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ACWA places faith in hydrogen to power Saudi’s future

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Around 90 percent of clean energy spending comes from advanced economies and China
  • Reducing natural gas dependency is priority for governments
  • Green hydrogen to play central role in Saudi energy transition plans

Saudi Arabia, the world’s top oil exporter, has grand ambitions to become the globe’s number one producer of green hydrogen.

The kingdom is aiming to produce around four million tonnes of the gas by 2030 as part of Saudi Crown Prince Mohammed bin Salman’s (MbS) Vision 2030 to diversify the economy.

Green hydrogen is set to play a central role in the kingdom’s ambitious energy transition plans, with MbS announcing at the Saudi Green Initiative held in October last year that the kingdom is targeting net zero by 2060. 

Speaking at the FT’s Hydrogen Summit held yesterday in London, Paddy Padmanathan, president and CEO of Saudi Arabian utility company ACWA Power, which is leading on the development of Saudi’s hydrogen, said he is bullish that the gas is becoming increasingly commercially viable. 

“Given where energy prices are today, I think we can be confident that they’re not going to return to where they were over the next five to 10 years,” Padmanathan said.

“And that’s a long enough horizon in my view for us to be jumping in and getting on with developing green hydrogen-based services.

“We have the technological capability today to produce green ammonia at numbers that are way below $1,000 per tonne.

“Renewable energy costs have come down phenomenally while technology continues to improve – electrolysers today have around 60 percent efficiency but that’s going to ramp up to 90 percent soon. And that will have a significant impact.” 

Paddy Paddy Padmanathan, president and CEO of ACWA Power
Paddy Padmanathan, president and CEO of ACWA Power

Plugging the energy gap

The Russia-Ukraine war has led to a dramatic spike in gas prices over recent months and therefore reducing natural gas dependency has become a key priority for governments around the world.

Increased production of green hydrogen could help plug that gap. 

ACWA Power has been notably stepping up its commitment to green hydrogen.

On May 26 it signed a joint development agreement (JDA) with Omani energy group OQ and US-based Air Products towards a multibillion-dollar investment in a green hydrogen-based ammonia production facility, powered by renewable energy in Oman. 

It has also previously committed to the development of a facility that will become the world’s largest hydrogen producer in the world. 

In July 2020 it signed a $5 billion deal with Neom and Air Products to develop a green hydrogen-based ammonia production facility located in the planned futuristic, zero-carbon city Neom.

The facility aims to produce 240,000 million tonnes of green ammonia per year by the first quarter of 2026. 

In May this year Padmanathan told Reuters that he expected to close the $5 billion financing for the project in the third quarter of this year. 

“We have ordered 2.2gw of electrolysers on the back of our Neom project,” Padmanathan told delegates at the FT Hydrogen Summit.

“That project is in construction and we’re now looking at a second project in Neom.

“We’re convinced that the ammonia industry has the capacity to multiply very fast.” 

Green ambition

Working in conjunction with Saudi’s sovereign wealth fund, the PIF, and Saudi oil giant Aramco, ACWA Power has been charged with developing $30 billion worth of renewable energy projects by 2030. 

Last year the kingdom issued a royal decree that the PIF will be responsible for developing 70 percent of the kingdom’s renewable energy in time for realising its Vision 2030 goals. 

Speaking at an ESG-themed summit hosted by Saudi’s Future Investment Initiative (FII) Institute in London in May, Aramco chairman and PIF governor H.E. Yasir Al-Rumayyan told a packed conference auditorium: “We’ve acquired a big percentage stake in ACWA Power whose main function now is to reach this 70 percent target for the PIF,” before adding that the PIF, which currently owns a 50 percent stake in ACWA Power, is considering increasing its stake. 

Al-Rumayyan also disclosed that the PIF is in the process of establishing a new hydrogen company that will act as a mediator between many of the SWF’s initiatives. 

Aramco, in which the PIF holds a four percent stake, published its first sustainability report in June this year. 

The report outlines Aramco’s focus on developing its blue ammonia and hydrogen business, with the aim of producing up to 11 million metric tons of blue ammonia per year by 2030 — with the potential to support significant emissions reductions in hard-to-decarbonise sectors such as heavy-duty transport, heating, and industrial applications.

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