Oil and gas shaped the modern history of states
such as Saudi Arabia and Qatar, Venezuela and Nigeria, Texas and Alberta. The
presence or absence of such resources, and the use made of them, shift
economics, societies, and geopolitics. Green hydrogen, the emerging clean fuel,
is quite different: it needs sun, wind, and land. So it should be an ideal
opportunity for many developing countries where those three things are in
abundance – but can they seize it?
اضافة اعلان
Green hydrogen uses renewable electricity
generated from solar, wind, or even hydropower or geothermal, to split water
into its constituents via electrolysis. There is virtually zero worldwide green
hydrogen production today, but excitement has surged since 2020. It seems an
ideal way to use newly-cheap renewables to make a zero-carbon fuel, with wide
potential to decarbonize heavy industry and provide sustainable fuels for ships
and airplanes. The vast quantities of renewable electricity required, though,
favor countries with vast areas of flat, mostly empty land.
A variety of investments
In March, a consortium of the UAE’s clean
energy company Masdar, Egyptian energy provider Infinity and German developer
Conjuncta signed a preliminary agreement for a 10 gigawatt, $34 billion green
hydrogen project in Mauritania. The northwest African country has a GDP of just
$10 billion and power generation capacity of barely half a gigawatt. To call
such a project transformational, if it happens, is an understatement.
And this is not Mauritania’s only hydrogen
concept: British oil major BP, France’s TotalEnergies, gas minnow Chariot, and
international renewable developer CWP Global are working on others. In total
these could amount to 80 gigawatts and hundreds of billions of dollars of
investment.
Namibia, in southwest Africa, with 2.5
million people and a GDP only a little higher than Mauritania’s, also possesses
a long Atlantic coastline and extensive desert territory. Hyphen Hydrogen
Energy, with African and German shareholders, plans a $10 billion hydrogen
plant.
More established energy producers in the
continent – South Africa, Egypt, Morocco, Angola – have also announced
projects. On current pronouncements, Africa stands behind only Europe in the
volume of green hydrogen production by the early 2030s.
Mauritania, Egypt and Morocco have the
advantage of proximity to Europe, set to be the biggest importing market
globally. Japan and South Korea are more distant and are expected to seek
supplies from the Middle East and Australia.
Hurdles to sustainable development
Such huge projects will drastically reshape
their host countries. However, they face numerous challenges. Even if they go
ahead, they will not bring the same easy wealth as oil and gas – but, done
well, there is the potential for broader-based and more sustainable
development.
First, there is the simple challenge of
delivering such huge investments in countries with limited infrastructure and
expertise. This favors the north African states and South Africa. Even here, it
has been difficult to sign long-term offtake contracts, essential to underpin
financing. The market is nascent, users are waiting to see how projects advance
and costs decrease. Developers need to execute their projects in order to
purchase equipment in bulk so that costs can fall, and electrolyzer-makers are
waiting on orders before gearing up production lines. This is a three-sided
chicken-and-egg problem.
Second, Africa faces competition.
Australia, Brazil, Chile, and the Arabian Peninsula have similar advantages of
sparsely-populated, coastal land with strong sun and wind, and more established
economies and technical expertise.
But perhaps the biggest threat of all comes
from the US. It has empty land with strong wind in the Midwest and sun in the
southwest. It has a massive, highly-skilled energy industry with abundant finance
and entrepreneurial talent. And President Joe Biden’s Inflation Reduction Act,
which was signed into law a year ago, offers remarkably generous subsidies for
hydrogen production, of up to $3 per kilogram, meaning that by the early 2030s,
it could be virtually free to make in favorable locations.
It’s hard to imagine that such largesse
will persist – it will become impossibly expensive, if green hydrogen expands
into a large industry. But right now, America is the land of opportunity. There
is the risk that developers will sit on their African projects until the market
shakes out.
Third, there is the question of how African
countries turn their hydrogen potential into gold. It will be a costly and
competitive industry. Taxing it heavily or demanding government shares will
drive away investors.
So states in Africa should ensure that at
least some of the hydrogen is used to generate value locally and not just
exported. Hydrogen, a very light and leak-prone gas, is costly to transport
internationally. Most announced projects plan to turn it into ammonia, a
constituent of fertilizers and an important chemical feedstock, which is much
easier to transport.
African farmers could certainly do with
more fertilizers. The hydrogen can also be used to convert iron ore into usable
iron, and to make synthetic fuels.
Despite these challenges, Gulf investors,
such as private UAE firm AMEA Power and Saudi Arabia’s ACWA Power, as well as
Masdar, are interested in the continent’s hydrogen potential. While indigenous,
European, and Australian firms are well-represented already, China, the US, and
Japan are conspicuous by their absence. The opportunities are there for
fruitful partnerships, and energy trades quite differently from past extractive
models.
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