Africa could capture 10% of global green hydrogen market
Hydrogen – made by splitting water molecules with electrolysis – is a clean energy source and a potential alternative to fossil fuels. Hydrogen is considered ‘green’ if the energy used to manufacture it comes from renewable sources such as solar and wind. A recent report by Abu Dhabi-based energy company Masdar argues that Africa could capture up to 10% of the global green hydrogen market by 2050. Here are highlights from the report.
Hydrogen is increasingly recognised as a critical element in the global net-zero transition. Hydrogen also plays a role in addressing concerns about energy security given the war in Ukraine as hydrogen will be critical to transport significant amounts of clean energy to energy-constrained global demand centres. Furthermore, it could play a key role in accelerating socio-economic development in Africa.
Green hydrogen offers an opportunity for Africa to capitalise on its massive renewable energy endowment. Africa has a theoretical potential capacity of approximately 850 terawatts (TW) of solar and wind. If only 2% of this, or 17 TW of renewables, were used for green hydrogen production it would produce about 900 metric tonnes per annum (mtpa) of hydrogen, equal to about 1.5 times the total global demand of 610 mtpa in 2050.
Africa enjoys high renewable energy capacity factors ranging from 28% to 36% for solar and 26% to 51% for onshore wind, respectively. This yields a world-class levelised cost of electricity (LCOE) and highly competitive hydrogen production costs that range from US$1.8 to $2.6 per kg in 2030. The cost of green hydrogen will continue to decline, reaching about $1.2 to $1.6 per kg in 2050 as hydrogen production technology such as electrolyser manufacturing scales up and performance improves and renewable energy LCOEs continues to decline, driven by lower equipment costs and improved capacity factors.
Green hydrogen has two specific pathways in Africa: one, exports to energy-constrained regions, and two, the deployment of green hydrogen for domestic consumption.
Africa could be highly competitive in hydrogen exports
Energy exports can take the form of pure green hydrogen or hydrogen derivatives. Suppliers can build an export-oriented hydrogen sector based on Africa’s attractive energy profile and proximity to demand centres in Europe and Asia. Green hydrogen export volumes, including the shipment of hydrogen derivatives such as ammonia, e-methanol, and e-kerosene, along with pure hydrogen, could reach 2 to 4 mtpa in hydrogen equivalent volume by 2030, targeting exports to end-users in East Asia and continental Europe. In 2050, volumes could reach 20 to 40 mtpa in hydrogen equivalent volume. Much of this will likely take the form of pure hydrogen, reflecting expected significant pipeline exports from North Africa to Europe (about 50% of the export volumes in 2050). The remainder is expected to consist of shipments of hydrogen derivatives, which are exports of synthetic fuels such as e-methanol and e-kerosene (30%), and ammonia (20%).
The export potential will vary for different types of products and across different parts of the continent. Overall, Northern and Southern Africa are likely to be the most attractive locations for exports of hydrogen or its derivatives, as well as parts of North-Western Africa such as Morocco.
Uniquely positioned to serve European demand centres, Northern Africa can directly supply hydrogen due to the limited distances involved (e.g., about 3,300 km from Algeria to Germany). Companies can retrofit existing natural gas export infrastructure to hydrogen pipelines (e.g., Algeria, Tunisia, and Libya). The cost of exporting hydrogen via pipelines could be as low as $2.2 total cost per kg landed in Northern Europe by 2030, while the cost of local European production would be higher at about $2.5 per kg when using attractive renewables resources, or even costlier when using less attractive resources.
Although the cost differential appears limited, Europe’s case for importing clean hydrogen is clear. Europe is a net energy importer today, importing about 60% of its energy, and is widely expected to remain an importer. The region is unlikely to build out sufficient volumes of renewable energy to decarbonise the grid, electrify end-uses like passenger vehicles, and produce hydrogen for the industrial and mobility sectors that need it. As such, Europe will probably import more than 60% of its needed hydrogen and derivatives.
Considering hydrogen derivatives, Northern Africa is likely the best positioned to focus on ammonia exports due to the limited availability of biogenic carbon dioxide (CO2) needed to produce synthetic fuels such as e-methanol or e-kerosene, whereas ammonia only requires hydrogen and nitrogen from the air. In 2030, the landed costs of ammonia in Rotterdam would be about $530 per tonne of ammonia versus $630 for a tonne of locally produced equivalent.
Western Africa will probably focus on hydrogen production for local demand given that renewable resources are likely not optimal in a global context, perhaps except for Nigeria, which might be attractive for blue hydrogen (hydrogen produced from natural gas and supported by carbon capture and storage) production given its natural gas resources. However, parts of North-Western Africa (such as Morocco or Mauritania) are competitive on a global level due to attractive solar and wind resources and proximity to Europe. This yields a favourable cost position to export ammonia to Europe and potentially pure hydrogen through pipelines. For Morocco specifically, ammonia export may be attractive with a landed cost of about $530 a tonne in Europe, notably lower than domestic production.
While Southern Africa cannot export hydrogen through pipelines, it is nonetheless well positioned to export ammonia or synthetic fuels such as e-methanol and e-kerosene due to attractive natural resources and existing port infrastructure that can be leveraged (e.g., the port of Lüderitz in Namibia or the port of Durban in South Africa, the busiest port in Africa). The attractive cost position of synthetic fuels for exporting results from the complementary profiles of solar and wind resources as well as the presence of industries such as pulp and paper, bioethanol production, and biomass power production that can serve as sources for biogenic CO2. About 15 mtpa of biogenic CO2 is available in sub-Saharan Africa, of which about 7 mtpa is found in South Africa. In 2030, the landed cost of e-methanol for use in maritime applications in Japan could be as low as $680 a tonne versus the $2,300 a tonne costs for local production.
For ammonia, exports to Europe and Asia from Southern Africa share similar landed costs to those from Northern Africa. Consequently, Southern Africa could become a major exporter depending on whether the at-scale market demand for synthetic fuels or ammonia materialises first.
Eastern Africa’s renewable and hydrogen cost position is less attractive than in other parts of the African continent. Although ammonia exported to Europe from Eastern Africa would cost less than domestic production in Germany, for example, other parts of Africa are likely more competitive. There could potentially be some upside from using geothermal energy resources (that Kenya, for instance, has in abundance) for clean hydrogen production. However, it remains unclear whether this energy source is sufficiently scalable beyond its current capacity. Hence, the main green hydrogen potential for East Africa likely involves displacing imported fertiliser or ammonia with domestic supply.
Domestic hydrogen demand in Africa
Green hydrogen can also meet Africa’s domestic demand for affordable clean energy and reduce the fossil fuel imports used, for example, in the production of nitrogen-based fertiliser or refined petrochemicals including fuel. It can unlock demand in end-uses like trucking, rail, and mining, and enable a competitive low-carbon export supply chain by decarbonising mining vehicles. Furthermore, hydrogen could support the development of resilient off-grid energy systems in areas that lack stable grid connections. Although other storage technologies (e.g., batteries) are often more cost-efficient, hydrogen can complement these and store energy for later use in transport, buildings, and local industries when the sun is not shining and the wind is not blowing, thus enabling a cost-efficient, self-supplied energy system.
Few expect Africa to be a first mover in the domestic consumption of clean hydrogen. Yet, domestic demand on the African continent could reach about 3 mtpa of hydrogen in 2030, growing from roughly 2 mtpa today. Of the approximately 3 mtpa of domestic hydrogen demand in 2030, about 0.2 to 0.5 mtpa is expected to be green hydrogen, while the remainder will predominantly consist of grey hydrogen (made from fossil fuels without capturing greenhouse gas emissions). In these demand scenarios, growth in the coming decade would primarily result from the adoption of hydrogen-fueled heavy vehicles in ground transport (about 10% of the additional demand of up to 1 mtpa), the production of ammonia for fertiliser to substitute for imports, and other industrial uses (75%), refining (10%), and potentially, remote or backup power generation (5%). By 2050, as the green hydrogen economy reaches a higher scale and stronger cost competitiveness, demand could reach 10 to 20 mtpa (about 3% of the global market) from industry (about 50% of total demand), mobility (25%), synthetic fuels (15%), and use in power and heat (10%).
Hydrogen project momentum continues to increase in Africa
African governments and companies, international investors, and global energy companies all increasingly recognise the opportunity hydrogen represents. Project momentum has grown over the past three years with more than 20 projects across Africa amounting to approximately 48 gigawatts (GW) of electrolyser capacity. More than 90% of these volumes focus on exports (mainly ammonia), with the remainder targeting domestic demand within the transport, chemical and fertiliser sectors.
Announcements amount to about $30 billion in total investments in hydrogen value chains and approximately $70 billion for the renewables needed to produce the hydrogen. Most hydrogen investment volumes (more than 60%) target hydrogen supply with the remainder slated to build out hydrogen infrastructure and end-use applications. Many of the investments are already in advanced development. About 15% of the volumes are undergoing feasibility or front-end engineering design (FEED) studies, while roughly 85% are in the early announcement stages. Despite the notable volumes announced, less than 1% have reached the final investment decision (FID), are under construction, or become operational. Although low by global standards, where about 10% of announced investments have reached the FID stage or beyond, 14 projects are expected to further mature toward final investment decisions in the coming one to two years.
Africa’s green hydrogen ecosystem is developing gradually, and momentum is growing. However, it does not yet reflect Africa’s full potential. More projects targeting the supply, infrastructure, and end-use of hydrogen are needed to cement Africa as a major hydrogen economy and realise the massive potential offered by green hydrogen. Investments needed by 2050 to realise 30 to 60 mtpa production are about $680 to $1,300 billion in production, distribution, and export infrastructure.