The Hydrogen Valley… and the Price of Sunshine

Living in Andalucía, you become accustomed to the sun in a way that people visiting from northern Europe never quite do. For a few days it is glorious… blue skies, warmth, that slightly ridiculous feeling that you have somehow cheated the weather. Then August arrives, and the sun ceases to be scenery and becomes an industrial-strength interrogation lamp. You begin looking at the shade of a wall with the same affection normally reserved for close relatives.

It turns out, however, that while we have been hiding from the Andalusian sun, industry has been looking at it rather differently.

Down in Huelva, at the La Rábida Energy Park in Palos de la Frontera, a rather enormous experiment is taking shape. Project Onuba is being developed as the cornerstone of what is intended to become the Andalusian Green Hydrogen Valley… a project involving more than €1 billion in its first phase, 300 megawatts of electrolysis capacity and an intended production of around 45,000 tonnes of green hydrogen a year.

On paper, it sounds impressive.

And it is.

But whenever I see the words green, billion, hydrogen and European strategy appearing together in the same paragraph, I find myself reaching instinctively for the red pen.

Not because the idea is necessarily bad. Quite the opposite. The underlying concept is fascinating. The question is whether the reality will live up to the brochure.

Hydrogen itself isn’t new. We have been producing and using it for decades, particularly in the chemical and refining industries. What is changing is how we produce it. Instead of relying upon fossil fuels, the intention is to use renewable electricity to split water into hydrogen and oxygen. If that electricity genuinely comes from renewable sources, the resulting hydrogen can be produced with dramatically lower greenhouse-gas emissions than conventional hydrogen.

That matters because there are parts of modern industry that are remarkably difficult to electrify directly.

You can put a battery in a car. You can increasingly put one in a van, a bus and, in some circumstances, a truck. But try doing the same thing with certain industrial furnaces, chemical processes, fertiliser production or large ships and the engineering becomes rather more complicated. Batteries are marvellous things, but there comes a point where carrying the battery required to carry the battery becomes a slightly unfortunate business model.

Hydrogen offers another route.

It can be used directly in industrial processes, converted into ammonia or methanol, and potentially used in sectors such as steel, fertiliser, chemicals, heavy transport and shipping. That is why Huelva is such an interesting location. It isn’t simply somewhere to build an enormous electrolyser and hope somebody turns up with a suitcase full of hydrogen requirements. The area already has major industrial activity and a significant port, creating the possibility of an entire industrial ecosystem developing around renewable energy and hydrogen.

And this is where Project Onuba becomes considerably more interesting than simply another giant solar project.

The ambition isn’t merely to produce hydrogen.

It is to use renewable energy to produce industrial commodities that Europe currently makes using fossil fuels.

That distinction matters.

If Andalucía can use its enormous solar resource to produce hydrogen, ammonia, methanol and other industrial products locally, it could retain considerably more of the economic value of the energy it produces. Instead of simply exporting electricity, the region could effectively export products made using that electricity.

There is a potentially important economic question hiding inside that.

Will Andalucía become Europe’s energy supplier… or will it become an industrial producer in its own right?

Those are not quite the same thing.

The wider Andalusian Green Hydrogen Valley is supposed to reach around 2 gigawatts of electrolysis capacity across its planned Huelva and Campo de Gibraltar hubs, with projected hydrogen production of up to 300,000 tonnes a year. The stated ambition is to cut millions of tonnes of carbon dioxide emissions annually.

If those figures are achieved, this won’t be a demonstration project tucked away behind an industrial estate.

It will be a substantial part of Europe’s emerging hydrogen infrastructure.

There is, however, a slightly awkward question which tends to receive rather less attention than the headline figures.

Water.

Electrolysis needs water. Andalucía is hardly famous for having too much of it.

Anyone who has lived here for any length of time knows that water isn’t an abstract environmental statistic. It is the thing that arrives through the tap, disappears from reservoirs during prolonged drought, determines what farmers can grow and occasionally becomes the subject of heated arguments that make British discussions about the weather look positively restrained.

So the question isn’t simply whether hydrogen production requires water.

Of course it does.

The question is where that water comes from.

If projects such as Onuba rely upon desalinated seawater, treated wastewater or other sources that don’t compete significantly with agriculture and domestic consumption, that changes the equation considerably. But desalination itself requires energy, produces concentrated brine and requires infrastructure. None of this makes it unacceptable… it simply means that the word green shouldn’t be allowed to end the conversation.

Then there is another inconvenient little detail.

Hydrogen is not an energy source.

It is an energy carrier.

That distinction is important because producing hydrogen consumes energy. Renewable electricity is used to split water; the hydrogen then has to be conditioned and transported, and if it is subsequently converted into another product such as ammonia or methanol, there is another transformation involved.

Energy is lost along the way.

If you can use renewable electricity directly for something, that will generally be more efficient than turning the electricity into hydrogen first.

So hydrogen shouldn’t really be viewed as the universal replacement for electricity.

Its real value lies in the things we struggle to electrify directly.

That makes the industrial applications particularly compelling.

There is also the question of transport. Huelva’s position on the Atlantic coast and its port infrastructure make it possible to imagine hydrogen-derived products moving towards other European markets, including the northern European industrial centres.

But hydrogen isn’t particularly convenient stuff to move around.

It is extremely light, requires specialised handling and creates infrastructure challenges that don’t exist with a tanker full of diesel. Converting hydrogen into ammonia or methanol can make transportation more practical, but that introduces yet another stage in the process.

Again… not necessarily a reason to stop.

Just another reason to look at the whole system rather than one shiny component of it.

And then we arrive at the money.

Project Onuba’s first phase is expected to involve more than €1 billion of investment, including €304 million in public funding through Spain’s Recovery Plan and the EU’s NextGenerationEU programme.

Public investment in major infrastructure isn’t inherently suspicious. Governments have always invested in infrastructure where the initial capital requirements are too large, the benefits are expected to extend beyond the immediate investor, or a new industry needs assistance getting off the ground.

The interesting question comes later.

Can the industry eventually stand on its own feet?

Because producing hydrogen is one thing.

Producing it economically enough that steelmakers, chemical companies, shipping operators and other industrial customers are prepared to buy it year after year is another.

That is the real test.

If public money helps establish an industry which eventually becomes commercially viable, there is a reasonable argument that the initial investment has helped create something rather than simply subsidising consumption.

If the business model remains dependent upon increasingly elaborate subsidies, then we have a different conversation.

And there is another issue which interests me even more… what happens to the surrounding economy?

A €1 billion industrial project doesn’t automatically mean €1 billion of local prosperity.

Some of that money will go into equipment. Some will go to international companies. Some will pay engineers, contractors and construction workers. Some will create permanent employment. Some will flow through the port. Some will disappear into supply chains extending far beyond Andalucía.

The important question is how much of the value remains here.

If Andalucía develops the engineering, manufacturing, maintenance, chemical processing and logistics industries around the hydrogen economy, the long-term consequences could be considerable.

If we merely provide the sunshine, the land and the infrastructure while somebody else captures most of the value… that is a rather different proposition.

And perhaps that is the question I would put at the heart of this whole thing.

Not whether Project Onuba is green.

Not whether hydrogen is the fuel of the future.

And certainly not whether a press release containing enough billions and megawatts can make a man feel that civilisation has finally got its act together.

The question is much simpler.

What exactly are we building here… and who is it ultimately for?

Because Andalucía has something that much of northern Europe would quite like more of… sunshine.

We have an extraordinary renewable-energy resource, a strategic coastline, ports, industrial infrastructure and an increasingly sophisticated renewable-energy sector. Turning some of that natural advantage into industrial production makes considerable sense.

But there is a danger in becoming so enthusiastic about the green transition that we stop asking ordinary questions.

Where does the water come from?

Where does the electricity come from?

How much land does it consume?

How much energy is lost?

Who pays for the infrastructure?

Who owns it?

Who gets the jobs?

Who gets the profits?

And what happens when the subsidies eventually disappear?

Those aren’t anti-green questions.

They’re not even particularly radical questions.