BAKU, Azerbaijan, Jan.20
By Leman Zeynalova – Trend:
It is very unlikely that a hydrogen cartel will emerge similar to historical fossil fuel alliances, such as the Seven Sisters, Trend reports with reference to the International Renewable Energy Agency (IRENA).
“The preconditions for an effective cartel are that there should be a relatively small number of producers that control a substantial share of the market; they must be able to set and enforce production quotas, control capacity expansion and limit the entry of new producers. Moreover, short-term substitutes for the product in question must be limited. The absence of these conditions has blocked the cartelization of gas markets. None are likely to be met in the case of hydrogen,” reads a report released by IRENA.
The agency notes that hydrogen can be produced in many places in the world.
“It is, in fact, a manufactured product rather than a raw material or energy source. This makes it impossible to deter new entry into the industry, a key condition for cartel formation. Moreover, many countries have stated the ambition to become exporters of hydrogen and derived fuels, limiting the chances of export concentration,” says the report.
IRENA analysts point out that it cannot be ruled out that future hydrogen exports or imports could be successfully instrumentalized for political blackmail or extortion.
“A precondition for energy statecraft is the existence of asymmetric independence, a situation in which one actor is much more vulnerable to breaking the relationship than the other – for example, because it can quickly resort to other trading partners or because it possesses significant buffers (e.g. emergency stocks). In the early days of the international hydrogen trade, the number of trading partners will be limited, and both suppliers and customers are likely to be locked into bilateral, long-term contracts. Any disturbance of imports or exports will be felt hard on the other side owing to the likely absence of a liquid market,” says the report.
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