Africa, rich in natural resources, is positioning itself as a key player in green hydrogen production. This emerging market offers significant opportunities to meet both internal energy needs and global demand. However, this potential can only be fully realized by overcoming major challenges related to infrastructure, production costs, and financing.
Major economic opportunity
Africa has ideal conditions for developing the green hydrogen industry. Its vast lands allow the harnessing of renewable energy sources such as wind and solar, with capacity factors reaching 69 % and 25 %, respectively. Additionally, geothermal and hydroelectric resources further enhance this potential, creating a favorable environment for renewable hydrogen production.
Growing demand in global markets
Europe and parts of Asia, in search of solutions to reduce their carbon emissions, are turning to green hydrogen. By 2050, global demand is expected to grow exponentially. Africa, with its renewable resources, could capture up to 15 % of the global market. This scenario would see green hydrogen production increase from 1 million tons per year (Mtpa) in 2030 to 11 Mtpa by 2050.
Key customers would include the industrial, transport, and energy sectors, all seeking alternatives to fossil fuels. Additionally, fueling ships with hydrogen-derived fuels could represent another 2 Mtpa, further cementing Africa’s importance in the global market.
Job-creating industry
Green hydrogen production isn’t just about exports. Harnessing this resource will also create millions of jobs. By 2050, the hydrogen industry could generate approximately 13 million years of work, especially in the construction and operation of hydrogen production and renewable energy sites.
South Africa, for instance, could reap significant economic benefits from this industry. The hydrogen sector could account for 3.6 % of its GDP by 2050, creating 370,000 jobs. Other African countries could follow this path, fostering sustainable and inclusive growth.
Despite these promising prospects, several obstacles hinder the development of green hydrogen in Africa. Production costs remain higher than in other regions, such as the Middle East and Australia. This difference is largely due to insufficient infrastructure and higher financing costs. These constraints increase the price of African hydrogen, making it less competitive on the global market.
According to the report “ The Africa Hydrogen Opportunity ” by the Hydrogen Council and co-authored by McKinsey, over 50 billion USD in investments are planned by 2030. However, only 5 % of African hydrogen projects are at the advanced technical design stage, compared to 20 % globally. Moreover, the final investment decision (FID) has only been made for 1 % of African projects, compared to 7 % globally. This delay in project maturity, coupled with the risks posed by local political and economic conditions, discourages some investors.
Solutions to reduce costs
The main challenge remains reducing production costs to make Africa a major player in the green hydrogen sector. High financing costs continue to be a significant barrier to the development of this industry. Projects in Africa require an additional 400 billion USD to reach maturity. Hydrogen exports could generate up to 15 billion USD annually by 2050, but this will require a solid legal framework and competitive financing conditions to compete with regions like the Middle East.
An effective approach would involve establishing public-private partnerships and improving the regulatory framework. Initiatives such as long-term purchase agreements and shared infrastructure could help reduce investment costs. Using insurance to cover political risks and mobilizing concessional financing would boost investor confidence. The development of hydrogen will also depend on cooperation between local and international players.
