Recent technology developments and policy roadmaps show the increasing potential of green hydrogen to accelerate the energy transition to a low-carbon economy in the MENA region, and to ensure energy security in the long run. Hydrogen, if produced with low-carbon energy sources, can be a great source of energy and electricity. This can be used to decarbonise hard-to-abate industry sectors such as chemicals and basic metals, as well as the transport and power sectors. Previously, it has been addressed the importance of low-carbon hydrogen for Net Zero transitions and energy security in the Middle East. But, as green hydrogen technologies are still not commercially viable, statements on hydrogen development remain pure assumptions and expectations. This article explores the potential of green hydrogen development in the region, putting a special attention on the financing viability and governance feasibility. 

New clean energy technologies like low-carbon hydrogen require a high amount of capital inflow to cover both upfront and operational costs. Innovative technologies that have never entered the market before face high financial risks and distrust from investors.

Still, low-carbon hydrogen demand is expected to skyrocket in the coming decades. According to McKinsey, the demand for clean hydrogen could reach approximately 660 million metric tons annually by 2050 (more than 20% of global emissions). 

To meet the future demand of green hydrogen, large-scale investments will need to be captured both from public and private sectors. This can only happen if markets are robust enough to meet the off-take demands, and provide the regulatory frameworks and financing  needed for the development of large-scale projects. 

The MENA region holds great potential in green hydrogen market development. In November 2022, during COP27, numerous projects were announced. One of the protagonists was Egypt, which signed 9 memoranda of understanding involving the production of green hydrogen and ammonia. Another example is Saudi Arabia, which launched the Saudi Green Initiative in 2021, and foresees setting up the world’s largest green hydrogen facility. Also, Oman recently released a new Strategy on Green Hydrogen with an expected investment of $140 billion in investment by 2050. 

At a regional level, rapid growth of green hydrogen projects will have many security implications, mainly in four areas: water, food, energy and economy. First, green hydrogen production can help improve water availability and quality by fostering desalination and cleaning mechanisms. As green hydrogen can only be produced with fresh and clean water, governments start to look at the potential to oversize projects’ desalination plants that can help provide higher quality water to the overall population. Second, green hydrogen production is used to produce ammonia and fertilisers, which can help secure agricultural crops from bacteria and natural diseases, and promote food resilience. Third, green hydrogen can be used to produce electricity with little to no carbon footprint. Not only does this help to increase electricity availability but it advances on energy transition through the use of renewable power generation. It can also help mitigate GHG emissions and decrease dependency on carbon intensive energy sources, such as coal or natural gas. Finally, developing a green hydrogen market brings new opportunities for the economic sector, including new job opportunities, transfer of skills and knowledge, and attraction of foreign investments. 

Given the numerous opportunities that green hydrogen brings, Middle East and North African countries start to harness their energy resources to secure a spot in the green hydrogen economy, especially into the growing Asia and European markets. This is the case of Egypt, which in 2022, created a strategic partnership on renewable hydrogen with the EU and the European Bank for Reconstruction and Development (EBRD). 

In spite of recent developments in the MENA region on green hydrogen development, there is still a need to continue to invest in oil and gas, due to its low costs and conventional sources. In parallel, climate pledges and clean investments are not enough to meet the Paris Agreement goals. Without a common strategy and collective governance framework, the green hydrogen market will not develop at the necessary pace. 

In conclusion, green hydrogen is penetrating fast in the energy market of the MENA region. Many countries have already announced pledges to develop a green hydrogen strategy. Others established partnerships with external project developers to implement pilot projects in their countries. Yet, there is still room for improvement before the green hydrogen market is fully developed. Robust policies, financing mechanisms and regional coordination is needed for an effective implementation of green hydrogen projects. MENA countries hold great potential in the hydrogen market: not only can they position themselves as frontrunners in the Net Zero transition, but they can also potentiate their geopolitical interests through the implementation of new green hydrogen partnerships and projects.