Egypt is experiencing green hydrogen headwinds – a breakthrough is needed

The large-scale renewable energy and green hydrogen sector in Egypt is struggling to take off, just as is the case in many other parts of the world. Fewer than five projects have moved beyond feasibility. Ambition is not the problem. Cairo has made hydrogen central to its industrial vision. The policies appear generous: up to fifty-five percent tax rebates, a Golden License regime that promises single-window approvals, and more than thirty memoranda of understanding signed with international developers. Egypt is not short of ambition or partners. 

The challenge is turning those promises into projects. Billions of dollars in potential investment are piled high on paper. Developers speak openly of deal fatigue. Financiers warn that terms are unbankable. Policymakers point to the new incentive laws, yet progress towards financial investment decisions is dragging on. 

The three challenges 

1. Lack of global demand  

Our readers are acutely aware of the global lack of customers, demand for green hydrogen and its derivatives. This is clearly having an impact also on projects in Egypt, although it is not the only challenge developers in Egypt experience. Globally, only 4% of renewable hydrogen and ammonia projects have have reached FID or are under construction. Of those, BloombergNEF data show just 13% are backed by binding offtake contracts. And some of the early price information suggests aggressive pricing, with references to USD 600 per tonne for ammonia being shipped from China.  

2.The cost of capital. 

The second challenge is the cost of capital. Developers in Egypt face borrowing rates of 16–18 %. In OECD markets, the figure is 4–6 %. Even with solar and wind among the cheapest in the world, as low as 2 US cents per kilowatt-hour, debt service erodes competitiveness. There is talk of concessional tranches and blended facilities. Developers say that what is available is not sufficient to make projects work. 

Throughout the roundtable the Green Hydrogen Organisation co-hosted at the British Embassy back in July one message was clear: the cost of capital needs to come down with a battery of innovative finance solutions. The availability of concessional finance is limited, there is also a need for e.g., first-loss guarantees, contracts-for-difference and various forms of climate finance solutions to further bring down the cost of capital. Developers underlined how even relatively small projects, such as a 100MW electrolyser, require years of coordination, legal work, and capital structuring.  

3.The grid, shared infrastructure  

The third challenge is the grid in Egypt and the reliance on shared infrastructure. A USD 5-6 billion transmission upgrade remains on paper. Wheeling charges are opaque. Developers have little clarity on transmission rights or dedicated corridors. Without this, even a 100MW electrolyser project is taking years to negotiate. 

Although the land allocated for renewables has risen from 5000 to more than 41,000 square kms in recent years and now enough for 180GW, the grid can reportedly only handle 36 GW. Storage is capped at 60 gigawatt-hours. A new transmission company and a green corridor are proposed, but timelines remain uncertain and frameworks incomplete. 

Who pays for desalination, pipelines, and storage? How grid access will be priced? How quickly will a transmission upgrade move from paper to construction? These are the questions developers and financiers will press in Cairo this September. 

This reliance on shared infrastructure, complex project negotiations result in delays and additional costs. This contrasts with a number of projects in China and India which have been developed by companies with a high degree of vertical integration. Envision, for example, produces the wind turbines and electrolysers they now use to produce the hydrogen and then ammonia destined for export from China.  

The Suez Canal Economic Zone 

Egypt does have real strengths. Land is plentiful, the solar and wind factors are good, and it is superbly located to serve strategic industries and global markets. The Suez Canal Economic Zone anchors more than half of the country’s planned hydrogen project pipelines at the crossroads of twelve percent of global trade. The Zones involvement in a €397 million H2Global contract to supply renewable ammonia to Europe until 2033 shows that progress can be made. 

There is also a need to carefully consider how the stronger projects slowly making their way towards financial investment decisions contribute to the local economy. Karim Shahin from the Prime Minister’s Office has put it neatly: Egypt must stop being just a host and start being a co-architect of its green industrial future. Today, more than 95% percent of hydrogen production plans are geared for export. That leaves fertiliser production, food security and domestic industry on the side-lines. It is a missed opportunity, and one Egypt cannot afford. From the outset, efforts need to be made to make sure that even projects mainly aimed at export are integrated in the local economy.  

The regional lens 

The regional picture sharpens the stakes. Morocco’s “Offer” approved six projects worth USD 32 billion this year, bundling land, permits and grid access into a bankable package. Mauritania passed a Green Hydrogen Code and allocated vast tracts of land. Algeria is anchoring projects through Sonatrach, and many MoUs have been signed in Tunisia. Saudi Arabia’s NEOM project closed at 8.4 billion dollars in 2023 and is already 80% built. 

All the while, India’s August auction delivered green ammonia at INR 52-55 per kilogram, about USD 600 per tonne, under ten-year contracts. China controls forty percent of global electrolyser manufacturing. Both countries are already shipping products. They are not waiting.