{"id":581299,"date":"2023-02-07T00:00:00","date_gmt":"2023-02-07T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/europe-could-be-our-biggest-green-hydrogen-export-market-what-needs-to-happen-to-get-trading-off-the-ground\/"},"modified":"2023-02-07T00:00:00","modified_gmt":"2023-02-07T00:00:00","slug":"europe-could-be-our-biggest-green-hydrogen-export-market-what-needs-to-happen-to-get-trading-off-the-ground","status":"publish","type":"goinggreen","link":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/europe-could-be-our-biggest-green-hydrogen-export-market-what-needs-to-happen-to-get-trading-off-the-ground\/","title":{"rendered":"Europe could be our biggest green hydrogen export market: What needs to happen to get trading off the ground?"},"content":{"rendered":"

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<\/span>Europe would be our biggest green hydrogen export market. What needs to <\/span>happen for us to get there? <\/span>The global green hydrogen industry is \u201centering hockey stick territory: the point where it sees a sudden and sharp turn upward,\u201d according to low carbon industries researcher <\/span>BloombergNEF<\/a><\/span>. The big three economies \u2014 the EU, US, and China \u2014 are set to drive that demand growth as they look to secure green power supply, and are busy building supply chains and infrastructure to accommodate the anticipated green hydrogen boom. Meanwhile, our abundant renewable generation potential and proximity to Europe is already attracting pledges of major investment from global firms to build local green hydrogen facilities for export to the EU. So what needs to happen to get green hydrogen flowing from here to Europe?<\/span><\/p>\n

REFRESHER- Green hydrogen + green ammonia: <\/span> When hydrogen is combusted with <\/span>oxygen in a fuel cell it produces zero-carbon energy, making for an environmentally-friendly burn. However, the vast majority of hydrogen produced globally today is derived from fossil fuels \u2014 some <\/span>96%<\/a><\/span> of the hydrogen consumed in Europe comes from natural gas. There is another way: Hydrogen can be produced by passing an electric current through water to split it into hydrogen and oxygen, a process known as electrolysis. Use renewable energy to power that electric current, and you have green hydrogen. Green ammonia is produced through the reaction of green hydrogen and nitrogen at high temperatures, in a process also powered by renewables. <\/span>Our <\/span>explainer<\/a><\/span> lays it all out.<\/span><\/p>\n

The EU wants a 50\/50 split between homegrown and imported renewable hydrogen: <\/span>Spurred by the need to wean itself off Russian fossil fuels and reach net-zero emissions targets, the European Commission last year introduced its <\/span>REPowerEU<\/a><\/span> clean energy plan. Under <\/span>the plan<\/a><\/span>, the bloc will look to produce 10 mn tons of renewable hydrogen and import another 10 mn tons from third countries annually by 2030. Imports would be split 60\/40 between renewable hydrogen and green ammonia.<\/span><\/p>\n

And we\u2019re laying the groundwork to meet that demand: <\/span>If all nine <\/span>green hydrogen and<\/a><\/span>ammonia facilities<\/a><\/span> international power companies last year agreed to build here go ahead, they would collectively produce up to 7.6 mn tons of green ammonia and 2.7 mn tons of hydrogen a year when fully operational. The projects need some USD 83 bn in investment to get off the ground. And that\u2019s just the beginning \u2014 the government signed <\/span>another seven MoUs<\/a><\/span> for potential green hydrogen projects in December, and will soon unveil its<\/span>national hydrogen strategy<\/a><\/span> detailing how it plans to develop the nascent industry. <\/span><\/p>\n

Most of this hydrogen would be destined for the heavy industry + transport sectors: <\/span>Green hydrogen can be used to generate electricity for any purpose \u2014 but most think its best potential lies in replacing fossil fuel use in \u201chard-to-decarbonize\u201d heavy industries, including steel, petrochemicals, and heavy-duty transport, according to BloombergNEF. The EU wants more of <\/span>its ammonia and refining plants<\/a><\/span> to run on renewable hydrogen, and is aiming for <\/span>30% of its primary steel production<\/a><\/span> to run on green hydrogen by 2030<\/span>. The bloc is also hoping renewable hydrogen will increasingly replace Russian natural gas as a green fuel for trucks, planes, and seaborne vessels that transport goods. <\/span><\/p>\n

But there are some major obstacles to getting an Egypt-EU green hydrogen supply chain in place: <\/span><\/p>\n

#1- Transportation costs pose a problem for long-distance imports: <\/span>Green hydrogen is <\/span>technically difficult and expensive to transport \u2014 whether in its original gaseous or liquefied form, <\/span>Reuters<\/a><\/span> reports. Transportation issues are best solved by keeping supply chains as short as possible \u2014 one reason why the International Renewable Energy Agency (IRENA) expects that 75% of global green hydrogen output will be domestically produced and consumed by 2050, according to a <\/span>2022 report (pdf).<\/a><\/span> <\/span><\/p>\n

Our best options: Export green hydrogen-derived products, and build a pipeline to <\/span>Europe. <\/span>\u201cDepending on the end use of the hydrogen, it might be more cost-effective to first transform it into a commodity and then ship the commodity instead of the hydrogen itself,\u201d IRENA writes. Those commodities could include green ammonia, methanol, steel, and transport fuels. In the long term, transporting green hydrogen through pipelines may provide a cheaper option than shipping it. By 2050, some 55% of internationally traded green hydrogen will be transported via pipelines, with the remainder shipped in the form of ammonia, IRENA predicts. <\/span><\/p>\n

Players in the local industry are already thinking along these lines:<\/span> The country\u2019s <\/span>first<\/a><\/span>green hydrogen plant<\/a><\/span> \u2014 built by a consortium of Norway\u2019s Scatec, Fertiglobe, Orascom Construction, and the Sovereign Fund of Egypt \u2014 will feed Fertiglobe\u2019s two existing ammonia plants in Ain Sokhna. Hydrogen Europe CEO Jorgo Chatzimarkakis said at the <\/span>Enterprise Climate X Forum<\/a><\/span> last year that he imagines we\u2019ll kick off hydrogen exports by sending ammonia and methanol to Europe. He\u2019d ultimately like to see a hydrogen pipeline linking Egypt to Greece and Trieste. <\/span><\/p>\n

#2- Regulatory issues: <\/span>EU members have for years been embroiled in disagreement over a <\/span>draft law that would regulate the bloc\u2019s use of renewables \u2014 at the center of which is how to define what \u201cgreen\u201d means when it comes to hydrogen, <\/span>Euractiv<\/a><\/span>reports. France is leading a charge to include hydrogen created from \u201clow carbon\u201d sources like nuclear energy in the green framework \u2014 while Germany wants to take a stricter renewables-only approach. The bloc is hoping to push the bill through by the summer, but so far hasn\u2019t been able to resolve the conflict, <\/span>Bloomberg<\/a><\/span> reports. <\/span><\/p>\n

#3- Global competition \u2014 not least from the US:<\/span> The Biden administration\u2019s landmark <\/span>Inflation Reduction Act<\/a><\/span> will offer US green hydrogen producers a USD 3.00 tax credit per kilo of hydrogen for their first 10 years of operation. That will push green hydrogen production costs in the US into sub-zero territory in the short term, according to <\/span>S&P Global<\/a><\/span>. That could spur private sector players to set up shop in the US rather than the EU \u2014 \u201ccausing a supply crunch and slowing clean H2 developments in Europe,\u201d hydrogen firms told <\/span>BloombergNEF<\/a><\/span>. Meanwhile, China looks to be setting a goal in place to dominate the global market for electrolysers, the key technology used to separate hydrogen from water, <\/span>Bloomberg<\/a><\/span> reports. <\/span><\/p>\n

The silver lining: Biden\u2019s IRA could spur Europe to ramp up green hydrogen incentives.<\/span> In an apparent response to US incentives, the EU has pledged to develop a renewable hydrogen bank, which will this year launch a pilot that aims to \u201cde-risk the market in Europe, both for domestically produced and imported hydrogen,\u201d EU top climate official <\/span>Frans Timmermans has said<\/a><\/span>. The EU Hydrogen Bank is set to support domestic green hydrogen producers by covering \u201c100% of the cost gap in comparison to grey hydrogen produced in the EU,\u201d and is exploring ways \u201cto best support access of European consumers to hydrogen imports,\u201d Timmermans said. <\/span><\/p>\n

We could push for more EU support:<\/span> COP27 saw the launch of the <\/span>Global Renewable<\/a><\/span>Hydrogen Forum<\/a><\/span>, which could serve as a venue for Egypt and other emerging players to argue for wealthy countries to provide subsidies for our green hydrogen industries. That would go a long way toward evening-out the distorting effects of the subsidies now promised to US producers under the Biden administration\u2019s Inflation Reduction Act. The forum is just one prong in ongoing cooperation with European partners on green hydrogen, including <\/span>support from the European Bank for Reconstruction and Development (EBRD)<\/a><\/span> to draft our national green hydrogen strategy, and <\/span>major financing from<\/a><\/span> both Europe and the US to build up renewables capacity that would feed green hydrogen facilities. <\/span><\/p>\n

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