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The scramble for green hydrogen is reshaping the continent
Every month the H2 silver bullet grows and grows, raising hopes across Africa. Here is how to ensure it hits the target
Green Rising
April 04, 2024
Hello – once in a while a shiny big new thing comes along with lots of hype… and when you strip away the hype you realise… it’s still a really big thing. That’s what green hydrogen in Africa looks like to us.
There is indeed a lot of hype. But there are also big international players making major commitments. Doing so doesn’t guarantee success. But it is real.
Green hydrogen has earned the right to be taken seriously as a potential mainstay of Africa’s green economy. It deserves constructive support. Now for the hard part: Creating facilities, jobs and returns.
⏳ Today’s reading time: 4 mins
LOGISTICS UPDATE | Thursday 4 April
🔎 Report: African climate services critically need more investment
🖥️ Webinar: Africa’s roles in tackling global climate change (April 8)
⚙️ Job: Zutari is looking for a Lead Structural Engineer (Joburg)
AND FYI…
📚 Other report: AfDB Climate Change and Green Growth - 2022
🦍 Other job: IUCN seeks a Regional Comms Officer (Nairobi)
1.🚁 Heli view: The triple hurdle green hydrogen must clear to power Africa
Western business has decided to double down on African green hydrogen in a big way.
Top guns: The Hydrogen Council, a club of global industry giants (see our Cheat Sheet below), this month got McKinsey to make the case for hydrogen’s potential on the continent.
The significance is not just in what the report says – but also who says it.
This blueprint for industrialisation based on billion-dollar investments was commissioned by players with the necessary capital.
A few details: McKinsey analysts chart the sector’s potential as follows.
African hydrogen exports could be worth more than $15 billion annually by 2050.
The sector can create 13 million job-years for African countries by mid-century.
Projected African exports: 7 million tons pa (2030), 32 Mtpa (2040) and 72 Mtpa (2050).
In South Africa, it could add 3.6% to GDP by 2050 and create more than 370,000 jobs.
Quick recap: What is green hydrogen? Using renewable energy to create hydrogen, a major ingredient in industry, transport and energy.
Over the past year, green hydrogen has become perhaps the most dynamic part of Africa’s green economy.
More than $100 billion in projects have been announced across a dozen countries.
Yes but: Before green hydrogen can take off in Africa, it needs to clear three major hurdles: Securing capital, ensuring demand, and finessing the local landscape.
Securing capital: Access to funds and actual investment can be different things.
More than $400 billion may need to be invested (equivalent to South Africa’s GDP).
$40 billion will be invested by 2030 but over 90% of capital will only be deployed later.
Highly variable perceptions of risk in Africa mean financing is subject to uncertainty.
A 6% increase in the cost of capital could increase hydrogen costs (LCOH) by 50% or more.
Ensuring demand: Africa is not exactly early to the party.
Only 5% of African projects are at the advanced planning stage and 1% have final investment decisions, compared to 20% and 7% globally.
Europe and parts of Asia are the primary market as North America, Australia and Latin America are already building plenty of capacity.
Potential government subsidies for American green hydrogen may exacerbate demand challenges in Africa.
Finessing the local landscape: Some African governments are struggling with hydrogen policies, though Kenya recently established its regulatory framework.
Transport infrastructure, land rights, water access and human capital are also potential bumps in the road.
Not stopping: The first quarter of the year has nonetheless seen a further stampede of interest.
Serious players: Conservative western industrial countries are now focusing on African green hydrogen. These are not your usual speculators.
Action stations: Mid-size African countries are emerging prominently in the sector.
Morocco will dedicate 2% of its landmass (1 mln hectares) to green hydrogen projects.
Algeria wants to supply 10% of Europe's hydrogen demand by 2040 via a subsea pipe.
Big brothers: Some of Africa’s major economies are also keeping up with new announcements.
A $5.8 billion deal in South Africa
Seven new projects worth $40 billion in Egypt.
New entries: Laggards no longer want to be left behind.
Uganda signed a $400 million deal for a green hydrogen-based fertiliser plant, aiming to enhance its food production and reduce imports.
Use cases: It’s no longer just about trade. Domestic applications are trialled.
BMW launches a hydrogen test car for South African consumers.
What it means: This is different from what raised up Asia’s economies. It’s less about (labour-intensive) manufacturing than green industrial applications.
Still, serious players are making the case for how hydrogen can reshape the continent, including forgotten places such as Mauritania.
Namibia may double its GDP, grow the labour force by 10% and reduce CO2 emissions by 45-60 million tons per year by 2040.
2. Cheat sheet: 24 big names betting on green hydrogen in Africa
