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By: Bitsat Yohannes-Kassahun

 

Luanda, 31 May to 2 June 2023 ¨C The Angolan government hosted the First Southern African-European Green Hydrogen Forum, organized by Germany¡¯s Hydrogen Diplomacy initiative, H2Diplo, and the Deutsche Gesellschaft f¨¹r Internationale Zusammenarbeit (GIZ). The event provided a platform for stakeholders working in green hydrogen development to come together and exchange perspectives. Government representatives from Angola, Namibia, and South Africa participated with researchers, think tank members, private sector project developers, leaders of special economic zones, engineering firms, and financing institutions such as the International Monetary Fund (IMF)and the African Development Bank.

During the opening presentation, Mr. Mikaa Mered, an Adjunct lecturer on hydrogen markets, diplomacy and geopolitics, outlined the significant demand for green hydrogen in Europe and beyond, making a clear case that current global green hydrogen production levels are nowhere near the amount needed to satisfy this demand. There are enormous growth opportunities and plenty of market share for green hydrogen producers. To put this into perspective, ten countries had a national government-published green hydrogen strategy in December 2019, with South Africa being the only African country. As of May 2023, this number rose to 50, with 42 more considering or actively preparing such a strategy. In Africa, five countries, namely Algeria, Egypt, Morocco, Namibia and South Africa, have published national strategies, and 18 more[1] are developing one[2].

Green hydrogen can cover a significant portion of the global energy transition needs, especially in hard-to-decarbonize sectors and industries such as steel manufacturing. Hydrogen has many industrial applications, but is about 55 per cent in ammonia production (a key component of nitrogen-based fertilizers), 25 per cent in oil and gas refinery operations, 20 per cent in methanol production (used in manufacturing plastics, textile, and fuels) and 10 per cent in other chemical processes. Blue hydrogen, produced from natural gas with carbon capture, and green hydrogen, produced from renewables, are increasingly getting much attention for their climate-friendly electrification potential and power-to-heat applications. In addition to decentralized electrification and fertilizer production, hydrogen could contribute to cold storage and cold chain capacity to boost Africa¡¯s food sovereignty.

Over the last five years, green and blue hydrogen production has been moving beyond ¡°potential¡± to actual physical implementation, with 217 green hydrogen projects reaching Final Investment Decision (FID). Although the lion¡¯s share of FID projects is in Europe, several African countries, including Angola, Namibia and South Africa, are also invested in the field. In May 2023, to continue with advanced feasibility studies towards implementing the country¡¯s green hydrogen plan, which at full-scale development, will produce 300,000 tonnes of green hydrogen per year using wind and solar power. The Namibian government estimates it will need about $190 billion up to 2040 to implement its vision fully. For its part, , the transportable form of green hydrogen, to Germany by 2025. Upon completion, the Angolan green hydrogen plant has a production target of 280 tonnes. The project site, being developed by Angola¡¯s SONANGOL, is strategically located near a new port development and integrated into the infrastructure that will serve as the country¡¯s oil and gas reserve site. With a hydroelectric plant just 17 kilometres away and a river within 5 kilometres to serve as a water source for the planned site, this project is far ahead on its potential production schedule. South Africa unveiled plans last year to produce over five million tonnes of green hydrogen a year by 2040, with an estimated cost of .

Other African countries, including , , and , actively pursue green hydrogen production goals, and with the momentum picking up pace on the continent, the time is ripe to address fundamental issues impacting Africa¡¯s green hydrogen ambitions.

First ¨C Negotiating for better deals and avoiding a race to the bottom

The current price of green hydrogen ranges between $4 to $8 per kilogram, which makes the sector lucrative, combined with the prospective demand. However, nearly all African countries with a green hydrogen strategy aim to become ¡°one of the leading/largest exporters of green hydrogen,¡± competing for the same markets with the same product and trying to produce it at the lowest possible price. Considering other countries outside the continent, such as , aim for the same goal, the situation could quickly turn into a disastrous race toward the bottom.

The potential financing of these green hydrogen projects through debt is equally worrisome, combined with the plan largely targeting export markets.  High transportation costs could make product prices uncompetitive and lower profit margins. According to some estimates, maritime shipping costs to target markets in Europe could of green hydrogen while lowering expected efficiencies in carbon neutrality. An alternative could be exporting semi-finished products, such as green steel, green cement, and solar panels, produced in Africa using African green hydrogen. But this creates an even more complex situation, summed up in the following question.

What industries and jobs would Europe be willing to invest in and shift to Africa for a real, just, and equitable global energy transition?

It is, therefore, important to have a joint African strategy and unified political leadership in the green hydrogen frontier. The Africa Green Hydrogen Alliance created by in May 2022 to collaborate on capacity building, financing, certification, and regulatory and policy spaces of green hydrogen development in Africa is a good start. This platform could be leveraged to establish a united front for negotiating better deals for the continent, a collective bargaining arrangement for Africa. With the right approach, this could be Africa¡¯s chance to go beyond a pure export market focus and negotiate for part of the green hydrogen financing to go to its own energy grid development and value-added manufacturing in exchange for using its precious resources and risking possible environmental impacts to produce green hydrogen for the world.

Second ¨C Harnessing the continent¡¯s advantage in access to mineral resources

The technology to produce and use green hydrogen at scale is costly, and the profitability of green hydrogen-based energy economies hinges on the cost-effective development and production of its two key components. The first is the electrolyzers, which produce hydrogen by splitting water molecules, and the second is fuel cells to convert hydrogen into usable energy.

In addition to the abundant renewable energy needed to operate the electrolyzers, African countries, including South Africa and Zimbabwe, can leverage their rich resources in platinum and platinum group metals (PGMs). These metals can withstand harsh chemical conditions in fuel cells to catalyze the difficult oxygen reduction reaction to convert hydrogen into usable energy. However, they are costly, with in June 2023.

Initiatives exist to try and remove platinum from the fuel cell equation, or at least minimize its part, including using non-precious, transition metal nitrides, such as iron, cobalt, manganese and titanium, to produce next-generation fuel cells. However, these technologies are experimental and not yet widely available at scale. Even when they are, African countries will continue to hold an edge as they also have rich resources in these metals and other critical minerals needed for the global energy transition.

Despite this opportunity, only a fraction of African countries have plans to effectively leverage this access to mineral resources to support green hydrogen hardware production. is developing a plan to produce electrolyzers locally and is working on developing its PGMs into value-added fuel cells and fuel cell-powered trucks. The continent must develop strategies to harness its abundant mineral resources to integrate itself into global manufacturing value chains to compete and win in the green hydrogen and other renewable energy components market.

Third ¨C Adequate investments that go beyond ¡°catalytic financing¡±

The current estimates of Africa¡¯s potential to produce worth of green hydrogen need massive upfront investments in capital expenditures, developing related infrastructure, and upstream and downstream industries. The sector is too new, and the lack of understanding of potential risks prevents traditional development partners and private sector backers from investing fully. Thus, conversations have focused on ¡°catalytic financing¡± for Africa¡¯s green hydrogen economy. In line with the triggering nature of a catalyst ¨C in the chemical sense ¨C to jump-start a reaction when all the necessary ingredients are present, such a financing strategy, while helpful, will not be sufficient. For example, a ¡°catalytic financing¡± of $10 million will require a follow-up investment of $100 billion to make an impact.

The inadequacy of financing is especially true for medium-sized local firms, whose representatives decry the dearth of agile and affordable financing options to develop the upstream and downstream industries. The promise of quality local jobs will not materialize if these firms do not have the means to get off the ground. However, the current financing instruments available do not widely cater to the relatively small transaction volumes these medium-sized firms require, nor are they fit for purpose because they are not dominated by local currencies that are more relevant for these firms.

The time is right to negotiate better terms driven by Africa and Africans¡¯ interests in the global financial architecture.

Against this backdrop, the question of an industrialized Africa that can absorb the green hydrogen it produces takes on an outsized importance. On the following projection maps for 2050, Africa appears most prominently on the ¡°production¡± side, providing 2,715 EJ of green hydrogen for the world. However, the continent does not appear on the ¡°off-takers¡± side. Regardless of historical power dynamics, geopolitical interests and global financial architectures, Africa cannot be expected to serve as a provider of the world¡¯s green energy needs without the ability to use the supply for its own domestic consumption. With the green hydrogen train picking up steam and accelerating toward a bright future, everyone should be on board, especially Africa.  Africans are helping to build this train, and it is unconscionable to think they could be left behind, finding themselves environmentally, financially, and socially worse off than when the project started.

Maps Source: Mered, Mikaa, 2023. Geopolitics of Green Hydrogen: Current Trends and Developments. Presented at First Southern Africa -Europe Green Hydrogen Forum, Luanda, Angola. Using IRENA 2020 data.

 

Global green hydrogen production map by 2050 under 1,5 USD/kg (in EJ)