Hydrogen is considered key in the energy transition and could lead to significant geoeconomic and geopolitical shifts, according to IRENA.
In a new report, Geopolitics of the Energy Transformation: The Hydrogen Factor, the organisation points to the emergence of new centres of geopolitical influence – particularly in the southern hemisphere with good potential for renewables that can be generated cheaply – as the production and use of hydrogen increases and traditional oil and gas trade declines.
IRENA estimates that hydrogen could cover up to 12% of global energy use by 2050 with almost one-third traded across borders – a higher share than natural gas today. Countries that have not traditionally traded energy are establishing bilateral energy relations around hydrogen, with over 30 countries and regions planning for active commerce already today.
For example, in Latin America Chile was first off the mark with Brazil, Colombia and Uruguay following. South Africa and Namibia are leading the way in sub-Saharan Africa while Australia and New Zealand, which also have hydrogen strategies in place, also are developing or considering trade routes.
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Conversely, fossil fuel exporters such as Oman, Saudi Arabia and the United Arab Emirates increasingly consider clean hydrogen an attractive way to diversify their economies. However, broader economic transition strategies are required as hydrogen will not compensate for losses in oil and gas revenues, according to IRENA.
“Hydrogen could prove to be a missing link to a climate-safe energy future”, commented Francesco La Camera, Director-General of IRENA.
“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.”
Geopolitical play out
IRENA in the report indicates that the geopolitics of clean hydrogen will likely play out in different stages, with the 2020s as a big race for technology leadership as the costs fall with the scaling up of infrastructure. But demand is expected to only take off in the mid-2030s as cross border trading increases at pace with the cost competitiveness of green hydrogen with fossil-fuel hydrogen.
The organisation suggests that countries with ample renewable potential could become sites of green industrialisation, using their potential to attract energy-intensive industries. The manufacturing of equipment like electrolysers and fuel cells could drive business, with China, Japan and Europe already having developed a head start.
In this connection, the report notes the dominance of China as a producer of several critical materials used in electrolysers, including nickel, gadolinium, zirconium, lanthanum, cerium and yttrium.
However, with the many countries that have declared their ambition to become exporters of hydrogen, hydrogen trade is unlikely to become weaponised and cartelised, in contrast to the geopolitical influence of oil and gas.
Policy considerations
In its policy considerations, IRENA notes that hydrogen is part of a much bigger energy transition picture, and its development and deployment strategies should not be pursued in isolation and that setting the right priorities for its use will be essential for its rapid scale-up and long term contribution to decarbonisation efforts.
On the international front cooperation will be necessary to devise a transparent hydrogen market with coherent standards and norms and supporting the advancement of renewable energy and green hydrogen in developing countries is critical for decarbonisation and could contribute to global equity and stability.
Policymakers should consider the broader impacts of hydrogen development on sustainable development to ensure positive, long-lasting outcomes.
