IRENA: Transition to H2 alters future Geoeconomic dynamics

Jan. 18, 2022
By 2050, hydrogen is expected to power up to 12% of global energy use

The International Renewable Energy Agency’s (IRENA) analysis has found that rapid growth of the global hydrogen economy can lead to significant geoeconomic and geopolitical shifts.

Hydrogen is expected to cover up to 12% of the global energy use by 2050. Growing trade and targeted investment in hydrogen is expected to boost economic competitiveness. It will also influence the foreign policy landscape.

 IRENA’s Director-General Francesco La Camera expects hydrogen to help achieve a climate-safe energy future and explained that, “Hydrogen is clearly riding on the renewable energy revolution with green hydrogen emerging as a game changer for achieving climate neutrality without compromising industrial growth and social development. But hydrogen is not a new oil. And the transition is not a fuel replacement but a shift to a new system with political, technical, environmental, and economic disruptions.”

 IRENA expects more than 30% of hydrogen to be traded across borders by 2050 and this percentage is higher than natural gas. Countries, which have not been involved in energy trade, are now establishing bilateral energy relations around hydrogen. As more players enter this market, hydrogen trade is unlikely to become weaponised and cartelised.

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 More than 30 countries and regions are planning active hydrogen-related commerce today. Some countries, like Japan and Germany, which expect to become importers, are deploying hydrogen diplomacy. Fossil fuel exporters, like Australia, Oman, Saudi Arabia and the United Arab Emirates, consider clean hydrogen as a way to diversify their economies.

 IRENA expects countries, which are able to generate cheap renewable electricity, as fit to produce competitive green hydrogen. Countries, like Chile and Morocco, which are net energy importers are set to emerge as green hydrogen exporters.

 IRENA’s report expects the 2020s to be a big race for technology leadership but demand is expected to increase in the mid-2030s. Green hydrogen may strengthen energy independence, security and resilience by reducing import dependency and price volatility and increasing the flexibility of the energy system. However, there may be greater focus on material security for raw materials needed for renewable technologies. Hydrogen supply chains may be impacted and cost and revenue may be negatively affected by shortages and price fluctuation.

Manufacturing equipment needed for renewables, like electrolysers and fuel cells, may drive business. By the mid-2030s, green hydrogen may cost-compete with fossil-fuel hydrogen globally and this may happen sooner in countries like, China, Brazil and India.

 Shaping the rules, standards and governance of hydrogen could lead to geopolitical competition or open a new era of enhanced international cooperation. To contain the widening of a global decarbonisation divide, promote equity and inclusion, create local value chains, green industries and jobs in countries rich in renewables, it will be essential to help developing countries deploy green hydrogen technologies and advance hydrogen industries.