People are surprised and uncertain about Saudi Arabia’s plan to enter into a potential $700B global hydrogen market. A country with underutilized (way underutilized) renewable resources is suddenly building a $5B plant powered entirely by sun and wind that will be among the world’s biggest green hydrogen makers.
Why the sudden pivot to hydrogen? Maybe they are going environment friendly?
Of Course Not!
It’s all about business – SUPPLY AND DEMAND. As long as the supply for crude is strong, it doesn’t make any sense to bring change in that.
But that’s where green hydrogen comes into the picture. The industry is emerging and has the potential to replace the crude business and countries like Germany have already said that they will need an enormous amount of hydrogen and expect Saudi to fulfill that.
Saudi understands that it’s good to start early and become a strong contender. Take control of supply right from the start. Becoming a global leader in supplying hydrogen, and that’s possible only if they take the early lead.
Petrostates stand to lose as much as $13 trillion by 2040 because of climate-change targets, and Saudi Arabia is among those expected to be most affected. The best way is to change the energy source and cover their losses.
So their decision makes perfect sense. Failure would endanger their survival. It’s because the main focus is on exporting hydrogen rather than incorporating it into their own grid, so it’s a financial decision they cannot fail on.
The country has relied on exporting energy and they are just changing the energy source.