Africa should guard hydrogen potential against exploitative partnerships – panel

Africa has vast potential for green hydrogen production, but developers looking to export the fuel should not repeat extractive relationships established by the oil and gas sector in the region, delegates heard at the World Hydrogen Week conference in Copenhagen, Denmark, on Oct. 2.

Potential hubs in the north and south of the continent could produce green hydrogen at between €1.55/kilogram and €1.90/kg at delivery points, significantly below the levels currently possible in Europe, according to a December 2022 study by the European Investment Bank (EIB).

Africa could have a green hydrogen production capacity exceeding 50 million metric tons per annum by 2035, the EIB said. Developers such as Germany's RWE AG are already eyeing large-scale projects to ship hydrogen-derived molecules to Europe's industrial offtake hubs, part of EU-driven initiatives to court African nations in hydrogen export deals.

Green hydrogen is produced with renewable energy. Solar and wind power an electrolyzer, which, upon adding water, makes hydrogen without emissions.

"What is the difference between exporting oil and gas to Europe — taking resources from the ground in Africa — [and] exporting the sun and the wind?" asked Olivier Mussat, CEO of hydrogen startup Atome PLC, which focuses on South America.

Mussat added that many populations in African countries face challenges with power and water access, and that many large international developers with ambitions for hydrogen projects have not yet understood this.

"They've been too focused on their requirements in their countries," Mussat said at the conference.

Governments in Africa should focus on the resources they want to leverage for the benefits of their people, Mussat said. "Forget about the carbon requirements in Europe; that is not your problem."

Wind, solar and hydropower resources are abundant in parts of Africa such as Namibia, but water scarcity needs to be considered in potential hydrogen projects, said Mussat, who was previously chief investment officer for global energy at the International Finance Corporation, part of the World Bank.

Leveraging African capital

To foster a hydrogen industry, African policymakers should draft incentive and regulatory frameworks to mobilize private sector investment and integrate domestic value chains with international markets, the EIB said.

Local governments should be on board with plans, "not [developers] trying to force the project, which unfortunately many people still do," Mussat said.

Infrastructure also requires improvement, with grid transmission lines to move the power often proving too costly to build, he said.

To provide some of the funding for local projects, multilateral financial institution Africa Finance Corp. (AFC) is looking to partner with African capital, according to Begna Gebreyes, head of heavy industries, telecoms and technology at AFC.

"We want to attract foreign direct investment, but when it comes from outside, it is usually because it wants to take twice as much back out," Gebreyes said in Copenhagen.

"There are huge stores of wealth within Africa, but ironically, those are invested in US treasury bonds. So it's about trying to redirect that capital to invest back into Africa," he said.

The potential 50 million metric tons of annual hydrogen production could add an average €40 billion of GDP per year — throughout the project lifetime — in Morocco, Mauritania, Egypt, Namibia and South Africa, the countries the EIB considers as most promising. This would correspond to about 5% of their current GDP.

Local job creation

Beyond ensuring that wealth stays within the region, Gebreyes also pointed to employment opportunities that can be created if resources are further processed into higher-value products locally.

"African consumption should support African job creation," Gebreyes said.

Mining company Fortescue Ltd. is developing a green hydrogen project in Kenya, targeting the production of fertilizer. In a 2023 update, Kenyan President William Ruto described the project as part of a "radical socioeconomic transformation" that would leverage decarbonization as a tool to allow the country to leapfrog into a clean economy.

Fortescue plans to market the ammonia from its Kenyan project locally, and there are also opportunities for marketing hydrogen-derived fertilizer production in many parts of Africa that currently import it at a higher cost, said Olusola Adesanwo, business development manager at Fortescue.

Similarly, hydrogen-based transport fuels made locally could reduce the need for expensive and polluting diesel imports, Mussat said. The EIB also sees applications in Africa's steel industry.

Adesanwo said the fertilizer project and others like it could create a full value chain with employment and skills development. Industry players should also engage with local government and institutions about their anticipated need for skills, for instance, through university programs, so that a local workforce with the relevant education is available.

"It is a lot of painstaking, expensive work, but we need to start doing it now," Adesanwo said.