A recent study published in ‘Energy Conversion and Management: X’ investigates the potential of green hydrogen to catalyze economic transformation in Saudi Arabia, a nation historically reliant on fossil fuel exports. With global demand for fossil fuels projected to plummet by 75 percent by 2050, the urgency for diversification strategies has never been greater. The research, led by Viktor Paul Müller from the Fraunhofer Institute for Systems and Innovation Research ISI and the Copernicus Institute of Sustainable Development at Utrecht University, employs an inter-country input-output model to analyze the interdependence of various sectors within the Saudi economy.
Müller and his team explored four configurations of Power-to-X (PtX) plants, focusing on the production of green hydrogen and ammonia using pure solar and hybrid solar-wind systems. Their findings reveal that hybrid plants tend to yield stronger domestic economic impacts compared to their pure solar counterparts. More intriguingly, the production of green ammonia generates relatively higher employment levels, a critical factor for a country grappling with high unemployment rates among its youth.
“The construction sector emerges as the largest contributor to domestic employment and value added for all PtX configurations,” Müller stated, highlighting the sector’s pivotal role in this potential economic shift. As Saudi Arabia embarks on this green energy journey, the construction industry stands to benefit significantly, not only through direct job creation but also by fostering a new ecosystem for clean technology manufacturing.
However, the research also underscores the risks of relying too heavily on foreign supply chains. Currently, foreign impacts, particularly from countries like China and the United States, account for about half of the total economic effects, especially in sectors like electronics and machinery. Without a strategic move to localize parts of the hydrogen supply chain and clean technology production, Saudi Arabia risks losing substantial value creation to international players.
Müller emphasizes the importance of targeted policy measures to harness the “renewables pull effect,” suggesting that proactive investments in local manufacturing could help secure a more substantial share of the economic benefits from this transition. As the construction sector gears up to support the rollout of PtX plants, the potential for job creation and value addition presents a compelling case for stakeholders and policymakers alike.
This research not only sheds light on the immediate commercial impacts for the construction sector but also hints at a broader narrative: the transformation of an economy traditionally tied to oil into a more diversified and sustainable landscape. As Saudi Arabia navigates this transition, the insights from Müller and his colleagues could serve as a blueprint for other fossil fuel-dependent nations looking to embrace renewable energy technologies.
For more information, you can visit the Fraunhofer Institute for Systems and Innovation Research ISI.
