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Local Market Focus: The Catalyst for Faster FID in Hydrogen Projects

Hydrogen-concept-production-site

The transition towards green hydrogen, an energy vector with enormous potential, has sparked a series of opportunities and challenges on the global stage. An export-centric approach, adopted by several nations, may fall short in establishing a sustainable, resilient green hydrogen industry. Conversely, a strategy focusing on local markets first can offer compelling benefits, fostering a solid foundation before venturing into the international scene.

The Export-Driven Approach: A Common Pitfall

Countries like Saudi Arabia, Oman, and Chile have emphasized exporting green hydrogen. This approach is primarily driven by their heavily subsidized downstream markets. The introduction of green hydrogen into their refineries, which is currently more expensive, would invariably result in higher distribution costs, making it less attractive to local consumers. This could potentially lead to social unrest due to increased living costs.

To navigate this challenge, these countries could consider collaborating with regions like North Africa, renowned for its abundance of renewable energy resources and proximity to European markets. Existing infrastructure, could further streamline the transportation of green hydrogen to Europe. The income generated from such ventures could then be invested back into their countries to facilitate the energy transition.

Meanwhile, the U.S. is developing both its green and blue hydrogen industries for domestic markets. Blue hydrogen, produced from natural gas in a process involving carbon capture technology, complements the more sustainable green hydrogen, offering a pragmatic transition strategy that leverages the country's rich oil resources. This balanced approach aims to leverage local demand to drive down costs and build a sustainable industry.

Overcoming the FID Hurdle through Local Market Focus

Obtaining Final Investment Decisions (FID) can be a long, arduous process, often posing significant roadblocks for new projects. Prioritizing local markets, however, can expedite this process. By providing a clearer and more immediate validation of demand, the feasibility of technology, and potential impact, a local-first approach can significantly facilitate and accelerate the acquisition of FID. This shift in focus can thus pave the way for faster realization and scaling of green hydrogen projects.

The Cost-Saving Benefits of a Local Market Focus

Prioritizing local markets not only accelerates FID acquisition but also results in substantial cost savings by circumventing the need for transforming gaseous green hydrogen into liquid derivatives like ammonia and methanol. This conversion process, typically required for transporting green hydrogen due to its gaseous nature, can be avoided when focusing on local markets, thereby eliminating these transformation costs.

Moreover, emphasizing local distribution can significantly reduce transportation costs, further enhancing the cost-competitiveness and sustainability of green hydrogen.

The Path Ahead: Embracing a Local-First Approach

  1. Government Policies and Incentives: Governments should formulate policies and incentives that encourage local production and use of green hydrogen. This could include subsidies or tax breaks for green hydrogen projects.

  2. Building Collaborative Ecosystems: Establishing strong collaborations between research institutions, government bodies, and industry partners can spur innovation and foster a competitive market environment, accelerating the adoption of green hydrogen.

  3. Investing in Infrastructure: To promote the local use of green hydrogen, substantial investments in infrastructure, such as production facilities, storage, and distribution networks, are crucial.

Local Market Focus: A Win for Decarbonization, Economic Growth, and Investment

Adopting a local-first approach can play a vital role in achieving local decarbonization goals while stimulating economic growth. According to the International Energy Agency, the use of hydrogen could potentially reduce global CO2 emissions by up to 34% by 2050.

Moreover, focusing on local markets can drive economic growth by creating job opportunities in renewable energy production and green hydrogen distribution sectors. Furthermore, a localized green hydrogen industry creates opportunities for technical and vocational training programs, fostering a skilled workforce ready to lead the future energy sector.

Investor Attraction: Proving the Real-world Application

A local market focus can be a powerful catalyst for attracting investments. Local projects provide tangible evidence of the feasibility and potential returns of green hydrogen initiatives. Demonstrating real-world application and benefits can alleviate investors' concerns and uncertainties, encouraging them to financially back these ventures. With more investments, the green hydrogen industry can grow and innovate at a much faster pace, creating a virtuous cycle of development.

Green Hydrogen: A Versatile Energy Solution

The versatility of green hydrogen further enhances its appeal for local markets. As an energy vector, it can be utilized across a myriad of sectors - from powering industries and vehicles, to heating homes and even producing clean cooking fuel. This multi-faceted application presents ample opportunities for local markets to integrate green hydrogen into their energy mix, paving the way for a holistic, carbon-free economy.

In conclusion, focusing on local markets can foster faster FID, encourage economic growth, and drive decarbonization efforts. It's a promising catalyst for the broader adoption and success of the green hydrogen industry globally. With strategic policies, robust collaborations, and targeted infrastructure investments, the transition to a green hydrogen economy is more achievable than ever.

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