With nations focusing on green recovery to revive their economies post the pandemic, hydrogen will have an important role to play owing to its versatility as a carbon-free fuel. However, the question remains that whether it will merely form a small part of a diversified energy portfolio or will it dominate the energy mix of major economies. A report titled “The Hydrogen Revolution in EMEA” by DLA Piper analyses the development of the hydrogen market and the approach that is being taken in key jurisdictions with a special focus on Europe, the Middle East and North Africa. REGlobal presents select extracts from this report.


Hydrogen is the most abundant element in the universe. As it can provide a clean, alternative energy source, it is also a crucial part of future energy systems as countries across the globe drive towards zero carbon economies. Hydrogen’s immense potential is demonstrated by the fact it is an energy carrier with an energy density more than twice that of natural gas.

The use of hydrogen in a range of processes is not a new phenomenon, and demand currently comes from a wide array of sectors, led by petroleum and agriculture:

  • Just under half of all current hydrogen consumption occurs in petroleum refining as hydrogen is used to crack heavier oils into lighter oils for use as petroleum and other oil and gas products.
  • The second-largest use of hydrogen is in agriculture where it is used to produce ammonia for fertilizers (by combining hydrogen with nitrogen).
  • The remaining 10% of hydrogen demand comes from across the food, metals, electronics, and methanol industries.

In these sectors, demand for hydrogen has grown steadily since 1975 to reach a global demand today of over 70 million tonnes per year with an estimated market size of more than USD115 billion. That trend is expected to continue and be a central feature of the energy transition away from traditional energy sources.

Current forecasts anticipate that demand for hydrogen will continue to steadily increase towards 2050. With so many sectors considering hydrogen as a zero-emission energy carrier or fuel, steady demand from existing off-takers will be augmented by the rise in demand from customers in new sectors. Current data suggest that global hydrogen demand will require additional generation of 35-1,100 TWh per year by 2030, increasing to 300-19,000 TWh per year by 2050.

Particular demand growth is anticipated in those sectors which are traditionally regarded as difficult to de-carbonize, such as the steel and cement industries, where clean sources of hydrogen (which are expected to be available in increasing volumes at increasingly lower cost) are likely to have a vital role to play. Other drivers of increased demand will include fuel cell vehicles (cars, buses, trucks, and trains), heating for buildings and power generation, with each of these aided by improvements in costs and processes as wells as excess renewables generation used to power electrolyzers.

As mentioned above, the availability of improved, and cheaper, production processes generating increasing volumes of clean (i.e. low or zero carbon emission) hydrogen will also be a driver of demand. That will be a major step change for global hydrogen production in circumstances where 98% of current demand is met by hydrogen sources which are not clean, or as clean as they could be.

  • Coal gasification produces what is referred to as “brown” hydrogen. That production method accounts for 23% of current hydrogen demand. It is one of the cheapest means of hydrogen production but creates significant amounts of CO2 as a by-product.
  • Around 75% of hydrogen demand is currently met by a production process known as steam methane reforming (SMR), which uses natural gas as a feedstock. At present this process is done almost entirely without carbon capture and storage (CCS), and as a result is not a clean source of hydrogen. However, the hydrogen which it produces is known as “blue” hydrogen because it is a cleaner process than others such as coal gasification (brown hydrogen).

The impact of these processes is significant; far from being an environmentally positive solution in all cases, brown and blue hydrogen production are responsible for huge emissions. In 2019 alone, 830 million tonnes (MtCO2/yr) of CO2 emissions were created by producing hydrogen across the world.

Part of the solution is the increased use of CCS, both in new facilities and by way of retrofit to existing SMR and coal gasification plants. However, the rate of adoption is relatively slow as the technology is currently expensive and, in most cases, fails to capture all carbon emitted.

It is in those circumstances that if hydrogen is to fulfil its potential, greater utilization of clean production methods is paramount. Currently only 2% of hydrogen demand is met by production using water electrolysis, which uses proton exchange membrane (PEM) electrolyzers which can separate hydrogen from the oxygen in H2O without emitting CO2 as a by-product. This production method is known as green hydrogen. It has the potential to make a material contribution towards zero carbon economies, and its feasibility as a power supply increases as costs associated with photovoltaic solar panels and wind turbines decline.

Unlocking hydrogen pathways

The challenge for hydrogen then, is to unlock pathways to the production of blue and (in particular) green hydrogen, and to serve increasing demand with decreased reliance on those methods of production which do not serve the zero-carbon agenda. As it stands the choice for businesses (and to a degree the sectors in which they operate) is between electrolysis using renewable power or by fitting CCS to SMR and coal gasification processes. Deciding which to choose will depend on several factors such as the size of required investment, the level of government support, scale of operations, and available feedstock. 

For the oil and gas sector, SMR plants fitted with CCS allow continued use of existing production assets while simultaneously reducing carbon emissions from hydrogen production operations. This blue hydrogen approach would enable industrial-scale volumes of carbon-neutral hydrogen to be produced. Economies of scale could then be exploited to simultaneously develop smaller-size green hydrogen production to help accelerate the development of all forms of hydrogen technology.

Elsewhere, relative newcomers to the hydrogen economy, such as fuel cell electric vehicle (FCEV) technologies, represent a new source of demand and so will likely need to coalesce around a green hydrogen-led approach in order to comply with net zero carbon targets. These greenfield hydrogen production projects can be developed in a number of ways. The most beneficial from an environmental standpoint is electrolysis powered by renewable energy sources, typically wind or solar. Where wind and solar are not available, developers in most cases must invest in SMR or gasification with CCS.

There are emerging technologies currently in testing or pilot programs that offer additional potential routes for clean hydrogen production in the future, although commercial use and scalability are still a long way off. One of these, Trigeneration, is gaining traction. This is a process which produces electricity, hydrogen and hot water using agricultural waste. Another is power- to-X (P2X) which creates synthetic fuels from renewable electricity generation using gas and liquid reconversion, which broadens the potential offtake options for the power generation sector so that energy produced by projects can be indirectly used in areas such as chemical production. These synthetic fuels can also replace fossil fuel use in other areas.

The central importance of production costs

Inevitably, the key to unlocking the right hydrogen pathways is cost. Today, coal gasification and SMR without CCS are the lowest cost options for hydrogen production (which in part explains why they satisfy 98% of current demand), followed by natural gas SMR with CCS. This coupled with legacy investment concerns (e.g. potential stranded investments in fossil fuelled hydrogen production without CCS), has contributed to holding back interest in, and support for, clean (blue and green) hydrogen production. However, those concerns are not shared by all, and a number of significant players are leading the way towards a greener hydrogen future.

Current cost levels have led to limited consideration of hydrogen as an energy source or fuel for end-use in sectors such as storage, transport, industrial heating and metals manufacturing, and in the gas grid for buildings and residential heating. Finding a solution for these sectors is particularly important given the long-term environmental costs associated with the enormous carbon emissions which they generate. Many agree that reducing the cost of renewable power is the key. There will be limited commercial incentive to invest or to change while there remains such a significant discrepancy between the cost of renewable power for the purposes of hydrogen production and the cost of power for less green hydrogen production processes.  

However, there have been recent declines in the cost of electricity from renewable energy and considerable strides made in the evolution of electrolysis equipment which is closing the cost gap. According to a study by the Hydrogen Council, green hydrogen production costs are on track to reduce by 50-60% by 2030. That forecast is causing investors, developers and end-users to take notice, with the consequence that hydrogen has surged back to the top of the agenda for decarbonizing future energy supply. 

Region-wise analysis


As one of the world’s major energy markets, with a clear commitment to address climate change, Europe presents an immense opportunity for the development of the use of hydrogen, as hydrogen presents an immense opportunity for the EU. That mutuality of interest enthuses those with an interest in both reducing carbon emissions and developing hydrogen as an energy and fuel source, making Europe a regional leader in hydrogen projects. 

As of 2020, Europe is a world leader in operational hydrogen production projects, with a significant pipeline of projects announced and planned to come online in the next decade. Transporting hydrogen in dedicated networks is something that has been carried out in Europe for decades. However, these networks have traditionally been part of on-site production operations in the oil and gas and industrial sectors. 

Spring 2020 brought announcements in Europe that positioned renewable energy as a catalyst to activate a strong recovery from the COVID-19 pandemic. The European Commission is planning to align its COVID-19 economic strategy with the European green deal strategy in a post-pandemic recovery plan which includes an accelerated push to renewable energy. As of June 2020, plans and announcements to scale up electrolysis operations in Europe to approximately 17 GW of installed capacity by 2030 – and the potential for significantly more in subsequent decades – have been catalogued in the IEA Hydrogen Project database. To put that in context, under 1 GW of hydrogen electrolyzers have currently been installed across the continent. These targets may of course be aspirational rather than realistic. The largest electrolyzer under construction in the EU today has a capacity of 10 MW, so achieving 17GW of installed capacity will require a rapid upscaling of electrolyzers in development and production.

There are multiple options when it comes to electrolysis. Of the currently available technologies, alkaline electrolysis is the most mature, having been available since the 1920s and used in industrial application, although it is difficult to scale while keeping production costs low. Solid oxide electrolyzer cell (SOEC) is a far less mature technology and so currently possesses prohibitively high production costs. In that context Power-to-x (using surplus electricity generation to produce hydrogen) and PEM (water electrolysis, which uses proton exchange membrane (PEM) electrolyzers) are expected to become the dominant hydrogen production processes over the next decade. PEM electrolyzers are a particularly attractive technology because of their potential application to another increasingly significant problem: balancing the grid.

Buildings and the gas grid: The most popular way to heat buildings across Europe is currently via natural gas, with around 42% of all residences – or 90 million – supplied in this way. While most existing gas grid infrastructure is not outfitted properly to distribute pure hydrogen and such a change would require customers to upgrade to hydrogen-compatible boilers, blended hydrogen and natural gas could be distributed almost immediately in most places throughout Europe. No upgrade would be required for grid infrastructure or end-users’ heating systems. That is an opportunity which, as yet, has not been fully utilized but the potential for change (given the scale of emissions from buildings) is obvious.

In this context, in September 2020 the European Federation of Energy Traders released a contract that can be used to buy and sell hydrogen based on environmental tracking certificates, built on guarantees of origin or national certificates. Although this is a very early step, it is clear a trusted system tracking the environmental value of hydrogen is needed.

Industrial heat: There are of course several different options for decarbonizing industrial heating operations, with the use of hydrogen representing one option which can (and should) be used alongside others. Those options include:

  • Demand-side measures to help manage resources by increasing recycling and reuse of products
  • Energy efficiency measures which adapt production equipment in order to lower energy use per production volume
  • Electrification to replace fossil fuels with renewable heating
  • Replacing fossil fuels with biomass boilers
  • Low-carbon hydrogen, through CCS or electrolysis, but also potentially through production powered by nuclear generation plants

There are many available options to address the significant challenge of carbon emissions generated by the industrial heat segment. Given the scale of the challenge, the solution needs to be on a significant scale, and it may be that, despite its detractors, nuclear power generation provides the best of the available options for Europe.

Hydrogen 2050 Roadmap: The study, “Hydrogen Roadmap Europe: A sustainable pathway for the European Energy Transition,” developed by the FCH JU and 17 European industrials, analyzes the effects of a high-hydrogen-uptake scenario towards 2050. By documenting a potential route for future decarbonization, a picture can be created of where the more prominent investment opportunities within the hydrogen space may lie over longer timescales.

The path laid out by the roadmap creates clear high- level targets for hydrogen deployment, staged over three phases – heating and power for buildings, industrial heat and industry feedstock. In many ways, the flourishing hydrogen sector that the plan describes will echo the development of the renewable electricity sector which took place in the early part of the 21st Century. But, just like with technologies like wind and solar, firm state support and rapid cost reductions will also be required within the hydrogen market for these aspirations to be realized.

The EU Hydrogen Strategy, unveiled in July 2020, sets out a phased approach for a gradual transition:

  • In order to achieve the objectives of the first phase, there will need to be a step-change in the manufacturing of electrolyzers, including large ones up to 100 MW. To make best use of the planned new electrolyzers, they should be placed next to the sites of highest demand, such as steel plants, chemical complexes, and oil refineries. In transport, the success of hydrogen fuel-cell vehicles – trucks, buses, and cars – will be largely dependent on the presence of adequate refuelling infrastructure.
  • In the second phase of the EU’s hydrogen strategy, green hydrogen should reach cost-parity with other methods of hydrogen production, and will find its way into steel manufacturing, trucks, rail and other transport modes, including maritime applications.
  • In the third phase of the European strategy, the focus will be centered on upping output from the renewables sector so it can be used for hydrogen production. By 2050, the strategy envisages around 25% of all renewable generation being used for this purpose.

The Middle East

Due to the scarcity of freshwater in the Arabian Gulf, Middle Eastern countries are looking to sea water to produce hydrogen, which first needs to be desalinated using reverse osmosis (RO). This is a costly proposition, but it has not hampered interest in the possibility of producing clean hydrogen in the region. 

A number of factors are in the favor of the Middle East when it comes to its prospects in the low-carbon hydrogen space. There is, of course, a world-leading oil and gas industry which could be retooled towards hydrogen production, but also there is vast potential for enormous solar generation which could similarly be employed to make hydrogen. Lastly, the region sits on a crucial junction within international trade routes and so it could tap into hydrogen export markets where they begin to develop.

The availability of hydrocarbons in the six economies of the Gulf Cooperation Council (GCC) has also led to the emergence of heavy industry, including aluminum smelters, chemical industry, refineries and steelmaking, and several of these have provided demand for hydrogen for many years.

The Middle East is home to a string of solar projects, in Dubai, Abu Dhabi and Saudi Arabia, that have established new benchmarks for the low cost of energy. Early in 2020, Abu Dhabi Power Corp in the United Arab Emirates (UAE) secured the world’s lowest tariff for a solar power plant – a 2 GW solar PV plant in Al Dhafra – with a winning bid of 1.35US¢/kWh from EDF and China’s Jinko Power. The Al Dhafra project continues a trend for breaking new ground in terms of how low bids for solar capacity can go, which is a particularly pronounced trend in the Middle East due to its advantageous natural solar resources, extremely low cost of capital enjoyed by many state-backed companies, and economies of scale on offer from the size of the projects themselves.

Complementing daytime solar PV and concentrated solar power (CSP) with electrolysis to create clean hydrogen storage infrastructure means that intermittent daytime solar resources can be effectively stored, and potentially distributed over long distances, for use during the evening or when solar energy is limited, using combined heat and power (CHP) and grid balancing infrastructure.

The domestic oil and gas, and steel sectors, can also benefit from the development of hydrogen capacities, potentially providing them with a low-carbon alternative in a world which is rapidly moving towards the post- fossil fuels age. If the UAE is taken as an example, the vast desert scape which makes up much of the country’s topography could be repurposed to install sufficient solar generation to be able to create a hydrogen industry that could match its current oil and gas wealth, and much of the same conditions exist in other Middle Eastern countries.

Oman is developing bold strategies to reach the renewable energy podium in the Middle East. The Port of Rotterdam in the Netherlands owns a 50% stake of the Port of Sohar and Freezone in Oman. Thus, the sultanate is exhibiting great interest in producing solar, wind and hydrogen energy to ship to Rotterdam. Oman aims to play a crucial role in the energy supply chain, including the production of solar and wind-powered hydrogen production and shipping. For instance, Belgian engineer DEME Concessions is working with Omani partners to start a 500 MW solar and wind-powered hydrogen production in the Port of Duqm in Oman.

Development of hydrogen production in the region is also assisted by the geographical proximity to Asian growth markets means. Companies like Shell and Kawasaki are currently exploring ways to safely export hydrogen, with the element in its liquid state being seen as the best way to do so. That may give the Middle East a material strategic advantage in terms of the prospects of hydrogen in the region. As an illustration, Japan is planning to deploy hydrogen as a clean energy source on a large-scale by 2030. As one of the largest importers of energy from the Middle East, Japan’s hunger for energy and its poor natural resources could replace the Silk Road with a hydrogen equivalent which would pair Asian markets with supply from the Middle East.

Additionally, there is opportunity to produce green hydrogen-based ammonia to replace the carbon- emitting manufacturing processes currently in Saudi Arabia’s northwestern region. A joint venture project between Air Products, developer ACWA Power and smart-city mega-project NEOM, is planning to build in Saudi Arabia what the groups claim will be the “world’s largest green hydrogen plant”. With the first section of NEOM aimed to be complete by 2025, the US$500 billion green hydrogen-based ammonia production plant will be built in the Tabuk Province of northwestern Saudi Arabia and planned to produce 650 tonnes of hydrogen for global export.

North Africa

North Africa has recently drawn attention as a potential partner for European companies looking at clean hydrogen sector opportunities to accelerate an ambitious green deal, which is speeding up its targets for the next decade. The region, (and in particular Morocco), lays claim to a significant mix of renewable energy resources necessary for clean hydrogen production – i.e. water, sun, biomass and wind. Indeed, the vast coastline presents attractive opportunities to develop impressive wind energy capacities (which can be a key component of hydrogen sector development) in the coming years.

According to the World Bank, with 3,500 km of coastline, Morocco’s wind speed can reach up to 10m/s, which could potentially translate into 135 GW of wind power (offshore included). Morocco also has one of the highest rates of solar insolation in the world, with between 3,000-3,600 hours in the Sahara Desert. At the end of 2019, Morocco’s renewable energy capacity reached 3,685 MW, including 700 MW of solar energy, 1,215 MW of wind power, and 1,770MW of hydroelectricity. The country’s objective is to reach 6,000 MW of renewable energy production before the end of 2020 – an attainable goal, according to the Moroccan Agency for Sustainable Energy (MASEN).

Since 2016, P2X has begun to take hold within the minds of policymakers and industry in Morocco and the country is now shooting to be a world-leader in the field, with hydrogen naturally being a key part of the equation. In 2018, the Moroccan Institut de Recherche en Energie Solaire et Energies Nouvelles (IRESEN), in partnership with the German Corporation for International Cooperation and the German Moroccan Energy partnership (GIZ-PAREMA), assessed that Morocco could account for nearly 4% of the global P2X market by 2030, which illustrates its potential as a significant market player.

To that end, Morocco embarked on an ambitious renewables program which set a target of 42% of electricity supply coming from renewable by 2020, moving onto 52% by 2030. To achieve that it plans to add up to 11 GW of solar, wind and hydropower capacity by 2030. As an example of the work already underway to achieve its goals, Morocco has built the Noor solar complex in Ouarzazate. It consists of CSP and PV projects that will ultimately total 582 MW of capacity. The scale of these projects have particularly helped to reduce the cost of CSP, which now rivals thermal generation in the country on a costs basis.

IRESEN has succeeded in moving P2X up the agenda of the Moroccan government, while also encouraging the investigation of green hydrogen as a decarbonization solution for the country.

According to the Netherlands Association for the United Nations (NVVN), by aggregating solar and wind project output in Morocco a high load factor for hydrogen electrolysis can be achieved. In 2019, Morocco was host to bids of EUR28/MWh for an 850 MW wind farm, demonstrating the low renewable generation costs achievable in the market. The NVVN predicts that tariffs will further reduce to EUR10-20/MWh in the next decade. An agreement was signed between Morocco and Germany on June 2020 for the development of the hydrogen production sector and to set-up related research and investment projects. Following this agreement, MASEN announced the implementation of the first industrial green hydrogen plant in Africa.

If electrolyzer efficiencies of 80% can be coupled with reduced capex requirements of EUR300/kW, which should be within reach over coming years, hydrogen could be produced in Morocco for around EUR1 per kg, beating expected costs in Europe and cost-competitive with high-carbon emitting hydrogen production via SMR without CCS. This is a further illustration of the opportunity for Morocco to be a major hydrogen player.

Wind power is a key technology with benefits for the MENA region, with the Global Wind Energy Council data indicating an increase of 894 MW of wind power in the region in 2019. Despite allowing cost-effective and sustainable energy, wind power still faces challenges in power market frameworks, transmission infrastructure bottlenecks and policy. What is more than evident from recent studies, and from current and planned projects, is that natural resources in North Africa, an in Morocco in particular, present a huge opportunity for the region to be a key player in the development of the hydrogen sector.

The report can be accessed here