Major energy exporters are accelerating towards to the green energy transition and Wood Mackenzie says mastering the hydrogen trade could make all the difference.

The global energy market was worth US$2 trillion in 2020, contributing to more than 9 billion tonnes of carbon dioxide equivalent (CO2e) emissions, and in the same year Wood Mackenzie said the top five energy exporters – Saudi Arabia, Russia, Australia, the United States of America, and Indonesia – produced more than half of all energy traded.

WoodMac research director Prakash Sharma said the global energy energy trade is set to see its largest disruption since the 1970s and the rise of the Organisation of the Petroleum Exporting Countries (OPEC).

“In addition to investing in renewables to slash emissions and enhance energy security, countries and industries are now looking to electricity-based fuels and feedstocks, and hydrogen could be the game-changer,” he said.


Countries hoping to benefit from hydrogen export megaprojects

Several countries are hoping to benefit from developing export-oriented hydrogen mega-projects, with blue and green hydrogen projects being developed in Russia, Canada, Australia, and the Middle East.

In the growing green hydrogen space, Wood Mackensize says “nearly 60% of proposed export projects are in the Middle East and Australia, principally targeting markets in Europe and Northeast Asia” and over the last 12 months there has been a “50-fold increase in announced green hydrogen projects alone.”

And locations with a proven track record of exporting natural resources with conditions for low-cost renewable electricity and the potential for large-scale carbon capture will be the most attractive.

Countries such as Saudi Arabia, Brazil, Chile, Oman, and Kazakhstan are hoping to grab a slice of the hydrogen pie having announced megaprojects targeting the export market, while others, such as Russia and Canada, have vast low-cost gas resources and plenty of carbon capture and storage (CCS) capacity.

However, based on Wood Mackenzie’s analysis of future costs, Australia and the Middle East sit in the top echelons for solar irradiance and offer massive green hydrogen potential.

For Australia it says the opportunity to produce green hydrogen will help transform its energy export portfolio and align it with the changing needs of its trading partners.

Sharma said: “Australia, in particular, stands out from the crowd in its track record of exporting a diverse set of natural resources and minerals, sheer physical scale, solar and wind resources and substantial potential for large-scale CCS.”


The difference between blue and green hydrogen – the world needs both

Wood Mackenzie vice chairman Gavin Thompson said while no two hydrogen export projects look the same, the most obvious difference in proposed projects is between blue (produced via fossil fuels) and green hydrogen (produced via renewables).

But while current costs of green hydrogen production are more than three times higher than blue hydrogen, “green hydrogen costs are expected to fall as electrolyser manufacturing technology improves and renewable electricity costs decline.”

And an expected drop in costs will support a pivot from blue to green hydrogen in the long run.

“The reality is that the world needs both to achieve the required pace of global decarbonisation. Blue hydrogen production has a scalability advantage over green hydrogen at present and can already be developed in the requisite volumes, though lead times are longer.

“Most proposed projects are currently a combination of the two. A blue hydrogen exporter in Australia or the Middle East, for instance, could establish a market position while expanding into green hydrogen as costs decline over time and capacity becomes available.

“Producers could therefore build out their low-carbon hydrogen supply chains as green hydrogen becomes more competitive over time.”

Suppliers with access to major, low-cost gas resources and carbon capture and storage (CCS) have a natural advantage for blue hydrogen exports.

Wood Mackenzie says regions such as the Middle East, Russia, and the United States, with competitive onshore drilling costs, appear best placed to develop an interregional export position.