Hyphen Hydrogen Energy is in talks with potential new investors in its $10bn Namibian green hydrogen project as it seeks strategic partners with the financial clout and technology to support it through the construction phase, CEO Marco Raffinetti tells Hydrogen Economist in an interview.

The Hyphen project, located in the Tsau Khaeb National Park in southwestern Namibia, is sub-Saharan Africa’s largest and only fully vertically integrated green hydrogen project.

Plans envisage the project reaching first-phase capacity of 1mn t/yr by 2027. At full-scale, it is expected to produce 2mn t/yr from 3GW of electrolyser capacity powered by 7GW of renewables.

“We will bring in appropriate partners with the big balance sheets to help us execute on the physical construction of the project—[and] those discussions are underway,” Raffinetti says. “It is an enormous project. The best way to think of it in terms of scale is as similar to an upstream LNG project, where it is very common to have a lead developer co-investing in the project alongside customers, strategic and financial partners.”

“We will bring in appropriate partners with the big balance sheets to help us execute on the physical construction of the project” Raffinetti, Hyphen

The project’s current shareholders are German renewables company Enertrag and Africa-focused investment firm Nicholas Holdings. The Namibian government is also taking a 24pc stake in the project by exercising an option granted to it under the terms of feasibility and implementation agreement (FIA) finalised in May. The FIA also entitles the government to 5pc of the project’s gross revenues, as well as land rent and taxes.

“The government wants to be not only the provider of land and the recipient of royalties and taxes, but also a co-investor in the sector. We think that is very important for lowering risk because, ultimately, it reduces the gap between government and the private sector,” Raffinetti says.

Lower country risk helps to keep down the cost of financing and ultimately feeds through into a lower delivered commodity price. “Having a very low risk host country that is appropriately incentivising the establishment of green hydrogen is enormously important,” Raffinetti says. “And that is where we think Namibia has really differentiated itself from the rest of the players globally, not just on the African continent.”

International benchmark

Raffinetti thinks Hyphen sets the international benchmark for how such projects should be developed. “As the Global North looks to decarbonise its energy system, it cannot do that at the expense of the Global South,” he says.

The project has letters of intent from buyers for 100pc of its first-phase capacity, with further negotiations under way. “We have been blessed with a large amount of interest from offtakers,” Raffinetti says. “We have got a lot more negotiations still underway that we have not gone public with.” 

He declines to put a figure on the project’s cost of production but reckons it is one of the lowest-cost, if not the lowest-cost, project of its type. The project shareholders are technology agnostic when it comes to choosing electrolysers. “Ultimately, the choice of electrolysers is likely to come down to not just the technology, but who has got capacity available in the market and the strategic partners that are brought on board,” Raffinetti says.

Reliance on intermittent wind and solar may require the project to include a small amount of thermal power generation in the form of diesel or gas-fired turbines to optimise the use of the electrolysers. “This could be seen as controversial to people who do not understand the efficiencies of the energy system,” Raffinetti says. “But if you can eke out 2pc or 3pc or 4pc improvements in efficiency in hydrogen production from the electrolyser production facility, you are going to offset way more carbon through that additional hydrogen produced from the same amount of equipment deployed than you are emitting from that small amount of carbon emitted in power generation.”

Water for the electrolysis will come from desalination. The electrolysers and the wind and solar capacity will be sited only c.70km from the coast, which means the cost of desalination and transport of water to the plant will be “very modest” relative to the project’s overall capex. The desalination plant may be oversized in order to create water supply for the local town as its population grows, Raffinetti says.

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Author: Stuart Penson