November 21, 2023
By Haley Zaremba

Spain and Portugal Spearhead Ambitious Green Hydrogen Plans

• Countries like Spain, Portugal, and Morocco have significant potential for solar and wind energy production, positioning them as potential green energy exporters.

 
• Spain's premature focus on green hydrogen export and technological challenges exemplify the risks of developing the sector too rapidly without adequate local consumption and infrastructure.
   
• The region must carefully consider the most effective use of its renewable energy resources, balancing local needs with export potential and technological capabilities.

The Mediterranean has big dreams of becoming Europe’s clean energy powerhouse, but they have a long way to go before that goal becomes economically and logistically feasible. Between its plentiful sun for solar energy and its considerable existing natural gas infrastructure, which could be repurposed for piping green hydrogen across the region, there is a serious amount of potential. But can they harness it?

The Mediterranean is geographically blessed when it comes to green energy potential. Countries like Spain, Portugal, and Morocco boast huge amounts of sunlight and wind, and far lower population density than most of Europe. This gives them the potential to build out massive solar and wind farms that most countries could only dream of, setting them up to be green energy exporters at a time when Europe is increasingly seeking to secure more clean energy. And North Africa and Spain are already ramping up energy transportation potential via undersea cables.
While this seems like the perfect recipe to build up new trade routes for clean energy, the Mediterranean is taking a big risk by trying to build up the sector too much, too soon. “Europe has to jump-start a market for a new source of energy and do so in a deregulated arena with many competing players,” the Economist warned earlier this month. “Simultaneously ramping up demand and supply is a delicate balancing act.”

The case of Spanish hydrogen exemplifies exactly these issues. Spain has been at the forefront of the green hydrogen movement thanks to its abundance of renewable energy potential and a supportive energy environment, but it seems that the country has put the cart in front of the horse. Europe may not be ready to import as much green hydrogen as Spain is planning to export. Experts warn that Spain must be careful not to blow up current energy supply chains in the interest of unpromised export potential. “There’s a sequencing in terms of what’s logical to do,” Martin Lambert, head of hydrogen research at the Oxford Institute for Energy Studies, told Bloomberg earlier this year. “The first step is to do as much as possible to decarbonize the power system locally, then make hydrogen from surplus renewable power to use locally, and then move on to exports.”

What is more, the Spanish government has poured money into developing the sector without first working through the logistics of getting the necessary technology up and running. In this sense, too, Spain is getting a bit ahead of itself. At present, Spain is saddled with a cutting-edge green hydrogen electrolyzer that doesn’t work, thanks to a design flaw on the part of American maker Cummins. As a result, the network of hydrogen-based buses and fuel cells which were designed to run on the hydrogen produced by the electrolyzer also sit dormant, and now parts of the Spanish electorate, as well as those they’re voting into office, seem to be decreasingly interested in pushing the industry forward.

And Spain isn't alone in its potentially misguided strategy. Portugal, too, has set lofty goals for its own green hydrogen production sector. Earlier this year, the country doubled its own goals for production capacity and now aims for its new electrolyzer capacity to produce green hydrogen to hit 5.5 GW by 2030, and plans to pour tens of millions of Euros into the effort.
And while the Mediterranean has more renewable energy potential than its own population could consume, this doesn’t necessarily mean that pumping that excess capacity into green hydrogen production is the best move. Exporting renewable energy without converting it might actually be the most logical – and most climate-friendly – strategy. Green hydrogen is crucial to ‘deep decarbonization’ in ‘hard-to-electrify and hard-to-abate sectors,’ but critics have warned that there simply isn’t enough existing renewable energy capacity to produce enough green hydrogen to replace natural gas and coal in petrochemicals, steel and agricultural product fabrication. And all that green energy might be far more useful in other applications. A new report by the International Renewable Energy Agency (IRENA) warns against the “indiscriminate use of hydrogen,” cautioning that extensive use of hydrogen “may not be in line with the requirements of a decarbonised world.”

By Haley Zaremba for Oilprice.com