A European Vision: The Future of Hydrogen’s Geopolitical Role in Global Politics
Hydrogen has become a promising option for nations competing to transition towards green energy sources. It offers opportunities to integrate sectors that are difficult to decarbonize, such as heavy industries, aviation, and maritime trade. This global trend has recently gained momentum, especially in Germany and the European Union, as they strive to maintain their leadership in industrial production and technology. This push will eventually drive them to import hydrogen, leading to a reorganization of economic and political relations between countries and shifting the global political and economic balance.
In light of these anticipated changes, the German Institute for International and Security Affairs recently published a research paper on the geopolitical role of hydrogen as a new energy source. The paper examines the contributions of various stakeholders and presents different scenarios for the hydrogen sector by 2040. It also outlines key strategies Europe should adopt to diversify its political and economic partnerships in this field.
The paper focuses on the geopolitical dimension of energy and how both depletable and renewable energy resources, along with related processes like transport and trade, impact political relations between nations. It tracks the roles of international actors and explores potential strategies for conflict and cooperation, while highlighting the pivotal role of technological innovation in enhancing value chains within the energy sector. This innovation could lead to a reshuffling of the roles of international actors in global politics.
A New Energy Source
Hydrogen stands out as a low- or zero-carbon energy source, making it highly attractive in light of global goals to adopt environmentally friendly energy generation strategies. Hydrogen’s geopolitical impact stems from its potential to reshape the global map of key energy exporters, which in turn could lead to shifts in the balance of economic and political power. Nations are pursuing various approaches to harness hydrogen for energy production, the most notable being:
Grey Hydrogen: Currently the most common method of hydrogen production, this low-carbon process involves steam methane reforming of natural gas. The natural gas is heated with steam, producing hydrogen along with carbon monoxide and carbon dioxide. In 2021, each ton of hydrogen produced resulted in approximately 12 to 13 tons of carbon dioxide emissions, accounting for about 2% of global emissions.
Blue Hydrogen: This method uses the same production process as grey hydrogen but incorporates carbon capture technologies. These technologies absorb the carbon emissions from hydrogen production, storing them underground or using them in industrial processes as raw materials. This reduces carbon emissions by 80 to 90%. Currently, about 99% of hydrogen is produced using these two methods, with costs ranging between five and eight euros per kilogram, largely due to high natural gas prices, exacerbated by the global energy crisis stemming from the war in Ukraine.
Green Hydrogen: Europe’s and Germany’s current focus is on producing hydrogen via electrolysis, where water is split into hydrogen and oxygen using electricity generated exclusively from clean energy sources, such as solar, wind, hydropower, or even nuclear energy. This ensures the production of environmentally neutral hydrogen, free of carbon emissions. The cost of producing green hydrogen ranges from 4.60 to 7.30 euros per kilogram, depending on the cost of renewable energy used in electricity generation. It is expected that costs will continue to decrease, potentially reaching around 1.90 euros per kilogram in Sub-Saharan Africa and 1.50 to 2 euros in the Gulf states by 2030.
The Global Shift Towards Hydrogen
The global transition to hydrogen as an energy source faces complex challenges, particularly the need for economic cooperation and diplomatic efforts among key players. No single country currently possesses all the necessary components for the hydrogen production process. Some nations have the infrastructure, others the technological advances, and others the raw materials or financial resources.
Another challenge is transporting hydrogen from exporting countries to those with infrastructure. Nations have adopted various strategies to overcome this hurdle, including transporting hydrogen as gas through pipelines or as a liquid via ships through cooling processes, or shipping derivatives like ammonia. In this context, several global powers are making significant efforts to transition to hydrogen, motivated by environmental concerns, dwindling energy resources, and other factors. The most notable include:
The European Union: The EU aims to play a leading role in building the global hydrogen market amid fierce competition from other powers such as China and Russia. Europe has launched several initiatives, including the REPowerEU plan to reduce dependence on fossil fuels and promote the green transition, and the European Hydrogen Bank initiative.
China: China is focused on achieving energy independence and industrial sustainability through hydrogen. Beijing has strengthened its production-supporting sectors, such as increasing solar panel output, and aims to produce between 100,000 and 200,000 tons of hydrogen from renewable energy sources annually by 2025.
The United States: The U.S. has a strategy to produce 10 million tons of clean hydrogen annually by 2030 and 50 million tons by 2050, providing full support for the necessary technology and production processes.
The Gulf States: Oman, Saudi Arabia, and the UAE are nearing the realization of a sustainable hydrogen economy (for export) thanks to resources like land, sunlight, wind, natural gas, and the financing required for production. Other nations, such as Russia, India, and Morocco, are also striving to follow the leaders in this field but face political and financial obstacles.
Expected Scenarios
The research paper outlines three potential scenarios for the future of the global hydrogen sector by 2040, based on assumptions related to natural resources, technological leadership, independence, and global conflict (particularly between the West and China):
Reorganizing International Actors’ Roles: This scenario envisions new leadership centers for the hydrogen economy emerging in the East (East Africa and the Middle East). Indicators include the concerted efforts of the EU and the U.S. to increase their investment shares in the Gulf region. By 2031, Saudi Arabia plans to open the world’s largest green steel plant in NEOM, relying on hydrogen for exports primarily to the EU. Moreover, China and the Gulf countries are expected to forge significant agreements, such as China importing hydrogen-related equipment in exchange for hydrogen and petrochemicals from the Gulf by 2028.
Continued European Dependence on Hydrogen: Despite Europe’s efforts to achieve energy independence in hydrogen, current and anticipated conditions suggest this goal may not be achievable. Initial operations of electrolysis plants in Spain are expected by 2028, leading to increased European demand for raw materials, particularly from South Africa, the leading exporter of hydrogen-related raw materials. This could result in dependency on exporting countries, especially if South Africa strikes deals with BRICS nations to freeze its European supply.
European Political Pressure on Hydrogen: The EU may resort to political and economic pressure, imposing conditions on hydrogen-exporting nations to secure deals and ensure the continuous flow of supplies needed for Europe’s energy transition.
While these scenarios would contribute to achieving climate protection goals by reducing carbon emissions, the research paper suggests that Europe may face disappointing outcomes. Technological and industrial leadership may shift to Afro-Asian countries controlling hydrogen value chains. The world could witness the rise of new political powers and the decline of others, with the Gulf states expected to play a central role in the global hydrogen economy.
Hydrogen Alliances
The research paper proposes several suggestions to support Europe’s transition towards hydrogen, including allocating funds and grants for research and development to aid the energy transition. Since there is little previous research in this area, it recommends directing support to industries and processes related to hydrogen transformation, such as developing carbon capture and storage technologies and reducing the costs of water electrolysis through diversified electricity generation methods like wind, solar, and hydropower.
However, transitioning to hydrogen does not mean that Europe will eliminate its dependence on other countries for energy supplies. According to expected scenarios, Europe will form new dependencies on other actors, at least to supply the raw materials needed for the transition. Therefore, it is crucial to expand the base of raw material exporters and the necessary technologies to avoid market risks, necessitating the diversification of political and diplomatic relations with African and Asian countries.
Finally, the paper calls for the establishment of global hydrogen governance by effectively directing investments and providing mechanisms for technological exchange and resource integration. A practical step could be the creation of a coalition of major exporters and importers in the hydrogen market. This coalition could build on existing institutions, such as the European Hydrogen Bank, which would ensure value chain and supply integration while providing a regulatory framework for trade and commercial agreements.
Deutsches Institut für Internationale Politik und Sicherheit, Die Geopolitik des Wasserstoffs, November, 2023.
