Oil-rich states key to scaling up hydrogen – report

The clean hydrogen opportunity for hydrocarbon-rich countries found that the share of hydrogen in global energy demand could reach 10-15 per cent by 2050, helping abate up to 20 per cent of global emissions. McKinsey claims that hydrocarbon rich countries (HRCs) such as Canada, the USA and Saudi Arabia will be key to unlocking this growth, relying on existing infrastructure, knowledge and export links to grow hydrogen as an energy resource.

“Hydrogen has the capacity to play a fundamental role in curbing greenhouse gas emissions, abating up to 20 per cent of global emissions across the world by 2050,” said Maurits Waardenburg, associate partner at McKinsey.

“Hydrocarbon-rich countries can enable the transition to clean hydrogen by leveraging their energy production experience, highly developed infrastructure, geographic locations, and access to abundant renewable energy to produce and export hydrogen with very low or zero carbon emissions.”

According to McKinsey, HRCs will need to scale up competitive supply of both blue and green hydrogen, the former derived from natural gas using carbon capture, the latter produced using renewable energy. Green hydrogen costs are expected to decline by approximately 50 per cent by 2030, as electrolyser costs fall. HRCs with access to low-cost wind and solar resources will be well placed to build on this green hydrogen momentum in the medium to long term, while also hedging the risk of blue hydrogen’s cost competitiveness in the decades to come.

With more than 680 large-scale clean hydrogen projects already announced globally – representing more than $240bn in mature investments – the report said it is essential that these countries act soon to enhance their current assets and processes for the expected growth. However, it remains to be seen if the fossil fuel industry and the states that support it are doing enough to pivot away from oil and gas and advance lower carbon technologies such as hydrogen.

“The implications of hydrogen energy are particularly important in making progress toward net-zero in hard-to-abate sectors,” said Markus Wilthaner, partner at McKinsey. “For example, McKinsey’s analysis shows that global low-CO₂ flat steel demand could grow to more than 100 metric tons by 2030.

“McKinsey’s research suggests that hydrocarbon-rich countries should build on their competitive advantages and become leaders in clean hydrogen. These actions include investing and focusing on hydrogen equipment manufacturing, hydrogen production, CCUS, hydrogen transportation, clean hydrogen downstream production, and integrated project developers. Investment and action today will help countries access new and growing value pools whilst also driving the journey to a cleaner future.”