Interview with Sun-Min Kim, Country Cooperations Algeria & India, International PtX Hub

What are the scope and objectives of the PtX Hub?

Sun-Min Kim: Currently active in 13 countries across the globe, the PtX Hub provides technical assistance and capacity development support to partner governments for the establishment of lasting and sustainable framework conditions for the PtX market ramp-up. Implemented by the German Development Agency ,GIZ, the PtX Hub is financed by the German Federal Ministry of Economic Affairs and Climate Action (BMWK).

Support from the PtX Hub includes:

• Knowledge products (webinars, dialogues and briefings) on a wide range of topics, such as standards, certification, sustainability and financing.
• Training: Worldwide, the PtX Hub trains local decision-makers, academics and private sector representatives. Since 2020, the PtX Hub has provided Renewable Power-to-X Training covering the fundamentals of the PtX value chain. In addition, 2023 will see the release of deep dive modules focusing on selected topics (such as certification, green ammonia, aviation, transport, and safety). To find out more, see here.
• Technical assistance: The PtX Hub supports partner governments with technical studies and recommendations to better understand their PtX potential and risks and develop their strategies and regulatory frameworks for PtX.
• Integrating sustainability: The PtX Hub has developed a comprehensive framework for the integration of the sustainability of PtX products, production processes, and policies. In addition to the environmental dimension, the framework also considers social, economic and governance aspects. To find out more, see here.

What is your role at the PtX Hub?

Sun-Min Kim: I am part of the country cooperation team at the International Power-to-X Hub (PtX Hub) as a technical advisor focusing on Algeria and India.

For countries with high renewable energy potential, future production of green hydrogen (hydrogen generated through renewable electricity) or derivatives (Power-to-X” such as green ammonia or jet-fuels) presents a promising means of delivering benefits for thesocio-economic development of these countries and driving forward efforts towards a net zero energy transition. The PtX Hub support partner countries in their quest to finding suitable PtX pathways that can contribute to their own climate as well as development goals. The PtX Hub is a platform for international knowledge exchange to promote sustainable PtX production worldwide.

As part of the country cooperation team, my role involves identifying partner government needs in close consultation with in-country teams and jointly developing support activities, particularly by matching offers of global support available within the Hub, such as capacity building measures and technical expertise, to country demand.

What are the current challenges faced by the PtX Hub and the governments you support?

Sun-Min Kim: When we talk about “green” or renewable hydrogen generated through water electrolysis, we are talking about a nascent sector that is dependent on young technologies and is dynamic in its development. We are also talking about a sector without yet established comprehensive regulatory frameworks. In short, we are talking about a sector navigating uncertainty.

Naturally, what we have observed is a number of countries seeking orientation and points of reference that can help them in defining their own PtX pathways (strategies). Countries also look to other jurisdictions to better understand the setup of PtX-relevant policy and regulatory frameworks (policies and regulations). In addition, in recent years, we have seen several state-investor discussions progressing around specific projects, albeit that the regulatory landscape in many aspects does not fully support the contracting arrangements for those projects. The PtX Hub, through some of its activities, supports partner countries to acquire knowledge and advice that helps them understand their legislative gaps and where regulatory reform is required in respect ofthe PtX value chain.

For us, the challenge not only lies in there being a steady market ramp up, but in that market ramp up being beneficial to all parties involved. The experience of the extractives sector around the so-called “resource curse” serves as a cautionary tale. An abundance of natural resources does not automatically translate into a positive socio-economic impact for the wider public in a host country. Good governance and strong institutions are needed to ensure that such abundance translates into value for the country. While solar and wind are not finite resources as compared to minerals, the question of how large investments can contribute to a country’s developmental goals is equally relevant.

PtX is in early development. We observe that a focus is often put on incentives in the policies being put in place. While such market considerations are important, it is equally important to develop frameworks that focus on how a country can benefit from its own resources, i.e. taxes, local content, community development etc.

In the context of climate and sustainability, what is your focus and what measures are you supporting Governments taking towards the achievement of their Nationally Determined Contributions (NDCs)?

Sun-Min Kim: Between COP26 and COP27, eight countries have included PtX into their strategies to reach national climate targets. This makes a total of 20 countries now considering PtX in their NDCs and realizing its potential to contributing to a net zero transition. While not a silver bullet to all sectors, PtX particularly offers an interesting pathway for sectors in which direct electrification is not yet possible and thus no realistic alternatives for defossilization exist. Such hard-to-abate sectors include heavy industries, such as cement, steel and the manufacture of chemicals, and heavy-duty transport like shipping and aviation.

Because the production of PtX itself is highly energy-intensive, weighing when the use of renewable energy for PtX is actually desirable or if its direct use can service certain sectors that are electrifiable are important considerations. The PtX Hub provides technical support to some of its partner countries in conducting industry-wide analyses for PtX uptake and potential defossilization impact. 

Expanding the discussions on sustainability of PtX is one of the main objectives of the PtX Hub. Our previously mentioned EESG Framework for Sustainable PtX broadens the scope of how sustainability is thought about, going beyond the environmental dimension to include economic, social and governance considerations. We are, for instance, engaging on the topic of certification within the EU in a context where the definition of “green” hydrogen and PtX continues to be under discussion.

Concluding remarks

Sun-Min Kim: I pointed out above the overall risk posed by the difference in speed between gradual developments of legal frameworks for PtX and more rapidly advancing project-level negotiations. In such a context, establishing close linkages between regulatory requirements and contract negotiations  is more desirable than ever.  

Project-specific negotiations in the area of PtX carry particularly strong weight in the current stage of sector development. In the absence of comprehensive regulations, they present an opportunity to anchor important principles and standards as contractual arrangements on the one hand. On the other hand, the risk of locking in premature concessions on the part of the government cannot be ignored. Where many countries are only beginning to understand which regulations are already in place, which gaps there are and which reforms needed, the implications of trade-offs between early contractual decisions and nascent regulatory frameworks need to be considered on an urgent basis. The duration of large-scale investment contracts often spans over several decades, leaving little room for future adjustments. If countries will be obliged on a long-term basis to investment agreements entered into while regulatory reform is on-going, it is imperative to factor in strategic sector objectives and possible options for alignment with future regulatory reforms.

This not only calls for stronger interfaces between the regulatory and contract level stakeholders at the national level; it also makes apparent the need for international partners, such as the PtX Hub, who support governments on regulatory efforts to enter into closer collaboration with other partners providing negotiation support.