Unlocking Africa's Green Hydrogen Potential for Prosperity and Sustainability

Unlocking Africa’s Green Hydrogen Potential for Prosperity and Sustainability

Green hydrogen stands as a potent catalyst for Africa’s transformative journey towards becoming a global powerhouse. However, the challenge lies in mobilizing the necessary capital to realize this vision.

Next week, global leaders convene in Nairobi for the Africa Climate Summit and UNFCCC Africa Climate Week to chart a new path toward climate-positive growth. Green hydrogen, offering energy access and decarbonization solutions for Africa while driving global economic shifts in industries like heavy manufacturing, shipping, and aviation, emerges as a linchpin of this vision. By fully harnessing its role in the burgeoning hydrogen economy, Africa can address its energy poverty and propel development.

Africa boasts abundant renewable resources, including wind, solar, and hydro power, which are integral to a just energy transition, supplying millions with clean energy, and advancing sustainable development. These same renewables can power electrolyzers for green hydrogen production.

The urgency to integrate green hydrogen into African energy transitions, industrial strategies, and climate commitments cannot be overstated. Three crucial reasons underpin this urgency:

  1. Climate Mitigation: To avert climate catastrophe, we must replace fossil fuels with renewables. Africa’s renewable wealth can drive both its sustainable development and the world’s demand for clean fuels.
  2. Job Creation: Green hydrogen can generate over 4 million jobs by fostering its production and processing within Africa. It’s pivotal in the decarbonization of various sectors, including steel, petrochemicals, mobility, and agriculture. Africa, by becoming a green hydrogen production hub, can elevate its role in global green manufacturing supply chains.
  3. Economic Powerhouse: Realizing Africa’s green hydrogen potential aligns with Agenda 2063, positioning the continent as a goods exporter, not just a raw materials supplier. Production and export of green hydrogen across member countries of the Africa Green Hydrogen Alliance alone could create millions of jobs and substantially boost their GDP.
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However, realizing this potential hinges on securing significant funding. Africa currently has over 70 announced green hydrogen projects in need of financing to launch. Massive global green hydrogen incentives are attracting investments to these projects, but Africa’s projects require a cumulative investment of $900 billion by 2050. This amounts to approximately $6 billion annually until 2030, with more substantial investments needed in subsequent decades. Comparatively, this financial requirement pales in comparison to the $1 trillion spent on fossil fuel subsidies globally in 2022.

Mobilizing this capital necessitates innovative financing solutions from both public and private finance institutions. To attract low-cost capital and bridge the perceived investment risk gap (currently five times higher than in OECD countries), progressive policies are essential to create favorable investment conditions. Development finance institutions and commercial banks should incorporate green hydrogen into their green financing frameworks, offering incentives like differentiated loan interest rates. Examples of innovative financing, such as Namibia’s €1 billion “SDG Namibia One Fund” and the $1 billion “SA-H2” blended finance fund in South Africa, must be scaled up.

Internationally, demand for green hydrogen is growing. Europe, for instance, aims to produce 10 million tonnes of green hydrogen by 2030 and is considering importing it. Africa could benefit from such initiatives, such as the European Hydrogen Bank and Germany’s “H2Global” support scheme.

To accelerate progress, public and private finance institutions should commit to investing $6 billion annually in renewable energy and green hydrogen projects by 2030. The time for action is now, and these investments can be announced by COP28 in Dubai in November.

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Finance serves as the bridge to Africa’s cleaner, greener, and more prosperous future—a future accessible to all its citizens.

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