KEY ELEMENT

The developing international market for hydrogen is promising to become a major fuel source by 2050, generating trillions of dollars annually.

The International Energy Agency (IEA) has predicted that the market for green hydrogen considered the "energy carrier of the future" will grow significantly in 2030-2050. More than 30 countries are already planning to produce hydrogen. EU, Australia, countries of Latin America, Middle East, and also India and China have actively joined the process. The latter even announced the creation of the world's largest enterprise for the production of environmentally friendly hydrogen. Moreover, new projects are announced both by countries importing traditional fuels and the ones exporting it: Saudi Arabia, Norway and the US.

The Caspian countries want to join the list as well. Kazakhstan expects to start producing green hydrogen and export it to Europe by 2030 as part of a $50 billion project. In January 2023, the Russian government adopted a new roadmap to 2030 for the development of hydrogen energy with the participation of Gazprom and Rosatom.

Azerbaijan is still studying the processes of organising the production of green hydrogen and its export to Europe. There is an intention, which promises to lead to interesting projects in the future.

Consumer-oriented process

With the start of the Russian-Ukrainian war, the issue of reducing dependence on Russian energy resources has become even more pressing. In an attempt to accelerate the process of ensuring carbon neutrality, Europe has developed numerous hydrogen projects.

In the summer of 2022, the European Commission approved a €14.2b project to develop technologies for hydrogen energy infrastructure throughout the EU. Of this, €5.4b will be provided by public subsidies and €8.8 billion will be raised in private investment. The entire package includes 41 projects, to be implemented by 35 companies from 15 EU countries.

The project will develop technologies and industrial projects to use hydrogen as an element for electric batteries, a means of stabilising renewable energy sources (RES), fuel for cars, ships and aircraft. So far, hydrogen accounts for only 2% of the EU's energy consumption.

In parallel, the EU has also agreed to build an underwater hydrogen pipeline to link the Iberian peninsula with the rest of Europe.

In December 2022, Spain, Portugal and France teamed up to build the H2Med hydrogen pipeline. "We intend to bring EU hydrogen production to 10 million tonnes by 2030 and import another 10 million tonnes. This hydrogen must reach our industry. We intend to create a system of strategic corridors to transport hydrogen from west to east, including the Iberian corridor," said the President of European Commission, Ursula von der Leyen.

This year it was decided to extend the H2Med pipeline to Germany. Construction will start in 2025, and by 2030 the new system will pump around 2 million tonnes of green hydrogen per year - 10% of EU consumption. The total cost of the project before Germany joined the project was estimated at €2.5b.

Meanwhile, Finland, Poland, Germany and the Baltic States have agreed to create the Nordic-Baltic Hydrogen Corridor. It is supposed to bring green H2 produced around the Baltic Sea to consumers along the corridor and in Central Europe. In addition, as the infrastructure around the Baltic Sea is further developed, it will be possible to create a strong hydrogen market.

The project is expected to strengthen the region's energy security, reduce dependence on imported fossil energy and play an instrumental role in reducing the carbon footprint of households and energy-intensive industries along the corridor.

The UK announced its intention to increase the production capacity for low-carbon hydrogen to 5GW by 2030. It is estimated that by 2050, the total market value of the UK will reach £13b ($17.88b). According to British authorities, by 2050, hydrogen can supply 20-35% of the energy consumption in the country. In the medium term, the British hydrogen economy can attract £4bn of investment and create over 9,000 jobs by 2030.

Microsoft co-founder Bill Gates has praised the US government's policy of promoting green transition. According to him, initiatives of the US authorities to encourage investments in new technologies, such as green hydrogen, will have a positive effect. He noted that, at present, there is no market for green hydrogen, which is "four times more expensive than it needs to be". However, with the support of the US and EU authorities, it is possible to create such a market within the next decade.

A number of hydrogen projects are also being successfully implemented in Latin America, which could make the continent the world's third largest production centre.

Among Asian countries, China has set a goal to stimulate growth in the hydrogen energy sector and to produce 100,000-200,000 tonnes of hydrogen from renewable energy sources by 2025. In early December 2022, China launched the country's first production line for H2-powered industrial vehicles. Hydrogen Energy, a subsidiary of the Chinese energy giant State Power Investment Corporation, which produces hydrogen production equipment and catalysts for fuel cells, expects to build seven new production lines by 2024.

India is also getting involved in the development of green hydrogen production, and intends to invest around $2.2b in the sector. The new five-year programme will significantly expand the clean H2 production industry to reduce the country's production costs by 20%.

Caspian hydrogen

Green hydrogen is produced by electrolysis of water using renewable energy sources such as solar or wind power. Burning hydrogen does not produce carbon dioxide at all.

Given the Caspian Sea's great potential for renewable energy development, especially wind power, experts believe that the region has every chance to become a hub for green hydrogen production.

This opinion has been also expressed by Gary Jones, BP Regional President for Azerbaijan, Georgia and Türkiye. "In general, if we talk about such a priority area of energy transition as the production of hydrogen—green and other varieties of it—[Caspian] region has a very great opportunity to become a centre for the production of all kinds of hydrogen," Jones said.

Of the five Caspian littoral states, Kazakhstan and Azerbaijan currently associate their “green hydrogen future” to the Caspian Sea.

The German-Swedish company Svevind Energy GmbH signed an agreement with the Kazakh government to build a 20GW eco-friendly hydrogen plant with its own funds. The cost of the project is $50b.

Production is planned to start in 2030 and the power plant is expected to reach its full annual capacity of 2 million tonnes of green hydrogen by 2032. This is equivalent to about one fifth of the EU's stated green hydrogen import target by 2030.

The project involves the construction and operation of a desalination plant (255,000 cubic metres per day), a 40GW renewable energy plant (wind, solar) and 20GW capacity for water electrolysers.

In addition, the Kazakh government is working with other foreign investors on two more projects to produce green hydrogen.

All these plans has a potential to turn Kazakhstan into one of the largest hydrogen producers in the world.

Azerbaijan is planning and implementing projects to create 25GW of renewable energy capacity for export and the production of green hydrogen. Experience in hydrogen production is being exchanged with leading companies and countries of the world (Masdar, ACWA Power, BP, Fortescue Future Industries).

"Regarding the production of green hydrogen, I can say that we are thinking about it," Azerbaijani Energy Minister Parviz Shahbazov said.

"If you look at the current situation, Azerbaijan can ship more gas to Europe to diversify its sources. This also includes hydrogen. Hydrogen could be a form of green energy that Azerbaijan could export in the future through a pipeline," Suhail al-Mazroui, UAE energy minister said.

In December 2022, the Azerbaijani Ministry of Energy and the European Bank for Reconstruction and Development (EBRD) signed a Memorandum of Understanding on Technical Support for the Development of Electricity Sector in Azerbaijan. The memorandum will support the use of renewable energy sources, encourage grid improvements, increase energy efficiency, reduce methane emissions and provide for cooperation on the phased research and application of innovative technologies, including green hydrogen. The parties agreed to prepare a roadmap with recommendations on respective policies and technologies to decarbonise the energy sector.

Azerbaijan has so far produced small quantities of high-purity hydrogen at the Baku refinery for diesel and gasoline hydro-treatment and at the Ethylene-Polyethylene plant.

At the same time the Swiss unit of the State Oil Company of Azerbaijan, SOCAR Energy Switzerland, together with Alpiq and EW Hofe are involved in a project for the construction of an electrolysis plant in Freienbach, Switzerland with a production capacity of up to 10MW. The plant is expected to produce 1,000-1,200 tons of green hydrogen annually, which will be supplied to filling stations. By the way, the first SOCAR-branded hydrogen fuel station is planned to open in Switzerland in June 2023.

As for the nationwide production of green hydrogen, it will require substantial investment and special state support mechanisms, just as for the construction of solar and wind power plants.

The current technology for producing green hydrogen is the most expensive one. However, the situation may change in the next ten years, as is the case with renewable energy technologies. For example, the construction of solar power plants has become 74% cheaper in the same period.

Dozens of companies, research centres and universities around the world are now working to make hydrogen technology cheaper. Both in terms of electrolysis production, fuel cells and hydrogen storage. Given the priority of this area, there is little doubt that these goals will be achieved. And the hydrogen economy will be much closer to us than we can imagine.