The EU aims to import significant volumes of green hydrogen from Africa by 2030 but faces competition from China, the US and the Middle East amid growing interest in the continent’s largely untapped renewables potential.

The EU aims to ramp up its imports of renewable hydrogen to 10mt/yr by 2030. “A fair chunk, 30–50% of what the EU requires, will come from Africa,” said Mourad el-Yaalaoui, chair of the board at investment firm Public Ventures. “Nonetheless, Africa will not place all its eggs in the EU basket or any other single basket.”

The new generation of African leaders are formidable strategic thinkers and doers, he added. “Africa has an interest in doing business with Europe, but the relationship is going to be way more balanced and productive than it used to be.”

The IEA said Africa, with its vast solar and wind resources, could produce 5,000mt/yr at less than $2/kg, potentially positioning it as a “hydrogen powerhouse” as the transition reshapes the global energy landscape.

“Produce green hydrogen, and you can rely on us as buyers” Scholz, German chancellor

Countries such as Morocco, South Africa, Namibia and Egypt stand out as more promising partners for the EU on account of their political stability and better infrastructure.

Morocco has emerged as a highly desirable partner for hydrogen agreements, given its proximity to Europe and substantial investments earmarked for the sector. The country has allocated approximately 6,000km² of public land—almost equivalent to the size of Kuwait—for green hydrogen and ammonia plants as a part of the "Morocco offer" aimed at encouraging extensive green hydrogen projects.

The proposed 5,600km Nigeria–Morocco Gas Pipeline is planned to be connected to the existing Maghreb–Europe pipeline, which connects gas fields in Algeria with Spain via Morocco.  

China, France, Italy, the US, Russia, the UK, Japan and India were the top bilateral energy financiers in Africa from 2012 to 2021, according to data from thinktank the Carnegie Endowment for International Peace. China, the largest financier, invested more than $53b in Africa’s energy market over the period. This includes the development of large infrastructure projects in return for cheap access to Africa’s natural resources, including oil and gas.

China aims to become a global leader in green hydrogen, with its imports expected to be around 13mt/yr by 2030, surpassing the EU’s 10mt/yr target.

In March 2023, China International Energy Group announced plans to establish a massive green hydrogen production project in Egypt with investment of $5–8b.

The US, Japan and the UAE have also expressed interest in investing in the hydrogen sector in Africa. Since 2021, the US International Development Finance Corporation has committed more than $438m to climate-linked projects in Africa to advance renewable energy goals, including green hydrogen.

The UAE is looking to tap the African hydrogen market as it aims to produce 1.4mt/yr of low-emission hydrogen by 2031, with 71.4% being green hydrogen. At the recent Africa Climate Summit in Nairobi, the UAE unveiled a $4.5b capital commitment to fast-track the expansion of renewable energy development in Africa.

And in October, Japan and South Africa signed a memorandum of cooperation on creating synergies in the field of green hydrogen and ammonia.

Finance gap

There is a burgeoning pipeline of hydrogen projects spanning Egypt, Mauritania, Morocco, South Africa, Namibia, Kenya and Angola. However, to realise the potential, an estimated investment of nearly $1t will be required by 2050, according to Switzerland-based non-profit the Green Hydrogen Organisation. It forecasts African of 6mt/yr by 2030, with an export potential of nearly 4.1mt/yr.

However, international investors in Africa face high finance costs, while accusations of “energy imperialism” levelled at Europe could trigger community protests, potentially stalling projects.

“The cost of capital in Africa is significantly higher than in developed countries. However, blended finance and private equity partnerships are increasingly leading commercial and concessional investors to take on calculated risks in selected high-potential countries such as Morocco, Mauritania, Egypt, Namibia and South Africa,” said Yaalaoui.

Chigozie Nweke-Eze, CEO of project developer Integrated Africa Power, emphasised the success of hydrogen investments in Africa hinges on strategic planning and the commitment of national governments to advocate for the interests of their respective countries.

Clarity on investment conditions for international stakeholders is crucial, with a focus on ensuring projects contribute to sustainable development within the countries in which they are implemented.

Noteworthy is the Hyphen hydrogen project in Namibia, valued at $10b, where the Dutch government has granted $43m to support green hydrogen development. The Namibian government plans to utilise $25m of this grant to acquire a stake in Hyphen.

Erik Rakhou, a management consultant in the energy sector, highlighted three essential components for establishing a robust financing structure: involvement of local governments as stakeholders, endorsement by multilateral agencies, and a resilient EPC structure.

Multilateral development banks with extensive experience in supporting local economic development can act as arbiters in large-scale projects in Africa, especially when securing long-term contracts spanning 10–15 years, thereby fortifying the financing structure, according to Rakhou.

Local resistance  

When German Chancellor Olaf Scholz told African leaders to “produce green hydrogen, and you can rely on us as buyers”, many Africans were offended.

“The remarks led to widespread criticism as Africa was positioned solely as an exporter of raw materials, lacking expertise in value addition. The concerns of energy imperialism are rooted in some reality, considering the history of colonialism by Western Europe,” said Jabri Ibrahim, UN Climate Change High-Level Champion.

For over a century, the Democratic Republic of Congo (DRC) has exported resources such as rubber, copper, cobalt, gold and platinum to Belgium. However, despite this history, the DRC remains one of the five poorest nations globally, as noted by Roland Ngam of thinktank Rosa Luxemburg Stiftung.

5,000mt/yr – Potential production

Further, while European nations advocate for a clean energy transition, African leaders remain steadfast in their commitment to fossil fuels.

“Africa cannot afford to adopt the Western-centric energy transition,” said NJ Ayuk, chair of energy industry group the African Energy Chamber, at COP28. Rosa Luxemburg Stiftung regards sourcing hydrogen from Africa to meet clean energy targets in the EU as colonialism under a green facade.

Additionally, given the food crisis in parts of Africa, exports might divert much-needed hydrogen away from the fertiliser industry and aggravate the water crisis, added Jabri.

There are several examples in recent years where large-scale projects in Africa have been stalled because of community protests. For example, the Lamu coal power station in Kenya, funded by Chinese investors, had to be suspended due to environmental protests. Large-scale mining projects in the DRC and oil and gas projects in Nigeria too faced delays due to community protests.

“Let us not forget the African diaspora, probably the most underutilised African asset. Therefore, in the next decades, we may well see a substantial increase in the repatriation of African talent,” said Yaalaoui.

African leaders will not give up on localisation that delivers in-country value; they want the global clean energy transformation to benefit Africans in Africa. They want to see inclusion materialising in the daily lives of their fellow Africans, he said.

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Author: Namrata Acharya