African Green Hydrogen Exports: What are the risks?
Following Europe’s recent scramble for Africa’s natural gas resources due to the Russian invasion of Ukraine, Europe is now increasingly investing in the development of green hydrogen projects on the continent. Given Africa’s significant renewable energy potential, driven by its substantial solar photovoltaic power potential, the continent is well equipped to develop large-scale green hydrogen projects to supply European demand. Whilst there may be significant economic pay-offs for African countries exporting hydrogen to Europe, with an estimated €1 trillion green hydrogen potential, there are also many risks in the development of the nascent industry which may inhibit long-term growth.
Source: International Renewable Energy Agency
European hydrogen plans
Hydrogen has become a key part of Europe’s decarbonisation plans in its net-zero goals. Despite currently accounting for less than 2% of Europe’s energy consumption, the EU is aiming to ramp up production over the next decade. With the introduction of the REPowerEU plan in May 2022, the European Commission (EC) clearly stated its intention to utilise renewable hydrogen as an important energy carrier in its attempt to reduce its reliance upon Russia's fossil fuel imports. The EU plans to produce 10 million tonnes and import 10 million tonnes of renewable hydrogen by 2030.
The EU has planned to secure strategic partnerships with developing African nations such as Namibia and Egypt to ensure that they have a secure supply of renewable hydrogen. The incentives built into the EU regulations, enticing African nations to develop green hydrogen export facilities to Europe, could come at the expense of local populations. The energy poverty of many African nations, particularly in sub-Saharan Africa, has led many to argue that their domestic energy needs should be prioritised over helping the EU deliver its climate strategy.
The EU and individual European nations have already begun making huge commitments to green hydrogen in Africa, including provisions for exports from the continent to serve Europe’s domestic needs. The recent signing of a $34 billion agreement for a giant green hydrogen project in Mauritania is just one of those developments. Similarly, some European nations are working on hydrogen pipeline projects in Africa to meet their climate targets and to provide more secure energy supplies in future. Such projects include the “SoutH2 Corridor” pipeline project connecting North Africa with Italy, Austria, and Germany. The energy ministries in the respective countries have all signed a joint letter of political support for developing the 3,300-kilometre-long hydrogen pipeline corridor.
Source: Offshore Energy
Risk to African nations
Economic feasibility
Whilst many European nations emphasise Africa’s huge renewable energy to create green hydrogen, there are also significant economic risks that remain in its development. According to a study by the European Investment Bank, International Solar Alliance and the African Union, large-scale green hydrogen generation can enable African nations to supply 25 million tons of green hydrogen to global energy markets, equal to 15% of the current amount of gas used in the EU. The study also reported that green hydrogen is economically viable at €2/kg, due to the abundant availability of solar energy, enabling the possibility of low-carbon economic growth across the continent and reducing emissions by 40%. With more than 52 green hydrogen projects in Africa having been already announced, and production set to reach 7.2 million tonnes by the end of 2035, African nations look set to have massive increases in GDP, whilst also benefitting from the many new permanent and skilled jobs generated across the continent.
However, policymakers must be cautious to fully weigh up the economic feasibility of such projects. Limited transportation infrastructure makes transporting hydrogen which costly and hardly economically competitive. Even maritime shipping, the most cost-effective method for distances over 3,000km, would cost an estimated additional$1 to $2.75/kg. For shorter distances, the cost of pipeline transport could be significantly lower, estimated at$0.18/kg per 1,000km for new hydrogen pipelines and $0.08/kg for retrofitted gas pipelines. Given its economic competitiveness, hydrogen pipelines are the preferred choice of transportation for European nations, with the EU set to provide huge subsidies for a proposed hydrogen pipeline, named the“South Corridor”, stretching from North Africa to Bavaria. Nevertheless, as the green hydrogen industry is at a very early stage of development, it is very difficult to predict how the market will grow in the long term and accurately predict the economic payoffs of hydrogen pipelines for African nations. The demand for hydrogen could vary from150 to 500 million metric tonnes/year by 2050 due to the level of worldwide climate goals, specific actions taken within various sectors, efforts to enhance energy efficiency, direct electrification, and the adoption of carbon capture technologies. Therefore, if the European market does not develop at the speed and scale expected, African nations investing in green hydrogen will be left with huge debts to be paid for by their populations.
Source: IEA
2. Energy poverty
The potential development of green hydrogen exports to Europe should also not overshadow Africa’s broader energy landscape. At present, 600 million people, primarily located in sub-Saharan Africa and equivalent to 43% of the total African population, lack access to electricity. Sub-Saharan Africa (excluding South Africa) consumes approximately 180 kWh of energy per capita, compared to 13,000 kWh per capita in the U.S. and 6,500 kWh in Europe. Renewables also remain in their infancy in Africa, with approximately 180 TWh of renewable power generated in Africa in 2018, equivalent to approximately less than 0.02% of its estimated potential. African nations must be cautious to ensure that they choose the correct trade-off between utilising hydrogen for exports to Europe and their own domestic needs. Should African nations divert their resources toward hydrogen production for exports, some fear that green hydrogen may become another “neo-colonial resource grab” and starve African nations of their resources.
Therefore, African nations must ensure that all the benefits of green hydrogen exports are not extracted for European gain. The agreements between the EU and African nations such as Egypt, Morocco and Namibia already show worrying signs of resource exploitation. Despite these deals being presented as a win-win scenario, the rules allow hydrogen projects to “cannibalise” the local infrastructure for exports. Namibia is a prime example as it is racing to become Africa’s first green hydrogen exporting hub despite only 56% of its citizens having access to electricity in 2022 and relying upon imports to meet its electricity demand. The Namibian government hopes to develop 10 hydrogen export projects with European nations. However, there are concerns over potential misuse of climate finance, which should focus on aiding local development, rather than export projects.
Outlook
With increasing interest and investment from European nations into green hydrogen projects in Africa, countries on the continent must remain cautious of the huge benefits promised by their European counterparts. Despite the continent's unparalleled potential for producing low-cost green hydrogen in the future, producing green hydrogen at economically competitive prices remains elusive given the high costs of production and transportation. However, should these costs be brought down by increased European investment, African nations may well prioritise meeting their own domestic energy demands and accelerating domestic renewable energy deployment before considering exporting green hydrogen to Europe in large-scale quantities.
China’s push for hydrogen energy: The power of ambition for green infrastructure
In March 2022, China announced its target to produce approximately 200,000 tonnes per year of green hydrogen and at least 50,000 hydrogen-fuelled vehicles by 2025 to supplement its target of reaching net-zero carbon emissions by 2060. This comes after a huge push for hydrogen use during the 2022 Winter Olympics in Beijing. With China being the world’s largest producer of hydrogen at 33 million tonnes annually—80% being grey or blue hydrogen, widespread usage of green hydrogen is anticipated for China’s energy infrastructure.
In understanding hydrogen, there are three main forms: grey, blue, and green. Grey hydrogen is generated using fossil fuels and other high carbon-emitting sources and blue hydrogen is produced using low carbon-emitting sources such as steam methane reformation with Carbon Capture, Usage and Storage (CCUS) or other fossil fuels with CCUS. On the other hand, green hydrogen is made through the electrolysis of renewable energy sources and emits no carbon emissions.
The success of China’s move towards green hydrogen will depend on whether it can geographically connect its renewable-rich regions in the western provinces to the high hydrogen demand areas on the coast in China’s eastern provinces, as well as efficiently and cost-effectively store hydrogen during periods of high production yet low demand for green hydrogen energy. For example, while energy supply of hydrogen produced from solar energy sources usually outweighs demand during the summer months, energy demand rises during winter months due to higher electricity needs—such as for heating—and lower solar energy generation on account of shorter days during the winter. For this reason, green hydrogen energy storage is crucial to meet mismatched demand and supply periods.
In terms of transportation, hydrogen can be transported in a variety of ways depending on the transportation distance. For shorter distances, retrofitted pipelines for high-pressure gases or natural gas blending are the best options. Currently, China has two pure hydrogen pipelines in place—although both are under 500 kilometres—and one hydrogen-natural gas blending pilot project. For longer distances, hydrogen could be shipped in the form of ammonia, gas tanks, liquefied, or through retrofitted subsea transmission pipelines. However, converting hydrogen to ammonia or cryogenic liquid is still extremely expensive and nascent in terms of technology, especially as liquid hydrogen technology is only used in China’s aerospace and defence sectors. This also poses a problem for hydrogen storage in the form of liquid.
Another option is underground storage within depleted oil and gas reservoirs, salt caverns, or aquifers. However, China’s natural storage options are limited; thus, there is large scale investment into developing underground gas storage across China. Hydrogen can also be stored through gaseous storage and tube trailer technologies; however, steel containers used in China for hydrogen storage have a lower pressure capacity than that used in Europe, North America, Japan, and South Korea. Hydrogen regulations must therefore be amended to improve China’s competitive hydrogen storage ability.
While challenges for transportation and storage persist, ambition for green hydrogen energy usage across China is growing. The country now has more than 250 hydrogen refuelling stations, making it the country with the highest number of hydrogen refuelling stations globally. Moreover, investments are being poured into green hydrogen infrastructure and technology solutions in China. There is no doubt that in due time, China will be a key player in the global hydrogen industry.