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9 July 2020

Record green hydrogen plant opens Europe’s gateway to North Africa

Saudi Arabia is set to be home to the world’s largest green hydrogen plant in 2025, with ACWA Power and Air Products launching a joint venture to power 4 GW of production from solar resources across the Kingdom.

The group will invest a total of $5 billion in the project, which will be able to produce 650 tons of green hydrogen per day, once it comes online in 2025. Much of this will be used in the production of 1.2 million tons of green ammonia each year, with Air Products hoping to ship and trade the fuel in global markets.

The project itself will be located at the, as yet unbuilt, city of Neom, near the country’s border with Egypt and Jordan, with the city itself owning one-third of the project. Saudi Arabia plans to establish Neom as a special economic zone and as a hub for renewable energy and green hydrogen.

Sitting at the gateway to North-East Africa, the $500 billion city is well situated to become a hub of any energy trading between the MENA region and Europe. With the demand for oil falling, many of the country’s in the region are starting to sweat, due to their high dependence on oil exports in GDP. As a percentage of GDP, oil rents (essentially the profit made from oil) account for 38% in Iraq; 37% in Libya; 23% in Saudi Arabia; and 22% in Oman. To replace this revenue stream, green hydrogen, produced from the wealth of solar potential in the region, is an ideal solution, especially with Europe exploring plans to make use of 40 GW of green hydrogen capacity from North Africa.

The remaining two thirds of the project will be split equally between ACWA and Air Products.

US-based Air Products and Chemicals claims itself to be the world’s largest producer of hydrogen, with the bulk of it produced from fossil fuels; it also claims itself as a world leader in natural gas technologies, trading on the NYSE at a value of around $60 billion. The company’s role as the sole offtaker in this project therefore marks an acknowledgement in the shift away from grey and blue hydrogen, and the premiums that will be available in the future market for green hydrogen. In addition to the $5 billion production plant, Air Products will also invest $2 billion in the associated distribution infrastructure, which could be hugely valuable if the flux of hydrogen flowing from Africa through to Europe rises as we expect.

ACWA Power’s role in the project is simple – supply the renewable power. The Saudi Arabian power and water company currently has 12,815 MW of generation capacity in operation or construction across the country, only 300 MW of which is from renewables; the Sakaka IPP plant set for operation in Q2 2020. However, the company’s PV activity in the MENA region is ramping up rapidly, including a record low bid for 900 MW of solar in Dubai at a price of $0.0169 per kWh.

Other supplies for the project include Haldor Topsoe, for conversion from hydrogen to ammonia, and electrolyzers from German outfit Thyssenkrupp, which recently announced that it had hit the 1 GW mark from production capacity.