As governments and industries seek less-polluting alternatives to hydrocarbons, the world’s biggest crude exporter, Saudi Arabia, has said it is building a $5 billion plant powered entirely by sun and wind.
The project will be among the world’s biggest green hydrogen projects when it opens in the planned megacity of Neom in 2025.
The task of turning a patch of desert the size of Belgium into a metropolis powered by renewable energy is being handled to Peter Terium, the former chief executive officer of RWE AG, Germany’s biggest utility, and clean-energy spinoff Innogy SE.
Hydrogen is morphing from a niche power source — used in zeppelins, rockets and nuclear weapons — into big business, with the European Union alone committing $500 billion to scale up its infrastructure.
But huge obstacles remain to the gas becoming a major part of the energy transition, and skeptics point to Saudi Arabia’s weak track record so far capitalising on what should be a competitive edge in the renewables business, especially solar, where there are many plans but few operational projects.
“There’s nothing I’ve ever seen or heard of this dimension or challenge. I’ve been spending the last two years wrapping my mind around ‘from scratch,’ and now we’re very much in execution mode,” Terium told Bloomberg.
With the project, Saudi Arabia is setting its sights on becoming the world’s largest supplier of hydrogen — a market that is estimated to be worth as much as $700 billion by 2050.
“You’re seeing a more diversified portfolio of energy exports that is more resilient,” said Shihab Elborai, a Dubai-based partner at consultant”, saying that “It’s diversified against any uncertainties in the rate and timing of the energy transition.”
Blueprints are being drawn and strategies are being announced, but it’s still early days for the industry as hydrogen is expensive to make without expelling greenhouse gases, difficult to store and highly combustible.
Green hydrogen is produced by using renewable energy rather than fossil fuels, while the current cost of producing a kilogramme is a little under $5, according to the International Renewable Energy Agency.
Saudi Arabia possesses a competitive advantage in its perpetual sunshine and wind, and vast tracts of unused land.
It’s more expensive to produce renewable energy in Europe, and the continent’s anticipated demand while implementing a Green Deal should exceed its own supply, Terium said.
“By no means will they be able to produce all the hydrogen themselves,” he said. “There’s just not enough North Sea or usable water for offshore wind,” he noted.
While country produces one-eighth of the world’s oil supply, but its operational renewables capacity is small by regional standards, and it’s starting from zero with green hydrogen.
It is said that the government is partnering with Acwa Power, a Riyadh, Saudi Arabia-based power developer partly owned by the kingdom’s sovereign wealth fund, and Air Products and Chemicals Inc., a $58 billion company based in Allentown, Pennsylvania, to build the green hydrogen plant.