November 01, 2024
Economy

Namibia needs billions in investment to realise green hydrogen potential

November 15, 2022
Namibia needs billions in investment to realise green hydrogen potential

Namibia requires billions of dollars in investments to benefit from green hydrogen, a new report by global research firm McKinsey and the Africa Green Hydrogen Alliance (AGHA) has revealed.  

The study noted that members countries under the AGHA – Egypt, Kenya, Mauritania, Morocco, Namibia, and South Africa – would need to invest between N$7.7 trillion- N$15 trillion (US$450 billion to US$900 billion) in cumulative investment by 2050 to realise the grouping nations green hydrogen potential.

“This translates to about N$103 billion (US$6 billion) each year between now and 2030, about N$515 billion (US$30 billion) each year between 2030 and 2040, and about N$945 billion (US$55 billion) each year between 2040 and 2050, which is around 2% of the annual total required investment into energy,” read part of the report.

McKinsey added that realising these socioeconomic and environmental benefits would require substantial investment.

“Funding would likely need to be made available at the national level to develop critical infrastructure, and access to financing for private ventures would need to be facilitated. As much as 70% of the required investments could come from foreign direct investment. As hydrogen projects are capex intensive, cost of capital is a key determinant of the levelized cost of hydrogen and this competitiveness. Therefore, access to low-cost financing is a critical prerequisite. While sufficient capital exists globally to finance the hydrogen economy, matching this to bankable projects is proving difficult. Concerted action could be required by African stakeholders to create an enabling environment for these international capital flows to help unlock green hydrogen in Africa.”

Delivering AGHA’s green hydrogen ambition could, however, add up to N$2.2 trillion (US$126 billion) to Africa’s GDP and create around 4.2 million jobs by 2050.

“Overall, the recurrent benefits of operating new hydrogen and renewable energy infrastructure could support about 2 million jobs and generate up to US$76 billion per year in GDP contribution by 2050 in the Achieved Commitments scenario. This is equivalent to around 7 percent of the 2021 GDP of AGHA member countries,” the study said.

Namibia and South Africa are projected to tap into a 10–22 million tonnes per annum (Mt) of hydrogen equivalent export market, while Methanol and synthetic kerosene exports are likely to dominate from Southern Africa and could reach 13 Mt of hydrogen equivalent by 2050 according to the AGHA and McKinsey report.

This is against the Ministry of Mines and Energy targets of creating a green fuels industry with a production capacity of 10-12 million tonnes per annum (Mtpa) of hydrogen equivalent (H2) by 2050.

The study notes that AGHA member countries may also need to ensure that their respective workforces are sufficiently upskilled and able to fill the large number of skilled jobs that are likely to be created, while commending Namibia’s proactive approach by establishing the Green Hydrogen Research Institute, established by the University of Namibia.

“A thriving green hydrogen economy would not be possible without the relevant skills and innovation capacity to support it. Therefore, developing regional and international research and development partnerships to support the growth of hydrogen skills on the continent could be key. Stakeholders could invest in local upskilling initiatives; for example, Namibia established the Green Hydrogen Research Institute in October 2021 to act as a national hub for hydrogen R&D, helping upskill Namibians and develop local businesses.”

International cross-border trade for hydrogen and its derivatives is expected to reach 100–180 Mt by 2050 according to the study.

McKinsey and Company is among global consultancy firms that were hired by the Namibian government to draft the country’s green hydrogen strategy

The study findings come after President Hage Geingob on Monday noted that the realization of green hydrogen will take some time and thus the country will continue to prioritise the development of oil and diamond sectors to boost the country's revenues, despite Namibia’s push for green energy, particularly hydrogen.

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Last modified on Friday, 18 November 2022 04:53
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