Can green hydrogen drive economic transformation in Saudi Arabia? - An input-output analysis of different Power-to-X configurations

Global demand for fossil fuels is projected to decline by up to 75 percent by 2050, requiring new economic strategies for fossil exporters to promote diversification. This study employs an inter-country input-output model to assess sector interdependence in Saudi Arabia and explore the macroeconomic impacts of investing in Powerto-X (PtX) plants. We analyze four configurations: pure solar and hybrid solar-wind systems, producing either green hydrogen or ammonia. Our comparative analysis shows that hybrid plants appear to have stronger domestic effects than pure solar configurations, while producing green ammonia instead of hydrogen generates stronger relative employment. These trends remain consistent across different sensitivities and domestic supply shares. However, the differences between configurations and sensitivities decrease with increasing domestic supply. Currently Saudi Arabia has limited developed manufacturing sectors and the economy is heavily dependent on exports of crude oil and related products-a situation often referred to as the "resource curse". For all PtX configurations, the construction sector therefore emerges as the largest contributor to domestic employment and value added. At current import shares, foreign effects, particularly in China and the United States, account for about half of the total impact, especially in sectors such as electronics and machinery. Without embedding the hydrogen supply chain into their industrial landscape by starting to produce parts of clean technologies locally, exporters risk substantial value creation occurring predominantly abroad. Overall, our research highlights the need for targeted policy measures to capitalize on the ,,renewables pull effect" when installing PtX plants for green energy exports.