ENERGY SECURITYHydrogen Changing Power Dynamics in Energy Sector

By Sergio Matalucci

Published 29 December 2022

As the EU tries to finalize its hydrogen rules, Asian countries are moving fast to secure deliveries and the US is committing money to set up local supply chains. Can the Middle East collaborate with both continents?

The momentum behind hydrogen has remained strong over the past year, but unexpected twists are changing what insiders are calling the “hydrogen race.”

The European Union, the region which just two years ago held a competitive know-how advantage, is now getting caught up in defining its own regulatory framework. These rules are needed to create certainties to implement local hydrogen projects and define a hydrogen supply chain to unlock export projects abroad.

The EU’s cooperation with Gulf countries, and the Middle East in general, is one good example.

Project developers see the potential for hydrogen production in the region. Land, renewable energy, infrastructure and ports are plentiful. Such large projects increase efficiencies yet require caution, as investment mistakes could waste billions of dollars.

It takes quite some time between the signing of the memoranda of understanding and the final investment decisions, as these projects need more time to design, to get the permits and partnerships in place. The off-takers also need to be secured,” Alexander Ritschel, head of technology at Masdar, told DW.

Masdar, a UAE-government-owned renewable energy company, is one of the major hydrogen investors in the region. It wants to be an early mover and is waiting for regulations in import markets, namely EU member states and Asian countries like Japan and South Korea.

The financing becomes more complicated if significant rules are not defined. We don’t need to wait for all the details of all regulations, but the most important ones need to be clear,” said Ritschel.

Competition for Hydrogen Deliveries?
Masdar welcomes the clear political will of Asian countries, adding it is waiting for local incentive schemes to be published. “These details are being finalized, most likely next year. Whenever they are, we can go ahead.” According to Ritschel, the Middle East has the resources to meet Asian and European hydrogen demands simultaneously.

Not everybody agrees that a lack of competition among importers will lead to harmony. Some experts think the developing hydrogen economy will bring about new, competitive relationships between countries. 

Europe, and especially Germany, have a wrong perception of the hydrogen market. They think they can wait because, eventually, they will decide who will produce hydrogen, not realizing that other countries are far quicker. Exporting countries are increasingly deciding whom to collaborate with,” Dawud Ansari, a researcher at the German Institute for International and Security Affairs, told DW.