Pavel Tereshchenko
Head of the Analytical Department of Invest In Network

Executive Summary:

·       Geography. Kazakhstan and Uzbekistan have a favorable geographical location between Europe and East Asia, which, according to forecasts, will become the world's largest consumers of hydrogen.

·       Development of RES. Kazakhstan and Uzbekistan are working on a significant increase in installed renewable energy capacities. Kazakhstan plans to introduce more than 6 GW of solar and wind power plants by 2035, as well as achieve carbon neutrality by 2060. At the same time, Uzbekistan plans to generate 25% of electricity from renewable energy sources by 2030, which implies the commissioning of about 10 GW of RES capacity.

·       International practices. Active development of "green" hydrogen projects in Europe takes place through specially created clusters of "green" hydrogen production, which are created by the efforts of several countries. This is done to optimize logistics, as well as to improve integration and regional cooperation.

·       The need for actions. Competition on the part of Persian Gulf countries, or rather Saudi Arabia and the UAE, which also have logistical access to the markets of Europe and China and a more developed infrastructure necessary for the production of "green" hydrogen. Under fierce competition, the most effective way for Central Asian countries to gain a large share in global exports of "green" hydrogen is to act in a coordinated manner, jointly develop and use the infrastructure necessary for the production and export of "green" hydrogen.

What is "green" hydrogen?

Hydrogen itself is not an innovative element. It is actively used in various sectors, such as oil refining and ammonia production, and its use as an energy carrier was worked out at the end of XX century. However, this process was not developed actively due to various political and economic factors. Hydrogen production can be implemented in various ways according to the classification by color:

·       "gray" – steam-gas conversion;

·       "brown" – coal gasification;

·       "blue" – steam-gas conversion with carbon dioxide utilization;

·       "turquoise" – pyrolysis of natural gas;

·       "orange" – electrolysis using atomic energy;

·       "green" – electrolysis using RES.

The most interesting for the world community is "green" hydrogen, since its production does not involve carbon dioxide emissions even in small quantities, as in the case of low-carbon "blue", "turquoise" and "yellow".

Why "green" hydrogen and why now?

The issue of the development of "green" hydrogen in Central Asia is becoming more relevant every month. In addition to the extremely dynamic promotion of the sustainable development agenda, the existing energy crisis is actively pushing countries to look for an alternative to oil and gas, which have significantly increased in price. Such an alternative is "green" hydrogen. It allows the use of renewable sources where electrification was impossible or difficult from a technical point of view.

External factors that emphasize the need for accelerated development of hydrogen infrastructure in the region are experts' estimates of the volume of the hydrogen market, as well as plans of other countries for the development of production capacities. According to the analysis of the EY Energy Center, in the conditions of enhanced state support, the demand for hydrogen in the world will increase 10 times by 2050 compared to the level of 2019. At the same time, analysts of Precedent Research in 2020 stated that the market volume of "green" hydrogen alone could reach $89.18 billion by 2030.

Forecast of demand for hydrogen in the world

mln t

2050 (sustainable development)

2050 (enhanced state support)

Heating of buildings

Power industry

Transport

Production sector

Sources:IEA, Rystad Energy, Hydrogen Council, analysis of YE energy center (Central, East, South-East Europe and Central Asia)

As for other countries, the main rival of Kazakhstan and Uzbekistan in the potential export of "green" hydrogen is Saudi Arabia. The country plans to become one of the largest exporters of "green" hydrogen to diversify energy exports, as well as achieve carbon neutrality by 2030, having 40 GW of installed capacity of PPS, 16 GW of the WPP and 2.7 GW from other renewable sources. For reference: Kazakhstan will achieve carbon neutrality in 2050, and plans to introduce about 6 GW of renewable energy generating capacity by 2035. This comparison shows that additional capacities will be required to compete with Saudi Arabia in the export of "green" hydrogen. The competition itself will occur due to overlapping sales markets. According to EY, Saudi Arabia plans to export its products to EU countries, as well as to China. Kazakhstan and Uzbekistan have access to the Chinese market through a joint border, as well as access to the European market through Russia or through potential cooperation with the countries of the Caucasus. The geographical location in this case is an advantage and to some extent delimits the markets: Saudi Arabia, in the case of China, will supply products to other regions of the country. However, with a developed hydrogen distribution system, even regions of China closer to Kazakhstan and Uzbekistan will be able to receive hydrogen from ports where Saudi Arabia will supply it.

Key potential centers for hydrogen offer and demand*

км-km

Large potential exporters of hydrogen

The largest potential consumption centers

The interest in consumption and export potential

*Based on statements of intent

Sources: EY energy center (Central, East, South-East Europe and Central Asia)

Thus, in the conditions of an actively developing renewable energy market in all Central Asian countries, regional cooperation will be a logical response to the upcoming tough competition in the export of "green" hydrogen. The cooperation will allow the most efficient use of existing infrastructure facilities to optimize them for the export of "green" hydrogen, and will also allow the use of more renewable energy resources for its production.

What will cooperation give?

Developing the capacities of "green" hydrogen with the help of international clusters is already a popular strategy. For example, the European Union plans to develop the hydrogen economy by creating international clusters that will optimally use the infrastructure of several countries for the production of "green" hydrogen. This is advantageous due to several factors:

·       Improving the energy security of the region.

·       Improving the investment climate of the entire region.

·       Exchange of experience, training of highly qualified specialists in the region and subsequent development of new technological solutions.

·       Reducing carbon dioxide emissions has a positive effect on the environmental situation in neighboring countries.

The use of such cooperation schemes in Central Asia will also diversify the structure of state revenues and reduce dependence on oil and gas exports. The Central Asian countries have the opportunity to get all the advantages of cooperation on "green" hydrogen, if the countries coordinate their actions and develop regional clusters for the production of "green" hydrogen.

What needs to be done?

In order to achieve the most efficient production of "green" hydrogen in Central Asia, as well as to obtain the largest share in the world market as exporters of "green" hydrogen, countries need:

·       To promote the creation of a coordinated renewable energy development program between the countries of the region.

·       To develop a single transparent legislative space to simplify investments.

·       To adopt the standardized technical requirements for "green" hydrogen infrastructure facilities.

·       To develop joint training programs for new specialists with the involvement of the private sector.

·       To create a regional distribution system of "green" hydrogen.

·       To upgrade power lines for efficient transmission of EE generated by RES to increase the capacity of production of "green" hydrogen.

For successful implementation of all tasks, it is necessary to create a special platform enabling representatives of the private and public sectors to interact closely with each other, thereby contributing to deeper regional integration of RES. ‘Invest In Network’ company fully shares this point of view and holds specialized regional renewable energy conferences attended by high representatives of all interested market participants. Participation in such events allows the private sector to find new partners, as well as go directly to the relevant ministries, while for government agencies, participation in the event allows increasing the investment attractiveness of their country and interact directly with potential investors. We, Invest In Network, are confident that it is within the framework of such networking that the most mutually beneficial relationships are established. Seeing the interest in "green" hydrogen in Central Asia, our events also include this topic in their agenda.