To decarbonise its economy, the European Union (EU) is banking on Africa’s potential to produce the green hydrogen essential for energy transition. Since the launch of the European Commission’s RePowerEU plan in 2022, against the backdrop of the global energy crisis, international institutions, governments and private companies have been jostling to announce agreements to develop the “miracle molecule” in Africa.

From Rabat to Pretoria, via Cairo, Windhoek, Nouakchott, Tunis, Algiers and Kinshasa, a wave of memos of understanding has spread across the continent. The stakes are high for European countries, which are determined to import at least 10 million tonnes of renewable hydrogen per year from African countries by 2030.

Production potential of 50 billion tonnes/year

At a time when industrial hydrogen (also known as grey hydrogen) is mainly produced using fossil fuels, essentially natural gas or coal, green hydrogen is produced by electrolysis of water using renewable energies from solar, wind or hydroelectric farms to achieve the objective of zero CO? emissions.

Although the “fuel of the future” is currently produced on a small scale, with a global production capacity of 109 kilotonnes by 2022, the African continent has some major assets at its disposal. According to a Deloitte report, North Africa and sub-Saharan Africa are among the regions with the greatest potential to develop green hydrogen, along with the Middle East and the Americas.

According to an estimate by Gide Africa, a law firm working on green hydrogen, Africa is at the forefront of the “green revolution” with a production potential of “50bn tonnes per year by 2035”.

The EU’s financing arm, the European Investment Bank (EIB), lists four key African clusters driven by “the best solar energy in the world” – Mauritania, Morocco, Southern Africa, and Egypt. In its report, Africa’s Extraordinary Potential for Green Hydrogen, the EIB mentions “economically viable green hydrogen projects at €2 ($2.17) per kilo” on the continent.

While the European financial institution sees Africa as a future global energy hub, t-hrough exports of its “green gold”, which can accelerate low-carbon economic growth, analysts at Deloitte are betting on global flows that could reach around $280bn by 2050, with the market approaching a total of $1,400bn.

Betting on major projects, waiting for funding

In the rush to reach its goal, the EU plans to create a European Hydrogen Bank, with a budget of €3bn, and to mobilise €100bn in investment to produce and import green gold.

This is a godsend for Morocco, Mauritania, Egypt, Kenya, Namibia and South Africa, all members of the Africa Green Hydrogen Alliance (AGHA), to boost the countries’ GDP through exports of this fuel.

Over the past two years, aware of their strength on paper, African countries have rushed to sign agreements and partnerships – with promises of funding – with European partners, particularly Germany’s leading H2Global programme.

Morocco, a pioneer in developing renewable energies in Africa, recently unveiled its roadmap to becoming a world leader in green hydrogen by making a million hectares of “accessible land with high potential for green hydrogen production” available to investors.

Uncertainties, costs reveal a ‘return to reality’

However, according to data from the International Energy Agency (IEA), only a few projects have reached the feasibility study and design phase, and final investment decisions have yet to be made. “There are very few concrete projects, not only in Africa but on a global scale,” says Anne-Sophie Corbeau, a researcher at the Center on Global Energy Policy at Columbia University in New York.

Most development projects in Africa are at a very early stage due to “uncertainties about the development of an international market for green hydrogen, but also a lack of buyers and the impact of rising prices on production costs”, according to the IEA’s latest report, Renewables 2023: Analysis and Forecast to 2028. It predicts green hydrogen production will grow more slowly than expected, except in China.

“After the enthusiasm generated by the cascade of political announcements, there is a kind of return to reality, because the development of green hydrogen faces financing difficulties and weak support policies,” says Ines Bouacida, a researcher specialising in climate and energy issues at the Institut du Développement Durable et des Relations Internationales think tank (IDDRI).

The cost of producing green hydrogen fluctuates between $4.5 and $6.5 per kg, according to the latest forecasts from the Hydrogen Council and McKinsey & Company. This is an increase of between 30% and 65%, accelerated by a rise in the cost of labour and materials, as well as the cost of building electrolysis plants.

The promise of a rapid reduction in the cost of renewable hydrogen has also been slow to materialise. “To speed up projects, we need buyers prepared to commit to long-term contracts. But with prices still high, buyers are reluctant to make long-term commitments,” says Corbeau.

Climate injustice, poor power supply hamper progress

Hydrogen is an attractive prospect for African countries, and if the sector manages to develop, it could play a crucial role in decarbonising industry within the EU. However, at a time when 567 million people in sub-Saharan Africa have no access to electricity, the memos of understanding signed on the continent, most of which are for exports, are causing a stir.

More countries are expressing an interest in exporting than in importing

Youba Sokona, vice-chairman of the Intergovernmental Panel on Climate Change (IPCC), asks: “Why do African countries, in a hurry to become the EU’s main suppliers, agree to meet the needs of their European partners before guaranteeing access to low-carbon electricity in their countries?”

For the Malian researcher, the continent must resolve three major problems:

• The debt trap
• Food sovereignty
• Energy sovereignty

For Bouacida, the development of green hydrogen for export also raises the issue of climate justice, the risk of building unbalanced partnerships, and the risk that projects will not materialise.

“Producing green hydrogen for export rather than selling it on the market may lower financing rates and increase foreign exchange earnings, but neither should all renewable hydrogen production be exported,” says Corbeau. “More countries are expressing an interest in exporting than in importing”.