Egypt reveals ambitious hydrogen strategy

• Cost likely to be $60bn
• Research warns of lack of buyers
• Aim is to add $18bn to GDP

Egypt’s newly launched hydrogen energy strategy will require the investment of around $60 billion over the coming decades to achieve its ambitious targets.

However, research by Bloomberg this week highlighted the fact that the majority of existing hydrogen plants around the world have failed to attract sufficient buyers for their output.

On Thursday Egypt launched its National Low-Carbon Hydrogen Strategy, which has set a target to capture between 5 and 8 percent of the global tradeable hydrogen market by 2040, which would increase the country’s GDP by between $10 billion and $18 billion.

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A report prepared by the London-based consultancy Advisian, with financing from the European Bank for Reconstruction and Development, suggested that Egypt will need $60 billion of investment to maintain full market implementation by the 2040s.

It also predicted that a thriving low-carbon hydrogen sector could create 100,000 jobs for Egyptian workers.

The report predicts Egypt will produce 5.6 million tonnes of hydrogen a year by 2040, more than 10 times current global output.

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While most of this will be intended for export, Egypt’s strategy involves the country holding back between 35 and 39 percent of low-carbon hydrogen for domestic use.

This will shore up energy security and contribute to its nationally determined contributions, part of the climate action plan that countries submit to the United Nations Framework Convention on Climate Change secretariat every five years.

In June the Egyptian electricity minister said that the country hopes to source 58 percent of its electricity generation from renewable sources, up from current rates of around 12 percent. The expansion of renewable hydrogen is at the centre of this plan.

Egypt is one of a number of countries across the world hoping to become a global leader in low-carbon hydrogen production. Its proximity to the European Union, which has said it wants to import 10 million tonnes of renewable hydrogen by 2030, and its extensive solar and wind resources add to its competitiveness.

In July Egypt signed a deal to provide Germany with at least 259,000 tonnes of green ammonia by 2033.

But the biggest challenge for the sector is attracting enough buyers. Across Europe, the Middle East and Africa nine out of 10 low-carbon projects are being developed without a clear idea who they will be selling to. 

Novel energy sources such as renewable hydrogen require large investments in transmission and logistics infrastructure that could put off potential consumers. Global uncertainty over hydrogen buyers is reportedly becoming an increasing concern for investors. 

“No sane project developer is going to start producing hydrogen without having a buyer for it,” said Bloomberg NEF analyst Martin Tengler.

“And no sane banker is going to lend money to a project developer without reasonable confidence that someone’s going to buy the hydrogen.”

The hydrogen rainbow

• Green hydrogen is produced on a carbon-neutral basis through water electrolysis. 
• Turquoise hydrogen is created when natural gas is broken down into hydrogen and solid carbon with the help of methane pyrolysis.
• Blue hydrogen is generated from the steam reduction of natural gas. 
• Grey hydrogen is obtained by steam reforming fossil fuels such as natural gas or coal. 
• Sometimes other colours are ascribed to hydrogen, based on how it is produced. For red, pink and violet hydrogen, the electrolysers are driven by nuclear power. 
• Yellow hydrogen is hydrogen produced from a mixture of renewable energies and fossil fuels. 
• White hydrogen is a waste product of other chemical processes, while the use of coal as a fuel produces brown hydrogen.