumproductioncouldsupportannualdeploymentofupto3-7.5GWayear.•Fasterdynamicresponse;wellsuitedtoVREandvoltageregulation.Solidoxideelectrolysercells(SOEC)Demonstrationplants•Nocycling(rampupordown);wellsuitedforconstantbaseloadhydrogenproduction.Anionexchangemembrane(AEM)Limiteddeployment•Doesnotuseanypreciousmetals.•MembraneislessexpensivethanthatusedforPEM.28©PanchenkoVladimir/shutterstock.com02TheroleofhydrogenintheenergytransitionTheHydrogenFactor2.3HYDROGENAPPLICATIONSANDPRIORITYSETTINGHydrogenisaversatileenergycarrierthatcanbeusedinmanyapplications.Figure2.3showsthepotentialusesforhydrogen,someofwhichcanprovideearlydemandforhydrogenandhelptheindustrytakeoff.Figure2.3PotentialusesforcleanhydrogenSource:IRENA(2020b).INDUSTRIALPROCESSES•Reﬁning•Ammoniaandmethanolsynthesis•Directreducediron(DRI)forsteelproductionPOWERSECTOR•Flexiblepowergeneration•O-gridpowersupply•Large-scaleenergystoragePOWER-TO-FUEL•Renewablegases•Syntheticfuels•AmmoniaHEATING•Industrialheating•ResidentialandcommercialheatingTRANSPORT•Roadtransport•Trains•Aviation•ShippingFEEDSTOCKAPPLICATIONSENERGYAPPLICATIONS29GeopoliticsoftheEnergyTransformationDecarbonisationstrategiesrequirecarefulmanagementtoensurethatthetechnologiesandsolutionsselectedaremostefficientlydeployed.Thus,thewidearrayofoptionscallsforidentificationofusesinwhichhydrogencanprovidethemostvalue.Itsproduction,transportandconversionrequireenergy,raisingoveralldemand.Indiscriminateusecanslowtheenergytransition,alsodilutingthedecarbonisationeffortsofthepowergenerationsector.Hydrogenisthereforebestreservedfortheusesthatcurrentlyhavenoviablealternative.Figure2.4comparespossibleendusesbasedonthesizeofapplicationandthematurityofhydrogensolutionscomparedwithelectricity-basedones.Policyattentionshouldbegiventothemorematureandcentralisedhydrogensolutions.Thisattentioncaninvolvededicatedresearch,planningandsupportingpolicies(IRENA,forthcoming-b).Makingtheshifttoatrulysustainableeconomyisnotsimplyaboutswitchingenergysourcesandkeepingthecurrentenergysystem;moreefficient,justandequitablewaysofusingenergymustbedeveloped.Doingsoinvolvesreducingunnecessaryenergyconsumptionacrossmanyfinalusesandchangingthecurrenteconomicsystem,whichisbasedoncontinuouslyincreasingconsumption.Inheavyindustry,forexample,40%ofCO2emissionscouldbesavedbyreusingsteel,aluminiumandplasticsmoreeffectively(Lovins,2021a).Anotherexamplewouldbeamodalshiftfromshort-distanceflightstoelectrifiedtrains,wherepossible,toreducedemand.Figure2.4CleanhydrogenpolicyprioritiesSource:IRENA(forthcoming-b).ELECTRIFICATIONMaturityofhydrogensolutions(comparedwithotherdecarbonisationsolutions)DistributedapplicationsCentralisedapplicationsHYDROGENHIGHPRIORITYSeasonalstorageInternationalshippingSteelReﬁneriesLong-haulaviationHightemperatureheatingResidentialheatingMidtemperatureheatingUrbanvehiclesShort-termstorageRegionaltrucksShort-haulaviationLong-haultrucksFerriesTrains02468100,00,20,40,60,81,0LOWPRIORITY30©KingRopesAccess/shutterstock.com02TheroleofhydrogenintheenergytransitionTheHydrogenFactor2.4BARRIERSTOSCALINGUPHYDROGENThefollowingbarrierscurrentlypreventcleanhydrogenfrommakingalargercontributiontotheenergytransformation:•Cost:Thecostofcleanhydrogen,particulargreenhydrogen,isstillhighrelativetohigh-carbonfuels.Notonlythecostofproductionbutthecostsoftransporting,convertingandstoringhydrogenarealsohigh.AdoptingcleanhydrogentechnologiesforendusescanbeexpensiveandCCSisyettobedeployedatscale.•Technologicalmaturity:Sometechnologiesinthehydrogenvaluechainrequiredfordecarbonisationstillhavealowleveloftechnologicalreadinessandneedtobeprovenatscale.Forinstance,gasturbinesthatoperateexclusivelywithhydrogenarenotcurrentlyavailableofftheshelf,andwhenitcomestomaritimetrade,thereisonlyoneprototypevesselthatcantransportliquidhydrogen.•Efficiency:Hydrogenproductionandconversionincursignificantenergylossesateachstageofthevaluechain,includingproduction,transport,conversionanduse.Moreover,productionofbluehydrogenisenergy-intensive,addingtooverallenergydemand.•Sufficientrenewableelectricity:By2050,theproductionofhydrogenwithelectrolysersmayconsumecloseto21000TWh–almostasmuchelectricityasisproducedgloballytoday(IRENA,2021a).Asmoreend-usesectorsareelectrified,alackofsufficientrenewableelectricitymaybecomeabottleneckforgreenhydrogen.•Policyandregulatoryuncertainty:Althoughover140countrieshavepledgedtoachievenetzeroemissionswithinthecomingdecades,thespeedwithwhichthesegoalswillbeachievedremainsuncertain.Stable,long-termpolicyframeworksareneededtosupportdevelopmentanddeploymentatscale.•Standardsandcertification:Countrieslackinstitutionalisedmechanismstotracktheproductionandconsumptionofanyshadeofhydrogenandidentifyitscharacteristics(e.g.originandlife-cycleemissions)(IRENA,2020b;IRENA,IEAandREN21,2020).9Moreover,hydrogenisnotcountedinofficialstatisticsoftotalfinalenergyconsumptionandtheeconomicvalueofcleanhydrogen’scontributiontoemissionreductionsisnotrecognised.•Chicken-and-eggproblem:Thereisachicken-and-eggprobleminbuildingoutthenecessaryinfrastructureforhydrogen.Withoutdemand,investmentsremaintooriskyforwide-scaleproductionthatcouldreducecosts,butwithouteconomiesofscalethetechnologyremainstoocostly.9Themechanismtotrackoriginandlife-cycleemissionsisoftenreferredtoas“GuaranteeofOrigin”system.Itisconsideredapillarofgreenhydrogenpolicymaking(IRENA2020b).31GeopoliticsoftheEnergyTransformationBOX2.2GEOPOLITICSOFHYDROGENSURVEYSForanemergingandrapidlyevolvingtopicthathasgatheredwidespreadinterest,twovoluntarysurveysweredesignedtogarnerfeedbackfrompolicymakersandindustryexpertstoprovideabaselineforobservinghydrogensectordevelopments.Thefirstsurveywasfocusedongatheringinputfromcountriestodevelopahigh-levelunderstandingofcountryplansandassociateddriversandbarriersofhydrogen’sroleintheenergytransition.ThesurveywasissuedtoIRENA’sMembership,164countriesandtheEUatthetime.Atotalof48responsesfrom37Memberswerereceived.Asecondsurveywasissuedtotargettopicalexperts(purposivesampling)togathermoretechnicalviews.Underthissecondsurvey,162expertswereapproached,and78responsesreceived.Inputreceivedwasanalysedandaggregated.Selectedoutputsareprovidedthroughoutthisreport.Thefullsurveyresultsareavailableinadigitalannex.Figure2.5MainperceivedbarrierstodevelophydrogenpoliciesandstrategiesSource:IRENAMembersurvey,2021HighcostsoflowcarbonhydrogenproductionLackofdedicatedinfrastructureClimateconcerns(regardingcurrentfossilfuelbasedH2production)TechnologylimitsLackofaccesstocapitalandinvestmentincentivesNeutralNotimportantImportant3202TheroleofhydrogenintheenergytransitionTheHydrogenFactor10Thedifferenceacrossregionsismainlydefinedbyi)thequalityoftheresource;ii)thecapitalcost(CAPEX)forrenewableenergyandtheelectrolyser;iii)theweightedaveragecostofcapital(WACC).Thelasttwowillvaryovertimeasmorecapacityisdeployedandexperienceisdeveloped(IRENA,forthcoming-a)Figure2.6WorldsolartechnicalpotentialSource:Vortex(2021a)Note:Annualaverageglobalhorizontalirradiation(kWh/m2).AlsoavailableontheIRENAGlobalAtlasforRenewableEnergywebplatform.Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.2.5PROSPECTSFORINTERNATIONALHYDROGENTRADEToday,hydrogenisaverylocalbusiness.About85%ofhydrogengasisproducedandconsumedon-sitewithinafacilityratherthanboughtandsoldonthewidermarket(IEA,2019a).Evenwherehydrogenissold,itisusuallynottransportedacrosslargedistancesbecauseofthelogisticaldifficultiesandcosts.Overtime,hydrogencouldbecomeaninternationallytradedcommodity.Thegreenvarietyoffersadditionalmeansto“shipsunshine”,thatis,transportsolarandotherrenewablesacrossborders.Thesingle-largestcostcomponentofproducinggreenhydrogenisthecostofelectricity(IRENA,2020a).Asthelevelisedcostofrenewablesdifferssignificantlyacrossregions,thepriceofhydrogenwillalsodiffer.10Greenhydrogenwillbemosteconomicallyproducedinlocationsthathaveanoptimalcombinationofabundantrenewableresources(Figure2.6andFigure2.7),availableland,accesstowaterandtheabilitytotransportandexportenergytolargedemandcentres.034168310241365170620482389273001.883.755.637.509.3811.2513.1315.033GeopoliticsoftheEnergyTransformation11Intheory,trucksarealsoanoption.However,trucktransportisviableonlyforsmallquantities–tosupplyrefuellingstations,forexample.Inpractice,pipelinesandshipsarethemeansoftransportationforbulkvolumesoverlongdistances.12Existinggasnetworkwithamaterialcompatiblewithhydrogenandwithadecreasinggasdemandthatallowsthesimultaneousrampingupofhydrogen.Repurposedpipelinescanbe65-94%cheaperthannewpipelines.Therearetwomainmodesfortransportinghydrogenacrossborders:pipelinesandships.11Distanceandvolumedeterminewhichmodeischeapest(Figure2.8).Forinstance,withsmallvolumes(e.g.0.3milliontonnesofhydrogenperyear),pipelinescouldbecheaperthanshipsfordistancesbelow1500km.Forlargevolumes(e.g.1.5milliontonnesofhydrogenperyear),newlybuilthydrogenpipelineswouldbethemostcost-effectiveoptionfordistancesupto4000km.Incaseswhererepurposednaturalgaspipelinesareanoption,12thecosteffectiverangeextendsto8000km.Toputsomeofthesedistancesintoperspective,connectingWindhoek,NamibiatoJohannesburg,SouthAfrica,wouldrequireapipelineofabout1500km.ConnectingToronto,CanadatoMexicoCity,Mexicowouldrequireapipelineofabout4000km.ShippingfromChiletoJapanisalmost17000km.Figure2.7WorldwindtechnicalpotentialSource:Vortex(2021b)Note:Annualaveragewindspeedat100metres(m/s).AlsoavailableontheIRENAGlobalAtlasforRenewableEnergywebplatform.Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.01.883.755.637.509.3811.2513.1315.034©Oxanaso/shutterstock.com02TheroleofhydrogenintheenergytransitionTheHydrogenFactorFigure2.8CostefficiencyoftransportoptionswhenconsideringvolumeanddistanceSource:IRENA(forthcoming-a)Note:H2=hydrogengas;km=kilometre.MtH2/yr=milliontonnesofhydrogenperyear.NewpipelineLiquidH2RepurposedpipelineAmmoniaVolume(MtH2/yr)Distance(km)10001.51.00.55000100002NH3SUISOFRONTIER©Hunini,CCBY-SA4.0,viaWikimediaCommons352NH3GeopoliticsoftheEnergyTransformationThereareabout4600kmofdedicatedhydrogentransmissionpipelinesoperatinginnorth-westernEurope,theRussianFederation(Russia)andtheUnitedStatesofAmerica(UnitedStates).PlansareinthemakingfortrunkpipelinesystemsinEurope,calledthe“hydrogenbackbone”(GasforClimate,2021a).Itisalsopossibletosimplytransmitrenewableelectricityviacablesandtransformitintohydrogenattheendoftheline.Whetherapipelineoracableistheoptimalsolutiondependsonseveralfactors,includingthedesiredendproduct,thetopographyoftheterrain,andthedistance.Hydrogentransportbyshipistechnicallypossibleforlargerdistanceswherepipelinesarenotanoption.Becauseofitslowenergydensitybyvolume,13gaseoushydrogenisbestconvertedintoamoreenergy-denseliquidbeforebeingloadedontoaship.Thereareseveralvectorsforhydrogentransportviaship(Box2.3),butammoniaisthemostpromising.Itisalreadyaninternationallytradedcommodity,withsome18milliontonnestradedin2020(about10%ofglobalproduction)(Atchison,2021).133kilowatthourspercubicmetre(kWh/m3)comparedto10kWh/m3formethaneundernormalconditions.BOX2.3THREEMAINWAYSTOTRANSPORTHYDROGENBYSHIPLiquidhydrogen.Thehydrogenmoleculesmustbecooledto-253°Catportterminalsbeforebeingloadedontohighlyinsulatedtankerships.Asaresult,theliquefactionprocessconsumes25–35%oftheinitialquantityofhydrogen.Currently,onlyoneocean-goingshipcantransportpurehydrogen,theSuisoFrontier,builtbyKawasakiinlate2019andonitsfirstroutetoAustraliainlate2021(Harding,2019).Liquidorganichydrogencarriers(LOHCs).Aslateofdifferentorganiccompoundscanabsorbandreleasehydrogenthroughachemicalreaction.LOHCscanserveasastorageandtransportationmediumforhydrogenandcanbetransportedasliquidswithoutcooling.LOHCsareverysimilartocrudeoilandoilproducts,sotheexistingoiltransportinfrastructurecouldevenbeadaptedtotransportLOHCs(Niermannetal.,2019).Ammonia.Hydrogencanbeturnedintoammoniabyreactingwithnitrogenfromtheair,usingnothingbutelectricity,waterandair.Ammoniahasamuchhigherenergydensitythanhydrogenthatmeansalargervolumeofenergycanbetraded.Thereisawell-establishedinternationaltradeinammoniathatcanbeleveraged.Itiscurrentlyusedasafeedstock,notablytomakefertilisers.Itcouldalsobeusedasadecarbonisationfuel,suchasintheshippingindustryandpowergeneration.Thedownsideisthatammoniaistoxicifleakagesoccurandapotentialsourceofnitrogenoxideemissions.3602TheroleofhydrogenintheenergytransitionTheHydrogenFactorHydrogentransportcostsarestillveryhigh,buttheyaresettocomedownthankstoeconomiesofscale,lowerprojectrisksandimprovementsintechnology.Tradecouldbescaledupmorerapidlyinbluehydrogenthangreen,becauseitcurrentlyenjoyslowerproductioncostsandbenefitsfromexistinggasinfrastructure.Greenhydrogentradeisexpectedtoincreasetowards2030,thankstoimprovingeconomiesofscaleandtheadoptionofenablingpolicies,whichwilldecreaseproductioncosts.IRENAanalysissuggeststhataboutone-thirdofgreenhydrogenwouldbetradedacrossbordersby2050(IRENA,forthcoming-a).Thisshareisslightlylargerthantoday’sshareofnaturalgastradedglobally(24%).Abouthalfofthehydrogentradein2050islikelytogothroughpipelines,includingrepurposednaturalgaspipelinesthatexisttoday.Theotherhalfwouldbetransportedbylong-haulshipsintheformofammonia.Thissituationisakintothatofnaturalgas,whichissplitintoregionalpipeline-basedtrade(48%in2020)andglobalLNGtrade(52%)(BP,2021).Countriesarealreadyforgingbilateraldealsthatcouldpavethewayfornewhydrogentraderelations(Figure2.9).Figure2.9Anexpandingnetworkofhydrogentraderoutes,plansandagreementsMapsource:NaturalEarth,2021Notes:Informationonthisfigureisbasedontheinformationcontainedingovernmentdocumentsatthetimeofwriting.Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesandnamesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.ImporterNewroutesinplaceorunderdevelopmentExporterMoUsinplaceestablishingtraderoutesPotentialtraderouteexplicitlymentionedinpublishedstrategiesImportingregionExportingregionNorthAfricaAsiaPaciﬁcLatinAmericaEurope37REDRAWINGTHEGEOPOLITICALMAPCHAPTER3GeopoliticsoftheEnergyTransformationHydrogencouldaltertheglobalbalanceofpowerandbringaboutshiftsintherelativepositioningofstatesandregionsintheinternationalsystem.Thischapteridentifiesfront-runnersintermsofpolicy,futurehydrogenexportersandemergingtechnologyleaders.Italsodiscussesthepositionoffossil-fuelproducercountries,whichcouldusehydrogentohedgeagainstsomeofthetransitionrisksastheworldmovestowardsnetzeroeconomies.Thischapteralsodescribeshowhydrogencouldfostertherelocationofenergy-intensiveindustriestorenewablehotspots,whichcouldbecomesitesofgreenindustrialisation.03©imaginima/istockphoto.com3803RedrawingthegeopoliticalmapTheHydrogenFactor3.1POLICYFRONT-RUNNERSANDLEADINGMARKETSAgrowingnumberofcountriesandcompaniesareengagedinintensecompetitionforleadershipincleanhydrogentechnologies.Thissectiondiscussesthreemetricswithwhichtoidentifypolicyfront-runnersandpotentialleadingmarkets:nationalhydrogenstrategies,investmentsandprojectsontheground.In2017,justonecountry(Japan)hadanationalhydrogenstrategy.Today,morethan30countrieshavedevelopedorarepreparinghydrogenstrategies(Figure3.1),indicatinggrowinginterestindevelopingcleanhydrogenvaluechains.Figure3.1Hydrogenstrategiesandthoseinpreparation,October2021Source:Bloomberg(2021b)andWEC(2021).Mapsource:NaturalEarth,2021Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesandnamesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.JapanRepublicofKoreaRussianFederationNewZealandAustraliaChileParaguayColombiaMoroccoOmanEgyptUruguaySingaporeSaudiArabiaItalySpainPortugalFranceCanadaChinaUzbekistanFinlandSwedenDenmarkPolandGermanyAustriaCroatiaUnitedKingdomNorwayEuropeanUnionBelgiumNetherlandsHungaryCzechRepublicSlovakia39GeopoliticsoftheEnergyTransformationThereisconsiderablevariationinthescopeanddetailofthesestrategies.Box3.1describesthevisionandfocusofselectedcountriesandregionsthatcouldbecomeearlyleadingmarketsforhydrogenbecauseoftheirmarketsizeand/orambitioushydrogenplans.Theselargemarketsarewellpositionedtosetstandardsandotherrulesofthegameiftheirstrategiesandplansareoperationalised.BOX3.1EARLYADOPTERS?HYDROGENVISIONSINSELECTEDFRONT-RUNNERCOUNTRIESANDREGIONSCHINA:Withannualconsumptionofmorethan24milliontonnes,Chinaistheworld’slargestuserandproducerofhydrogen.Productionofhydrogen,whichispredominantlycoal-based,accountsfor3-5%ofChina’scoalconsumption.14Since2019,Chinahashadmorethan30greenhydrogenprojectsintheworks.Itsfirsthydrogenroadmap,issuedin2016,focusedonhydrogenapplicationsintransport(StrategyAdvisoryCommitteeoftheTechnologyRoadmapandSAE-China,2016).Witharound8400fuelcellelectricvehicles(FCEVs)deployed,Chinahastheworld’sthird-largestFCEVfleet(aftertheRepublicofKoreaandUnitedStates),anditleadstheworldinthedeploymentoffuelcelltrucksandbuses(IEA,2021c).InthecurrentFive-YearPlan(2021-2025),hydrogenisoneofChina’ssixindustriesofthefuture(CSET,2021).Althoughthecountrydoesnotyethaveanationalstrategyforhydrogen,16provincesandcitieshavelaunchedfive-yearplansthatfeatureit.EUROPEANUNION:TheEuropeanUnion(EU)issueditshydrogenstrategyinJuly2020.ItidentifiedhydrogenasakeypriorityforachievingtheEuropeanGreenDeal.Thestrategyfocusesonrenewablehydrogen.Itincludestheinstallationof40gigawattsofrenewablehydrogenelectrolysersintheEuropeanUnionby2030(EuropeanCommission,2020a).TheEuropeanUnionaspirestobecometheindustrialleaderincleanhydrogen.Toachievethisgoal,itlaunchedtheCleanHydrogenAlliance.SomeEUcountriesexpecttobecomelarge-scaleimportersofhydrogen;othersexpecttobecomeexportersortransithubs.INDIA:IndialauncheditsNationalHydrogenMissioninAugust2021,withtheambitionofbecoming“aglobalhubforgreenhydrogenproductionandexport”.PrimeMinisterNarendraModiconsidersgreenhydrogenvitaltomakinga“quantumleap”towardsachievingenergyindependenceby2047(RechargeNews,2021a).Thegovernmentisconsideringmakingitmandatoryforrefineriesandfertiliserplantstousesomegreenhydrogen.Indiaistheworld’slargestammoniaimporter,akeyinputforfertiliserproduction,withimportsofUSD1.27billionin2019(UNComtrade,2021).14The3%figurewasestimatedasfollows:Chinaproduces24milliontonnesofhydrogen,62%ofwhichismadewithcoal.Ittakesabout8kilogrammes(kg)ofcoaltomake1kgofhydrogen.Totalcoalconsumptionforhydrogenproductionisthus119.04milliontonnes,whichwas3%oftotalcoalconsumption(3.8billiontonnes)in2019.The5%figurecomesfromBrasington(2019).4003RedrawingthegeopoliticalmapTheHydrogenFactorJAPAN:Japanwasthefirstcountrytoadoptanationalhydrogenstrategyin2017.Itaimstobecometheworld’sfirst“hydrogensociety”,throughwidespreaduseofhydrogenacrossallsectorsoftheeconomy(METI,2017).Itsplanisbackedbyconsiderablegovernmentinvestmentinhydrogentechnologiesandinfrastructure.In2020,aroundUSD670millionwasinvestedinthehydrogenandfuelcellbusiness(JapanMinistryofEnvironment,2020),andmobilitytargetsweresetfor800000FCEVunitsand900hydrogenfuellingstationsby2030(CSIS,2021).Itisdevelopinglong-termsupplyagreementsforhydrogen,likethosethatspearheadedtheliquefiednaturalgastrade(METI,2017).REPUBLICOFKOREA:TheRepublicofKorea's2019hydrogenroadmapidentifiedhydrogenasanengineofeconomicgrowthandjobcreation.ThecountryseekstobecomeagloballeaderinproducinganddeployingFCEVsandlarge-scalestationaryfuelcellsforpowergeneration(CSIS,2021).By2020,around10000passengerFCEVshadbeendeployed,morethaninanyothercountry(E4Tech,2021).Thegovernmentaimstoincreasethatnumberto200000by2025aspartoftheGreenNewDeal(MOEF,2020).Italsoplanstousehydrogentopower10%ofthecountry’scities,countiesandtownsby2030and30%by2040(KoreaHerald,2019).Thegovernmentexpectshydrogentobecomethecountry’slargestsingleenergycarrierin2050,accountingforathirdoftotalenergyconsumption(RechargeNews,2021b)andisexploringhydrogenimportswithvarioussuppliercountries,includingAustraliaandSaudiArabia.THEUNITEDSTATESOFAMERICA:TheUnitedStatesisthesecond-largestconsumerandproducerofhydrogenintheworld,accountingfor13%ofglobaldemand.Until2020,itwastheworld’slargestFCEVmarket,ledbyCalifornia,whichhassupportedthesectorforalmostadecadethroughtheCleanVehicleRebateProgram.InNovember2021,theUnitedStatessignedtheInfrastructureInvestmentandJobsActintolaw.ItdedicatesUSD9.5billiontoacceleratingthedevelopmentofcleanhydrogentechnology.TheUnitedStatesalsolaunchedtheHydrogenEarthShottobolsterthedevelopmentofcleanhydrogenprojects.Itsetsanambitious"111goal":toreducethecostofcleanhydrogentoUSD1per1kilogrammein1decade.41GeopoliticsoftheEnergyTransformationFigure3.2Averageannualfundingpotentiallyavailableforhydrogenprojects,2021-2030Source:BloombergNEF(2021b).Note:Figureprovidesasnapshotofsupporttohydrogeninselectedcountriesasof5August2021.Itdoesnotshowsupportmechanismsthathavebeenannouncedsinceorareunderdiscussion,suchasthehydrogenproductiontaxcreditproposedbytheUnitedStates(USCongress,2021).3.02.52.01.51.00.505.0Funding(USDbillion)4.56EuropeanUnionGermanyAustraliaNetherlandsJapanFranceItalyUnitedKingdomRepublicofKoreaNorwayUnitedStatesCanadaSpainPolandDenmarkChinaPortugalChileTechnology-neutralfundsforwhichH2projectscanapplyTargetedsupportforH2TheCOVID-19pandemichasheateduptheraceforleadershipincleanhydrogen,asmanycountriesrecognisetheimportanceofhydrogenforaddressingthetwinchallengesofclimatechangeandeconomicrecoveryfromCOVID-19.Significantsharesofcountries'stimulusfundshavebeenearmarkedforhydrogenprojects,bringinghydrogenintotherealmofgeoeconomiccompetition.ByearlyAugust2021,governmentshadallocatedatleastUSD65billionintargetedsupportforcleanhydrogenoverthenextdecade,withFrance,GermanyandJapanmakingthemostsignificantcommitments(Figure3.2).Theseamountsaresizeable,buttheypaleincomparisonwithenergysectorsubsidies,whichamountedtoUSD634billionin2017,70%ofwhichsupportedfossilfuels(IRENA2020c).4203RedrawingthegeopoliticalmapTheHydrogenFactorOnthebackofthesenationalplansandsupportschemes,investmentincleanhydrogenhastakenoffinrecentyears(Figure3.3).AsofNovember2021,globalannouncementsofhydrogenprojectsby2030adduptoUSD160billionofinvestment,withhalfoftheinvestmentsbeingplannedforgreenhydrogenproductionusingrenewableenergysourcesandelectrolysis(HydrogenCouncil,2021).Figure3.3CleanhydrogenprojectsandinvestmentasofNovember2021Source:HydrogenCouncil(2021).Mapsource:NaturalEarth,2021Note:Thefiguredescribeslarge-scaleprojectsonly,includingcommissioningafter2030.Itdoesnotincludemorethan1000small-scaleprojectsandprojectproposals.GW=gigawatt;H2=hydrogen;ktpa=kilotonnesperannum.Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.Reﬁnery,ammonia,methanol,steelandindustryfeedstockTrains,ships,trucks,carsandotherhydrogenmobilityapplicationsCross-industryandprojectswithdierenttypesofendusesH2distribution,transportation,conversionandstorage221large-scaleindustrialusage133transport74integratedH2economy51infrastructureprojects43giga-scaleproductionRenewableH2projects>1GWandlow-carbonH2projects>200ktpa43GeopoliticsoftheEnergyTransformationThepipelineofannouncedelectrolyserprojectsreachedover260GWgloballybyOctober2021,and,ifimplemented,wouldbringanadditional475GWofwindandsolarPVcapacityonlineby2030(IEA2021d).15Althoughthisisadramaticincreasefromthe0.3GWofelectrolysisthatwasinstalledin2020,itisfarfromthe160GWthatmustbeinstalledonaverageeveryyearthrough2050tomeetthe1.5°Cgoal(IRENA,2021a).Witharoundhalfoftheworld’sannouncedmegawatt-scaleprojects,Europeissurgingahead,drivenlargelybystrongmomentuminambitiousdecarbonisationpolicies,nationalstrategiesandgovernmentsupport.EuropeisfollowedbyAsia(23%ofannouncedprojects)andNorthAmerica(13%).ThelargestvolumesofcleanhydrogenareprojectedtocomefromEuropeandOceania,whichtogetheraccountformorethanhalfthecapacitythrough2030,mostofwhichisfromrenewables.Giga-scaleprojectshavealsobeenannouncedthatfocusonhydrogenexportsinAfrica,LatinAmerica,theMiddleEastandOceania(Box3.2).BOX3.2HYDROGENPROJECTSINAFRICA15Someoftheprojectscountedinthetallyof260GWareonlyintheconceptstage.Africa’svastrenewablepotential,alongwithitsexperiencewiththepreviousgenerationofelectrolyserfromtheearly20thcentury,hasdrawntheattentionofinternationalinvestorsthathaveannouncedseveralgreenhydrogenprojects.EGYPTandZIMBABWEalreadyhaveinstalledover100megawatts(MW)ofelectrolysers.InDecember2021,Egyptannouncedanew100MWprojectforproducinggreenammonia.InMay2021,CWPGlobal,arenewabledevelopmentcompany,signedamemorandumofunderstandingwiththeGovernmentofMAURITANIAtodevelopa16gigawatt(GW)electrolysisproject,intandemwith45GWofrenewables.ThetotalcostoftheprojectisexpectedtobeUSD40billion(EnergyVoice,2021).MauritaniaalsogaveexclusivedevelopmentrightstoChariot(anoilandgascompanyactiveinBrazil,Morocco,andNamibia)todevelopupto10GWofoffshoreandonshorewindforgreenhydrogenproduction,aprojectthatcouldspearheadAfrica’sfirstoffshorewindfarm(RechargeNews,2021c).AtCOP26,theGovernmentofNAMIBIAannouncedtheselectionofHYPHENHydrogenEnergyasthepreferredbidderforagreenhydrogenproject.Thefirstphaseoftheprojectwouldbring2GWofrenewable-electricitygenerationcapacity,alongwiththeelectrolysercapacitytoproducegreenhydrogenforconversionintoammonia.Furtherexpansionphasesinthelate2020swouldraisethetotalinvestmentvaluetoUSD9.4billion,whichisalmostinlinewithNamibia’scurrentGDP.Oncecomplete,theintegratedfacilitywouldhavearenewablegenerationcapacityof5GWandanelectrolysercapacityof3GW,withsurpluselectricitycapacitytobefedintotheNamibiangridandpotentiallyintotheregionalpowerpool.Theprojectwillusedesalinatedwater,partofwhichwillbesuppliedtocommunitiesinnearbyLuderitz(EngineeringNews,2021).44SoutheastAsiaEuropeNortheastAsiaRestofAsiaLatinAmericaOceaniaNorthAmericaMiddleEastandNorthAfricaSub-SaharanAfrica202313141272111468421288642715200010000SoutheastAsiaEuropeNortheastAsiaRestofAsiaLatinAmericaOceaniaNorthAmericaMiddleEastandNorthAfricaSub-SaharaAfrica03RedrawingthegeopoliticalmapTheHydrogenFactor3.2ANEWCLASSOFENERGYEXPORTERSCountriesandregionswithhighrenewablepotentialandalowlevelisedcostofelectricitycanusetheirresourcestobecomemajorproducersofgreenhydrogen.Theabilityofdifferentregionstoproducelargevolumesoflow-costgreenhydrogenvarieswidely.Africa,theAmericas,theMiddleEastandOceaniaaretheregionswiththehighesttechnicalpotential;Europe,NortheastAsiaandSoutheastAsiahavefewerresourcesforproducinggreenhydrogen(Figure3.4).Countries’technicalrenewablepotentialisnottheonlyfactordetermininghowlikelytheyaretobecomemajorproducersofgreenhydrogen.Manyotherfactorscomeintoplay,includingexistinginfrastructureand“softfactors”(e.g.governmentsupport,businessfriendliness,politicalstability)andthecurrentenergymixandindustry(e.g.renewableplans,potentialdemandforhydrogen).Figure3.4TechnicalpotentialforproducinggreenhydrogenunderUSD1.5/kgby2050,inEJSource:IRENA(fothcoming-a).Mapsource:NaturalEarth,2021Note:Assumptionsforcapitalexpenditures(CAPEX)2050areasfollows:PV:USD225-455/kW;onshorewind:USD700-1070/kW;offshorewind:USD1275-1745/kW.Weightedaveragecostofcapital:Per2020valueswithouttechnologyrisksacrossregions.Technicalpotentialhasbeencalculatedbasedonlandavailabilityconsideringseveralexclusionzones(protectedareas,forests,permanentwetlands,croplands,urbanareas,slopeof5%[PV]and20%[onshorewind],populationdensity).Wateravailabilitywasnotconsideredintheanalysis.EJ=exajoule;kW=kilowatt.Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesandnamesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.45GeopoliticsoftheEnergyTransformationOnewaytoforeseefutureimportersandexportersofgreenhydrogenistocomparetheirdomesticproductionpotentialwiththeirexpectedhydrogendemandby2050,andthecostofimport.16Threegroupsofcountriescanbeidentified.Thefirstgroupincludescountrieswithlowcostgreenhydrogenproductionthatcoulddevelopintoexporters.Theycanleveragetheirrenewablemarketstoattractinvestmentsingreenhydrogenproduction.Australia,Chile,MoroccoandSpainareamongsuchnethydrogenexporters.Thesecondgroupincludescountriesthatcanbecomeself-sufficientingreenhydrogen.Thesecountrieshavesufficientproductionpotentialtocatertotheirownneedswithoutresortingtoimports.ItincludesChinaandtheUnitedStates.Thethirdgroupincludescountriesthatwillneedimportstosatisfydomesticdemand,includingJapan,RepublicofKorea,andpartsofEuropeandLatinAmerica.Ofcourse,thispicturecansignificantlychangewithinvestmentatscaletodevelopnewrenewablemarketsandhydrogeninfrastructurewherepotentialsareabundantbutlackingaccesstotechnology,know-howandlocalcapabilities.Oneofthekeyunknownsisthecostofcapital(weightedaveragecostofcapitalorWACC),whichiscurrentlydifferinggreatlybetweencountries(Box3.3).16Keyparametersinthemodelarethedomesticproductionpotentialandpriceofblueandgreenhydrogen,aswellastheimportcostofbothblueandgreenhydrogen(whichitselfisafunctionofproduction,(re-)conversion,andshippingcost)IRENA(forthcoming-a).BOX3.3THEIMPORTANCEOFCAPITALCOSTASSUMPTIONSFORHYDROGENTRADEPROJECTIONSInafuturedominatedbyrenewables,energycostwillbedominatedbythecapitalcost.Itisoftenseenasaprudentapproachtoassumethatthecostofcapitaldifferencesseenaroundtheworldtodaywillpersistin2050(Egli,SteffenandSchmidt,2019).However,ifoneassumesthatthesedifferencesevenout(Bogdanov,2019),thepicturechangescompletely(Figure3.5).LatinAmerica,theMiddleEastandTurkeywouldbecomegreenhydrogenexportersinsteadofimporters,whileSpainwouldmoveintheoppositedirection.TheexportpotentialofcountriessuchasAustraliaandChile,whichalreadyenjoylowWACCtoday,wouldbeseverelydiminished,whiletheimportneedsoftheEUandGermanywouldrisesignificantly.WACC4603RedrawingthegeopoliticalmapTheHydrogenFactorFigure3.5ImpactofcostassumptionsonhydrogenproductionofselectedcountriesNote:Figureshowsproductionanddemandvolumesforgreenhydrogenbyregionorcountryin2050basedonoptimistic2050CAPEXassumptions:PV:USD225-455/kW;onshorewind:USD700-1070/kW;offshorewind:USD1275-1745/kW;electrolyser:USD130/kW.GreenhydrogenproductionisbasedonassessmentoflandavailabilityforsolarPVandwind.Demandisinlinewitha1.5°Cscenario.Productionanddemandvolumesusealogarithmicfunctiontoputthedifferentordersofmagnitudeonasimilarscale.Thismakestheaxisdimensionless:itcouldbeinterpretedasanindexratherthanasenergyflows"WACC2050"assumesafutureworldwheretheriskisthesameeverywhere."WACCtoday"meansalltheregionshavedifferentWACCasisthecasetoday.LargelyunaectedDrasticreductionDrasticincreaseCountrydemandExporterImporterBrazilSuadiArabiaIndiaAustraliaChileColombiaMoroccoEuropeUnitedKingdomArgentinaTurkeyWACCtodayWACC205047GeopoliticsoftheEnergyTransformationExpertsbelievethatAustralia,Chile,Morocco,SaudiArabiaandtheUnitedStatesarebestplacedtoemergeasmajorcleanhydrogenproducersby2050(seeFigureB.3inAnnex).Someofthesecountries,namelyAustralia,SaudiArabiaandtheUnitedStates,arecurrentenergyexporters.Theycanretaintheirroleasenergyexporters,althoughtheywillenteramuchmorecompetitivemarket,asgreenhydrogencanbeproducedalmostanywhere.Othercountries,suchasChile,MoroccoandNamibia,arecurrentlynetenergyimporters.17Forthesecountries,agreenhydrogentransformationrepresentsacompletereversaloffortune,asamplerenewablepotentialopensnewpossibilities.Countriesthatsucceedinbecomingmajorexportersofgreenhydrogenandderivedfuelsalsostandtogainingeostrategicimportance(Box3.4).17Chilecurrentlyimportsabout65%ofitsenergyneeds,Morocco91%andNamibia74%(WorldBank,n.d-a).BOX3.4FROMENERGYIMPORTERTOEXPORTER?HYDROGENACTIVITIESINSELECTEDFOSSIL-FUELIMPORTINGCOUNTRIESWITHGREENHYDROGENEXPORTPOTENTIALCHILE:Chilelaunchedagreenhydrogenstrategyin2020.Itaimstoreach5GWofelectrolysercapacityby2025and25GWby2030,producetheworld’scheapesthydrogenby2030andbecomeoneoftheworld’stopthreehydrogenfuelexportersby2040(GobiernodeChile,2020).ItisestimatedthatthecountrycouldbeexportingUSD30billionworthofgreenhydrogenandderivativesby2030(Mander,2020).HydrogenhasattractedgrowingattentioninLatinAmerica,mostlybecauseoftheregion’shighrenewablespotential.Severalcountriesintheregionhaveeitherpublishedorarepreparingnationalhydrogenstrategiesandroadmaps(Figure3.1).MOROCCO:MoroccocreatedaNationalHydrogenCommissionin2019andpublishedagreenhydrogenroadmapinJanuary2021.Hydrogenismentionedasakeygrowthsectorinthenationaleconomy.By2030,thecountryenvisagesalocalhydrogenmarketof4terawatthours(TWh)andanexportmarketof10TWh,which,takentogether,wouldrequiretheconstructionof6GWofnewrenewablecapacityandsupportthecreationofmorethan15000directandindirectjobs(MEM,2021).4803RedrawingthegeopoliticalmapTheHydrogenFactorNAMIBIA:Thecountry’svastsolarandwindenergyresourceshaveattractedattentionfrominvestors.Thegovernmentidentifiedgreenhydrogenandgreenammoniaasemergingexportopportunities(GovernmentofNamibia,2021).ItsetupanationalGreenHydrogenCouncilandappointedaspecialgreenhydrogencommissioner.Thegovernmentisalsolookingintosettingupablademanufacturingplantforwindturbines,agreensteelplantandanammoniafertiliserproductionline(Weidlich,2021).ThesizeoftheseproposedprojectsisverylargerelativetoNamibia’seconomy,pointingtothetransformativepotentialofgreenhydrogenforthenationaleconomy(Geingob,2021).3.3TRANSITIONPATHWAYFORFOSSILFUELPRODUCERSTheenergytransitionwillsignificantlyaffectfossilfuelproducers:Itishighlylikelythatlargepartsofoil,gasandcoalreserveswillneverbeextractedandmonetised.AforeshadowingoftheseeffectswasevidentduringtheCOVID-19pandemicin2020,whenlowerpricesandcollapsingdemandwipedoutaroundaquarterofthevalueofalloilandgasreserves(IEA,2020).Althoughlow-costproducersmayseeanincreaseintheirmarketshareastheenergytransitionprogresses,eventheywouldseelargedeclinesinrevenuesastheoverallmarketisexpectedtoshrink(IEA,2021a).Severaloilandgasproducershavealreadyseentheirsovereigncreditratingsdowngraded.The20countrieswiththehighestnetfossilfuelexportstoGrossdomesticproduct(GDP)ratio(Figure3.6)sufferedamediannetdowngradeof1.6notchesintheircreditratingsbetween2015and2020(Fitchratings,2021).Asdecarbonisationprogresses,producercountrieswillhavetomovetheireconomiesawayfromarelianceonoilandgas.©RobertGo/istockphoto.com©Astalor/istockphoto.com49GeopoliticsoftheEnergyTransformationFigure3.6Strandedassetriskformajornetfossilfuelexporters,2019Source:UNComtrade(2021)andWorldBank(n.d.-b)Note:ThepriceofBrentcrudeoil(theinternationalbenchmark)averagedUSD64perbarrelin2019.Itsaveragein2010-2020wasUSD76.2perbarrel(EIA,n.d.).50403020100-10NetexportrevenuesasshareofGDP(%)KuwaitUnitedArabEmiratesCongoQatarAzerbaijanAngolaIraqOmanGabonSaudiArabiaKazakhstanMongoliaNorwayRussianFederationNigeriaGhanaCameroonColombiaEcuadorCanadaBolivia(PlurinationalStateof)UzbekistanMozambiqueAustraliaBahrainIndonesiaNaturalGasCoalOil5003RedrawingthegeopoliticalmapTheHydrogenFactorCleanhydrogenoffersanattractivetransitionpathwayforoil-andgas-exportingcountriestodiversifytheireconomiesasmajorexportmarketsmovetowardslow-andzero-carbonfuelsandenergycarriers(Figure3.7).Oil-andgas-producingcountriesarewellplacedtopivottohydrogen,astheycanleverageestablishedenergyexportinfrastructure(ports,pipelinesandstoragefacilities);askilledworkforcefamiliarwithproducing,convertingandhandlingenergyfuelsandgases;andexistingenergytraderelations.Intherun-uptoCOP26,severalexportersadoptedanetzerogoal,includingAustralia,Russia,SaudiArabiaandtheUnitedArabEmirates.Cleanhydrogenisavitalavenueforachievingthesegoals.Somefossil-fuelproducingcountrieshavealreadyadoptednationalhydrogenstrategies(e.g.Australia,Canada,Colombia,Norway,RussiaandtheUnitedKingdom)orarepreparingtodoso.Thestrategiesoffossilfuelexportersoftenmentiontheopportunitythathydrogenofferstodevelopnewexportindustries(Box3.5).Severalespousea“technology-neutral”approachandexplicitlyincludethepossibilityofbluehydrogen(thisisthecaseforAustralia,CanadaandNorway,forinstance).AustraliaandCanadaprovidedetailsofexpectedornecessarycarboncaptureratesforhydrogenproducedfromfossilfuelstobeconsidered“clean”,whichtheysetatorover90%(Longdenetal.,2022).Figure3.7ExpertviewsonhydrogenstrategiesandimpactsforoilandgasproducersHydrogenoersopportunitiestodiversifynationaleconomiesawayfromoilandgas.Oilandgasproducercountrieswhodonotpivottohydrogenintimerisktoloseouteconomically.Hydrogencouldthrowaneconomiclifelinetolong-lastingnaturalgasassetsandavoidassetstranding.NeutralNegativePositiveSource:IRENAexpertsurvey(SeeBox2.2).51GeopoliticsoftheEnergyTransformationBOX3.5PIVOTINGTOHYDROGEN?HYDROGENSTRATEGIESOFSELECTEDFOSSIL-FUELEXPORTINGCOUNTRIESAUSTRALIA:Australiaaimstobecomea“majorglobalplayer”incleanhydrogenproductionandtradeby2030;itconsidershydrogenits“nextbigexport”.By2030,thecountrywantstobeamongtheworld’stopthreeexportersofhydrogentoAsianmarkets(GovernmentofAustralia,2019).ThegovernmenthasinvestedoverUSD1billiontostimulatethedomestichydrogenindustry,includingco-sponsoringsevenhydrogenhubs(GovernmentofAustralia,2021).Ninegigawatt-scalegreenhydrogenprojectsareplannedorunderdevelopment,althoughthegovernmentdoesnotruleoutbluehydrogenproduction.Australiahasalsoforgeddealswithprospectiveexportmarkets,suchasGermany,Japan,andSingapore.CANADA:Canada’sstrategyidentifiesnewexportopportunitiesandstatesthatthecountryiswellplacedtobecome“aleadingglobalcleanfuelsexporter”(GovernmentofCanada,2020).By2050,itaimstobeoneoftheworld’stopthreecleanhydrogenproducers.AlthoughCanadaisopentomanyproductionpathways,itsstrategymentionstheneedtoultimatelytransitiontoanincreasingpercentageofrenewableorzero-emissionproductionmethodsandrefersspecificallytothecountry’slargehydropowercapacity.NORWAY:NorwayisamajorgasexportertoEurope,deliveringaroundaquarterofEurope’sgasneeds,mostlythroughpipelines.Equinor,aNorwegianenergycompany,iscurrentlystudyingthepossibilityofdeliveringnaturalgastoGermanyortheNetherlands,whereitcanbeconvertedintobluehydrogen.ThehydrogenwouldthengotoasteelmillinDuisburg,Germany,andthecarbondioxidewouldbeshippedbackforstorageundertheseabedoftheNorwegianshelfoftheNorthSea(EquinorandOGE,2019).OMAN:Omanispreparinganationalhydrogenstrategywiththeaimofestablishingahydrogen-centricsocietyby2040.Italsoplanstobecomealarge-scaleexporterofgreenhydrogenorgreenammonia.Severalgigawatt-scaleprojectshavealreadybeenannounced,allcapitalisingontheabundantsolarandwindresourcesinthealWustagovernorateandeyeingtheArabianseaportofDuqmforexports.Thebiggestoftheseprojectswillbepoweredby25GWofsolarandwind(Argus,2021).RUSSIA:Russiaaimstobecomeoneoftheworld’slargestexportersofcleanhydrogen,mainlythebluevariant.InthewordsofPrimeMinisterMikhailMishustin,“hydrogenenergywillreducetherisksoflosingenergymarkets”(TheRussianGovernment,2021).By2030,Russiaaimstoaccountfor20%oftheglobalhydrogenmarket,whichislargerthanitscurrentshareofthenaturalgasmarket(RIANovosti,2021).Bythemiddleofthecentury,Russiaforeseesexportingupto50milliontonnesofhydrogen,bringinganadditionalUSD23-100billiontotheannualbudget(Patonia,2021).5203RedrawingthegeopoliticalmapTheHydrogenFactorSAUDIARABIA:InJuly2020,theHeliosGreenFuelProjectwasannounced,aUSD5billiongreenhydrogenandgreenammoniaplantpoweredentirelybysolarandwind.Theplantisexpectedtostartoperationin2025intheplannedmegacityofNeom,ontheshoresoftheRedSeanearSaudiArabia’sborderswithEgyptandJordan(HELIOS,n.d.).SaudiAramco,thenationaloilcompany,acquireda70%stakeintheSaudiBasicIndustriesCorporation,theworld’sthird-largestexporterofammonia(Aramco,2020a).SaudiAramcomadethefirstshipmentofblueammoniatoJapaninSeptember2020,foruseinpowergeneration(Aramco,2020b).SaudiEnergyMinisterPrinceAbdulazizbinSalmansaidatapressbriefinginlate2020thathiscountry“willnotbechallengedinitsrecordofbeingthebiggestexporterofhydrogenonearth”(Ratcliffe,ElWardanyandMartin,2020).UNITEDARABEMIRATES(UAE):UAE'shydrogenroadmap,releasedinNovember2021,aimstoestablishthecountryasaleaderinblueandgreenhydrogenexports.Theambitionistocapture25%ofthegloballow-carbonhydrogenmarketby2030.Morethansevenprojectsarealreadyintheworksviamainstakeholders,includingtheAbuDhabiHydrogenAlliance,whichismadeupoftheAbuDhabiNationalOilCompany(ADNOC),theAbuDhabistateinvestorMubadalaandthestate-ownedholdingcompanyADQ.ADNOChasconcludedpartnershipswithcountriessuchasJapan(ADNOC,2021a),Malaysia(ADNOC,2021b)andtheRepublicofKorea(ADNOC,2021c)toexploreoptionsforhydrogentrade,andithasalreadysoldfourtestcargoesofblueammonia(EmiratesNewsAgency,2021).©OlegRi/shutterstock.com©DorothyChiron/shutterstock.com53GeopoliticsoftheEnergyTransformationThebluehydrogenproductionroutemightappealtocountrieswithcheapgasreserves.Severaloilandgasexporters–includingAustraliaandsomeofthesunnyandwindycountriesofNorthAfricaandthePersianGulf–couldalsobecomecompetitivegreenhydrogenproducers.Totaloilandgasexportrevenuesareexpectedtofallsignificantlyby2050.Althoughcross-borderhydrogentrademightgrowsignificantly,expertsdoubtthathydrogenwillgenerateasmuchrevenuesasoilandgasdotoday(Figure3.8).Hydrogencanthusnotbeconsideredanew,zero-carbonversionofoil.Unlikeoilandgas,hydrogenisaconversionbusiness,notanextractionbusiness,whichwilllikelylimitthepossibilitiestocaptureeconomicrent(UCL,n.d.).Thehydrogenbusinesswillbemorecompetitiveandinvolvemoreplayersthanoilandgas.Asthecostsofgreenhydrogenfall,newanddiverseparticipantswillenterhydrogenmarkets.Figure3.8ExpertviewsonfuturehydrogenrevenuesandmarketstructureTotaloilandgasexportrevenueswilldeclineby2050.Thehydrogenexportmarketwillbemorecompetitiveandinvolvemoreplayersthantheoilandgasmarket.Hydrogenexportscaneventuallygeneratethesamelevelofrevenuesascurrentoilandgasexports.NeutralNegativePositiveSource:IRENAexpertsurvey(SeeBox2.2).©imaginima/istockphoto.com5403RedrawingthegeopoliticalmapTheHydrogenFactor3.4RISEOFNEWTECHNOLOGYLEADERSOverthepastfewyears,zero-carbonsolutionshavegrownmorerapidlythanexpected,givingwaytonewsourcesofwealthcreationanddestruction(Systemiq,2020).Havingastakeinthevaluechainsofclimate-safeenergytechnologies,suchascleanhydrogen,canboostacountry’seconomiccompetitiveness,nationalsecurityandenergyindependence.Technologyleadershipmightbedevelopedaroundmanyaspectsofthehydrogenvaluechain.Amongcountriesthataspiretoexporthydrogenorderivatives,thereiswidevariationintechnologyownership,whichmayaffecttheirabilitytoinfluencestandardsandoperatingframeworks.Australia,CanadaandSaudiArabia,forexample,developedhundredsofinventionsbetween2010and2020(IRENAINSPIREwebtool,2021).Colombia,Egypt,Morocco,OmanandtheUnitedArabEmiratessawmuchlessactivity(withthreeorfewerhydrogen-relatedpatentsfiledbyeachofthesecountriesinthisperiod).Ineachofthesegmentsofthevaluechain,countriescouldplayleadingrolesinmultipleways(seeFigureB.8inAnnex).Thissectionfocusesoninnovationandmanufacturing.Figure3.9TechnologyleadershipopportunitiesingreenhydrogenvaluechainsSource:IRENA(2020b).Note:CO2=carbondioxide;N2=dinitrogen.RenewableenergyElectrolysisSustainableCO2captureStoragePipelineSteelindustryChemicalindustryReﬁneriesTrucksShippingGreenammoniaSyntheticfuels2222222CO2N22INDUSTRYPOWERGENERATIONHEATINGShippingAviationCarsRailTrucksBusesTRANSPORTPRODUCTIONFURTHERPROCESSINGENDUSETRANSFORMATIONNH3TRANSPORTATIONNH355GeopoliticsoftheEnergyTransformationFigure3.10Geographicdistributionofhydrogen-relatedpatentfamilies,2010-2020100%80%60%40%20%0ShareoftechnologytypeChinaEuropeJapanRepublicofKoreaRestoftheWorldUnitedStatesofAmericaFuelcellsHydrogendistributionHydrogenproductionHydrogenstorageFuelcells41%Hydrogendistribution2%HydrogenproductionHydrogenstorage36%21%China100%Percentageshareofhydrogentechnologypatents80%60%40%20%0%EuropeJapanRepublicofKoreaUnitedStatesRestoftheworldSource:IRENAINSPIREwebtool.Note:Patentdatafor2020arenotcomplete,becauseofconfidentialityintheearlystageofthepatentingprocess.Analysisfocusesonthetopfiveplayersandtheirpatentoffices.PatentapplicationsfiledattheWorldIntellectualPropertyOrganizationareallocatedtothecorrespondingreceivingoffice.Equalsharesareassignedtoapplicantsandpatentofficesinthepatentfamily.HydrogentechnologyisdefinedbasedonthesubcategorypatentcodesoftheCooperativePatentClassificationthatconcernthedevelopmentofenablingtechnologiesforthereductionofgreenhousegasemissionsrelatedtoenergygeneration,transmissionordistribution–insofarashydrogenisspecificallymentioned(Y02E60/34Distribution,Y02E60/50FuelCells,Y02E60/36ProductionandY02E60/32Storage).InnovationleadersThelandscapeofhydrogentechnologiesandcompaniesisstillinflux;renewedpolicyfocushastriggeredinnovationalongthehydrogenvaluechain.Toassesshowcountriesarepositionedinthecleanhydrogeninnovationrace,itisusefultolookattwometrics:researchanddevelopment(R&D)spendingandpatents.ThecountriesoftheOrganisationforEconomicCo-operationandDevelopment(OECD)havehistoricallyaccountedforthebulkofglobalR&Dspendinginhydrogen,althoughChinaisquicklycatchingup,asevidencedbythegovernment’ssix-foldincreaseinhydrogenR&Dexpenditurein2019(IEA,2021c).Publicfundingforhydrogenhasbeensplitrelativelyequallybetweenfuelcellsandotherapplications(IEA,2021c).IftherecentgrowthinhydrogenR&Dissustained,governmentsupportcouldreturntolevelsnotseensincethelate2000s.TheOECDcountriesaccountforthevastmajorityofpatentsinthefieldofhydrogen.Japandominatesfuelcellresearch,holdingalmost40%ofallpatents;Europeleadsinhydrogenproduction(primarilyelectrolysers)andhydrogenstoragetechnologies(Figure3.10).Fuelcellsaccountforabout41%ofallhydrogen-relatedpatents,butthefastestgrowthinrecentyearshasbeenrecordedinotherareas,suchasproductionandstorage.Benefits,suchasdomesticvalueadded,willdependonwheretheintellectualpropertyisconcentrated.5603RedrawingthegeopoliticalmapTheHydrogenFactorLookingatregionswherehydrogen-relatedinventionsareprotectedcangiveasenseofwheretechnologyleadersarelookingatcommercialisation(Figure3.11).In2010-2020,EuropeandtheUnitedStateswerethetwogeographicalareaswhereinventionswerehighlyprotected.MostofEuropeaninventions(60%)areprotectedintheEuropeanmarket;therestareprotectedinotherareas,particularlytheUnitedStates,whereEuropeaninventionsmakeupabout20%ofallpatents.AlthoughJapandevelopedthelargestnumberofinventions(36%ofthetotal),veryfewareprotectedinJapanfromabroad,indicatinghightechnologycapabilitybutfewermarketopportunities.ThegrowingnumberofinternationaltechnologypartnershipscouldseeJapanemergeasatechnologyleader,evenasanetimporterofhydrogen.Chinaliesattheoppositeendofthespectrum:morethan90%ofinventionsprotectedbytheChinaNationalIntellectualPropertyAdministrationcomefromabroad.Inthepastdecade,Chinahasremainedanattractivemarketasamanufacturinghub,atrendthatcouldcontinue.©remotevfx.com/shutterstock.com57GeopoliticsoftheEnergyTransformationFigure3.11Flowofinventionsinhydrogentechnology,2010-2020PatentOceLocationChinaChinaNationalIntellectualPropertyAdministrationEuropeanPatentOceJapanPatentOceKoreanIntellectualPropertyOceOthersUnitedStatesPatentandTrademarkOceEuropeJapanRepublicofKoreaRestoftheworldUnitedStatesSource:IRENAINSPIREwebtool.Note:Flowofinventionsfromcountrydevelopinghydrogen-relatedtechnologies(ontheleft)tothemarketwheretheseareprotected(ontherightside).Moreinformationavailableat:https://public.tableau.com/app/profile/irena.resource/viz/IRENA_INSPIRE_Hydrogen_Patents/HydrogenTech5803RedrawingthegeopoliticalmapTheHydrogenFactorFigure3.12Estimatedmarketpotentialforhydrogenequipmentandcomponents,2050TransportIndustryUSD60-65bnUSD50-60bnforelectrolysers,includingbalanceofplantUSD5-7bnforstorageUSD11-15bnforotherdistributionUSD16-20bnforcarbon-basedcompounds(e.g.methanol,synfuels,LOHC)USD3-6bnforfuelingstationsUSD11-15bnforequipmentUSD8-10bnforheatandpowergenerationUSD16-20bnforironreductionandelectric-arcfurnaceUSD8-10bnforcombustionenginesUSD11-15bnforonboardstorageUSD21-25bnforfuelcellsUSD21-25bnforammoniaUSD2-5bnforpipelinesUSD5-7bnforcompressionUSD5-7bnforcapturetechnologyUSD25-30bnUSD35-40bnUSD80-90bnPRODUCTIONENDUSETRANSPORTATION2TRANSFORMATIONSource:Ludwigetal.(2021).Note:LOHC=Liquidorganichydrogencarrier.EquipmentmanufacturingThenascentmarketforhydrogen-relatedequipmentishighlycomplexandfragmented.Afulldiscussionofalltechnologiesinvolvedisbeyondthescopeofthisreport.Thissectionfocusesonthetwokeyhardwarepiecesinthehydrogenvaluechain:electrolysersandfuelcells.Thesetwopiecesofequipmentofferthegreatestopportunitiesforcountriesandcompaniestocapturevalueinthecomingyearsanddecadesandestablishthemselvesasindustryleaders.EstimatespointtoaUSD50-60billionmarketpotentialforelectrolysersandaUSD21-25billionopportunityforfuelcellsbythemiddleofthecentury(Figure3.12).Thesetechnologiesaremorematurethantechnologiesinotherpartsofthevaluechain.NootheraspectofthehydrogenvaluechainwasconsideredasstrategicaselectrolysersinIRENA’sexpertsurvey,whilefuelcellsweredeemedessentialfortechnologicalleadership(seeAnnex).59GeopoliticsoftheEnergyTransformationElectrolysersElectrolysershavebeenusedfordecades.Severalalkalinewaterelectrolyserswithacapacityofmorethan100megawatts(MW)werebuiltduringthe20thcentury(Table3.1),oftennearhydropowerdamsthatcouldprovidecheapelectricity.Renewablehydrogenwasusedprimarilytoproducefertilisers.Infact,untilthe1960s,mostfertilisersoldinEuropecamefromhydropower-basedelectrolysisandammoniaproductioninRjukanandVemork,Norway(Philibert,2017).Electrolysiswasthuscrucialforfoodproduction.1818OntheeveofWorldWarII,electrolysiswouldalsobecomeofgreatmilitaryimportance.TheRjukanplantwasthefirstsitetoproduceheavywater(deuterium)inindustrialquantitiesinthe1930s,asaby-productoftheelectrolysisofwater.Sincedeuteriumcouldbeusedtodevelopnuclearweapons,thesitebecameastrategicflashpointduringWorldWarII.Table3.1Historicexamplesoflarge-scaleelectrolysishydrogenproductionplantsPlantlocation(country,city)Capacity(MW)CommissioningyearNorway(Rjukan)1651929Canada(Trail)901939Norway(Glomfjord)1601953India(Nangal)1251958Peru(Cuzco)251958Egypt(Aswan)1601960Zimbabwe(QueQue)951974Source:Smolinka,GüntherandGarche(2011);Godula-Jopek(2015).Note:AlloftheseplantsexcepttheplantinPeruhavebeenclosedorhaveswitchedtofossilfuels.19201930194019501960197019801651601251609095256003RedrawingthegeopoliticalmapTheHydrogenFactorDespitemorethan100yearsofexperienceinwaterelectrolysissystemsandthousandsofinstalledplantsworldwide,by2014,theindustrywasdescribedassmallandfragmented(FCHJU,2014).Althoughthetechnologyismature,electrolytichydrogenproductionwasnotabletocompetewithfossilfuels(Godula-Jopek,2015).Theopportunityofferedbythedecliningcostofrenewableelectricityandtheneedtoreduceglobalemissionstonetzeroarenowpromptingarenaissanceoftheelectrolyserindustry.In2018,annualglobalelectrolysermanufacturingcapacitywasabout135MW(IRENA2020a).Itisprojectedtoriseto16GWby2024(Figure3.13).Severalgigafactories(factorieswithgigawattproductioncapacity)havebeenannouncedforlarge-scaleproductionofelectrolysers,includinginAustralia,France,India,Italy,Norway,SpainandtheUnitedKingdom(IRENA,2021b;Bullard,2021;BrisbaneTimes,2021;LaRepubblica,2021).Projectsofthisscaleareexpectedtodramaticallyreducethecostofelectrolytichydrogenbyachievingeconomiesofscalethroughmassmanufacturingandfullyautomatedproductionlines.Figure3.13Estimatedglobalelectrolysermanufacturingcapacity2021-2024,basedoninvestmentplansSource:BloombergNEF(2021b).Note:AMER=Americas;APAC=Asia-Pacific;EMEA=Europe,theMiddleEastandAfrica.202220232024202110.113.316.05.120151050Production(GW)56%30%14%50%41%9%50%39%11%53%36%12%AMERAPACEMEA61GeopoliticsoftheEnergyTransformationEuropehastraditionallyheldastrongpositionintheelectrolysermanufacturingindustry.Eventoday,roughlyhalfofallelectrolysermanufacturersarelocatedinEurope,andtheircomponentsuppliersaremostlyEuropean(FraunhoferISE,2020).Europe,theMiddleEastandAfrica(EMEA)areprojectedtoaccountforhalfofelectrolysermanufacturingcapacityinthecomingyears,basedonannouncedinvestmentplans(seeFigure3.13).19TheEuropeanhydrogenstrategyisgearedexplicitlytowardsmaintainingtheregion’scompetitivestrengthsinelectrolysermanufacturing.20ThereisastrongdesireinEuropetopreventitsfledglinghydrogenindustryfromfollowingthepathofthecontinent’ssolarPVindustry,anindustryinwhichEurope,particularlyGermany,onceheldaverystrongpositionbutwhichcollapsedinthefaceofcheaperChinesesolarmodules(Amelang,2020).AlthoughEuropehasthelargestmanufacturingcapacity,Chinaistheleaderinelectrolysershipments(BloombergNEF,2021b).ChineseelectrolysersarealsovastlycheaperthanEuropeanones.ChinesemanufacturerscanreportedlyproducestandardalkalineelectrolysersforUSD300/kilowatt–75%cheaperthanWestern-mademachinesofthesametype(BloombergNEF,2021b).Several,mostlyWestern,companiesareinvestinginmoreinnovativetechnologies,suchasprotonexchangemembrane,solidoxideandpressurisedalkalineelectrolysers.Althoughmoreexpensive,thesetechnologieshaveadvantages.Protonexchangemembraneelectrolysers,forinstance,aremorecompactandbettersuitedtooperatewithvariablerenewableelectricityproductionthanthestandardalkalinetype.21CompaniesinChina,EuropeandJapanhavedevelopedastrongheadstartinproducingandsellingelectrolysers,butthemarketisstillnascentandrelativelysmall.Ashydrogenproductionplantsmovefrommegawatttogigawattscaletomeettheanticipatedboomindemandforcleanhydrogen,marketsharescouldshiftquickly.Innovationandemergingtechnologiesalsohavethepotentialtoreshapetheelectrolysermarketandthecurrentmanufacturinglandscape.19Europeaccountsforbyfarthelargestmanufacturingcapacityinthiscategory.AnotherestimateseesEurope’selectrolysermanufacturingcapacityriseto~18GWby2025(GasforClimate,2021b).20TheEuropeanUnion’shydrogenstrategynotesthatEurope’spreferenceforrenewablehydrogen“buildsonEuropeanindustrialstrengthinelectrolyserproduction”andthat“Europeishighlycompetitiveincleanhydrogentechnologiesmanufacturingandiswell-positionedtobenefitfromaglobaldevelopmentofcleanhydrogenasanenergycarrier”(EuropeanCommission,2020a).21Thesedifferencesarelikelytobetrivialforlargeprojectsorcanbesurmountedwithengineeringsolutionsandbatteries(Wang,2021).2©Timphoto-video/shutterstock.com6203RedrawingthegeopoliticalmapTheHydrogenFactorFuelcellsFuelcellsaredevicesthatelectro-chemicallyconverthydrogenintoelectricity.Theyareessentiallyelectrolysersworkinginreverse:insteadofusingwaterandelectricitytomakehydrogen,theyusehydrogenandairtomakeelectricityandwater.22Fuelcellscanbedeployedinstationaryapplications(atlarge-scalepowerplants,forinstance);theycanalsobeusedintransportapplications,suchasfuelcellelectriccars,trucks,buses,forklifts,ferriesandships,andaircraft.Historically,mostpolicysupportforhydrogenwenttofuelcellelectricvehiclesandhydrogenrefuellingstations(IRENA,2020b).Thecostofautomotivefuelcellsfellbyabout70%between2008and2020(KleenandPadgett,2021),andfurthercostreductionscanbeexpectedifproductionisscaledup.Globalshipmentsoffuelcellshavegrownatarelativelymodestpace,however.In2020,1.3GWoffuelcellsweresoldglobally.Mostofthecapacitywentintocars,busesandtrucksinAsia(Figure3.14);some8000FCEVsweresoldin2020(E4Tech,2021).Althoughitisthehighestnumberonrecord,thefigurepalescomparedwiththe3millionelectriccarssoldgloballythesameyear(IEA,2021e).22Onetypeofelectrolyser,asolidoxideelectrolysiscell,isbasicallythecorrespondingsolidoxidefuelcelloperatedinreverse.Figure3.14Fuelcellsales,byregionofadoption,2016-2020Source:E4Tech(2021).150012009006003000Fuelcellsales(MW)20162017201820192020RestofworldAsiaNorthAmericaEurope63GeopoliticsoftheEnergyTransformationStill,severalcountriesarepushingaheadwithfuelcellsinmanyend-usesectors.Chinaaimstohave1millionFCEVsinoperationby2030;Japanhasinstalled400000residentialfuelcellsystems,withatargetof5.3millionby2030;theRepublicofKoreaistargetingtomanufacture15GWoffuelcellsforpowergenerationby2040(ofwhich7GWistargetedforexport);inEurope,acoalitionofcompanieshascommittedtodeployupto100000hydrogenfuelcellheavy-dutytrucksby2030.Californiahastheofficialgoalof200hydrogenrefuellingstationsby2025(CARB,2019),andvisiondocumentsforeseeupto1000suchstationsserving1millionFCEVsby2030(CACFP,2018).Comparedtoelectrolysers,theroleoffuelcellsintheenergytransitionisstillevolving.Innovationinfuelcellsmightshiftmarketsandattentioninthecomingyears.Inanycase,theoverallscaleofthemarketislikelygoingtobesmallerthanthatofelectrolysers.©Tramino/istockphoto.com©Scharfsinn/shutterstock.com6403RedrawingthegeopoliticalmapTheHydrogenFactor3.5INDUSTRIALDEVELOPMENTINRENEWABLES-RICHCOUNTRIESForcenturies,accesstoenergyhasbeenoneofthemajorfactorsdecidingthelocationofindustrialactivity.Fromthe12thcenturySongdynastyinChinatoEnglandduringtheIndustrialRevolutiontotheUpperMidwestoftheUnitedStatesinthe20thcentury,steelindustriesemergedinlocationswithaccesstocoalandironore(Lovins,2021b).Coalisbulky,heavyandcostlytotransport.Itwasthereforemoreefficienttoproducesteelatsitesofcoaldepositsandthentransportthesteelthantotransportcoaltothesiteofsteelproduction(McWilliamsandZachmann,2021).Coal-richareasoftenattractedwiderindustries.Inthe1770s,AdamSmithobservedinTheWealthofNationsthat“alloverGreatBritain,manufacturershaveconfinedthemselvesprincipallytothecoalcountries”(Smith,1776).Oneeconomichistorianremarkedthat“themapoftheBritishIndustrialRevolution,itiswellknown,issimplythemapofthecoalfields”(Pollard,1981).Itwasonlythemassivefallinfreighttransportcostssincethe19thcenturythatenabledindustriallocationstobecomeindependentofproximitytonaturalresources–aphenomenondescribedasthe“deathofdistance”(GlaeserandKohlhase,2004).Theglobalenergytransitionwillchangethesourcesofenergycapture,conversionanddistribution.Inanetzerofuture,accesstoenergywillbedeterminedlargelybyrenewablesourcesofelectricityandfuelsderivedfromthisinput(hydrogen,ammonia,etc.).Whetherthisshiftgoeshandinhandwithageneralindustrialrelocationtorenewables-richareashingesonthreekeyfactors:location-specificdifferencesinthecostofrenewableenergy,thecostoftransportingenergyandthestickinessofexistingindustrialfacilitiesandagglomerations(McWilliamsandZachmann,2021).Manyfactorsdrivelocationchoiceforindustrialproduction,includinghumancapital,infrastructureandlabourcosts,butthecostofenergycanplayadecisiverole.Forenergy-intensiveindustriessuchasiron,steel,chemicals,petrochemicals,non-ferrousmetalsandceramicmaterials,theinputcostofenergyandfossilfuelfeedstockrepresentsamajorshareoftotalproductioncosts(MoyaRiveraandBoulamanti,2016).Asmorecountriescommittonetzeroeconomiesandimposecarbon-reducingpoliciessuchascarbonpricing,theinputcostoffossilfuelswillriseevenmore.Asaresult,manyoftheseindustrieswillneedtoconsideraccesstolow-cost,cleanenergytoremaincompetitive.©NguyenQuangNgocTonkin/shutterstock.com65GeopoliticsoftheEnergyTransformationAlthoughthecostofrenewablesisfallingacrosstheglobe,sizeabledifferencesremainacrosscountriesandregions.Forinstance,manydevelopingcountriesinthetropicshaveanaturalcompetitiveadvantageinsolarenergy.23Capitalcostsacrossregionscandifferbyafactorofmorethanthree,andthecostofcapitalcandifferbyafactorofmorethansix.Asaresult,somecountriesarealreadyenjoyingathree-to-onecostadvantageinusingsolartechnologies–andtheratiocouldbemuchhigherforthebestlocations.24Thecostoftransportingrenewableenergy,whetherintheformofelectricityorhydrogen,remainsrelativelyhigh.Thecheapestwaytotransportenergyisinmaterialsandproducts.Thus,renewablepotentialscreateasignificantcompetitiveadvantageforregionswithsurplusrenewableresourcestobecomesitesofgreenindustrialisation.Relocatingindustrymakessensewheretheenergycostreductionexceedstheadditionalshippingcost.Relocationmaybenefitcommoditiessuchasaluminium,ammonia,iron,jetfuelandmethanol(Table3.2).23Thereisnouniversallyagreeddefinitionof“developingcountries”.Inthisreport,theyarethecountriestheWorldBankdefinesaslow-andmiddle-incomecountries.24CalculationisbasedoncommercialsectorsolarPVlevelisedcostofelectricityofUSD0.055/kilowatthourinIndiaandUSD0.190/kilowatthourinMassachusetts(UnitedStates)in2020(IRENA,2021c).Table3.2TheeconomicsofindustriallocationchoiceSource:Gielenetal.(2021).Note:Energycostbenefitswerecalculatedbymultiplyingenergyintensitybycostsavingsperunitofenergy.Shippingcostdataarefromrecentmarketsurveys.Figuresareindicative;theytendtofluctuatebasedonsupplyanddemand.TheenergycostbenefitisUSD0.03/kilowatthourforelectricity,USD5/gigajouleforthermalenergyandUSD1.5/kilogrammeforhydrogen.t=tonne.Worldproduction,2021(Mt/yr)Productprice(USD/t)Greenproductprice2030(USD/t)Shippingcost(indicative)(USD/t)Energycostbenefitofrelocation(USD/t)Primaryaluminium652500250070-100425Ammonia200250-400600100340Cement2900201005020Iron1389300-500400-60015-50115Jetfuel250300-500100050600Methanol100410-520600100375Hydrogen1208001500150015006603RedrawingthegeopoliticalmapTheHydrogenFactorTherearemanyexamplesofindustrialrelocationsbasedonaccesstocheapenergy.Followingtheoilcrisesinthe1970s,Japanphasedoutaluminiumsmeltersandswitchedtoimports.Aluminiumsmeltersaretypicallysituatedclosetohydropowerdamswithlargeamountsoflow-costelectricity,inplacesasdiverseasCanada,Iceland,Mozambique,Norway,Russia,Suriname,TajikistanandVenezuela(BolivarianRepublicof).Ammoniaplantshavebeenlocatedclosetosourcesoflow-costnaturalgas,inNorway,theMiddleEastandRussia,forexample.Renewableammoniaplantsarebeingplannedinplaceswithverylow-costwindandsolarproduction,inremotepartsofAustralia,Chile,OmanandSaudiArabia,forexample(Gielenetal.,2021).Ofcourse,tomorrow’slocationalchoicesarenotmadeonablankmap,andtheydependonmorethanjustcheapenergy.Existingindustrialclustersandagglomerationsarelikelytoberesistanttochangeandexhibitpathdependency.Mostlow-carbonsteelplantsinEurope,forexample,arelocatedwithinexistingindustrialclusters(McWilliamsandZachmann,2021).Moreover,countrieswillwanttoretaintheirindustrialbasewhilelookingforwaystodecarbonisepollutingindustries.Settingupnewproductionfacilitiesinrenewables-richcountriesdoesnotnecessarilyimplytheclosureofplantselsewhere.Onthecontrary,inmanyindustries,thereisscopeforgrowth.By2050,around200milliontonnesperyearofexpectedglobalsteeldemandcannotbemetbyretrofittingexistingproductionsites(Batailleetal.,2021).Newopportunitieswillexisttosetupadditionalcleanproductionfacilitiesincountrieswithironoreandcheaprenewables.25Inaddition,somecountrieswithoutaccesstocheaprenewableswillbeabletokeepdownstreamindustries,justascountrieswithoutoilcanhavelargepetrochemicalindustries.Butsomeenergy-intensiveindustriesmayrelocatetocountrieswithlow-costrenewablesurpluses,exportingcommoditiesorsemi-finishedproducts(directreducediron,etc.)forfinishinginothercountries.Australia,forinstance,currentlyexportsironoretoChina’scoal-firedblastfurnaces,whichproducehalftheworld’ssteel(Lovins,2021b).GivenAustralia’smassiverenewablepotential,acasecanbemadeforitshiftingfromexportingcokeandironoretoexportingdirectreducedironbasedonrenewablehydrogen(Gielenetal.,2020).25Hydrogen-basedsteelmakingrequireshigh-gradeironorepelletsasfeedstock.Onlyalimitedamountofhigh-gradeoreiscurrentlybeingproduced,mostlyintheAmericas,EuropeandtheMiddleEast,althoughBrazil,India,RussiaandSouthAfricaallhavegood-qualityreserves.Australia,theworld’slargestironoreproducer,currentlyproduceslower-gradeores.Australianironoreproducerswillneedtorefinetheirproductinordertomakeitsuitableforhydrogen-basedsteelmaking,possiblyraisingproductioncosts(BloombergNEF,2021c).©AJ_Watt/istockphoto.com67TRADE,SECURITY,ANDINTERDEPENDENCECHAPTER4©©imaginima/istockphoto.comGeopoliticsoftheEnergyTransformationAshydrogenbecomesaninternationallytradedcommodity,thehydrogensectorwillattractgrowingsumsofinternationalinvestment.Alongwiththesenewtradeandinvestmentflowswillcomepatternsofglobalinterdependencedifferentfromthehydrocarbon-basedenergyrelationshipsofthe20thcentury.Theshiftwillchangethegeographyofenergytrade.Countriesthathavenotpreviouslytradedenergywitheachotherhaveanopportunitytoestablishbilateralenergyrelationscentredonhydrogen-relatedtechnologiesandmolecules.Aseconomicrelationsbetweencountrieschange,somighttheirpoliticalrelations.Theadventofaninternationalhydrogenmarketcouldwellreshapeforeignpolicyandbringshiftsinbilateralrelationsandalliances(Figure4.1).046804Trade,security,andinterdependenceTheHydrogenFactorFigure4.1IRENAMemberviewsonimplicationsofhydrogenonforeignpolicyby2030Source:IRENAmembersurvey,2021(seeBox2.2).Respondentscouldselectmultipleoptions.Chartshowsshareofcastvotes.CreationofnewbilateraltraderelationsDecreaseinfossilfueltradeRegionalizationofenergyrelationsLessenergyinterdependenceShiftsinpoliticalalliancesCreationofnewbilateraltraderelationsDecreaseinfossilfueltradeRegionalisationofenergyrelationsLessenergyinterdependenceShiftsinpoliticalalliancesOpeningofdedicateddiplomaticocesNosigniﬁcanteect69GeopoliticsoftheEnergyTransformation4.1ANEWGEOGRAPHYOFTRADETheimpactofcleanhydrogenonglobalenergytradeneedstobeassessedinthecontextofthebroaderenergytransformation.Theshiftfromfossilfuelstorenewableswillfundamentallyalterthenatureandgeographyoftheenergytrade.Tradeinenergyresourceswillgraduallyturntotradeinenergytechnologiesandrelatedcomponentsandrawmaterials(IRENA,2019a).Asaresult,thevalue26oftradeinfossilfuelswilldeclineandthatinelectricity,hydrogenandhydrogen-richfuelswillrise(Figure4.2).26Suchvaluealsoincludessocial,political,andgeostrategiceffects,amongothers.Figure4.2Shiftsinthevalueoftradeinenergycommodities,2020to2050AmmoniaBioenergyCoalElectricityGasHydrogenMethanolOil2050USD1.6trillion2020USD1.5trillionOilOilAmmoniaBioenergyMethanolHydrogenGasGasMethanolElectricityElectricityCoal70©LaurenceDutton/istockphoto.com04Trade,security,andinterdependenceTheHydrogenFactorEnergyrelationsarelikelytoberegionalised,therebytransformingthegeopoliticalmap.Renewablescouldbedeployedineverycountry,withrenewableelectricityexportedtoneighbouringcountriesviatransmissioncables.Inaddition,cleanhydrogencouldfacilitatethetransportofrenewableenergyoverlongdistancesviapipelinesandshipping,unlockingpreviouslyuntappedrenewableresourcesinremotelocations.However,drivenbytransportcosts,adualmarketforhydrogenislikelytoemerge:aregionalmarket,tradedthroughpipelines,andaglobalmarketforammonia,methanol,andotherliquidfuels.Inotherwords,hydrogenmaywellendupbeingtradedinamarketthatismorediverseandregionalisedthanoilandgasmarkets.Currentuseofhydrogenisconcentratedinindustrialcoastalzones,wheremanyoftheworld’srefineriesandchemicalfacilitiesarelocated.Theseportsformidealspringboardstoleveragethescaleupofcleanhydrogen.Withtime,theycoulddevelopintoimportorexporthubsaswellasstoragesitesforbunkeringfuelsforthemaritimesector.Theseportsandotherareaswithconcentratedactivitiesalongthehydrogenvaluechain(sometimesreferredtoas“hydrogenvalleys”)could,inalaterstage,becomeconnectedthroughhydrogentransportationlinks.Theportscouldalsobecomethenodesfromwhichanetworkofhydrogenrefuellingstationsbranchesoutalongmajorfreightcorridors.Someexistingnaturalgastransmissionpipelinescouldberepurposed(withtechnicalmodifications)tocarryhydrogen.Themapofexistingnaturalgastransmissionpipelines,asshowninFigure4.3,suggestswherepotentialcross-borderlinkscouldremain,evenwithgreenhydrogen.Clearly,notallregionsareequallycoveredbynaturalgaspipelines.ThedensenetworksofpipelinesinEastAsia,Eurasia,andNorthAmericastandinstarkcontrastwiththerelativelysparsenetworksinothercontinents,andthealmostcompleteabsenceofsuchinfrastructureinSub-SaharanAfrica.However,Africa’svastrenewablepotentialopensnewopportunitiesforthecontinent’sdevelopmenttoanet-zeroworld(Box4.1).71©AvigatorPhotographer/istockphoto.com©fivepointsix/istockphoto.comGeopoliticsoftheEnergyTransformationBOX4.1INFRASTRUCTUREOPPORTUNITIESFORAFRICAINTHESHIPPINGSECTORAfricahasvastrenewableenergypotentialthatcouldbeusedtomeetdemandfromgrowingseatrade.In2019,totalmaritimetradeinAfricawas762milliontonnes,representingabout7%oftheglobaltotal(UNCTAD,2020).Intermsofmaritimefreight,Nigeriarepresentsalmostathirdoftheactivity,followedbyMoroccoandSouthAfrica.Lookingto2050,higherincome,economicgrowthandalargerpopulationcouldcausemarinefreighttogrowbymorethan11timescurrentvalues(Khalilietal.,2019).Evenconsideringenergyefficiencyandapotentialreductionof45%inships’energyconsumption(IRENA,2021d),electricitydemandforsyntheticfuelscouldreach500TWh.Toputthisintoperspective,Africa’sentireelectricitydemandin2019wasabout700TWh(IEA,2019b).Higherconsumptionwouldrequireanywherebetween100GWand350GWofelectrolysis(dependingonthetypeofrenewableelectricityused)andcouldtriggeraninvestmentofUSD200-400billion.Bunkeringfacilitiesfornewfuelsintheshippingsectorgotogetherwiththetransformationofportsandtheconstructionofexportfacilities.Actionsinthisdirectionhavealreadybegun.InNovember2021,theNamibianPortsAuthoritysignedamemorandumofunderstandingwiththePortofRotterdamaimingtoestablishatradingrouteforgreenhydrogen.Theportaimstoimport20MtH2by2050,whileNamibiaalreadyhasplanstodevelopa0.3MtH2project,startingexportsby2026.ThePartnersforGrowthProgrammeoftheEuropeanUnion’sChamberofCommerceandIndustryinSouthernAfricaassessedthepotentialofhydrogenexports,includingpotentialvolumes,costs,andmarkets(RoosandWright,2021).Asaresult,afeasibilitystudytoassessthepotentialofBoegoebaaiasanexporthubforgreenhydrogenandammoniawasannouncedinOctober2021.Thiswouldcomplementindustrialactivityintheregionandjustifytheconstructionoftheport,whichiscurrentlyunderassessment.7204Trade,security,andinterdependenceTheHydrogenFactorNodecisionaboutenergyinfrastructureshouldoverlookthefactthatthegeographyofinfrastructureinadecarbonisedeconomycouldturnouttobeverydifferentfromwhatitistoday.Onthesupplyside,forinstance,theproductionofrenewablehydrogenwilllikelytakeplaceinlocationsdifferentthantoday’soilandgasfields(Muttittetal.,2021).Conversely,significantelectrificationofend-useswillreshapedemandinsizeandscope.Everynewinvestmentdecisionislong-lived,sofixedpipelineinfrastructureshouldbeassessedwithafuture-prooflogic.Forinstance,anygaspipelineinfrastructurebuilttodayshouldbeamenableto“repurposing”tocarrycleangasessuchashydrogenandbiomethane.Suchrepurposingcomeswithtechnicalchallengesandeconomiccosts,allofwhichneedtobeaccountedforwhenplanninginvestments.Figure4.3GlobalmapofnaturalgastransmissionpipelinesSource:GreenInfoNetworkandGlobalEnergyMonitor(2021).Mapsource:NaturalEarth,2021Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.73GeopoliticsoftheEnergyTransformationHydrogentradeoffersopportunitiesfornewregionalandcross-regionalco-operation.Regionalhydrogentradecouldbefostered,forexample,betweenEuropeandNorthAfrica(vanWijkandWouters,2021),betweenAustraliaandtheIndo-Pacific(Bowen,2021)oracrosstheAfricancontinent(Figure4.4).Hydrogencouldalsoshapefuturemaritimetradinglinks.Somecompaniesandgovernmentsarealreadyplanninginternationalvaluechainsandshippingroutes.Theworld’sfirsttransoceanicshipmentofhydrogentookplaceinDecember2019,asatankerwithhydrogenproducedinBruneiandconvertedintomethylcyclohexanesetsailfortheJapaneseportofKawasakiCity.Inthesamemonth,KawasakiIndustrieslaunchedthe“SuisoFrontier”,thefirstdedicatedhydrogentankerfortrialshipmentsofliquidhydrogenfromAustraliatoJapan.InSeptember2020,thefirstcargoofhydrogen-derived“blueammonia”madeitswayfromSaudiArabiatoJapan,whereitwasusedforpowergeneration.27Thesetrialsanddemonstrationprojectssuggestthedawningofanewerainenergytrade.4.2SHAPINGTHERULESOFTHEGAMEHydrogenwillnotonlyalterenergyinfrastructureandtradeflows;itwillalsorequirenewrules,standards,andgovernance(Grinschgl,PepeandWestphal,2021).Shapingthoserulescouldbeanarenaforgeopoliticalcompetitionorinternationalco-operation.Althoughdefiningcommonrulesmightseemaninherentlytechnicalactivity,itwillhelpdeterminethetechnologiesthatdominatefuturemarketsandrewardthosewhomasterthem.Standardsaredesignedtoimprovethequality,safety,andinteroperabilityofvariousgoodsandservices.Divergentstandards,however,couldfragmentmarkets,stirregulatorycompetitionanderecttradebarriers(IRENA2020b,IRENA,2021b).Ifhydrogenistocontributetotheclimateagenda,itisessentialtoknowitscarbonfootprintandsustainabilityimpact.Certificationneedstobringadequatestandardsofreliability,transparencyandindependentauditing.Thiscanbeachievedthroughcertificatesor“guaranteesoforigin”.Whilemultipleschemeshavealreadyemergedindifferentregions,28noglobalstandardhasyetbeenestablished.Moreover,theexistingschemeswidelydifferinhowsustainabilityisdefinedandwheretheemission-countingboundariesaredrawnalongthesupplychain(AbadandDodds,2020).Internationalco-operationwillbeessentialtoensureconsistencyinterminologyanddatatoensurethatconversionbetweencertificationschemesistransparentandconsistent.27SincethecapturedCO2wasusedtoproducemethanolandforenhancedoilrecovery,thecarbonfootprintofthishydrogencargowassignificant.28TheseincludeCertifHyintheEuropeanUnion,pilotprojectsinAustraliaandmethodologicaladvancesattheinternationallevelfromtheInternationalPartnershipforHydrogenandFuelCellsintheEconomy,amongothers(IRENA2020b).7404Trade,security,andinterdependenceTheHydrogenFactorSource:AfricanHydrogenPartnership(2019).Mapsource:NaturalEarth,2021Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesandnamesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.AlgiersCairoTripoliBamakoNiameyNdjamenaOuagadougouTunisTangierRabatNouadhibouNouakchottDakarBanjulBissauConakryFreetownMonroviaAbidjanAccraYaoundéBanguiLubumbashiLobitoPortKisanganiKigaliBujumburaMwanzaBrazzavilleLibrevilleKinshasaLuandaKampalaLoméMogadishuBagamoyoBeiraBlantyreLilongweMbeyaDaresSalaamDurbanJohannesburgGaboroneBulawayoWindhoekWalvisBayLüderitzCapeTownHarareLusakaNairobiMombasaDjiboutiTamanrassetKhartoumAddisAbabaAgadezKanoLagosAlgiers—LagosCairo—MogadishuCairo—DakarDakar—DjiboutiDakar—LagosLagos—MombasaLagos—LuandaBeira—LuandaCapeTown—DjiboutiGaborone—LüderitzDurban—DaresSalaamMombasa—DaresSalaamFigure4.4PossiblehydrogenroutesacrossAfricaalongexistingandfuturetrans-Africanhighways75GeopoliticsoftheEnergyTransformationGeopoliticalmotivesloomlargeinthesediscussions.Countrieshaveanincentivetosetstandardstomaintaintheircompetitiveadvantages.Forinstance,hydrogencertificationschemesthatcoveronlyemissionsgeneratedduringproductionwouldexcludethosethatariseduringtransportandwouldlikelybefavouredbyproducerslocatedfarfromconsumermarkets(Whiteetal.,2021).Similarly,countrieswithlargenaturalgasreservesandtransportationsystemsmightbemorelenienttowardsgreenhousegasemissionthresholdsthatfavourtheblueproductionpathwayorthatfocussolelyoncarbonratherthanmethaneemissions.Evenifmethaneemissionsareincluded,countriescouldinfluencethemethodologyorvaluesusedtomeasurethem.Forexample,gasproducerscouldself-reportmethaneemissionsalongwiththeirproduction,whichcouldleadtounderreporting(Piriaetal.,2021).Thecurrencydenominationandpricingmechanismofinternationallytradedhydrogenareotherimportantaspects.Manyunknownssurroundboththenatureofpricediscoveryininternationalhydrogentrade(e.g.hubs,benchmarks,pricingmechanisms)andthetypeofcontracts(long-term,take-or-payoradifferentmodel).29Therelevanceofthecurrencyusedinglobalindexesisthatitsusecanimproveaparty’sleverageinnegotiatingdealsbeyondhydrogen.Thechosencurrencyispositionedasaglobalbenchmarkasthemarketexpands.Specifyingacurrencyreducesexposuretoimportcostsawayfromspecificcurrencypairs.Forinstance,theEuropeanUnion,whichislikelytobecomeoneofthekeyimportmarkets,isseekingtodenominateitsfuturehydrogenimportsineuros(EuropeanCommission,2020a).TheEuropeanCommissionstronglybelievesthatsuchamovewouldmaketheUnionlesssusceptibletotheeffectsofthe“extra-territorialapplicationofunilateralsanctionsbythirdcountries”(EuropeanCommission,2021).Puttingapriceoncarbonmightbehelpful,orevennecessary,tomakecleanhydrogencompetitivewithgrey,andultimatelyalsowithfossilfuels.Inthatsense,hydrogenmaybecomeembroiledinabroadersetofcarbontradewars.Strongregulationsaroundupstreammethaneleakages,forinstance,couldbecomeasourceoffrictionbetweenbluehydrogenproducersandimportingregionslookingforcleanhydrogen.Carbonborderadjustmentmechanisms,suchastheoneproposedbytheEuropeanUnion,couldcauseinternationalfriction,astheymayhurttrade-exposed,carbon-intensiveindustriesinnon-EUcountries.304.3HYDROGENDIPLOMACYAsintheearlydaysoftheliquefiednaturalgas(LNG)industry,manygovernmentsareforgingbilateraldealsandagreementstobuildandoperateinfrastructuretofacilitatecross-borderhydrogentrade.Thesedealsrangefromfeasibilitystudiestolettersofintent,memorandumsofunderstanding,energypartnerships,andeventrialshipments.Severalcountries,includingCanada,Chile,Germany,Italy,JapanandSpainhaveexplicitlymentionedpotentialbilateralhydrogentradingrelationsintheirnationalstrategies.Overtime,theseemergingdealsandvisionscouldgivewaytonewenergytraderelations,newshippinglanesandnewtraderoutes(Figure4.5).29S&PGlobalPlattshasalreadydevelopedpricebenchmarksforbothelectrolyticandgas-basedhydrogen(withoutCCS)insixdifferentcountries.Sofar,thebenchmarksaredenominatedinbotheurosandU.S.dollars(S&PGlobal,n.d.).Thisfirststepinmarketformationistypicallyfollowedbybilateralagreementsorregionalmarketsbeforeawidermarketwithmoreliquidityemerges(denOuden,2020).Similarly,theEEXpowerandgasexchangeisalsoplanningtolaunchapriceindexin2022;itwillreflecttheover-the-countermarketandbilateraltradesgovernedbyimportandexportagreements(Reuters,2021).Thisindexwillbeeurodenominated.30TheinitialproposalbytheEuropeanUnioncoversimportsofammoniaandelectricity,butnothydrogenhttps://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A52021PC0564.7604Trade,security,andinterdependenceTheHydrogenFactorFigure4.5SelectedcountrybilateraltradeagreementsandMOUs,announcedasofNovember2021Note:Figurecovershydrogentraderelatedagreementsonly,basedonpublicannouncementsandisnotexhaustive.Privateagreementsandthosethatfocusexclusivelyontechnologyco-operationarenotincluded.MOU=MemorandumofUnderstanding.RepublicofKorea(Prospective)ImporterSaudiArabia(Prospective)ExporterGermanyDemocraticRepublicoftheCongoAustraliaPortugalIcelandTunisiaRussiaChileMoroccoOmanUruguayDenmarkCanadaNamibiaBelgiumSouthAfricaNetherlandsJapanBruneiUAE77©nd3000/istockphoto.com©ake1150sb/istockphoto.comGeopoliticsoftheEnergyTransformationSomeoftheseemergingbilateralhydrogendealsinvolvecountriesthathaveanestablishedenergytraderelationship.Forexample,JapanalreadyimportscrudeoilfromSaudiArabia;bothcountriesarenowconsideringexpandingthetradingrelationshiptoblueammonia.However,otherbilateraldealsdonotcoincidewithexistingenergytradeflows.Thisisthecase,forinstance,withthebilateraldealsandconversationsbetweenGermanyandMorocco,NamibiaandtheNetherlands,andNewZealandandtheRepublicofKorea,amongothers.Whetherallthesehydrogentraderouteswillmaterialiseremainstobeseen,butthepotentialisthereforacompletelynewcartographyofenergygeopolitics.Somecountriesthatexpecttoimporthydrogenandrelatedzero-carbonfuelsarealreadyengaginginhydrogendiplomacy(Box4.2).GermanyandJapanaretrailblazersforforgingnewhydrogentraderelations,butothercountriesarefollowingsuit.Hydrogendiplomacymaywellbecomeafixtureinsomecountries’economicdiplomacy.4.4SHIFTSINPOLITICALRELATIONSTradeandinvestmentrelationshipsbetweencountriesareentwinedwithbroaderpoliticalconsiderations.Becausechangesineconomicrelationscanaffectpoliticalties(andviceversa),theemergenceofmarketsinhydrogenandothercleanfuelscouldbringaboutshiftsinpoliticalrelationsandalliancesbetweencountries.Traderelationsinoilandgasmarketshavelargelybeenshapedbygeology:hydrocarbonreservesareconcentratedinalimitednumberofcountries.Meanwhile,80%oftheworld’spopulationlivesincountriesthatarenetimportersoffossilfuels(IRENA,2019a).Bycontrast,everycountryhasrenewableresources,althoughthestrengthofthewindandthequalityofsolarirradiancedovaryaroundtheworld,andotherrenewableslikehydropowerorgeothermalenergyaremoreprevalentinsomelocations.Sincerenewableenergyisubiquitous,countriesmaygaintheflexibilitytochoosepreferredtradingpartnersinthecleanfuelmarketsofthefuture(GrimmandWestphal,2021).However,theabilityofcountriestoturnrenewablepotentialintoenergyproductiondependsontheirindustrialcapacitiesandontheintellectualpropertyunderpinninginnovation7804Trade,security,andinterdependenceTheHydrogenFactorBOX4.2THEEMERGENCEOFHYDROGENDIPLOMACYSeveralcountriesarealreadypursuingdiplomaticavenuestoadvancetheirhydrogenstrategies.Germanyhasconcludedbilateralhydrogendealswithawiderangeofpotentialsuppliercountries,includingAustralia,Chile,Morocco,Namibia,TunisiaandUkraine.TheGermanFederalForeignOfficeissettingupdedicatedhydrogendiplomacyofficeslinkedtoitsembassiesinLuanda(Angola),Abuja(Nigeria),Moscow(Russia),Riyadh(SaudiArabia)andKiev(Ukraine).Throughthesenewoffices,Germanyintendstosupportinternationaldialogueonthegeopoliticalimplicationsofaglobalhydrogenmarket.GermanyhasalsoallocatednearlyabillioneurostotheH2GlobalFoundation,abodysetupbysixteenmajorplayersinGermanindustrytoencourageaquickmarketramp-upforgreenhydrogenanditsderivatives.TheH2GlobalFoundationistaskedwithbuyinggreenhydrogenorhydrogenderivativesabroadandre-sellingtheseproductsatannualauctions.Thefundswillbeusedtomakeupthedifferencebetweenthepurchaseanddomesticsalespriceofhydrogenderivatives.31Japan’sdiplomatsandindustrialstakeholdersareengagingAustralia,Brunei,Norway,SaudiArabiaandothersaboutsettingupvaluechainsforhydrogentrade.Japan’sinternationalhydrogenstrategyaimstosecurenewimportflowsofgreenfuelstocompetewithLNGinpowergenerationandgasolineintransport.AcomplementaryaimistosellJapaneselow-carbontechnologiesandknow-howoverseas(Nagashima,2018).Othercountriesarefollowingsuit.TheNetherlandswasthefirstcountrytoappointadedicatedhydrogenenvoy(2019-2021).TheDutchgovernmentistargetingChile,Namibia,PortugalandUruguay,amongothers,aspotentialsuppliers.TheRepublicofKoreahasconcludedagreementswithSaudiArabiaandNewZealand.IndustrialplayersinBelgiumarelookingtoChile,Namibia,andOmanforlarge-scalehydrogenimports,whileSingaporeisstudyingtheviabilityofhydrogensupplyroutesfromLatinAmerica.Theseemergingbilateraldealsarepartofaglobalraceforthebestsitestoproducehydrogen(Radowitz,2021).Hydrogendiplomacycutstwoways,withexportersseekingandfindingpotentialcustomers.Chile’snationalhydrogenstrategy,forinstance,mentionsthatitwilldeploy“greenhydrogendiplomacy”topositionitselfinternationallyasasourceofcleanfuelsandenergycarriers.Itnotesthatitwillleverageitsparticipationininternationalplatformsandits“diplomaticrelationswith171states”tounlockitshydrogenexportpotentialandattractforeigninvestment(ChileanMinistryofEnergy,2020a).Ithostedagreenhydrogensummitin2020(ChileanMinistryofEnergy,2020b),anexamplefollowedin2021byOman,anotherprospectiveexporter.3231Theauction-basedmechanismmatchessupplyanddemandbyinstallinganintermediary,theHydrogenIntermediaryCompanythatconcludeslong-termpurchasecontractsonthesupplysideandshort-termsalescontractsonthedemandside.FundsfromtheFederalGovernmentwillclosethecostgap.WithH2Global,operatorsandinvestorsreceivetheplanningandinvestmentsecuritynecessarytodeveloplarge-volumeelectrolysiscapacities,astheycanbasetheirbusinessandfinancingmodelonlong-termpurchaseagreementswithasolventcontractpartneratcost-reflectiveprices.(BMWI,2021)32www.greenhydrogensummitoman.com/index.php79GeopoliticsoftheEnergyTransformationintherenewablessector.Thesecapacitiesarerelativelyconcentratedinafewcountries.Byimplication,mostcountriesaredependentonimportsofPVpanels,windturbines,andotherequipmentfromarelativelysmallsetofcountries.Therefore,traderelationsinrenewableenergyare,toalargeextent,shapedbynationalindustrialpolicies.Inaddition,corporatestrategiesselectcertaincountriesasregionalorglobalsupplyhubs.Hydrogentradeflowsmayalsoraisenewstrategicconsiderations.Assomecountriesandregionsbegintoimporthydrogeninlargequantities,thestrategicimportanceofexportingcountrieswillgrow.Newhydrogenproductioncentresandshippingrouteswillalsoinformstrategicplanningbysecurityanddefenceorganisations.Opportunitieswillarisetoshapethenascenthydrogenmarkettoadvancesustainabledevelopment.Germany,forexample,hasalreadyengagedseveralAfricancountriestoexploreanddevelopahydrogeneconomythatmakesuseofthecontinent’sresourcepotentialtosupportsustainableeconomicdevelopment(H2Atlas,2021).Fromthemanycountriesaroundtheworldwithgoodconditionsforproducingcheap,cleanhydrogen,prospectiveimporterscanpickthosewithwhomstrongtiesalreadyexist.Theymayalsoopttousetheirdemandforcleanhydrogentoforgenewalliances.Geographywillstillplayarole,sincenoteverycountrycanproducelow-costhydrogenforexport,andtransportcostsoverlongdistancesarelikelytoremainsignificant.Somecountriessimplylacktheresourceendowment(renewablepotential,space,land,wateravailability,etc.),whileotherslackgeographicproximitytomajordemandcentres.Inthiscontext,supportingthedevelopmentofhydrogenindustriesindevelopingcountrieswithabundantpotentialcanachievemultipleobjectives.Sincenotallcountrieshavethesameabilitytodeveloptheirrenewableenergypotentialatscaleandcompetitively,ortoaccesstechnologiesthatremainconcentratedinalimitednumberofplaces,establishinghydrogentraderelationscouldfosterco-operationaroundaccesstotechnology,knowledgeandcapital.Itcouldopennewpartnershippossibilitiestosetuplocalvaluechains,stimulateindustries,andcreatejobsincountriesrichinrenewables.Thus,cleanhydrogencanalsobeanavenueforgreaterequity.Thegrowinginterestincleanhydrogenisfosteringthecreationofinternationalpartnershipsandnetworks.Newalliancesarealreadyspringingupacrosstheworldintheformofmulti-stakeholderpartnershipsandindustrialalliances(GhoshandChhabra,2021).Inthelongerterm,asenergytradeflowschange,sowillsecuritypartnerships.ThewayinwhichtheUnitedStates’shaleboomfacilitateditspartialdisengagementfromtheMiddleEastmightinformsomeofthechangesthatwillfollowfromtheadvanceofcleanhydrogen.Forinstance,keyoiltransitroutesliketheStraitofHormuzmaybecomelesscriticalforglobalenergysecurity,eveniftheyremainrelevantforthetransportofcleanhydrogen,ammonia,andotherfuelsfromthePersianGulfandthewiderMiddleEast.80©imaginima/istockphoto.com©1001Love/istockphoto.com04Trade,security,andinterdependenceTheHydrogenFactor4.5GREATERENERGYSECURITYHydrogenhasoftenbeenseenasapotentialremedyforenergysecurityconcerns.Theoilpriceshocksofthe1970sandthepeakoilpricesoftheearly2000sdroveearlierwavesofinterestinhydrogen–andforgoodreason.Cleanhydrogencouldbolsterenergysecurityinthreemajorways:1)byreducingimportdependence,2)bymitigatingpricevolatility,and3)byboostingenergysystemflexibilityandresilience.Mostofthesebenefitsareassociatedwithgreenhydrogen,notblue.Andmanyofthemariseonlywhenandifthemarketdevelops.Energysecurityextendsbeyondavailabilityandaffordabilitytoembracesustainabilityandequity,aswell.Forexample,schemestoimportrenewablehydrogenfromcountrieswherelargepartsofthepopulationlackaccesstoelectricityorwherethegridstillreliesheavilyonfossilfuelsmayboosttheenergysecurityofimportersbutcanhardlybecalled“green”or“sustainable”.Chapter5willdigdeeperintothesustainabledimensionsofhydrogen.Energysecurityalsoneedstobeconsideredinthecontextofthephysicalimpactsofclimatechange.Thisisnotatriflingmatter,asenergyinfrastructureisbecomingincreasinglyvulnerabletoclimatechange.Itisestimatedthathalfoftheworld’sLNGplants,forinstance,areexposedto“veryhighrisk”fromdestructivecyclones,whilesome35%ofrefineriesarelocatedinhigh-riskareas.Manyoftheworld’sLNGplantsandrefineriesarelocatedincoastalareas,heavilyexposedtorisksfromviolentstormsurgesandcoastalflooding(IEA,2021f).Whilehydrogencouldboostfueldiversityandsystemresilience,hydrogenfacilities,particularlythoseinlow-lyingcoastalareas,couldalsobevulnerabletotheeffectsofclimatechange,includingstorms,floods,anddroughts.81©IuriiGarmash/istockphoto.com©stockstation/shutterstock.comGeopoliticsoftheEnergyTransformationReducingimportdependenceHydrogencanreduceenergyimportdependencebysubstitutingdomesticresourcesforimportedones.Iflocalwind,solar,hydro,biomassorgeothermalenergysourcesaretappedtoproducehydrogen,energysecuritywouldrisetotheextentimportedfuelsaredisplaced.Thiscouldhelpdecoupledomesticenergyconsumptionfromworldmarketvagariesandlowernationalenergyimportbills(Steinberger-Wilckensetal.,2017).IRENA’s1.5°Cscenarioenvisagesthattwo-thirdsofgreenhydrogenproductionin2050willbeusedlocallyandnottradedacrossborders(IRENA,forthcoming-a).Ifnaturalgasisusedasthefeedstocktoproducehydrogen,itmayextendorevenincreaseimportsofnaturalgas.Non-producercountriesthatdecidetomakehydrogenfromnaturalgascouldendupimportingjustasmuchnaturalgasviapipelinesorLNGterminalsastheydidbefore.33Gasexporterscouldswitchtoexportingbluehydrogendirectly,ofcourse.Fromtheperspectiveofimportingcountries,noneoftheseroutesbringssignificantchangestotheenergysecurityequation.Existingimportdependenciescouldbemaintained,orincreased,throughcontinueddependenceonacommoditypronetogeopoliticalandmarketvolatility.33TheuseofimportednaturalgastoproducehydrogenmightalsoleadtoareversetradeflowinCO2,whichmightneedtobeshippedbacktobestoredindepletedgas(oroil)fields,addinganotherlayerofcomplexitytothevaluechain.See,forexample,theLPG-for-CO2projectbetweenSaudiArabiaandtheRepublicofKorea,orthe“H2morrow”projectinvolvingNorwegianenergycompanyEquinor,Germany’slargestgaspipelineoperatorOGE,andGermansteelproducerThyssenkrupp(Ratcliffe,KimandPark,2021;OpenGridEurope,2021).82GREENHYDROGEN©metamorworks/istockphoto.com04Trade,security,andinterdependenceTheHydrogenFactorMitigatingpricevolatilityRenewablehydrogenmayshieldlargeindustrialoff-takersfromthevagariesoffossilfuelpricevolatility.Fossilfuelmarketsarenotoriouslycyclical,andpricescanswingsubstantiallyovertime.Theseriskswereillustratedinthefallandwinterof2021,whengas(andtoalesserextentelectricity)pricesinvariousmarketsacrossthegloberosetorecordhighs,causingenergy-intensiveindustries,suchasfertilisermanufacturing,totemporarilyscalebackproduction(PaulssonandDurisin,2021).Bycontrast,renewable-basedpowerisincreasinglypurchasedusinglong-termpowerpurchaseagreements(PPAs)withpricessetcompetitivelythroughauctions.Dependingonthestrategyofbidders,theymaydecidetotakeontheriskofswingsincommoditymarketsbydelayingsigningpurchaseagreementswithsuppliersofcomponentsandequipment,ortopassonthisrisktothesuppliersbysigningtheagreementsatthetimeoftheauction.Sofar,thefallingcostsduetothelearningcurve,technologicalandprocessimprovement,andeconomiesofscale,havebeenmoresignificantthanfluctuationsincommodityprices.Assuch,biddershavetypicallyplacedtheirbidsinanticipationoflowercostsandhigherprofitmargins,whichmeanstheyalsotakeonthisrisk.34ThismakesPPAsanattractiveoptiontoreduceexposuretofuelpricevolatility,notjustfromcommodityswings,butfromconflict,accidentsorothercauses.Expandingthefuelmixwithgreenhydrogencouldthereforebringmorepricestabilitytosectorssuchasfertilisers,aviation,andmaritimeshipping.Thatsaid,thevolatilityinfossilfuelpricesispartiallycausedbyinvestmentcyclesintheindustry,whichsometimesleadtomismatchesbetweensupplyanddemand.Thiswillbethesameforgreenhydrogenorammoniaproduction,withtheirfixedassetsandhighcapitalintensity.Whenthesupplyofgreenhydrogenisinsufficient,therewillbeatimelagineffortstoincreaseproductioncapacity.34Auctionsareflexibleintheirdesignandtheycanbetailoredtoassignriskstodifferentmarketplayers,dependingonthespecificcountrycircumstancesandobjectives.83GeopoliticsoftheEnergyTransformationImprovingflexibilityandresilienceHydrogencanalsobringflexibilityandresiliencetoanenergysystemexpectedtobecomedeeplyelectrifiedoverthecomingdecades.Carefulplanningisnecessarytoidentifythebestwaystodeployhydrogen.Forinstance,electrolyserscanbedeployedinareaswherehighsharesofenergyareproducedfromvariablerenewablesourcesandwhereexcesspowercannotbetransmittedthroughpowerlinesorstoredinbatteries(forexample,NorthernChileoroffshorewindproductionintheNorthSea)(IRENA,2021b).Whiledomesticelectrolysistargetsmightadvancethegoalsofenergysecurityandindustrialpolicy,governmentswouldnotwanttoundermineclimatemitigationgoalsordivertfocusfromotherpriorities,suchasuniversalaccesstoenergy.Hydrogen’struecompetitivestrengthliesinitsuniqueabilitytostoreenergyforlongperiodsoftimeandinlargequantities.Ascleanhydrogendisplacesfossilfuelsinsomeend-uses,hydrogenstoragecouldbecomeincreasinglycriticaltoenergysecurity,justlikenaturalgasstorageistodayinmanyregions.Yet,therearedifferencesbetweennaturalgasandhydrogenstorage.Naturalgasisstoredmostlytomeet(seasonal)variationindemand.Hydrogendemand,incontrast,islikelytobemoreconstant,atleastintheearlyyearsofthehydrogenmarketscale-up,whenthebulkofdemandislikelytocomefromindustrialcustomers(primarilysteel,ammonia,andhigh-valuechemicals).35Hydrogenstoragewillbeneededprimarilytomeetvariationinsupply,notdemand,asgreenhydrogenismadewithvariablerenewableenergysources.Thiscouldbeareasontolocatehydrogenstorageclosetoproductionratherthandemandsites.Locatingbothproductionandstorageinexportingcountriescouldraiseenergysecurityconcernsinimportingcountrieslackingbuffercapacitytooffsetpotentialsupplydisruptions.Theexactlocationofstoragesiteswillofcoursealsobedeterminedbytheavailabilityofsuitableundergroundstructures.Saltcavernsarecurrentlyconsideredthemostpromisingoptionforlong-durationstorageofhydrogen.36Thosenowusedfornaturalgasstoragecanbeconvertedtostorepurehydrogen.However,becausehydrogenhasalowerenergydensitythannaturalgas,aretrofittednaturalgasstoragesitecanholdonlyaround24%oftheoriginalenergyvolumes(GIEandGuidehouse,2021).Inotherwords,fourtimesasmuchareawouldbeneededtomaintaincurrentenergystoragecapacity.Globally,hydrogenhasbeenstoredinonlysixsaltcaverns:threeinTeessideintheUnitedKingdomandthreeinthestateofTexasintheUnitedStates.Rampingupgeologicalstorageofhydrogencallsforcarefulplanning,becausesomestoragesitesarelikelytobeusedforstoringmethane,biomethane,orevenCO2duringthetransitionandpossiblyinthelongterm.Hydrogencanalsoincreasetheresilienceofremotecommunities,fromvillagesnestleddeepintomountainstoislandslocatedfarfromthemainland.Suchcommunitiesfaceuniqueenergysecuritychallenges.Theyareoftenhighlydependentonexternalfossilfuels,whiletheirelectricitygridsaresmallandoftenrelyondiesel-generatorsforback-uppower.Yet,remoteandislandcommunitieshavesomeofthebestrenewableenergyresourcesintheworld(IRENA,2016a).Heretoo,hydrogen(oftencombinedwithbatteries)offersasourceofresilience.Forinstance,onthesmallScottisharchipelagooftheOrkneyislands,windandtidalenergyisconvertedintohydrogenthroughtwowaterelectrolysers.Thehydrogenthenprovidesheatandpowertolocalschools,harbourbuildings,andseveralferriesandfuel-cellvehicles(FCHJU,n.d).35Hydrogenuseforheatingandpeakelectricitygenerationcouldaddadoseofseasonalityandvariabilitytohydrogen’sdemandprofile,whichwouldamplifytheneedforstorage.36Hydrogencanalsobestoredinothertypesofundergroundformations(e.g.aquifers,rockcaverns,depletedoil,andgasfields)aswellasinabove-groundstoragetanks,pipelines,orvessels(Caglayanetal.,2020).84©ViktoriiaHnatiuk/shutterstock.com04Trade,security,andinterdependenceTheHydrogenFactor4.6TRADERISKSANDVULNERABILITIESIntroducinghydrogenasanenergycarriercanraiseenergysecurityrisks,especiallywhenitcomestointernationallytradedhydrogenandderivatives.Hydrogenisexpectedtoplayasmallerroleinadecarbonisedenergysystemin2050thanfossilfuelsdopresently.Therefore,theleveloftraderiskwouldbelimitedtoasmallernumberofsectors..Thissectiondiscussesthreepossiblevulnerabilitiesintheglobalsupplychainsofhydrogen:1)countryinvestmentrisk,2)technicalfailuresandpoliticaldisruptions,and3)accesstocriticalrawmaterialsforhydrogen-relatedtechnologies.InvestmentriskSettingupinfrastructureforhydrogentradecarriesrisksonbothsidesofthesupplychain.Giventhehighcapitalintensityofhydrogentradevaluechains,de-riskingtheseinvestmentswilllikelyrequirelargeconsortia,highlevelsofstateinvolvement,andinternationalco-ordination.ThehistoryoftheLNGmarketmaybeinstructiveinthisregard,asBox4.3shows.Fromtheperspectiveofanexporter,revenuesecurityiscrucial.Withoutanassuredstreamofrevenues,itisnotpossibletorecouptheupfrontcapitalexpensesincurredtobuildhydrogenprojects.Revenuemustbesufficienttocoverthecostsofelectrolysers(inthecaseofgreenhydrogen),naturalgasreformers(inthecaseofbluehydrogen),solarandwindparks(forgreenhydrogen),gasreservefacilities(forbluehydrogen),andtransportandstorageinfrastructure.PlansforhydrogenexportprojectshavesprungupacrossAustralia,theMiddleEast,NorthandSouthernAfricaandSouthAmerica.Together,theplansbehindthoseprojectsenvisagetheproductionofmillionsoftonnesofcleanhydrogenandderivativesdestinedforglobalmarkets.Theseplansfaceanuncertainfuture,asglobaldemandforcleanhydrogenisonlyjustemergingandcompetitionforsaleswillbefierce.Thelistofcountriesthataspiretobecomehydrogenexportersismuchlongerthanthoseplanningimports.Fromtheperspectiveofbuyerspreparingtodependonimports,securityofsupplyiscritical.Theyneedtofeelconfidentthatsufficientcapacitiesofrenewableelectricitywillbeavailableforelectrolysisinhydrogen-exportingcountries.Severalaspiringhydrogenexportersarefacingrisingdomesticdemandforpower.ConsidertheMiddleEastandNorthAfrica,aregionoftenseenasapotentialsupplierofhydrogenandderivatives.Thepopulationoftheregionisexpectedtodoublebetweennowand2050(UN,2019);electricitydemandisexpectedtosurgeasaresult.Thisplaceshighdemandsonrenewables,whichwillbeexpectedsimultaneouslytomeetincrementalelectricitydemand,replaceexistingfossilfuelgenerationunitsandpowerelectrolysersforproducinghydrogenforexportmarkets.85GeopoliticsoftheEnergyTransformationInvestmentuncertaintyalsoimperilsenergysecurity.Whilemanygigawatt-scalehydrogenexportprojectshavebeenannounced,theycouldexperiencedelaysowingtoseveralfactors,includingpermittingprocesses.InJune2021,forinstance,Australia’sgovernmentrejectedonenvironmentalgroundsaplantobuildtheworld’sbiggestgreen-energyexportproject,theso-calledAsianRenewableEnergyHub(Smyth,2021).Higherinvestmentriskstranslateintohigheroverallprojectfinancecosts–buttheydonotnecessarilyimpedeinvestment.Theupstreamoilandgassectorshowsthat,ifrevenuesareclear,investmentwillproceed,evenincountrieswithahigh-riskprofile.InMay2021,forinstance,anAustraliandeveloperofrenewableenergysystemssignedaUSD40billionmemorandumofunderstandingwiththegovernmentofMauritaniatobuildoneofthebiggestgreenhydrogenprojectsintheworld(Figure4.6).TheagreementwassignedeventhoughMauritaniahasalsoreceiveda“highwarning”labelonthefragilestatesindex(FundforPeace,2021).BOX4.3MITIGATINGVOLUMEANDPRICERISKINHYDROGENTRADE:LESSONSFROMTHEDEVELOPMENTOFTHELNGMARKETEarlyinitsdevelopment,theliquefiednaturalgas(LNG)industryfacedthesamedilemmaashydrogenexportersdotoday:howtomitigatethepriceriskforexportersandthevolumeriskforbuyers.Earlysupplyinthosemarketswenttoguaranteedoff-takersbasedonbilateral,long-termcontracts(twentyyearsormore)thathadthreekeycharacteristics(EnergyCharterSecretariat,2007).First,theyincluded“take-or-pay”clauses,bywhichbuyerswouldpayforminimumlevelsofnaturalgasregardlessofwhetherornottheywouldactuallyneedthem.Second,thecontractsadoptedasystemof“replacementvalue”pricing,underwhichthepriceofLNGwasnotbasedonthecostofproduction,transportation,profitmargin,andsoon–butwasinsteadlinkedtothepriceofcompetingfuels(generallyoil).Third,thecontractsincluded“destinationclauses”,whichpreventedthebuyerfromresellingpurchasedLNGtothirdparties.Asaresultoftheseconditions,earlyLNGtraderouteswereoftenreferredtoas“floatingpipelines”becausetheyinvolveddedicatedtankersshuttlingback-and-forthbetweenspecifiedLNGexportandimportterminals.Thisarrangementwasawaytosharerisk;itremovedthesecurity-of-supplyconcernsoftheLNGbuyerwhilegeneratinganacceptablereturnoninvestmentfortheLNGseller.Inrecentyears,theLNGtradehasbecomemuchmoreflexible,withgrowthintheuseofshort-termcontractsandspottrading.JapanplayedapioneeringroleinsettingupatradedLNGmarket.SinceitsfirstimportsofLNGfromAlaskain1969,Japanwasthelargestbuyerofthefuel(untilbeingovertakenbyChinainthefirsthalfof2021),anditshapedthestructureoftheLNGmarket.Priceindexingtotheso-calledJapancrudecocktailisnowastandardfixtureoftheAsianLNGmarket,whichisbyfarthelargestregionalLNGmarket(Koyama,2021).8604Trade,security,andinterdependenceTheHydrogenFactorFigure4.6Theworld’s20largestannouncedgiga-scalegreenhydrogenprojectsNote:Sizereferstoelectrolysercapacity.Informationbasedonannouncedplans.a.Estimatedelectrolysercapacitybasedonacomparisonwithsimilar-sizedschemes.Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.Mapsource:NaturalEarth,202112346587910111213141715162019181492015871331110191817161465122HyDealAmbition(67GW).................WesternEuropeUnnamed(30GW)..........................KazakhstanWesternGreenEnergyHub(28GW).......AustraliaAMAN(16GW)a.............................MauritaniaAsianRenewableEnergyHub(14GW)...AustraliaOmanGreenEnergyHub(14GW)a........OmanAquaVentus(10GW)........................GermanyNortH2(10GW).............................NetherlandsH2Magallanes(8GW)......................ChileBeijingJingneng(5GW)...................ChinaProjectNour(5GW)a.......................MauritaniaHyEnergyZeroCarbonHydrogen(4GW)a.AustraliaPaciﬁcsolarHydrogen(3.6GW)............AustraliaGreenMarlin(3.2GW)........................IrelandH2-HubGladstone(3GW)...................AustraliaMoolawatanaRenewableHydrogenProject(3GW)a–AustraliaMurchisonRenewableHydrogenProject(3GW)–AustraliaUnnamed(3GW)..............................NamibiaBaseOne(2GW)a.............................BrazilHeliosgreenFuelsProject(2GW)..........SaudiArabia12346587910111213141715162019181492015871331110191817161465122HyDealAmbition(67GW).................WesternEuropeUnnamed(30GW)..........................KazakhstanWesternGreenEnergyHub(28GW).......AustraliaAMAN(16GW)a.............................MauritaniaAsianRenewableEnergyHub(14GW)...AustraliaOmanGreenEnergyHub(14GW)a........OmanAquaVentus(10GW)........................GermanyNortH2(10GW).............................NetherlandsH2Magallanes(8GW)......................ChileBeijingJingneng(5GW)...................ChinaProjectNour(5GW)a.......................MauritaniaHyEnergyZeroCarbonHydrogen(4GW)a.AustraliaPaciﬁcsolarHydrogen(3.6GW)............AustraliaGreenMarlin(3.2GW)........................IrelandH2-HubGladstone(3GW)...................AustraliaMoolawatanaRenewableHydrogenProject(3GW)a–AustraliaMurchisonRenewableHydrogenProject(3GW)–AustraliaUnnamed(3GW)..............................NamibiaBaseOne(2GW)a.............................BrazilHeliosgreenFuelsProject(2GW)..........SaudiArabia87GeopoliticsoftheEnergyTransformationTherearelimitstothedegreeofriskaforeigninvestoriswillingtobear.Countriesinturmoil,whichmayhavesomeofthebestpotentialforhydrogenandderivatives(Rametal.,2020),areunlikelytotapthatpotentialinthenearfuturebecauseoftheimmenserisksofdoingbusinessinthemidstoftheirfragilepoliticalandsecurityconditions.TechnicalfailuresandpoliticaldisruptionsEnergysuppliescanbedisruptedbyvarioustypesoffailures–technical(failuresinequipmentorinfrastructure),human(errors,accidentsormalignacts),ornatural(hurricanes,earthquakesorfloods).Theconsequencesofsuchdisruptionsmaybemoresevereinthecaseofhydrogeninfrastructurebecausehydrogenhasuniquepropertiesthatrequirespecialhandlingforsafety.37However,thesafetyrisksassociatedwithhydrogenarewellunderstood,andnationalandinternationalstandards,protocolsandmeasurescanbeimplementedtomitigatethem.Anotherformofdisruptionoccurswhenstatesattempttoleverageenergytradeandinterdependenceasacoercivetoolforgeostrategicpurposes.Therearemultiplehistoricalexamplesofstatesmanipulatingenergyflows(exportboycottsorimportbans),energyprices(discountstoallies)orenergyinfrastructure(buildingnewoilandgaspipelines)toachieveforeignpolicygoals(VandeGraafandSovacool,2020).Mostsuchinstancesof“energystatecraft”havebeenassociatedwithcrudeoilandnaturalgas.Itcannotberuledoutthatfuturehydrogenexportsorimportscouldbesuccessfullyinstrumentalisedforpoliticalblackmailorextortion.Apreconditionforenergystatecraftistheexistenceofasymmetricindependence,asituationinwhichoneactorismuchmorevulnerabletobreakingtherelationshipthantheother–forexample,becauseitcanquicklyresorttoothertradingpartnersorbecauseitpossessessignificantbuffers(e.g.emergencystocks)(KeohaneandNye,2001).Intheearlydaysoftheinternationalhydrogentrade,thenumberoftradingpartnerswillbelimited,andbothsuppliersandcustomersarelikelytobelockedintobilateral,long-termcontracts.Anydisturbanceofimportsorexportswillbefelthardontheothersideowingtothelikelyabsenceofaliquidmarket.However,itisveryunlikelythatahydrogencartelwillemergesimilartohistoricalfossilfuelalliances,suchastheSevenSisters.Thepreconditionsforaneffectivecartelarethatthereshouldbearelativelysmallnumberofproducersthatcontrolasubstantialshareofthemarket;theymustbeabletosetandenforceproductionquotas,controlcapacityexpansionandlimittheentryofnewproducers.Moreover,short-termsubstitutesfortheproductinquestionmustbelimited.Theabsenceoftheseconditionshasblockedthecartelisationofgasmarkets(JaffeandSoligo,2006).Nonearelikelytobemetinthecaseofhydrogen.Hydrogencanbeproducedinmanyplacesintheworld.Itis,infact,amanufacturedproductratherthanarawmaterialorenergysource.Thismakesitimpossibletodeternewentryintotheindustry,akeyconditionforcartelformation.Moreover,manycountrieshavestatedtheambitiontobecomeexportersofhydrogenandderivedfuels,limitingthechancesofexportconcentration.37Hydrogenhasawiderangeofhighlyflammableconcentrations,andsomehydrogen-derivedcompoundsmayposehealthhazards.88cooperationtradeclimatesecuritysecurityrenewableH2policies203020502050standardsglobalcleanshippingpipelineH2equityprospectsprospectsfutureregionsregionstradepoliciesglobalnew20302030203020502050newnewnewfuturenewnewnewnewtradegreengreengreenshippinginternationalpolicieschangechangenewinnovationstradetradefuturefuturechangegreenrenewabledevelopmentdevelopmentregionsregionspipelinegreen©metamorworks/istockphoto.com04Trade,security,andinterdependenceTheHydrogenFactorAccesstocriticalrawmaterialsRawmaterialsareneededforhydrogentechnology(andseveralotherrenewableenergytechnologies)sothediscussionalsoexpandsto“materialsecurity”.Some30rawmaterialsareusedforfuelcellsandhydrogenstoragetechnologies(EuropeanCommission,2020b).Whilegeologicalsuppliesofmostmineralsandmetalsarepresentlysufficient,marketsareboundtotightenwithrapidlyrisingdemandandlongleadtimesinminingandrefiningprojects.Meanwhile,othertechnologiesmaycomealongtocompetewithhydrogenoveravailablequantitiesofcriticalmaterials.Evenifcountriesareabletoproducetheirownhydrogenandsoimproveenergyindependence,theymaydependonalimitednumberofcountriesfornecessaryrawmaterials.Technologicalinnovation,energyefficiency,recyclingandcirculareconomyconceptswillbecriticalinalleviatingconcernsovermineralandmetalbottlenecks.Rapidgrowthofhydrogenwillunderpinrisingdemandfornickelandzirconiumforuseinelectrolysersandplatinum-groupmetalsforfuelcells(IEA,2021g).Becausehydrogenwilltriggerincreaseddeploymentofrenewabletechnologieslikesolarandwind–andbecauseitwillgohandinhandwithstringingnewelectriclinesandinstallingbatteries–itwillalsoraisedemandforthemineralsusedinthosetechnologies.Differenttypesofelectrolysersandfuelcellshavedifferentmaterialrequirements.Alkalineelectrolysers,whichdominatethemarkettoday,relyonmaterialsthataregenerallydeemeduncritical,suchassteelandnickel(HyTechCycling,2020).Bycontrast,polymer-electrolytemembraneelectrolysersandsolid-oxideelectrolysersappeartoposemoreseriousproblemsofcriticalmaterialdependence.Platinumandiridium,usedinpolymer-electrolytemembraneelectrolysers,aretwoofthemostscarceandemission-intensivemetalsintheworld.Theirsupplyisalsohighlyconcentrated,withSouthAfricasupplyingover70%ofglobalplatinumandover85%ofglobaliridium(Figure4.7)(Minkeetal.,2021).Currentlynosubstitutesforiridiumareavailableorforeseen(Kiemeletal.,2021).89©Phawat/shutterstock.comGeopoliticsoftheEnergyTransformationOneofthemainusesofplatinumgroupmetalstodayisintheautomotiveindustry.Catalystsforinternalcombustionenginesusethreesuchmetals–platinum,palladiumandrhodium–tolimitsulphurdioxideandnitrousoxideemissions.Theriseofbattery-poweredelectricvehiclesreducesthisdemand.Theplatinumindustryhopesthattheriseofpolymer-electrolytemembraneelectrolysersandfuelcellscouldoffsetlostplatinumdemand.Solidoxideelectrolysers,whichareatlab-scaletoday,butpromiseefficienciesthatcouldreduceelectricityconsumption,faceevenlargerconcentrationofsupply;almost95%ofthecriticalmaterialsusedinsolidoxideelectrolyserscomeexclusivelyfromChina(Figure4.7)(IRENA,2020a).Thesameappliestosolid-oxidefuelcells.Itisimportanttonotethatthemarketsformanyofthesematerialsarenotliquidandareinelasticintheshort-term.Thismeansthatarelativelysmallchangeofsupplyanddemandcanresultinlargepricefluctuations.Thepast20years,forinstance,haveseenpricesfluctuatebyafactoroffourforplatinum,afactorof15forpalladium,andafactorof70foriridium(PlatinumMatthey,n.d.).Thesepricefluctuationscouldreverberatethroughhydrogensupplychainsandaffecttheoverallcostofkeypiecesofequipment,suchaselectrolysers,whilealsoaffectingtherevenuesforminersandrawmaterialexporters.90©Evgeny_V/shutterstock.com04Trade,security,andinterdependenceTheHydrogenFactorFigure4.7TopproducersofcriticalmaterialsinelectrolysersSource:IRENA(2020a).100%80%60%40%20%0YCeLaZrGdTaIrNiCoPtYttriumCeriumLanthanumZirconiumGadoliniumTantalumIridiumNickelCobaltPlatinumGermanyBrazilRwandaJapanCanadaCongoZimbabweRussiaSouthAfricaChinaFractionofglobalminingsupply(%)SouthAfricaRussiaZimbabweCongoChinaCanadaJapanRwandaBrazilAustraliaGermany91THEROOTCAUSESOFGEOPOLITICALINSTABILITY–ANDHYDROGEN’SROLEINADDRESSINGTHEMCHAPTER5GeopoliticsoftheEnergyTransformationIntoday’sinterconnectedworld,accountsofgeopoliticalchangemustgrapplewiththebroadandmultidimensionalnatureofglobalthreatsandvulnerabilities.Theconceptof“humansecurity”isoftenusedtodescribetherootcausesofgeopoliticalinstability.Lookingbeyondmilitarythreatstostatesecurity,thisconceptexpandsthesecurityagendatoincludenon-traditionalthreatssuchasclimatechange,povertyanddisease,whichcanunderminepeaceandstabilitywithinandbetweencountries.TheUnitedNationsGeneralAssembly(2012)hasendorsedthisprinciple,whichinformstheUnitedNations’workinareasrangingfrompeacebuildingtohumanitarianassistanceandsustainabledevelopment.The17SustainableDevelopmentGoals(SDGs)reflectthemultidimensionalnatureofhumansecurity.Dependingonhowitisdeveloped,hydrogencouldhavebothpositiveandnegativeeffectsonsustainabledevelopmentoutcomes(Figure5.1).05©PanchenkoVladimir/shutterstock.com9205Therootcausesofgeopoliticalinstability–andhydrogen’sroleinaddressingthemTheHydrogenFactorFigure5.1Expertviewsonhydrogen’simpactonselectedsustainabledevelopmentoutcomesby2050Source:IRENAexpertsurvey(Box2.2)AirpollutionClimatechangeEnergyaccessPeaceandsecurityJusttransitionNeutralNegativePositive5.1SOCIO-POLITICALTRANSFORMATIONSTheglobalenergytransitionhassocialandeconomicconsequencesthatcouldhavegeopoliticalrippleeffects.Tomaketheenergytransitionfairandinclusive,policymakersmustpayattentiontoitsimpactonjobsandindustrialdevelopment,aswellasitsinclusiveness.Ontheonehand,IRENAestimatesthatelectrolysersalonecoulddirectlyspurthecreationof2millionjobsworldwidefrom2030,outofaworkforcethatisexpectedtonumber137millionbythattime(IRENAandILO,2021).Ontheother,hydrogencouldbedisruptiveforcertainindustriesbyraisingtheriskofstrandedassets.Bluehydrogenissometimesportrayedasasafebet,becauseitallowsproducercountriestomonetisenaturalgasresourcesandpipelinesthatmightotherwisebecomestranded.Buttheexpectedcostreductioningreenhydrogencoupledwithstricterclimatemitigationpoliciesmeansthatinvestmentsinsupplychainsbasedonfossilfuels(blueorgrey)–especiallyassetsexpectedtobeinoperationformanyyears–mayendupstranded.IRENAexpectsgreenhydrogentoundercutbluehydrogenoncostsby2030(IRENA,2020a).Itmaydosoevensoonerinsomecountries,suchasChina,thankstoitscheapelectrolysers,andBrazilandIndia,thankstotheirinexpensiverenewablesandrelativelyhighgasprices(Figure5.2).932GeopoliticsoftheEnergyTransformationFigure5.2Countriesinwhichgreenhydrogencouldpossiblybecomecheaperthanbluehydrogen,byyearSource:BloombergNEF(2021d).Notes:FigureisbasedontheoptimisticalkalineelectrolysercostscenarioofBloombergNewEnergyFinance;one-to-onesizingofrenewableandelectrolysercapacity;and20-yeargaspriceoutlookaverages.Argentina20302029202820272026202520242023ChinaBrazilIndiaChilePhilippinesUnitedArabEmiratesUnitedKingdomUnitedStatesRepublicofKoreaAustraliaTurkeyMexicoMalaysiaSwedenCanadaIndonesiaSpainVietNamJordanThailandNetherlandsItalyGermanyFrancePolandJapan9405Therootcausesofgeopoliticalinstability–andhydrogen’sroleinaddressingthemTheHydrogenFactorAnotherriskofassetstrandingloomsattheend-usesegmentofthehydrogenvaluechain.Cleanhydrogenisexpectedtoplayanimportantroleinheavyindustriessuchassteel,cementandchemicals.Existingplantsinthesesectorshavetypicallifetimesof30–40years,withmostundergoingsignificantrefurbishmentduringtheirlifetimes(IRENA,2020b).Ifnewplantsandassetsarebuilttooperateonfossilfuels,theywilllockinbillionsoftonnesofgreenhousegasemissionsandriskbecomingstrandedinthejourneytonetzero.Withfewinvestmentcyclesleftbefore2050,itwillbecriticaltomaketheseplantsfuture-proof.Collaborationbetweenandamongcountrieswillbecrucialforthetimelydisseminationofcleantechnologies,especiallyforheavyindustryandtransport.Assistingdevelopingcountriesindeployinghydrogenprojectscouldhelplockout,ratherthanlockin,fossilfuels,forexample.Fortheirpart,industrialcountriesmaybebetteroffreplacingageinginfrastructurewithnetzerocompatiblesolutionsdesignedfortheeconomyofthefuture.Hydrogencanalsobepartofajusttransitionpackageandsupportbothindustrialdevelopmentandreconversion,includinginenergy-intensiveindustrialparksandports.Forexample,Iberdrola,aSpanishmultinationalelectricutilitycompany,hasbegunconstructingagreenhydrogenplantforindustrialuseinPuertollano,Spain,aformercoal-miningtown(Iberdrola,n.d.).ThePortofRotterdam,presentlyamajorhubforfossilfuels,hasoutlinedavisiontobecomeahubforcleanhydrogen,connectingittohigh-voltagecablestooffshorewindfarmsintheNorthSeaandestablishingnewtradingroutestoimporthydrogenandderivatives(PortofRotterdamAuthority,2020).©Igor-Kardasov/istock.com95GeopoliticsoftheEnergyTransformation5.2CLIMATECHANGE,WATERSTRESSANDFOODINSECURITYClimate-relatedsecurityrisksFormorethanadecade,climatechangehasbeenwidelyrecognisedasapotential“threatmultiplier”,exacerbatingexistingsourcesofconflictandinsecurity(UNGeneralAssembly,2009).The2015reportANewClimateforPeace,commissionedbytheGroupofSeven(G7)(Adelphietal.,2015)identifiessevencompoundclimate-fragilityrisksthatposeseverethreatstothestabilityofstatesandsocietiesinthedecadesahead(Table5.1).Theyrangefromincreasedlocalresourcecompetitionandvolatilefoodpricestomoreinsecurelivelihoodsandmigration.ThreatDescriptionLocalresourcecompetitionAspressureonnaturalresourcesincreases,competitioncanleadtoinstabilityandevenviolentconflictintheabsenceofeffectivedisputeresolution.LivelihoodinsecurityandmigrationClimatechangewillincreasetheinsecurityofpeoplewhodependonnaturalresourcesfortheirlivelihoods,whichcouldpushthemtomigrateorturntoinformalandillegalsourcesofincome.ExtremeweathereventsanddisastersExtremeweathereventsanddisasterswillexacerbatefragilesituationsandcanincreasepeople’svulnerabilitiesandgrievances,especiallyincountriesaffectedbyconflict.VolatilefoodpricesandsuppliesClimatechangeishighlylikelytodisruptfoodproductioninmanyregions,increasingpricesandmarketvolatilityandheighteningtheriskofprotests,riotingandcivilconflict.TransboundarywatermanagementTransboundarywatermanagementisfrequentlyasourceoftension.Asdemandgrowsandclimatechangeaffectsavailabilityandquality,competitionoverwaterusewilllikelyincreasepressureonexistinggovernancestructures.Sea-levelriseandcoastaldegradationRisingsealevelswillthreatentheviabilityoflow-lyingareasevenbeforetheyaresubmerged,leadingtosocialdisruption,displacementandmigration.Inaddition,disagreementsovermaritimeboundariesandoceanresourcesmayincrease.UnintendedeffectsofclimatepoliciesAsclimateadaptationandmitigationpoliciesaremorebroadlyimplemented,therisksofunintendednegativeeffectswillalsoincrease,particularlyinfragilecontexts.Table5.1SevenwaysinwhichclimatechangethreatensstabilitySource:Adelphietal.(2015).9605Therootcausesofgeopoliticalinstability–andhydrogen’sroleinaddressingthemTheHydrogenFactor38Hydrogen’sglobalwarmingpotentialovera100-yearperiodisestimatedtobe1.9-4.7,comparedto21.2-37.2formethane(FieldandDerwent,2021).Cleanhydrogenwillbeessentialtoachievingdeepdecarbonisationandavoidingrunawayclimatechange.Byreducingthethreatscausedbyclimatechange,itmaycontributetogeopoliticalstability.Theneedforgoodpolicyisparticularlyrelevantinthecaseofbluehydrogen,giventherisksofmethaneleakagesandthelackofstandardsoncarbondioxidecapturerates.Hydrogengascanindirectlycontributetoglobalwarmingwhenleakedintotheatmosphere,becauseitincreaseslevelsofmethaneandozone,themostharmfulgreenhousegasesaftercarbondioxide.Thiseffectshouldnotbeexaggerated,however.Theglobalwarmingpotentialofhydrogenover100yearsisestimatedtobelessthanafourththatofmethane.38Nevertheless,certificatesoforiginrootedinatransparentandcredibleinternationalsystemwillbecriticaltomonitorandmanagethecontributionofhydrogentoclimatechangeefforts.WaterstressWaterstressposesadirectthreattohumanandenvironmentalwell-being.Itcanalsodrivemassmigrationandsparkconflict.Theseconflictscaneruptatdifferentlevels,fromthecommunitylevel,wherelocalcommunitiesmaybeforcedtocompeteforscarcefreshwaterreserves,uptotheinternationallevel,intheformoftransborderconflicts(FAO,2020).Over2billionpeopleliveincountriesexperiencingwaterstress(UNESCO,2021).Theproblemisprojectedtoworsenbecauseofclimatechange,economicpatternsandpopulationgrowth.Hydrogenrequiressignificantamountsof(pure)waterasafeedstock.Astheeffectsofclimatechangecontinuetoexacerbatewaterstress,agrowingnumberofcountriesmayneedtoconsiderwhetherhydrogenproductionissuitableinthelongerterm.Theprojected409milliontonnesofgreenhydrogenneededby2050inIRENA’s1.5°Cpathwaywouldrequirearound7–9billioncubicmetres(m3)ofwaterayear–lessthan0.25%ofcurrentfreshwaterconsumption(WorldBank,n.d.-c).Moreover,thechoiceofproductionpathmatters,asgreenhydrogenhasasmallerwaterfootprintthanblue.SolarPVandwindtechnologiesaresignificantlylesswater-intensivethanthermalgenerationduringtheoperationalstage,thusfreeingupincreasinglyconstrainedwaterresources(IRENA,2015).Forinstance,IRENA’sanalysisofNationallyDeterminedContribution(NDC)commitmentsofChinaandIndiafindsthatscalinguprenewablepower,particularlysolarPVandwind,combinedwithimprovedcoolingtechnologies,couldreducethewaterwithdrawalintensityofelectricitygenerationby42%and84%by2030,respectively(IRENA,2018b;IRENA,2016b).IntheGulfCooperationCouncil(GCC)region,achievingrenewableenergydeploymenttargetsandplansby2030canreducewaterwithdrawalforpowerproductionandassociatedfuelextractionby11.5trillionlitres,a17%decrease(IRENA,2019b).©robert_s/shutterstock.com97GeopoliticsoftheEnergyTransformationInvestorshavesettheireyesonthelocationswiththebestsolarPVandwindresourcestodevelopgreenhydrogenprojects.Thecatchisthatsunnierlocationsalsotendtobethedriest.Morethan70%ofplannedelectrolyserprojectswillbeinwater-stressedregions,suchasAustralia,Chile,Oman,SaudiArabiaandSpain(Figure5.4).Asaresult,over85%oftheplannedgreenhydrogenprojectsmayneedtosourcewaterviadesalination(Rystad,2021).DesalinationofseawaterwouldaddUSD0.02–0.05tothecostofakilogrammeofhydrogen(Blanco,2021;CalderaandBreyer,2017).Andmostcommercial-scaledesalinationtodayispoweredbyfossilfuels.Figure5.3Waterconsumptionofhydrogenin2050comparedwithselectedsectorstoday(billioncubicmetres)Source:Blanco(2021).Notes:Figureconsidersonlywaterconsumption,notwaterwithdrawals.Withdrawalscoverwaterthatisdirectlyreturnedtothebodyofwaterfromwhichitwastaken.Consumptioncoversanywaterthatisconvertedintoanotherformorisnotreturnedtotheoriginalbody.Althoughmostwatercanberecoveredwhenhydrogeniscombustedorusedinafuelcell,itisnotgenerallyreturnedtotheoriginalbodyofwaterandwillbeconsideredtobeconsumed(Beswick,OliveiraandYan,2021).AgricultureIndustrialMunicipalDesalinationproduction(2018)Hydrogenproduction(2050)2769m3464m3768m334.7m324.8m329805Therootcausesofgeopoliticalinstability–andhydrogen’sroleinaddressingthemTheHydrogenFactorFigure5.4HeatmapofwaterstresslevelsSource:BasedonRystadEnergyRenewableCube(2021).Mapsource:NaturalEarth,2021Disclaimer:Thismapisprovidedforillustrationpurposesonly.BoundariesshownonthismapdonotimplyanyendorsementoracceptancebyIRENA.HighMediumLowGreenhydrogencanrepresentanopportunitytoimprovewatersecurity.Desalinationcanbecostlyforsectorslikeagricultureorsmallindustries,makingwatersupplycritical.Desalinationforgreenhydrogenadds1–2%toenergyconsumptionandthecostofproduction,wheretheelectricityconsumedisthedeterminingfactor.Thus,greenhydrogencouldgiveaspurtothedesalinationindustry,resultinginamassivescale-upofdesalinationcapacity.Thiscouldalsoincreasethesupplyoffreshwaterforotherpurposesbeyondelectrolysis,ordrivedownthecostofdesalination(IRENA,2020a).Itshouldbenoted,however,thatdesalinationplantsproducebrineenrichedwithsaltandchemicals,soecologicaleffectscouldarisefromitsreturntothesea.99GeopoliticsoftheEnergyTransformationConflictsoverlandandfoodHydrogenisusedtoproducealloftheworld’sindustrialammonia.Ammoniaisthemainingredientinsyntheticfertilisers,whichaccountforasignificantpartoftheworld’scropyields.Thesehydrogen-basedfertilisersnowsupportapproximatelyhalftheglobalpopulation(Ritchie,2017).Withouthydrogen,agriculturalproductivitywouldplummet,jeopardisingfoodsecurityformillionsofpeople.Currently,thereisnorealalternativetousinghydrogentoproducesyntheticfertiliser,andhydrogenisgenerallysourcedfromnaturalgasandcoal,withoutcarboncaptureandstorage.Theexpectedboomincleanhydrogencouldthuscontributetothedecarbonisationoftheglobalfoodsupplychain.Totheextentthatitincreasesthesupplyofhydrogenonthemarket,itcouldalsobolsterglobalfoodsecurity.TheseeffectscouldbeespeciallyrelevantforSub-SaharanAfrica,wherefertiliserconsumptionwaslessthan20kilogrammesperhectare(kg/ha)in2018–twotothreetimeslessthanrequiredtomeettheneedsoftheagriculturalsector(WorldBank,n.d.-d).Inadequateuseoffertiliserresultsinthedepletionofsoilnutrients,lowagriculturalproductivityandlessarablelandpercapita.AmmoniaonthecontinentislargelyproducedfromnaturalgasconcentratedinAlgeria,EgyptandNigeria.However,ammoniacanalsobecompetitivelyproducedfromsolarandwind,withprojectsannouncedinEgypt,Mauritania,MoroccoandNamibia(Box3.2).Settingprioritiesisalsovital,asdomesticneedsshouldbemetbeforecountriesexportammonia.©Niwatpanket/shutterstock.com©fotojog/istock.com10005Therootcausesofgeopoliticalinstability–andhydrogen’sroleinaddressingthemTheHydrogenFactorTheadventofcleanhydrogencouldalsoaffectglobalfoodprices.Imposinggreenhydrogenquotasonfertiliserproducers–asIndiaisplanningtodo–mayhelpscaleupgreenhydrogenproduction.Theimpactonfoodsecurityshouldbecarefullymonitored,however.Thecostofnaturalgascurrentlyrepresents60–80%ofthevariableinputcostsofproducingnitrogenfertilisers(EuropeanCommission,2019).Whenthepriceofgasswings,fertiliserpricesfollow.Thiseffectwasonfulldisplayinthefallof2021,whenasurgeinnaturalgaspricesforcedafewfertilisermanufacturersinEuropetoscalebacktheiroutputpartiallyorcompletely(Thapliyal,2021).Regardingtheimpactonland,therearesomelimitationsondeployinglarge-scalerenewables-basedelectrolysisinstallationsincertainareas,suchasareaswithhighpopulationdensitiesorcompetingactivitiesorfunctions(e.g.agricultureorprotectedareas).However,themostsignificantimpactonlandwillcomefromthevastwindandsolarPVfarmsthatneedtobebuilttosupplytherequiredamountsofrenewableelectricityandgreenhydrogen.OneprojectinAustralia,theWesternGreenEnergyHub,willcoveranareaof15000km2–roughlyhalfthesizeofBelgiumorLesotho–toproducegreenhydrogenandammoniaforexport.Theriskofcompetinglandusescanbereducedifrenewableinstallationsaredevelopedinunpopulateddesertregionsandoffshoreblocks,asisthecasewiththeNourwind-solar-hydrogenprojectinMauritania,whichcouldspurthedevelopmentofAfrica’sfirstoffshorewindfarm(Collins,2021b).©Ecopix/shutterstock.com101GeopoliticsoftheEnergyTransformation5.3HYDROGENANDTHEDEVELOPINGWORLDManycountrieshavelonglivedundertheassumptionthatthecheapestandmostaccessibledevelopmentrouteispavedwithfossilfuels,particularlycoal.Coalsuppliesoverone-thirdofpowergloballyandplaysakeyroleinindustriessuchasironandsteel.Forseveralrapidlydevelopingcountries,coalhasbeenthefuelunderpinninggrowthratesoverthepastyearsanddecades.InChina,forexample,coalaccountedfor61%oftotalpowergenerationin2020,andinIndia,71%ofthepowersupplyisdependentoncoal(Ember,n.d.-a;Ember,n.d.-b).Energy-intensiveindustrieslikecement,steelandchemicalsremainweddedtofossilfuels.Overthepastdecade,theadventofcheaperrenewableshasbeguntochallengetherelianceon20th-centuryfuels.ThefallingcostsofrenewabletechnologieslikesolarPV,windandbatteriesareopeninganewdevelopmentpathway.Renewablesarenowthecheapestformofelectricitygeneration,beating61%ofexistingcoal-firedpowerplantsoncostwithoutfinancialsupportin2020(IRENA,2021e;Lovins,2021a).Asaresult,thedevelopingworldnowhasauniquechancetoleapfrogfossilfuelsinthepowersystem.Severalcountrieshavealreadydonesoorareonthecuspoftiltingtowardsrenewablestosupplyallornearlyallofthegrowthinelectricitydemand(Bondetal.,2021).Thereisnoreasontobelievethatleapfroggingoverfossilfuelswillbeconfinedtotheelectricitysector.Forinstance,countriesandregionscanturndirectlytoelectricmobility,asIndiaandAfricahavewithtwo-andthree-wheelerelectricvehicles.Cleanhydrogencanexpandthesuiteofoptionstoenableleapfroggingacrossmanysectors.Manydevelopingcountrieshavedecadesofexperiencewithhydrogen,ifonlyasafeedstockforammoniaproductionforfertilisers.Afewcountriesareseizingopportunitiestopilothydrogenprojectsinnewsectors.Indonesia,SouthAfrica,andTrinidadandTobagoarestartingtodeploymethanol-orammonia-basedfuelcellsfortelecomtowers,oftenreplacingdieselgeneratorsforbackupsystems(Romer,2011).China,CostaRicaandMalaysiahaveintroducedfuel-cellbuses(DeSisternes,FernandoandJackson,2020).Indiaisconsideringmandatingrefineriesandfertiliserplantstousesomegreenhydrogen(Verma,2021).©PJ66431470/istock.com10205Therootcausesofgeopoliticalinstability–andhydrogen’sroleinaddressingthemTheHydrogenFactorDevelopingcountriesstillneedtobuilduptheirinfrastructure,includingroads,houses,schools,factories,seweragesystemsandpowersystems.Doingsorequiresagreatdealofenergyandemission-intensivematerials,whichareoftenimported.Fulfillingtheseneedswillmultiplythebenefitsofleapfrogging.Cleanhydrogencanoffernewindustrialopportunitiesfortheproductionanduseofcommodities,suchasgreensteel.Evensomeofthepoorestcountriesintheworldmaybeabletoexploittheirrenewableenergypotentialtoproducegreenhydrogenlocally,generatingeconomicopportunitiesandincreasingenergysecurity.Suchpotentialcanberealisedonlythroughaninternationalefforttochannelresources,sharetechnologiesandtransferknow-how.Theentireworldstandstobenefitfromthedeploymentofhydrogenindevelopingcountriesandemergingeconomiesifithelpsreducegreenhousegasemissionsandcontributestolocaldevelopmentandeconomicgrowth.Sincetheturnofthemillennium,energyconsumptionofthedevelopingworldhasalmostdoubled;developingcountriesandemergingeconomiesnowaccountformorethanhalfofglobalenergydemand(BP,2021),39eventhoughtheirpercapitaconsumptionisstillwellbelowthatofdevelopedcountriesandmillionsofpeopleinthesecountriesstilllackaccesstobasicenergyservices.Forthetimebeing,however,energytransitiontechnologiesarefartooexpensiveformanydevelopingcountries.Therefore,thegapbetweentherichworld,whichcanaffordresearch,developmentanddeploymentofcleanhydrogen,andthepoorerworld,whichcannot,mayincreasebeforeitnarrows,standinginthewayofafairandjustenergytransition.Assistingdevelopingcountries–particularlytheleastdeveloped–todeployhydrogentechnologiesearlyoncouldpreventthewideningofaglobaldecarbonisationdivide.Accessto(patented)technology,training,capacitybuildingandaffordablefinancewillbekeytorealisingthefullpotentialofhydrogentodecarbonisetheglobalenergysystemandcontributetoequityandstability.Thisisnotonlyamatteroffairness.Adiversehydrogenmarketcreatesnewopportunitiesfortradeandco-operation,reducingsupplychainrisksandimprovingenergysecurityforall.39BasedonprimaryenergyconsumptiondataforOECDandnon-OECDcountries.©marchmeena29/istock.com103POLICYCONSIDERATIONSANDTHEWAYFORWARDCHAPTER6TheGlobalCommissionontheGeopoliticsofEnergyTransformationstatedinits2019reportthattheworldtoemergefromtherenewableenergytransitionwillbeverydifferentfromtheonebuiltonfossilfuels(IRENA,2019a).Italsonotedthattheprecisescopeandpaceoftheenergytransformationcouldnotbepredicted.Theriseofhydrogenexemplifiesthispoint.Afewyearsago,hydrogenwasconsiderednicheintheglobalenergydiscourse.Today,itisacentralfocusofdecarbonisationstrategiesforharder-to-abatesectors,withagrowingnumberofcountriesandindustriesbettingonitswidespreaduse.Manyaspectsoftheenergytransitionarestillevolving.Theshareofrenewableenergyisgrowing,withtheresultingsystemicchanges.Significantelectrificationofend-useisalreadyreshapingdemandinsizeandscope.Theeventualroleofhydrogenisyettobedetermined,withthebulkofitstillproducedwithfossilfuels.Greenhydrogenproductionissettothrive,butalsoinlocationsotherthantoday’soilandgasfields.Differenteconomic,social,environmental,andgeopoliticalimplicationsmayemerge,ashydrogenmarketsdevelop.Despitemanyunknowns,hydrogendeploymentshouldmakesignificantinroadsby2030inaquestforadecarbonisedenergysystemby2050.Someoftheconsiderationstoinformpolicymakingaretouchedonbelow.06©northlightimages/istockGeopoliticsoftheEnergyTransformation104Hydrogenispartofamuchbiggerenergytransitionpicture,anditsdevelopmentanddeploymentstrategiesshouldnotbepursuedinisolation.Countriesshouldcarefullyassesshowhydrogenfitsintotheiroveralleconomic,social,environmentalandpoliticalstrategies.Amongthefactorscountriesmustponderastheystrivetopositionthemselvesinthenewenergyeconomyarethematurityoftheirenergysector,thecurrentlevelofeconomiccompetitiveness,andthepotentialsocio-economiceffectsofeachchoicetheymake.Forexample,acountrywithgoodrenewableenergyresourcesandcheapelectricitymaywellchoosetouseelectrolysistomakegreenhydrogencostcompetitive.Inothercases,policymakersmayseemorevaluefocusingonothertechnologiesunderpinningtheenergytransition(IRENA,2020b).Theenergytransitionisdiversifyingsuppliers,supplyroutesandthetypesofenergycarriersavailableforimport.Asaresult,plansandinvestmentsforinfrastructurewillhavetobecarefullyassessed,giventhatthesedecisionsarelong-livedandtherisks(andcosts)ofstrandedassetsarehigh.Pipelineinfrastructure,forexample,shouldbeamenabletorepurposingtocarrygreengasessuchashydrogenandbiomethane.Andthetechnicalchallengesandeconomiccostsofsuchrepurposingshouldbeaccountedforfromtheoutset.Settingtherightprioritiesforhydrogenusewillbeessentialforitsrapidscale-upandlong-termcontributiontodecarbonisationefforts.Globaleffortsshouldfocusontheapplicationsthatprovidethemostimmediateadvantagesandenableeconomiesofscale,particularlyinthenearterm.Initsearlydays,hydrogentradewilllikelybeshapedaroundbilateralarrangementsthatcarrytheriskofdefaultbyoneortheotherparty.Prioritisinghigh-demandapplicationsforwhichhydrogenisclearlythebestalternativeismorelikelytobecost-effectiveandlesssusceptibletotherisksassociatedwithnascentmarkets.Oneexamplecouldbesupportingandthenacceleratingashifttogreenhydrogeninindustrialapplicationswherehydrogenisalreadyused,suchasrefiningandtheproductionofammoniaandmethanol(IRENA,2020b).Theelectricitygeneratedfromrenewablesourcesforproductiveusesshouldbeprudentlyassessedbeforedivertingtoproducegreenhydrogen(IRENA,2020b).Otherwise,theindiscriminateuseofgreenhydrogencouldslowdowntheenergytransitionandpossiblydrawmorefossilfuelsbackintothepowermix.Failuretofollowtheprincipleofadditionalitycouldalsoimpedeprogresstowardexpandingaccesstoenergytothosewholackittoday,ifcountriesprioritisedeploymentofrenewablesforgreenhydrogenexport.TheHydrogenFactorPolicyConsiderations105Internationalco-operationwillbenecessarytodeviseatransparenthydrogenmarketwithcoherentstandardsandnormsthatcontributetoclimatechangeeffortsmeaningfully.Cleanhydrogencanbeanimportantpartofthedeepdecarbonisationpuzzleand,inturn,maycontributetogeopoliticalstabilitybyexpandingpositiveeconomicandpoliticalopportunitiesforcountriesandregionsandminimisingclimaterisksandlosses.Buttherearerisksofcarbonlock-inifhydrogenstrategiesprolongfossilfueldemandandsupplyandhinderenergyefficiencyandelectrification.Concerningbluehydrogen,anagreedthresholdforcarboncaptureandmethaneemissionswillbenecessarytoensurethatbluehydrogenmakesameaningfulcontributiontodecarbonisation.Transparencyinhowemissionsaredeterminedwillbeessentialfortheproperfunctioningofaninternationalhydrogenmarket.Thesuccessofcleanhydrogenmarketshingesupontheabilitytosetcoherentandtransparentrules,standardsandnormstofacilitateitsdeploymentacrosscountries,regionsandsectors.Shapingthesecouldbeanarenaforgeopoliticalcompetition,butmuchcanbegainedwithstronginternationalco-operationandconstructivepoliticalandeconomicengagement.IRENAprovidesausefulglobalumbrellaforsuchco-operationthroughitsCollaborativeFrameworkonGreenHydrogen.Supportingtheadvancementofrenewableenergyandgreenhydrogenindevelopingcountriesiscriticalfordecarbonisingtheenergysystemandcancontributetoglobalequityandstability.Adiversehydrogenmarketwouldcreatenewopportunitiesfortradeandco-operation,reducesupplychainrisks,andimproveenergysecurityforall.Theabilityofcountriestoturnrenewablepotentialintoenergyproductiondependsonthecapacitytomanufactureneededequipmentandtheintellectualpropertythatunderpinsinnovation.Presently,themanufacturingcapacityisconcentratedinafewcountries.Byimplication,mostcountriesdependonequipmentimportsfromarelativelysmallsetoflocations.Intheinterestofgeopoliticalstabilityandajustenergytransition,futureimportersshouldpromotediversificationbyenablingrenewable-richcountriesinthedevelopingworldtosetuplocalvaluechainsandjob-creatinggreenindustries.Accesstotechnology,training,capacitybuildingandaffordablefinancewillbevitaltorealisingthefullpotentialofhydrogentodecarbonisetheglobalenergysystemandcontributetoglobalequityandstability.©peshkov/istockGeopoliticsoftheEnergyTransformation106Geopoliticalriskscanbemitigatedbyreducingunnecessaryenergyconsumptionacrossmanyfinaluses.Makingtheshifttoatrulysustainableindustryisnotsimplyaboutswitchingenergysources,butalsoaboutdevelopingefficientwaysofusingenergyfairlyandequitably.Thisinvolvesreducingunnecessaryenergyconsumptionacrossmanyfinalusesandchangingthesystemthatisbasedoncontinuouslyincreasingconsumption.Forexample,inashifttoadecarbonisedenergysystem,countriesmaywellproducehydrogentoimprovetheirenergyindependencebutstilldependonalimitednumberofcountriesformaterials.Innovation,efficiency,recycling,andcirculareconomycanallhelpalleviateconcernsovermineralandmetalbottlenecks.Butreducingdemandwillbeessentialformaterialsecurityinthelongrun.Policymakersshouldconsiderbroaderimpactsofhydrogendevelopmentonsustainabledevelopmenttoensurepositive,long-lastingoutcomes.Theconceptof“humansecurity”isoftencitedasoneoftherootcausesofgeopoliticalinstability.Asdevelopedinthe2030Agendaandthe17SustainableDevelopmentGoals,theconceptexpandsthesecurityagendatoincludethreatssuchaspovertyanddisease,whichcanunderminepeaceandstabilitywithinandbetweencountries.Dependingonhowitisdeveloped,hydrogencouldpositivelyornegativelyaffectsustainabledevelopmentoutcomes.Forexample,fromatechnicalperspective,waterrequiredforhydrogenuseisgenerallynotperceivedasabarriertoitsdeployment.However,climatechangeismultiplyingwaterrisksinlocationscurrentlyseenaspromisinghydrogenproductionsites.Agreaterunderstandingofthemultidimensionalnatureofglobalthreatsandvulnerabilitieswillmakeitpossibletoforeseeanddefusecertainrisksthatmaycomewiththedeploymentofhydrogenonamajorscale.Governmentshaveauniqueopportunitytodaytoshapetheadventofhydrogen,avoidtheflawsandinefficienciesofcurrentsystems,andinfluencegeopoliticaloutcomes.Itisevidentthatincreasedadoptionofhydrogentechnologieswilldisruptcertaineconomicandpoliticalalliancesandpartnerships.Ifpursuedwithduecareandcaution,thissuiteofenergytechnologiesalsoofferstheopportunitytodemonstratethepositiveforcesofdisruption,enhancingnationalandregionalsovereignty,resilience,andco-operation.Experiencefromtheuseoffossilfuelsmaybeinstructiveastheraceforcleanhydrogenaccelerates.Policymakerscanalsodrawearlylessonsfromtrailblazersinthehydrogensectorandreplicatetheirsuccessfulpractices.Aboveall,internationalco-operationwillbeessentialtoeffectivelynavigatetheunknowns,mitigaterisksandovercomeobstaclesintheyearsahead.TheHydrogenFactorPolicyConsiderations107REFERENCESAbad,A.V.andP.E.Dodds(2020),“Greenhydrogencharacterisationinitiatives:Definitions,standards,guaranteesoforigin,andchallenges”,EnergyPolicy,Vol.138,111300.Adelphi,InternationalAlert,WoodrowWilsonInternationalCenterforScholars,andEuropeanUnionInstituteforSecurityStudies(2015),ANewClimateforPeace:TakingActiononClimateandFragilityRisks.ADNOC(2021a),“ADNOCandthreeJapanesecompaniestoexplorehydrogenandblueammoniaopportunities”,AbuDhabiNationalOilCompany,AbuDhabi,www.adnoc.ae/en/news-and-media/press-releases/2021/adnoc-and-three-japanese-companies-to-explore-hydrogen-and-blue-ammonia-opportunities.ADNOC(2021b),“ADNOCandPETRONASsigncomprehensivestrategicframeworkagreement”,AbuDhabiNationalOilCompany,AbuDhabi,www.adnoc.ae/en/news-and-media/press-releases/2021/adnoc-and-petronas-sign-comprehensive-strategic-framework-agreement.ADNOC(2021c),“ADNOCandKorea’sGSenergyexploreopportunitiestogrowAbuDhabi’shydrogeneconomyandcarrierfuelexportposition”,AbuDhabiNationalOilCompany,AbuDhabi,www.adnoc.ae/en/news-and-media/press-releases/2021/adnoc-and-koreas-gs-energy-explore-opportunities.AfricanHydrogenPartnership(2019),GreenAfricanHydrogenOperationalPlanning,www.afr-h2-p.com/documents,(accessed13January2022).Agora(2021),12insightsonhydrogen,AgoraEnergiewendeandAgoraIndustry,www.agora-energiewende.de/en/publications/12-insights-on-hydrogen-publication/.Amelang,S.(2020),“EuropevieswithChinaforcleanhydrogensuperpowerstatus”,CleanEnergyWire,www.cleanenergywire.org/news/europe-vies-china-clean-hydrogen-superpower-status.Aramco(2020a),“Aramcocompletesitsacquisitionofa70%stakeinSABICfromthePublicInvestmentFund(PIF)”,www.aramco.com/en/news-media/news/2020/saudi-aramco-completes-acquisition-of-70-percent-stake-in-sabic.Aramco(2020b),“World’sfirstblueammoniashipmentopensnewroutetoasustainablefuture”,www.aramco.com/en/news-media/news/2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