After several decades of ups and downs, many would agree that today green hydrogen is here to stay. Current plans to scale up and reduce the cost of green hydrogen in the EU, United States, or India underline that green hydrogen is about to step out of the niche and into the limelight on the world stage of the energy transition. The sheer explosion of dedicated reports and news articles lay testimony to the possibility that the hype might become real. However, green hydrogen still remains a small niche since fossil-fuel-based hydrogen dominates global production at about 95% and is significantly cheaper. But in the light of looming decarbonization needs and an ongoing energy crisis triggered by the war in Ukraine, green hydrogen might soon challenge the dominance of fossil fuels, especially natural gas.
This newfound taste for greening hydrogen is particularly strong in European countries. So far, the member states of the EU have reduced their dependence on Russian oil and gas in record time in an almost miraculous way. While this is good news for now, addressing the demands of a cheap-energy-hungry heavy industry and calming constituents increasingly fed up with energy price hikes requires substantial efforts. Here, green hydrogen has become one seemingly well-fitting solution to the European energy security puzzle.
Defining the pieces of the energy security puzzle
Solving this puzzle requires the right strategy and partners who can supply the large quantities of green hydrogen needed. Bloomberg recently reported that the green hydrogen market could reach a size of USD 8,120.8 Million by 2030. This considerable market opportunity is driven by plans of the European Commission to increase the amount of green hydrogen supplied across all relevant sectors to 20 Megatons (Mt) of hydrogen per year, by 2030. But to replace the about 27 billion cubic meters (bcm) of natural gas needed by European industries in 2030 is a significant challenge as they produced about 7 Mt of hydrogen mostly made from natural gas in 2022. Adding to the challenge is the Commission’s plan to import about half of the 20 Mt of hydrogen, which makes the search for reliable and capable partners a pressing issue.
In order to seize the opportunity on offer, many countries in the Global South have entered partnerships or joined green hydrogen networks. In 2022, the Renewable Energy Policy Network (REN21) reported that 38 countries already had policies in place or were currently working on a green hydrogen strategy. One notable initiative is the Green Hydrogen Alliance, which comprises African countries, including Egypt, Morocco, South Africa, Kenya, Mauritania, and Namibia. The alliance currently acts as a collaboration platform to build bridges within Africa and with the Global North. Although still at an early stage, it could be a critical forum for advancing the deployment of a green hydrogen infrastructure to meet the regional and possibly even global energy demand.
Searching for partners to make hydrogen imports and exports green and equitable
As green hydrogen projects are taking shape, the role of green hydrogen and partnerships between the Global North and South is increasingly criticized. Advocates favoring electrification argue that green hydrogen presents only a second-best solution to making green electricity cheap and widely available. A second point of criticism is the lack of a clear science-based definition of what ‘clean’ hydrogen means and the absence of discussion about safety aspects in the development of a hydrogen economy. Another contentious issue is the high demand for renewable energy to produce green hydrogen and the associated impact on local economies in the Global South in terms of energy, land, and material requirements. Finally, a fourth line of criticism sees an emerging ‘green colonialism’ leading to hydrogen injustices as a result of the interplay of global hydrogen governance and local economic and political conditions in the Global South.
The Green Hydrogen Alliance shows that such criticism reflects political realities in the Global South. While the Egyptian government is eager to attract international investments in hydrogen production, transparency and oversight on activities by its state-owned enterprises (SOE) are limited. Here, green hydrogen might become a tool for the government to attract more Western investment and political support despite local justice issues. Morocco’s attractiveness as a potential green hydrogen exporter is overshadowed by ongoing regional political conflict about the status of Western Sahara, where green hydrogen exports could become a potential political bargaining chip. At the same time, European energy security interests could override local energy needs in the light of European finance dictating an export orientation for Moroccan suppliers. South Africa aims to build inclusive institutions to channel international climate finance and attract technical assistance to develop a green hydrogen industry. But it remains unclear how political commitment can be translated into concrete benefit sharing given the country’s weak institutions and continued dependence on fossil fuels.
Building better green hydrogen partnerships between North and South
As green hydrogen is moving from being ‘the next big thing’ in decarbonization to the messiness of actual project implementation, it becomes crucial to design partnerships that avoid the mistakes from the past. In an upcoming study on Egypt, Morocco, and South Africa, we found that all countries were lacking resources and institutional frameworks to safeguard mutual benefits. Also, the institutional frameworks to accommodate the increasing interest in green hydrogen are still in flux and require additional efforts to assure local benefits. In light of earlier evidence from oil and gas industries, it is necessary to first establish institutions that can cope with the fair distribution of hydrogen rent and second to establish some degree of oversight through external audit bodies or parliamentary oversight committees. However, institutional change might prove to be hard in light of elite corruption and political rent-seeking in hybrid and authoritarian regimes such as Egypt and Morocco.
The difficult realities of concluding partnerships and projects in the Global South should not lead to a focus only on financial and technical feasibility but also require effective safeguards on the sharing of benefits. Another important consideration is that concrete safeguards are crucial to ensure that political conflicts, as in the case of Morocco or Egypt, do not further destabilize regional energy security. The example of Western Sahara and access to water along the Nile show that ignoring problems on the doorstep of the European Union does not lead to greater energy security but could come at the cost of leaving all involved parties worse off in the long run.
Based on the findings of our study, we have developed several recommendations. One of these is to establish clear policies and definitions for green hydrogen sourcing and tracking. Clear supply chain governance guidelines covering aspects of production and trade are critical and have some precedence in the Guidelines for Multinational Corporations issued by the OECD or in the anti-slavery laws in the UK and the Netherlands. A second recommendation is to establish Access and Benefit Sharing (ABS) mechanisms as part of partnerships to ensure the sharing of costs and benefits in building green hydrogen supply chains among stakeholders. Here, for instance, valuable lessons could be learned from existing international agreements governing access and benefit sharing of biological resources. Furthermore, it will be critical to gradually phase out fossil fuel subsidies and harness climate finance to create a level playing field for green hydrogen. A last recommendation is to introduce guaranteed prices and preferential tariff regimes for green hydrogen imports from the Global South to avoid a global race to the bottom in the green hydrogen space, especially in light of likely future competition between the United States, Australia, and countries in the Global South.
If partnerships are not designed well enough to ensure mutual benefit, this could pose serious risks to the global energy transition. Diverting green electricity to green hydrogen exports could seriously impede progress in the struggle for access to clean and universal energy in the Global South, while further cementing existing social and political inequities. Although green hydrogen is seen by some as the silver bullet to solving the problem of global energy security and decarbonization, we still need to better understand what is achievable within the tightening time frame dictated by climate change. Now is the right time to learn lessons from past injustices in extractive industries and to avoid a new ‘hydrogen colonialism’ that repeats past mistakes and puts ‘the race to net zero’ in jeopardy.
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