Interview – The Geopolitics of Hydrogen


Interviewee: Jane Nakano

Energy Review, Vol 4. Issue 10. 2022

Energy Review: According to a CSIS report, it is expected that clean hydrogen may significantly alter bilateral energy ties in the Indo-pacific region. On the other hand, can you elaborate further on how the ongoing Russian-Ukraine war will change the dynamics of the clean hydrogen trade in Asia?

Nakano: There are two main ways that the Russian invasion of Ukraine affects the dynamics of clean hydrogen trade in Asia. First, the prospect for Russia to emerge as a key supplier of clean hydrogen to Asian markets is in doubt following the invasion. Major international sanctions on Russian banks are a major blow to planned and potential hydrogen projects in Russia, such as hydrogen clusters/hubs in places like Yamal and Sakhalin. The western responses to the war and the reputational damage to Russia have severely constrained Russia’s ability to finance these projects, acquire requisite technologies, and access some major Asian markets for the foreseeable future.

Second, Europe’s commitments to reducing its reliance on Russian hydrocarbons and shifting its energy mix away from hydrocarbons, in general, suggest stronger energy ties between Europe and non-Russian suppliers of energy. For example, the European Union outlined in the RePower EU, an energy platform announced in May 2022, how the EU seeks to accelerate the clean energy transition while also reducing the block’s energy demand and diversifying imports of conventional energy. Specifically, the EU seeks to produce 10 million tons of renewable energy-based hydrogen within the EU while also importing 10 million tonnes of hydrogen, all by 2030. Such a strong pursuit of global hydrogen supplies could potentially complicate the emerging synergy between Asian markets and prospective hydrogen supplier countries to Asia, such as those in the Middle East, which may now see more near-term export opportunities among European markets.

ER: Studies project that a transition to green hydrogen will likely be faster in countries like China, Brazil and India. These countries have also introduced policies and missions to advance clean hydrogen production. In that light, what are some technological challenges that these economies may have to face while prioritising green hydrogen production?

Nakano: Countries that are pursuing renewables-based hydrogen production may be mindful of several issues. First, to the extent that renewables are an important source of electricity for households and industries, whether the expansion of renewables can keep pace with both the demand growth from hydrogen production and the requirement from existing customers is an important question.

Second, water is a key input, along with renewable resources and electrolyzers, for producing renewables-based hydrogen. The availability of water is a critical consideration. While estimates vary on how much water is required to produce renewables-based hydrogen, hydrogen production’s requirement for water can face competition from agricultural, industrial and households.

Lastly, if countries seek to domestically produce equipment and components for hydrogen production, the access to minerals that are required for electrolyzer manufacturing could be another important consideration. Critical minerals and metals such as nickel, platinum, iridium and rare earth elements are required in many types of electrolyzers that are already in wide deployment or in development today.

ER: China’s long-term plan for a hydrogen economy may hint at the country’s dominance over clean hydrogen supply chains in the future. Given the intensifying nature of US-China technological decoupling over supply chains, what challenges lie ahead in the path of a smooth transition to clean hydrogen?

Nakano: As hydrogen can be produced from various sources, access to technology to convert resources into various forms of hydrogen is an important license to participate in clean hydrogen value chains. In the current period of the great power competition and fading faith in the global economic interdependence, clean hydrogen supply chains could become a new frontier for geo-economic rivalry among major countries that are investing in the development of a hydrogen economy. In fact, the United States, China and the European Union are all investing in hydrogen technology development and equipment manufacturing to ensure stable access to clean hydrogen supply. A major concern in the west is whether China would successfully replicate its commanding position seen in other clean energy supply chains, such as for solar photovoltaic (PV) cells and electric vehicle batteries, to come to dominate the global supply chains for clean hydrogen technologies.

For example, the United States has launched a concerted effort to nurture industrial competitiveness in clean hydrogen, through the passages of the Infrastructure Investment and Jobs Act (November 2021), and the Inflation Reduction Act (August 2022). These laws provide fundings for research and innovation, technology manufacturing, as well as production projects for clean hydrogen.

While competition might help drive down costs and secure technology access, the uncoupling between China and the West over technology supply chains could hinder rapid cost reduction and a transition to hydrogen.

(Dr. Jane Nakano is a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies.) ■□■