The Hydrogen Economy: Unlocking Value Amidst Cost & Scale Challenges

By GrowEasy | Dubai, UAE | June 14, 2025

Executive Insight

Hydrogen is evolving into a pivotal pillar of global decarbonization efforts. With projected market growth from $155 billion in 2022 to $287 billion by 2030 (CAGR: 8%), it presents significant opportunities for investors. Yet the scale, complexity, and cost structures associated with hydrogen production, transport, and use create unique risks that must be navigated with precision.

This report provides a critical examination of:

  • The evolving hydrogen investment landscape across the Middle East, Africa, and the Former Soviet Union (FSU).

  • The operational and financial risks that continue to shape project viability.

  • Strategic investment frameworks to balance growth, risk, and operational efficiency.

Global Market Trends

Hydrogen as a Decarbonization Driver

As global climate targets tighten, hydrogen—particularly green (via renewable electrolysis) and blue (natural gas with carbon capture)—is gaining momentum across hard-to-abate sectors such as:

  • Steel and cement production

  • Ammonia and fertilizer manufacturing

  • Maritime and heavy-duty transport

Key drivers of growth:

  • Declining electrolyzer and renewable power costs

  • Expanding carbon pricing regimes

  • Emerging national hydrogen strategies and export agreements

However, commercial viability hinges on credible demand signals, offtake certainty, and risk-managed infrastructure deployment.

Regional Opportunity Mapping

Middle East: Scaling Global Ambitions

  • Strategic strengths: Exceptional solar and wind resources, sovereign backing, and existing export infrastructure.

  • Flagship projects:

    • NEOM (Saudi Arabia): Targeting 4 million tons/year green hydrogen by 2030

    • Masdar (UAE): Scaling to 1 million tons

    • Qatar: Advancing blue hydrogen pathways using LNG assets and CCS

Risks to manage:

  • Limited operational track records for mega-projects

  • Immature global hydrogen certification frameworks

  • Cost uncertainties around export readiness (e.g., ammonia conversion, shipping logistics)

Investor consideration: Projects backed by intergovernmental agreements and co-located with renewables offer lower execution risk.

Africa: Emerging Growth Engine

  • Resource advantage: Abundant land, solar and wind potential, and international donor interest

  • Notable initiatives:

    • Namibia: $9.4B green hydrogen export project

    • Morocco: 1 GW green hydrogen capacity roadmap

    • South Africa: Hydrogen Valley for domestic industrial use

Challenges:

  • Infrastructure bottlenecks (grid, ports, water)

  • Political and regulatory volatility

  • Early-stage ecosystems lacking supply chain depth

Investor consideration: De-risked entry via public-private pilot projects and multilateral-backed ventures is advisable.

Former Soviet Union (FSU): Niche but Strategic Plays

  • Current focus: Blue hydrogen via existing gas infrastructure; early exploration into green hydrogen in wind-rich regions.

  • Projects to watch:

    • Uzbekistan: Hydrogen pilot zones

    • Kazakhstan: Electrolyzer projects leveraging high wind availability

    • Russia: Pre-sanction H2CleanEnergy initiative (status uncertain)

Risks:

  • Sanctions and geopolitical barriers

  • Low regulatory maturity for hydrogen

  • Unpredictable foreign investment climate

Investor consideration: FSU plays require strong local partnerships, staged investment models, and conservative revenue assumptions.

Strategic Investment Considerations

Due Diligence Discipline

  • Rushed or overly optimistic feasibility models remain a key risk factor.

  • Recommended focus areas:

    • Integrated cost analysis (production, transport, conversion)

    • Infrastructure build timelines and co-dependencies

    • Offtake pricing realism and contract enforceability

    • Grid intermittency impacts on electrolyzer utilization

Cost-Effectiveness & Infrastructure Risk

  • Despite declining equipment costs, total system CAPEX remains high.

  • Critical pain points:

    • Water sourcing and desalination (especially in arid regions)

    • Transmission line expansion for remote projects

    • Export infrastructure (ports, conversion units)

ESG and Policy Alignment

  • For green hydrogen, sustainability credentials (e.g., carbon intensity, water use) will determine access to:

    • Green finance instruments

    • Regulatory support schemes

    • Long-term industrial offtake

  • Blue hydrogen must navigate:

    • Stringent CCS capture rates

    • Public skepticism and environmental scrutiny

Technology Maturity and Operational Complexity

  • Tech risk remains in:

    • Emerging carriers (e.g., LOHC, ammonia)

    • Storage integration (e.g., solid-state tanks, PtL systems)

    • Grid synchronization for flexible electrolysis

  • Operational excellence depends on:

    • Digital twin deployment

    • Predictive maintenance and real-time optimization

    • Co-location with renewables for cost stability

Exit Planning Under Uncertainty

  • Liquidity events are tightly linked to:

    • Market demand maturity in Asia and Europe

    • Policy guarantees on hydrogen blending or industrial mandates

    • Certification schemes enabling trade (e.g., RFNBO standards in EU)

  • Investors should monitor:

    • European and Asian demand centers

    • Timing of project de-risking (i.e., post-offtake signing, EPC close)

Case Study: Green Hydrogen–Ammonia Project

A good example highlighting the complexities of the hydrogen value chain is a recent green hydrogen-to-ammonia initiative.

Project Overview

  • A 20 MW electrolyzer unit was installed at an existing ammonia production plant.

  • The electrolyzer is powered by a 52 MW wind farm (PPA-backed), with Phase 1 scheduled to begin hydrogen output by end 2024 and wind generation by end 2025.

  • Estimated capital expenditure: US $85–100 million for Phase 1, effectively a “proof-of-concept” model

Lessons Learned

  1. Infrastructure Integration Matters
    While the electrolyzer is co-located with an ammonia plant, the limited size (20 MW) signals a pilot-scale design, and scaling will necessitate additional grid capacity, port access, and transport infrastructure.

  2. Coordination Between Generation & Use
    Electricity sourced from a remote wind farm requires dependable grid performance and smart scheduling to sustain electrolyzer operations— underscoring the importance of synchronous infrastructure planning.

  3. Of‑take Certainty Through Certification
    Operator aims to secure TÜV CMS 70 certification for hydrogen-derived ammonia to access EU markets and anchor 15-year purchase agreements—revealing the critical role of sustained offtake commitment.

Implications for Investors

  • Pilot over scale: Starting with smaller, integrated projects supports learning without overexposure to capex and execution uncertainties.

  • Certification as a leverage point: Obtaining recognized sustainability certification underpins access to premium markets.

  • Value of staged investment: Initial pilots serve to refine technology, offtake arrangements, and site-specific logistics ahead of scaling decisions.

This case offers an instructive parallel to our earlier FSU "capital sink" example: it illustrates how careful infrastructure alignment, validation of demand channels, and pilot-stage operational discipline can help manage cost, risk, and scalability in hydrogen projects.

Navigating the Path Forward

Conclusion

The hydrogen economy offers strong long-term potential—but its success is far from guaranteed. Cost-effective deployment, policy clarity, and operational efficiency remain critical bottlenecks. The ability to rigorously assess, structure, and manage these factors will define winners and losers in this space.

For investors, hydrogen projects should not be approached as traditional energy plays. They require cross-disciplinary assessment, measured capital allocation, and a strong understanding of evolving technological, policy, and market dynamics.



Explore Deeper

GrowEasy brings clarity, capability, and control to every stage of your investment journey

Connect with the Experts, Unlock Investment Success

Visit www.groweasy.ae or email us at info@groweasy.ae to understand more

Previous
Previous

Unlocking Carbon Value: Strategic Investment for Resilient & Efficient CCS

Next
Next

Operational Expertise: Your Decisive Edge in Natural Resource Investments