Saudi Arabia prepares to build second green hydrogen plant

Saudi Arabia has doubled down on its ambition to dominate the global green hydrogen market, with plans to build a second multi-billion dollar plant, even as it struggles to sell the output from its first large-scale hydrogen project.

ACWA Power, which is backed by the kingdom’s Public Investment Fund, has awarded a front-end engineering design contract for the 4 gigawatt Yanbu plant to Madrid-based engineering firm Tecnicas Reunidas and China’s Sinopec Guangzhou Engineering, Bloomberg reports.

The new plant, which is expected to go online in 2030, will generate 400,000 tons of green hydrogen per year using wind and solar power, almost double the 219,000 tons expected from its first $8.5 billion NEOM plant, which is estimated to be about 85% complete.

Green hydrogen, which is produced using renewable energy to split water molecules, is seen as a key to decarbonizing industries including steelmaking, shipping and fertilizer production. For export, it can be converted into more stable green ammonia and later reconstituted at its destination – a process known as “cracking.”

However the nascent industry has faced uncertainty and supply chain issues across multiple fronts, as it remains expensive compared to fossil fuels and industries have been slow to commit to building the infrastructure needed to use it.

Earlier this month, ACWA’s partner in the NEOM plant, U.S.-based Air Products & Chemicals, which has an exclusive off-take agreement, paused its $2.7 billion hydrogen cracking terminal in the English port town of Immingham over uncertainty related to obtaining U.K. subsidies.

The Saudi decision to press ahead with the Yanbu plant is a strong bet on the future of the green industry at a time when the kingdom needs to wean itself off fossil fuels. New analysis by Bloomberg Economics suggests Saudi’s dependence on oil revenue is largely unchanged from 2016 – and may have even grown deeper on some measures.