IRENA – Green hydrogen and derived commodities: an opportunity for Global South’s green industrialisation

IRENA – Green hydrogen and derived commodities: an opportunity for Global South’s green industrialisation

Due to its potential to decarbonise hard-to-abate sectors, green hydrogen–produced via electrolysis using only renewable energy resources— and hydrogen-derived commodities including ammonia and methanol, emerge as key components of a holistic energy transition towards net zero.

But the benefits of green hydrogen go beyond reducing greenhouse gas emissions. Scaling value chains for green hydrogen and derived commodities can enable green industrialisation, energy independence, increased participation in global trade and markets, and job creation.

Fossil-derived “grey” hydrogen is already an important industrial commodity today. Green hydrogen, beyond its role as a potential energy carrier, can also serve as a clean feedstock in carbon-intensive industrial processes.

To decarbonise hard-to-abate industrial sector, replacing existing grey hydrogen volumes with green volumes is a key priority. In chemical sector for example, green hydrogen will be a crucial component of the sector’s decarbonisation pathways. It is currently being actively pursued as a candidate for use in the direct reduction of iron for steel production.

The heavy-duty transport sectors—aviation, maritime shipping, and possibly long-haul trucking—are other sectors that represent an opportunity for next frontier green hydrogen deployment. They demand energy-dense solutions capable of powering extended journeys. Instead of fossil fuels, green hydrogen and its derivatives like ammonia, and e-fuels including e-kerosene and e-methanol are expected to provide clean alternatives.

In addition, green hydrogen has the potential to address the critical challenge of seasonal energy storage. Green hydrogen produced when renewable inputs are readily available, to be consumed when energy demand is highest, may provide a solution for large-scale, long-duration energy storage needed across extended periods. Flexible electrolysers may also support power system resilience in variable, highly renewable power systems.

Such versatile purposes have put green hydrogen in the centre of global energy transition acceleration efforts and discussions, prompting speculations about the prospects of an emerging international markets for hydrogen and derived commodities. IRENA analysis has suggested that around 20% of the total global demand anticipated for hydrogen may be satisfied through international trade flows.

The opportunity for international trade in green hydrogen and renewable-produced ammonia, methanol and other derived commodities stems from a geographic reality: the centres of demand for these commodities are unlikely to be in the regions with the highest potential of renewable energy resources needed for cost-effective production. Since electricity represents the primary cost component in green hydrogen production, countries with abundant solar and wind resources hold competitive advantages.

Trade dynamics will also vary across green hydrogen commodities. Ammonia is projected to dominate international flows, with 30% of global demand expected to cross borders, followed by e-methanol at 18%, direct reduced iron (DRI) at 14%, and gaseous hydrogen at 14.4%.

With high renewable energy potential, the Global South is poised to become essential players in the international markets for these green commodities. In doing so, the Global South’s countries can transform themselves from energy importers to exporters—a paradigm shift creating substantial economic opportunities for the developing nations, while enhancing their energy security.

Latin America for example, can leverage its solar and wind resources with existing industrial infrastructure. The region could become a major supplier across multiple green commodities, from ammonia and e-methanol to direct reduced iron, serving markets in North America, Europe, and Asia.

Sub-Saharan Africa is also presented with opportunities to produce green hydrogen for both domestic use and export. The region’s strategic geographic position is expected to enable efficient access to European and Asian markets, while its vast land availability supports the infrastructure deployments required for competitive green hydrogen production.

Another region that holds strategic significance given its proximity to European demand centres is North Africa. IRENA’s analysis indicates that the region could supply approximately 18% of the European Union’s green hydrogen and related commodities by 2050, establishing a robust Euro-Mediterranean energy trade that builds on existing energy cooperation frameworks.

To fully realise this potential, developing countries must coordinate policy frameworks with infrastructure development within a holistic energy transition strategy. Development of substantial renewable generation capacity and transport and storage infrastructure would be needed. IRENA’s estimation shows that on a global scale, the cumulative investment need for infrastructure throughout the hydrogen value chain amounts to USD 2.49 trillion by 2050. It encompasses 4.7 terawatts of renewable energy capacity, 2.1 terawatts of electrolysers, and 0.9 terawatt hours of battery storage.

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