ACWA Power building hydrogen bridge between Europe and Middle East, North Africa
“If the European Union wants to reach its climate targets, it needs to build a bridge with Saudi Arabia,” Marco Arcelli, ACWA Power’s Chief Executive Officer, said in an exclusive interview with pv magazine.
“I was skeptical about green molecules when I was working in Europe, but when I moved to Saudi Arabia, I saw that you have all the ingredients at scale and a lower cost,” the Italian CEO said, speaking about the country's “three times the sun”, solid wind and water conditions, together with its high credit rating.
Arcelli argued that Europe shouldn’t focus simply on a gas-to-gas switch but access the most affordable energy supply sources to secure and retain industrial production in the continent, including green hydrogen, the price of which will not follow the same oscillation patterns of geopolitics-sensitive gas. The price of green hydrogen would indeed remain pretty much stable.
According to Arcelli's forecasts, Europe will use a combination of locally produced and imported hydrogen in the future. He underlined that the Neom project has a 2,000 MW electrolysis capacity, adding that hydrogen production should start at the end of 2026. The Neom project is 65-70% complete, said Arcelli.
“It is 100 times bigger than the biggest plant in operation in Europe,” he said, underlining the country's plans. “We will soon have roughly 30 GW of renewable projects under construction in the Kingdom, and the vast majority of that is solar,” Arcelli added.
Europe's scarcity of land for renewable developments and its need for a secure power supply are other reasons Arcelli listed as to why Europe should open itself up to working with Saudi developers. At around 300 sq km, the Neom project would be difficult to situate in Europe, he pointed out.
He explained that the company's strategy in the African continent also hinges on collaboration with Italy.
Linking low-cost hydrogen produced in North Africa and the Gulf region to Europe represents a lucrative opportunity for all concerned, said Arcelli. ACWA Power is involved in several ongoing deals with various off-takers as part of the South H2 Corridor. When it is completed in 2030, the 3,300 km corridor will enable North Africa to export hydrogen to cities and towns in Italy, Austria and Germany.
ACWA Power has ongoing agreements in North Africa to explore the potential of exporting its North African hydrogen production capacity. But with Neom nearing completion, Arcelli said the company is now focusing on linking its Saudi-based hydrogen capacity to European markets.
In the weeks preceding pv magazine‘s conversation with Arcelli, ACWA Power signed two big memorandum of understanding (MoU) deals with a view to linking its hydrogen production in the Gulf region to European markets.
First up, the company's MoU with European natural gas company Snam will explore the establishment of a supply chain of green hydrogen to Europe from Saudi Arabia through the South H2 Corridor. Italy-based Snam is one of the main transmission system operators (TSOs) involved in the development of the corridor.
In September 2023, the Saudi-listed company signed strategic agreements with six Italian partners at the Saudi-Italian Investment Forum in Milan, held on September 4th, to bolster cooperation, especially in research and development.
Shortly after the latest Snam deal, ACWA Power signed a MoU with German company Securing Energy for Europe (SEFE) with a view to producing and supplying green hydrogen to Europe. The deal will see the two parties establish a hydrogen bridge between Saudi Arabia and Germany, with an initial target of supplying 200,000 tonnes of green hydrogen annually by 2030. ACWA Power will act as the lead developer, investor and operator of green hydrogen and green ammonia production assets. SEFE will be the main off-taker, as well as co-investor.
“The final details are still being ironed out between the parties,” Arcelli said. “There is a little bit of a difference between the two. The German agreement was targeted, focused on the supply of energy to Germany; the ones with Italy also included some additional aspects for Africa, where I think that together, the two countries can play and leverage each other to ensure that we can deliver affordable and secure water and energy to local populations.”
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