Australia and the Middle East have the greatest potential to become major exporters of “green” hydrogen in the coming years, according to an analysis by energy consultancy Wood Mackenzie.
Green hydrogen is produced using renewable energy instead of fossil fuels. It can be used as a clean energy source for sectors such as manufacturing and transportation – but it is expensive to produce and difficult to transport.
However, the expected increase in demand for low-carbon hydrogen – which includes green hydrogen – has prompted many countries to announce plans to build capacities to export hydrogen. Wood Mackenzie said in a report that nearly 60% of these projects are in Australia and the Middle East.
Australia vs the Middle East
Both Australia and the Middle East are close to potential major importers in Northeast Asia and Europe, said Prakash Sharma, Head of Markets and Transformations, Asia Pacific Advisory.
“Proximity will help … Australia is close to the Northeast Asian market, but the Middle East also can go anywhere in both directions – it can go to Europe and it can also go to the Northeast Asian market,” Sharma told CNBC. “Squawk Box Asia” on Thursday.
The main question is which market can overcome the cost and challenges He added that hydrogen is especially transported over long distances.
“I think companies and countries have perfected on-site production, but I think when it comes to the logistical challenge, it can be a game for anyone,” he said.
Sharma said Australia has an advantage in exporting green hydrogen to Northeast Asia given its current trading relationship with the region. He added that the country is already a major exporter of various natural resources and minerals, and has huge potential for renewable energy.
Hydrogen: a game changer?
Wood Mackenzie said demand for low-carbon hydrogen could rise sixfold to 530 million tons by 2050 — if countries maintain global warming to within 1.5 degrees Celsius above pre-industrial levels.
Nearly 150 million tons of this demand for low-carbon hydrogen could be shipped by sea, the consultancy said. It predicted that Northeast Asia would make up about 55% of the seaborne hydrogen trade, while Europe could make up 16%.
Despite its potential, the broader adoption of green hydrogen still faces hurdles.
During CNBC’s Sustainable Future Forum last week, Christian Bruch, CEO of Siemens Energy, said there are “no commercial justifications” for using green hydrogen at the moment.
But Wood Mackenzie said hydrogen could be a “change agent” in global efforts to reduce carbon emissions and enhance energy security.
The consultancy said green hydrogen production costs are expected to fall as technology improves and renewable electricity costs decline. This will help push producers towards a clean energy source, she added.