Green Hydrogen’s potential to become a competitive energy vector

Exponential advances in technology and the demand for clean energy presents Namibia with an opportunity to become a global powerhouse and key player in the energy transition. Most nations around the world acknowledge the effects that carbon emissions have on climate change with the resulting catastrophic impact to the planet, if we fail to decarbonize human activity. As a result, 195 of the world’s nations have committed to decarbonization by signing the Paris Agreement.

While the advantages of harnessing renewable energy in the form of the sun and wind have been known for many decades, the world has relied primarily on coal, oil and gas for its energy sources, because these energy sources were cheaper than renewable energy sources.

Similarly, with the now emerging green hydrogen industry, questions arise time and again regarding the affordability thereof in comparison to your traditional energy sources, and concerns about who will bear the “green premium” associated therewith.

New wind and solar plants are being rolled out at a scale that a few years ago would have seemed impossible. Just in 2023 alone, almost 500GW of solar and wind energy was installed globally, which is more generation capacity than the entire nuclear energy industry’s combined generation capacity as of today of 460GW, with the world’s first nuclear generation facility being built 70 years ago.

This shift is as a result of the phenomenal advances in science and technology spanning not just in engineering, design, methods of manufacture but also the construction and operation of solar and wind technologies, coupled with similar advances in battery energy storage technologies. These technological advances have reduced the cost of renewable energy to a small fraction of what it was only two decades ago, now making these technologies cheaper than fossil fuels. It is these advances in technology that has offered the world a pathway to arrest climate change and has triggered the global energy transition.

The emerging green hydrogen industry is at a similar stage today as solar, wind and large-scale battery energy storage was two decades ago; with one key difference: we now have the benefit of hindsight. This hindsight allows us to see how rapidly technology can evolve, achieving cost parity with fossil fuels through industry scale-up and the support of well-designed policy interventions. Green hydrogen production costs are projected to fall significantly over the coming decade as the industry matures, reaching cost parity with fossil-fuel-based hydrogen as soon as the late 2020s.

Turning to Namibia, with some of the best solar and wind resources in the world, combined with large open spaces, a strong legal system, stable political environment and a young ambitious population - all the necessary enablers to produce renewable energy cheaply.

Throughout human history, it has been the availability of cheap energy that has driven economic development and prosperity – and as they say energy really does make the world go round. As the world is in desperate need of clean energy, it is these enablers which present Namibia with the opportunity to capitalize on the energy transition and set a path for enduring prosperity. Clearly, Namibia should capitalise on its natural resources and deploy as much solar and wind to meet domestic needs, to stimulate the local economy, create employment and to improve social welfare whilst expanding its economy by attracting new energy intensive industries. Namibia is also well placed to harness its renewable resources to produce green hydrogen, being mindful that to meet Namibia’s 2025 ambition of 15 million tons per year, would only require 1% of Namibia’s land area.

Today around 100 million tons per year of hydrogen is produced from fossil fuels with high carbon emissions, with such hydrogen being used in critical industries such as the production of fertilizers.

The question then becomes how best can Namibia develop this natural sustainable resource to maximise value for all Namibians? Should Namibia produce the green hydrogen and export the “fuel” or should it seek to add value to the fuel by utilizing it locally to produce higher value goods for domestic consumption and export. The good news is that hydrogen is not an easy molecule to transport over very long distance. Why is that good news? As the world decarbonises, it is inevitable that industries will choose to relocate closer to sources of clean energy, thus providing the pathway for Namibia to industrialize by having energy intensive industries establish themselves in Namibia.

For those industries which cannot be relocated, on the export side, approximately 35 million tons per annum of hydrogen is used today to produce around 200 million tons per annum of ammonia, the main input into fertilizer production. The handling and transportation of ammonia over long distances by ships, trains and trucks is very mature and cost effective therefore enabling Namibia to launch the sector first by ammonia exports, and once having demonstrated its ability to execute energy projects at scale, draw further industries to adopt this new energy vector.

As with most new technologies, it should be noted that the green hydrogen industry and developers are facing their challenges, which range from securing offtake to slow implementation of subsidy mechanisms to address the green premium associated with green hydrogen. Although challenges exist, governments around the world are aware of these challenges and more importantly remain committed to achieving their decarbonisation goals which requires a transition to green hydrogen for key sectors of their economies. In response to these challenges, the key markets of Europe, Japan and Korea are developing a range of policies and support measures to accelerate the development of this emerging sector. This is not dissimilar to the early challenges faced in the evolution of the wind, solar and battery technologies, where specific policies and subsidies interventions drove innovation to accelerate the maturation of the industry and reduce costs of the technologies.

So how cost competitive is green hydrogen production compared to other forms of hydrogen production? To answer this question, we need to look at actual large scale green hydrogen projects currently under construction as the best source of evidence. Although there are less than a handful of these projects which are in construction; contrary to speculation, these first mover projects are showing a pathway to cost parity with current fossil fuel hydrogen at a pace which matches that of solar and wind generation technologies. As with wind and solar, as these costs fall, so will the adoption of green hydrogen increase.

With these necessary enablers, supported by international offtake and decarbonisation measures required to accelerate the adoption of green hydrogen into the global energy mix to meet global net zero commitments, developers around the world are willing to invest their capital in Namibia to implement the needed green hydrogen projects. Namibia, therefore, is in a unique position to embrace this opportunity; and by providing the right support and policies, transform itself for the benefit of its people by embracing its competitive advantage in its world-class renewable energy resources and its young and ambitious population.

To learn more about NamGHA, please visit our website on https://namgha.org/