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Carbon, wholesale power markets could boost Middle East hydrogen: Alcazar

Highlights

CO2 price could build blue hydrogen scale

Power market role in building grid capacity

Middle East potential low-cost hydrogen exporter

Carbon pricing, a wholesale power market and the development of hydrogen and ammonia trading hubs could incentivize low-carbon hydrogen investment in the Middle East, Alcazar Investment Management said this week in a report.

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The region already has a competitive advantage, Alcazar said in the report, published Nov. 22, with low-cost land and capital, industrial capacity and strong renewable power resources, as well as good access to growth markets, low-cost natural gas and potential for carbon capture and storage.

"Gulf Cooperation Council members and industry leaders need to establish clear policy objectives that would enable them to take part in the low-carbon hydrogen economy at an early stage," Alcazar said.

A carbon pricing mechanism could encourage the scaling up of blue hydrogen production, produced from fossil fuels with CCS, it said.

And a wholesale power market could encourage the investment needed to support the massive buildout of renewables needed for large-scale green hydrogen production by electrolysis.

Hydrogen pricing

S&P Global Platts launched new low-carbon hydrogen assessments in the Middle East on Nov. 22, as the region strives to become a major exporter of the energy carrier.

Initial prices showed the Middle East amongst the cheapest producers of renewable hydrogen in the world, second only to Australia in markets assessed by Platts.

The assessments track three production pathways in Oman, Saudi Arabia, Qatar and the UAE.

The lowest price on Nov. 23 was $2.62/kg, for alkaline electrolysis in Qatar.

This compared with $12.84/kg in potential demand centers in Europe (Netherlands) Nov. 22 and $10.17/kg in Japan Nov. 23.

"The launch of hydrogen assessments in the Middle East reflects the importance of the region as a potential key hub for the production of hydrogen and its derivates such as ammonia as part of the energy transition," Platts Hydrogen & Ammonia Pricing Specialist Anton Ferkov said.

Announced projects in Saudi Arabia, the UAE and Oman are set to produce 3 million mt/year of hydrogen in the 2030s, according to S&P Global Platts Analytics, with Oman's 14-GW Al Wusta and Saudi's 4-GW NEOM projects among the world's most ambitious to date.

And the UAE made a bold statement at the UN Climate Change Conference in Glasgow earlier in November, targeting a 25% share of the global clean hydrogen market by 2030.