Because of global warming, it is inevitable that global energy markets will shift towards renewable energy sources, in particular wind and solar power. These sources however differ from fossil fuels in two significant ways: their intermittent character and the form of energy they produce, electricity. Hence, hydrogen appears as a relevant solution to achieve ecological transition, allowing intermittent green electricity to be stored and to power hard-to-abate sectors.

Energy markets form an important component of global and regional geopolitics. As a consequence, the emergence of a new resource such as hydrogen could disrupt the current balance between states and profoundly reshape international relations. How can we assess the changes to be brought about by the rise of hydrogen as a strategic resource of the 21st century? One may start by considering how various countries may position themselves in a hypothetical, global green hydrogen market.

The capacity to produce green hydrogen, i.e. hydrogen produced through electrolysis of water powered by renewable electricity, is limited on a large scale by three main factors, identified for example in this report: access to renewable electricity, water, and hydrogen production, transportation and storage infrastructure.

The first lesson that can be drawn from these limitations is that the hydrogen market is likely to be polarized between producing countries for domestic consumption, producers for export, and importers; moreover, the physico-technical constraints suggest that the hydrogen market will be similar, at least initially, to that of natural gas in terms of its partially regionalized nature.

Which countries are best placed with regard to these parameters? These are, as mentioned above, countries with a high level of infrastructure, as well as renewable potential and significant freshwater resources in relation to their population. This is predictably the case for North American countries and Australia, but other more unexpected countries could do well, such as Morocco and Norway, or other countries in the Southwest Pacific such as Indonesia and New Zealand. These countries would likely be major exporters in the hydrogen market.

Conversely, countries such as Japan and Central Europe on the one hand, and certain African and Middle Eastern countries on the other hand, suffer respectively from a deficit in renewable potential or water. Hydrogen production in these countries is unlikely to become self-sufficient in the 21st century. In fact, Japan, which has an ambitious hydrogen strategy, has already moved towards diversified imports from Southwest Pacific countries.

A large number of countries in Africa and South America, as well as in Central Asia, suffer from a serious infrastructure deficit that will penalize them greatly in the development of a hydrogen industry.

There remain a number of countries with moderate renewable potential, as well as sufficient water resources and a high level of infrastructure, which have sufficient production potential for their domestic and possibly the directly neighboring markets. Included in this category are notably certain countries in Western and Southern Europe such as France, Spain, Greece or Turkey.

China, Russia and India are special cases given the size of these countries. All three have significant renewable potential, but in the case of India and Russia it is difficult to fully exploit. In the first case it is due to spatial constraints compared to agriculture, in the second case to the low energy density of renewables leading to higher costs. Moreover, there are doubts about the ability to develop efficient infrastructures in these two countries. China’s industrialization is also threatening its water resources; however, its resources will probably enable it to produce a significant part of its domestic hydrogen consumption.

All these elements allow us to sketch out what could be the structure of the future global hydrogen market, in comparison with the current hydrocarbon markets:

• The switch to green hydrogen can be expected to offer most developed countries an opportunity to develop domestic energy production at least to some extent. As such, countries such as China or those of the European Union could become less dependent on energy imports. However, the greater the need for hydrogen as it penetrates the market, the more these countries will have to rely on external suppliers; this is particularly the case in Europe, where internal production (France, Spain, etc.) or that of neighboring countries (Morocco, Norway, etc.) are likely to be rapidly overwhelmed by needs. It is therefore likely that some of the economic regions that currently import energy will continue to do so after a transition to hydrogen; this is all the more true for Japan, which is under even more constraints.

• It can also be expected that the countries of the Middle East in general, and of the Arabian Peninsula in particular, will lose their privileged status as energy exporters. The geostrategic importance of the region will decline, as will the inflow of capital. Conversely, countries such as Australia and Indonesia could emerge as new hydrogen champions and supply a large part of the Pacific Asia region

• Finally, North American countries benefit from all the factors necessary to maintain their position as energy exporters acquired with the development of shale gas in a green hydrogen economy. Their water resources, their vast surface area coupled with their easily exploitable renewable potential, as well as their developed and partially export-oriented energy infrastructures are major assets for the future. They thus have the opportunity to take significant market shares both in Europe, Asia and potentially in South America, depending on the development of production in these regions.

North American energy players therefore have every interest in encouraging and supporting the transition to green hydrogen for both domestic and international markets.

By Anatole Gosset – Independent Analyst