The Kingdom of Saudi Arabia and Germany recently signed an energy agreement that sets the stage for green hydrogen exports from the Gulf to Europe.
Saudi energy developer ACWA Power and German energy trading firm SEFE committed to an annual supply of 200,000 tonnes of green hydrogen by 2030.
The plan will create a direct supply route between the two regions.
Germany’s Plan for Hydrogen Supply
Germany is looking for alternatives to Russian gas since the war in Ukraine disrupted supply chains. The country is shifting towards hydrogen for steel production and industrial heating.
Under its hydrogen plan, Germany is securing agreements with suppliers around the world and Saudi low-cost renewable energy makes it a practical choice.
NEOM’s Role in Green Hydrogen Production
The deal connects with Vision 2030 and the NEOM project.
NEOM, a planned city powered by renewables, is home to the NEOM Green Hydrogen Plant.
This site, a collaboration between ACWA Power, Air Products, and NEOM, is set to become the largest hydrogen production facility in the world when operations begin in 2026. The plant will produce 1.2 million tonnes of green ammonia annually for export.
Investment in Hydrogen Infrastructure
Saudi is broadening renewable energy and hydrogen production.
The Kingdom aims to derive half of its power supply from renewables by 2030. The ACWA Power-SEFE agreement supports Saudi Arabia’s wider economic plans, which include diversifying exports beyond oil.
SEFE, previously known as Gazprom Germania, has been building hydrogen supply chains, including agreements with Brazil and Norway.
Challenges of Transport and Cost
However, hydrogen transport presents technical hurdles.
Hydrogen gas is volatile and has a low energy density, making storage and shipping costly. One method involves converting it into ammonia, which is easier to transport, but reconverting it back into hydrogen leads to energy losses.
Saudi Arabia’s benefit lies in its strong solar and wind resources, allowing for low-cost hydrogen production that remains competitive despite logistical hurdles.
New Energy Links: The Middle East and Europe
As Europe moves towards renewables, the Kingdom is adjusting accordingly.
European industries are using hydrogen to cut emissions and Germany has already set up a hydrogen diplomacy office in Riyadh to support trade.
Once an oil supplier to Europe, Saudi Arabia is now building its presence in green energy.
Saudi Arabia’s Future in Hydrogen Production
As global demand for hydrogen rises, Saudi Arabia is working to increase its role in the market. The Kingdom is developing production capacity and investing in hydrogen research.
The agreement with Germany fits into a broader effort to build a worldwide hydrogen supply network, with potential trade expansion into other European countries.
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