The Africa hydrogen opportunity for a just transition

BRUSSELS, March 26, 2024 – Developing renewable hydrogen production in Africa would allow African nations to meet domestic electricity needs while becoming a major exporter to supply growing global demand, a new report released today by the Hydrogen Council finds.

The Africa Hydrogen Opportunity, co-authored by McKinsey & Company, highlights that Africa is exceptionally well-positioned to produce renewable hydrogen and derivatives thanks to its world-class solar, wind, geothermal and hydropower resources.

Cost-effective renewable hydrogen production could accelerate deployment of renewable power for domestic use across the continent supporting industrial development and just transition. At the same time, scaling up renewable hydrogen export industries in African countries could capture a significant share of the expected global market, mobilizing cumulative investment of $400 billion.

The hydrogen industry can create some 13 million job-years for African countries by mid-century. In South Africa alone, the hydrogen economy could add 3.6% to South Africa’s GDP by 2050 and create over 370,000 jobs, as highlighted by the Ministry of Science and Innovation of South Africa at the Hydrogen Council’s recent meeting in Johannesburg. Global hydrogen leaders and decision-makers from the region gathered to advance solutions for accelerating hydrogen economy in the region.

Yoshinori Kanehana, Chairman of the Board of Kawasaki Heavy Industries, Ltd. and Co-Chair of the Hydrogen Council, said: “Many African regions still lack access to reliable power supply. Developing renewable energy alongside robust infrastructure is crucial as it unlocks Africa’s immense potential to produce cost-competitive renewable hydrogen. With a solid renewable power and infrastructure base, Africa could provide reliable domestic clean power supply while leveraging its resources to become a promising exporter of renewable hydrogen for global decarbonization.”

However, the report finds higher financing costs alongside infrastructure and skilled labour availability are currently an obstacle in Africa compared to other regions, making the expected hydrogen production cost of African countries higher than those in the Middle East and Australia. Stakeholders could consider taking one or multiple of several actions to reduce cost of financing, leading to increased chance of project success. There is an opportunity for stakeholders to realize Africa’s hydrogen potential for people and planet.

Sanjiv Lamba, CEO of Linde and Co-Chair of the Hydrogen Council, said: “Unlocking Africa’s renewable hydrogen potential will require coordinated efforts across public and private sectors. By working together to create a supportive economic and legal framework that helps mitigate risk and enables investment, we can realize the economic benefits while accelerating the energy transition worldwide.”

Fleetwood Grobler, President and CEO of Sasol, said: “Developing a hydrogen economy is an opportunity for a just transition in Africa that ensures nobody is left behind – one that drives sustainable economic growth, creates millions of new jobs, increases access to affordable clean energy. With the right investments and public-private collaboration, African nations can leverage their world-class renewable resources to meet domestic needs and become exporters, all while ensuring communities see the benefits through workforce development, value-added industries and energy security”.