The Geopolitics of Hydrogen is underway. Will Nigeria miss out?

Image by Florian Kropshofer from Pixabay

By

Victor Igono

Date Published

May 17, 2022

Category

Political Economy

Prior to Russia’s invasion of Ukraine, the world (including parts of Europe) had dragged its feet on climate change, the energy transition, and what constituted an appropriate timeline. However, the war was a rude awakening to many countries, especially in Europe. The continent’s dangerous dependence on Russian oil and gas limited its ability to respond to Russian aggression and put the entire continent at the mercy of a single supplier. This painful reality forced the continent to prioritize supply redundancy and security over longstanding arguments for cheap supplies. Beyond Europe, supply redundancy (including in food supplies) is fast becoming a national security priority for many countries.

In the short term, Europe’s attempts at weaning itself off Russian gas have focused on sourcing alternative gas supplies from nearby countries like Qatar, Algeria, and Nigeria among others. These have received extensive coverage. However, below the radar, European countries (and other key economies) have taken steps toward bolstering their energy security by leveraging the potential of hydrogen energy. A combination of rapid technological progress, improved cost economics, unfavorable geopolitical developments, and continued clamor for a faster energy transition has increased global interest in hydrogen usage across key economic sectors.

But what is hydrogen?

Hydrogen is reputed as the most abundant element in the universe. However, it is hardly found alone. Hydrogen is often derived from other sources, including water and fossil fuels. This creates a distinction among various types of hydrogen. Gray hydrogen is derived from steam, blue hydrogen is derived from fossils, and green hydrogen is derived from the electrolysis of water using renewable energy sources. 

Currently, blue and gray hydrogen are the most common and relatively cost-competitive. Green hydrogen (which has the least carbon footprint) is the long-term goal and forms a key part of the intended energy mix of countries after the energy transition.

Hydrogen energy generates electricity, heat, and water which makes it especially clean and less harmful to the environment. More so, the ability to store it for a long time makes it especially suitable for certain industries where intermittent energy sources might be inappropriate. These include shipping (which is responsible for 25% of emissions in the transportation sector), air transport, and heavy industrial sectors like fertilizer production, automotives, and more. These characteristics have led to renewed interest in hydrogen from potential buyers and sellers, spurring a quiet but strategic rivalry among key players.

Energy Geopolitics: The hydrogen case

By early 2021, the total value of hydrogen projects in the pipeline was estimated at $500 billion. However, major geopolitical developments since then, especially the Ukraine war, have added further urgency to the need for reliable energy alternatives. This year, Germany launched a hydrogen diplomatic office aimed at fostering long-term relationships with potential producers. The country’s energy minister signed supply agreements with Saudi Arabia, in addition to agreements already signed with Egypt, Namibia, and Morocco. Other major economies, including the Netherlands, Japan, and China are already exploring local production as well as external supply contracts.

On the supply side, key producers are emerging across different parts of the world. A longstanding challenge for hydrogen production vis-à-vis other fossil sources is its cost economics. Separating hydrogen from its core compounds (water or fossil fuels) requires significant energy input. More so, increased demand for green hydrogen means that countries with relatively cheap renewable energy sources (wind, solar, geothermal, etc.) are at a comparative advantage vis-à-vis renewable energy-poor countries. Thus major hydrogen projects are increasingly located in countries with abundant solar and/or wind resources. In Africa, five countries (Namibia, South Africa, Egypt, Morocco, and Mauritania) currently play host to large-scale green hydrogen projects. Nigeria is absent from the list.

Nigeria currently lacks a clear national hydrogen strategy notwithstanding the country’s wealth of renewable energy sources. While the country has focused on its natural gas pivot, there is a case for exploring the potential of hydrogen production. Foremost, funding for renewable projects, including hydrogen, is widely available. This contrasts with the dearth of funds currently witnessed in the oil sector. Secondly, as the strategic rivalry between the west and the east continues, energy security will remain critical. Combined with the unpalatable choice between transiting to cleaner energy or risking increased climate disaster, hydrogen is likely to become a key commodity, especially for use cases where electric batteries and wind turbines are simply impractical.  

Conclusion

Nigeria’s continued failure to develop a hydrogen policy could impact the country’s long-term place in the African energy landscape. In addition to lost investments, the potential rise of non-traditional energy players in Africa would impact Nigeria’s strategic value to global partners. Finally, considering the disproportionate role of energy in the Nigerian economy, there is a need to take proactive steps with a view to sustaining strong competitive advantages vis-à-vis other African countries. A clear policy coupled with strong collaboration among financiers, energy research institutes, and the private sector could help leverage the country’s renewable resource advantage. In addition to revenues, the hydrogen value chain would help create jobs and energy sources for nearby industries

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Disclaimer: This information in this article is NOT investment advice. It is intended for information and entertainment purposes only.

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