On 7 June, the Climate Parliament hosted a parliamentary roundtable on the potential of green hydrogen in the energy transition with Andris Piebalgs, Adviser to the President of Latvia, former Commissioner for Energy and for Development of the European Commission. This meeting was organised in collaboration with the United Nations Industrial Development Organization (UNIDO) and with the support of the European Commission (DG INTPA).
In order to decarbonise our economy, solar, wind and hydro power are our best prospects of producing clean, large-scale sustainable energy. However, electricity is not always a viable alternative to replace oil, kerosene and other fossil fuels, and in some sectors, such as industry and transport, hydrogen represents our best hope of transitioning to entirely clean synthetic fuels. Electric batteries would not allow us to power long-distance planes and ships, but hydrogen can. It is a clean gas which, when combusted, only produces water and energy. Unfortunately, it is a scarce resource in its gaseous form on Earth and must be produced. For hydrogen to be a real solution against climate change, it should be produced in a clean way, but if the global hydrogen industry were a country today, it would be among the top 10 carbon emitters in the world. Most of the hydrogen that we are producing is ‘grey hydrogen’ made from coal and gas. Green hydrogen, on the other hand, is produced by water electrolysis using renewable energy. It represents a real solution for the transition of economic and industrial sectors that are harder to decarbonise, as an alternative to replace polluting fuels with sustainable fuels and make our energy system greener.
Green hydrogen is not only a solution for climate change, it is also an immense economic opportunity. Hydrogen has many industrial applications, it is used to produce fertiliser, for refining, as well as for steelmaking. Green hydrogen could largely replace coal in steelmaking and gas in the production of ammonia. With the ongoing war in Ukraine, gas prices are skyrocketing, supply routes are being destroyed, and many countries are not able to afford fertilisers anymore. Because of this, several African countries are already facing a serious threat of agricultural production shortages and food insecurity. Africa enjoys the best solar radiation in the world, it also has a high potential for hydropower, and for windpower on its Western coastline. As Mr Piebalgs explained, in his country, Latvia, green hydrogen could be produced at a rough cost of $4 per kilogram. In Africa, thanks to the abundance of renewable energy, the price could be as low as $1.5 per kilo. Industrialisation has been on the development agenda in Africa for more than 50 years, but most countries are still struggling to have a viable industry and too many manufactured goods still need to be imported from abroad at a high price. This dependency is a structural challenge that a green hydrogen industry could partly solve. Compared to the other continents, Africa would have an incredible competitive advantage in the production of green hydrogen and could become a major player in the green steel and green fertiliser industries, for domestic consumption and export. The argument of climate change aside, it offers great prospects in terms of job creations, economic and trade opportunities and industrial competitiveness.
The MPs mentioned a number of barriers that can slow down the development of a green hydrogen economy in Africa, the main one being the access to finance. Investors believe that a higher risk means money should cost more, and in Africa, the cost of capital is very high. Green hydrogen requires substantial upfront investment, both for renewable energy generation and for hydrogen production through electrolysers and water desalination equipment. Development agencies and governments can provide public funds as seed capital, but only the private sector could finance the green transition at the speed and scale required. More than a hundred trillion dollars are available in the bond market, and it is essential to be able to attract this capital into green infrastructure projects. Our experts encouraged the MPs to work with their governments on legislation and regulatory frameworks favourable for investment, and on guarantees and de-risking mechanisms to persuade project developers that investing in Africa is safe and provides good returns on capital. Parliamentarians can also push for their governments to provide a clear national strategy on green hydrogen and show serious commitment to following it. These plans should take into consideration the limitations faced by each country, such as access to water, land issues, and identify solutions to overcome them. Another major barrier is linked to the fact that during the electrolysis process, part of the energy is lost. In places where people still do not have access to electricity, in countries where the energy supply per capita is low, additional investment for electricity generation is required to meet the people’s energy demand and the demand from the industrial sector. Having a strong strategy on the development of green hydrogen can provide an extra incentive to accelerate the development of renewable energy capacity.