By Catherine Koffman
Africa is a continent of significant competing needs. However, its wealth of resources both underground and in the atmosphere offers a solution to meet much of its existing challenges, as well as contribute significantly to the energy needs of the rest of the world.
As the world transitions from fossil fuels and grapples with the urgent need to reduce carbon emissions towards a greener future to meet its ambitions of net zero, alternative energy resources such as green hydrogen is poised to revolutionise the energy landscape in Africa and beyond.
Africa, with its abundance of renewable energy potential, as well as mineral resources which are critical feedstock to renewable energy industrial processes, stands at the forefront of this transformative journey.
The green hydrogen revolution, unlocking economic and environmental benefits.
Green hydrogen is produced through a process known as electrolysis, where electricity generated from renewable sources, such as solar or wind, splits water into hydrogen and oxygen.
This clean, emissions-free hydrogen can be used as a versatile energy carrier across various sectors, from industry to transportation.
Africa, with its abundance of wind and solar resources as an input for renewable energy production, is uniquely positioned to harness green hydrogen as a beacon for sustainable development.
The potential benefits of green hydrogen production in Africa extend far beyond environmental considerations. By embracing green hydrogen, African nations can:
Diversify energy sources - green hydrogen can complement existing energy sources and provide a reliable backup during energy shortages.
Create jobs - the hydrogen industry offers substantial employment opportunities, from production and distribution to research and development.
Facilitate energy export - Africa can become a net exporter of clean energy, strengthening economic ties with other countries, regions, and continents.
Drive technological advancements - as the hydrogen sector grows, it will stimulate innovation, creating a knowledge-based economy in Africa.
Various warning signals have been raised about the development of green hydrogen, most notably the cost of production and the inputs for production.
Green hydrogen requires in the first instance, water, which is much needed on a continent experiencing growing instances of drought because of climate change, and secondly, renewable energy resources to ensure energy on a continent that needs to meet its energy demands.
This does not negate the potential of this energy resource by utilising excess renewable energy capacity to produce hydrogen, as a significant contributor to Africa’s reduction of energy wastage, improve grid stability, and create a new highway for economic growth.
Consequently, alongside the growing investment by private developers into the production of green hydrogen, investment by public sector through public and private sector partnerships, need to continue to address the availability of inputs into the production of green hydrogen, such as expanding the security of water and renewable infrastructure to de-risk de-risking the scarcity of these necessary inputs.
An important consideration to the cost of investment, are the funding requirements from a development phase, investing in high-risk project preparation capital as well as funding the capital required for the production process once the projects are prepared.
To this end, blended finance funding models structured to fill the gaps across the funding value chain would play a significant role for catalysing and market making in this sector.
Development finance for early-stage development to construction loans with a blend of financial instruments which allow for first loss, last paid, quasi-equity, mezzanine, and senior debt as well as the bond market, will play a key role to facilitate bankability and affordability of projects.
Similarly, while the cost of development and purchasing the resource may be contributing factor to the speed of uptake, this can be mitigated by focused investment in the circular economy that arises from its production and commoditisation.
From a government perspective, clarity in policy and regulation will fertilise an enabling environment; and collaboration with the private sector can put in place the drivers of a marketplace in terms of price regulation, tax incentivisation.
One needs to weigh up the cost of not seizing this vast potential both from economic and growth perspective for emerging countries, but also the world’s collective transitioning journey to the cost of investing resources and development and benefits to the circular economies.
The expanding landscape of hydrogen plants in Africa
For the African continent to thrive in this new energy asset class, collaboration and partnerships will be required.
There are several countries that are in various stages of developing a green hydrogen market some further along than others, depending on the extent of their available input resources, for example Lesotho, Mozambique, Namibia, South Africa with vast solar and wind energy. In South Africa, with a dedicated renewable energy programme in place (the REIPP) since 2010, it is leveraging off its success with the programme and is now implementing a developing battery storage programme to capture and store excess generation for future deployment to the national grid network, strengthening the case for green hydrogen production by providing excess renewable energy reserves.
In northern Africa, where wind energy resources are substantial, several hydrogen projects are underway, tapping into the energy produced by wind farms to create green hydrogen.
Coastal regions in west Africa, with their proximity to the Atlantic Ocean, are exploring offshore wind energy to generate hydrogen, taking advantage of the region's geographical advantages.
The road ahead
To unlock the potential of green hydrogen in Africa, a multifaceted approach is required. This includes partnership of investment into renewable energy infrastructure, fostering research and development, establishing regulatory frameworks, and forming international collaborations to ensure the sustainable growth of the hydrogen sector.
Green hydrogen is not just an energy solution, it is an important thrust into the green industrialised sustainable future. As Africa continues to embrace this revolutionary energy source, we are on the brink of a new era where clean, renewable energy drives economic growth, fosters innovation, and mitigates the impacts of climate change.
In this journey toward sustainable development, the Development Bank of Southern Africa is committed to supporting projects and initiatives that harness the power of green hydrogen, propelling Africa into a cleaner, more prosperous future.
Catherine Koffman is the Group Executive Project Preparation at the Development Bank of Southern Africa.