Saudi Arabian renewables developer ACWA Power has signed up Chinese oil company Sinopec to engineer and build the world’s largest integrated green hydrogen and ammonia project in the port city of Yanbu on the Kingdom’s Red Sea coast.

The project, under development by ACWA and German energy firm EnBW, is expected to produce 400,000t/yr of green hydrogen and 2.8mt/yr of green ammonia, with commercial operations scheduled to start in 2030, Sinopec said in late August.

ACWA’s doubling down on green ammonia has raised eyebrows. It is already developing the $8.4b NEOM project in Saudi Arabia’s Tabuk province, which is nearing completion after a challenging process that has included big cost overruns. For context, Yanbu’s electrolyser capacity will potentially be about twice that of NEOM.

NEOM is a joint venture between ACWA, US company Air Products and the city of NEOM. Air Products is the sole offtaker under a long-term deal, the idea being it will then sell the product via its global network. However, the company said earlier this year it is delaying investment in import infrastructure in Europe until it sees clearer regulation firm customer commitments in that market.

Chinese rival

ACWA faces competition for market share from Chinese renewables technology company Envision. In July, it said it had commissioned “the world's largest and most advanced green hydrogen and ammonia production facility” in Chifeng in Inner Mongolia.

Producing at a rate of 320,000t/yr of green ammonia, the plant plans to start exporting in the fourth quarter of this year. Envision has signed a long-term offtake deal with Japanese trading house Marubeni. Production is expected to rise to 1.5mt/yr by 2028.

The project will be powered entirely by an offgrid renewable energy system and will be the first of its kind to be fully AI-enabled, achieving real-time optimisation and stability at scale, according to Envision.

Development at pace

The pace of development and scale of both Yanbu and Chifeng are breathtaking, and a sign of the bullish stance on green hydrogen that now looks to be baked into both countries’ energy policies, and to a lesser extent those of India and other Middle Eastern countries.

Both Saudi Arabia and China are placing huge bets on the emergence of significant export demand for green hydrogen and its derivatives, both to replace existing grey hydrogen and to feed new applications in hard-to-abate industries, as well as new sectors such as steel, mobility and power generation. That is despite lots of evidence that potential offtakers remain reluctant to pay up for green hydrogen.

The two countries’ motivations are multi-faceted and complex, ranging from domination of global markets for green technologies such as electrolysers, to decarbonisation of their domestic economies and, in Saudi Arabia’s case, the need to hedge against a future phase down of fossil fuels. Their strategies are backed by big government support, at a time when acute financial constraints hinder the ability of many Western governments to underwrite the transition.

Western wobbles

In the West, project cancellations and regulatory uncertainty have stalled the industry in parts of Europe. Three of the leading projects to have successfully bid for subsidies via the EU’s European Hydrogen Bank have withdrawn from the process, citing regulatory uncertainty and funding shortfalls.

Questions are being raised about the pace at which EU member states are implementing policies set out at the EU level.

Two of the region’s leading electrolysers manufacturers—Germany’s Thyssenkrupp Nucera and Norway’s Nel—have reported sharply lower order intake in the latest quarter, highlighting the challenges posed by green hydrogen project delays.

In the US, developers are still assessing the implications of a recent tightening of the deadline for projects to qualify for the 45V tax credit—a subsidy that until recently had supercharged investment in the hydrogen sector. Approximately 75% of the US green hydrogen pipeline is unlikely to qualify for Section 45V tax credits due to the accelerated 2027 expiration deadline, according to consultancy Wood Mackenzie.

“The Chinese are going faster, and they have cheaper energy available,” said Pierre-Etienne Franc, CEO of Hy24, a hydrogen private equity asset manager. “They are basically leading the race. The others follow. They seem… on all fronts fully unstoppable,” he told the World Hydrogen Summit earlier this year.

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Author: Stuart Penson