Green hydrogen could sustainably industrialise Africa and boost GDP by 6 to 12% in six key countries - new report

Analysis identifies commercial opportunity, job creation, top export markets, and investment needs for Egypt, Kenya, Mauritania, Morocco, Namibia, and South Africa.

• With global demand for hydrogen projected to rise sevenfold by 2050, new analysis from the Africa Green Hydrogen Alliance - and analytical support from McKinsey - quantifies opportunity for the 6 current member countries of the Alliance (Egypt, Kenya, Mauritania, Morocco, Namibia, and South Africa). 
• By 2050, green hydrogen could increase the GDP of the six countries by $126bn, which is equivalent to 12% of these countries’ current GDP.
• High potential in wind and solar energy means that these countries could produce green hydrogen and related products such as ammonia in a competitive fashion, both meeting domestic demand for hard to abate applications like heavy industry and off-road transport, in addition to growing market exports.
• European Union, Japan, and South Korea identified as priority export markets – reflecting existing infrastructure and high level of demand from existing manufacturing centres not able to fulfil all their clean hydrogen needs. 
• Investment of $450-$900 billion needed between now and 2050.
• The Africa Green Hydrogen Alliance, with support from the UN Climate Change High-Level Champions, the Green Hydrogen Organisation and the African Development Bank, calls for greater cooperation between governments and the private sector to unlock the investment needed.

UN Climate Change High-Level Champion Nigel Topping said: “This study confirms that Africa stands to become a leader in the global green hydrogen arena. By investing in green hydrogen, the frontrunner countries in the Africa Green Hydrogen Alliance can create millions of jobs and unlock a roaring economic engine. It's key that the deployment of green hydrogen aims to maximise benefits to local communities and spur the creation of new green industries such as green steel and fertiliser. For this the private sector and financing community should step up and unlock investments, while meaningfully engaging local communities to craft an overwhelmingly positive story for Africa and the climate.” 

Jonas Monberg, CEO of the Green Hydrogen Organisation (part of the Secretariat for the Alliance) said, “This report provides a unique insight into the potential of harnessing the sun and wind in six African countries to build green hydrogen economies, producing fertilisers and steel, exporting energy and having more of it at home. For the climate and for the development of these countries, we should urgently mobilise the USD 450-900 billion it will cost to realise this potential.”

Wale Shonibare, Director for Energy Financial Solutions, Policy and Regulation, the African Development Bank said: “Green Hydrogen offers Africa the opportunity to play a key role in driving the world's transition to net-zero emissions. Working with AGHA countries the African Development Bank is mobilising technical assistance and innovative financing to bring transformative green hydrogen and ammonia projects to fruition to serve domestic and export markets.” 

Eric Mwangi, Economic Advisor to the Cabinet Minister, Ministry of Energy of Kenya said "This week, The President Dr. William Ruto announced a partnership with FFI to develop 300MW of green ammonia. This is just the beginning! We can play a leading role in addressing climate change, while also safeguarding food and energy security for all Kenyans. This project highlights the potential.”

Frans Kalenga, Technical Advisor to the Minister of Mines and Energy of Namibia said: “Namibia is perfectly positioned to produce  low cost green hydrogen and ammonia for domestic and international markets. The African Green Hydrogen Alliance provides a platform for us to collaborate with neighboring countries. AGHA’s report reaffirms the potential, and provides important recommendations on how we can work together to unlock the extraordinary potential.”

Masopha Moshoeshoe, Green Economy Specialist in the Investment and Infrastructure Office in the Presidency of South Africa said: “Given the significant economic and social impacts of the nascent green hydrogen sector, it has been identified in the draft South African Country Investment Strategy as one of the Big 5 frontiers for investment attraction. Green hydrogen has the potential to marry South Africa’s significant mineral endowment with its significant renewable energy endowment to drive first stage beneficiation of green products in the country and to be a vector for reindustrialisation. The Africa Green Hydrogen Alliance provides the opportunity for regional and continental collaboration by major potential suppliers of green hydrogen.” 

Lehbib Khroumbaly, Advisor of Mauritania minister of Petroleum Mines and Energy, said: “This report indicates that the potential of our countries is huge in the new energy system. The energy vision of Mauritania is in line with this analysis, our country is endowed with world-class wind and solar resources, wide space and strategic geographical position which allows us to produce competitive green hydrogen for international markets but also for the local market especially for transforming our iron ore industry and creating value, especially the production of green steel. It's a great opportunity for the local economy and for decarbonization of the international economy.  Regional and international cooperation will be a key enabler for this new sector."

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As countries and heavy industry decarbonise, demand for green hydrogen is growing rapidly. To help capture Africa’s share of this growing market, a major new report sets out more granular detail on the nature of the opportunity, the investment need, and the barriers to overcome. Published by the Africa Green Hydrogen Alliance (AGHA, a group of six countries with high production potential), the UN Climate Change High-Level Champions and the Green Hydrogen Organisation, with analytical support from McKinsey, the report is a wake up call to investors and policymakers to help unlock the opportunity.

Overall, the analysis finds that if governments globally deliver on their existing commitments to reduce emissions, demand for hydrogen (hydrogen produced using renewable energy) will grow sevenfold from today’s levels to 607 Mt by 2050.

Based on the solar and wind power potential of countries in Africa, the analysis finds that many African countries – particularly in the north and south of the continent - are well positioned to produce low-cost green hydrogen. With energy costs making up more than 60% of hydrogen production costs, bountiful low-cost renewable energy is a large competitive advantage. The production costs of green hydrogen in Africa could drop by around 50% between 2025-2050, as the cost of energy falls and the supply chain scales up.

This cost-competitiveness could allow the six countries to meet the entirety of their own demand for green hydrogen and related-products needed for heavy industry and segments of transport, estimated at 10-18 Mt by 2050. This would include uses such as the use of green hydrogen as a replacement fuel for coal in steel making, or the production of ‘green ammonia’ used to make fertiliser.

There is also a potentially significant export opportunity, as key industrial centres in the European Union, Japan, South Korea, and Southeast Asia will have large demands for green hydrogen if they are to meet their decarbonisation targets – but due to geographical constraints, will be unable to produce low-cost green hydrogen from renewables. Given their natural resources, the six member countries of the Alliance could collectively supply more than one-fifth of the world’s demand for green hydrogen by 2050. 

Production of green hydrogen for domestic consumption and export in the six countries could create up  to 4.2m new jobs and an increase lead to a $66- $126bn increase in these countries GDP by 205, equivalent to 6-12% of their current GDP. 

If the production potential of these six countries is achieved, it could help abate around 6.5 G of cumulative CO2 emissions globally by 2050, roughly equivalent to the combined CO2 emissions in the United States and Europe in 2021.

To capture this market, the six countries would need to rapidly expand their renewable energy capacity, as well the capacity of electrolysers to convert water into hydrogen. This includes by 2030:

• Approx. 29-56 gigawatts (GW) additional electrolyzer capacity. This is up to 17% of the total global green hydrogen capacity we may need by 2030 to align with limiting global warming to 1.5°C. 
• Approx. 51-96 GW of dedicated renewable energy capacity. 

The analysis finds that ~$3bn-$6bn in investment needed annually between now and 2026, rising to ~$28bn-$45bn annually between 2040 and 2050. The total cumulative investment needed is between $450bn-$900bn. The vast majority of the investment (~70%) required is for the renewable energy and electrolyser capacity needed.

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