The economics of green hydrogen are challenging today, primarily because the underlying costs, skill, knowledge and availability of renewable energy sources vary widely.
It has been estimated that, hydrogen demand by 2050 could vary from 150 to 500 million metric tonnes per year, depending on global climate ambitions and the development of sector-specific activities, energy-efficiency measures, direct electrification and the use of carbon capture technologies. The most important development at Cop26 was that countries agreed to focus on the tougher 1.5C aspirational goal of the Paris Agreement, acknowledging that the 2C target would allow massive devastation to take place. Research conducted since the Paris Agreement was signed has shown a temperature rise of 2C above pre-industrial levels would cause changes to the climate system that would be, in many cases, catastrophic, and some of them would be irreversible, so switching the focus to a 1.5C goal represents vital progress. So at Cop27, there will be far more emphasis on climate finance, adaptation and loss and damage, issues of vital importance to developing countries. That leaves a lot remaining to be done at Cop27, and the signs are not good so far. Only 24 countries have updated their nationally determined contributions (NDCs) between Cop26 and Cop27. The energy crisis and economic woes of the past year could even make Cop27 a turning point towards clean energy and a low-carbon.
Furthermore, it is vital that Namibia’s transmission infrastructure be strengthened and bolstered, as the country pursues new renewable energy technologies and these are added into the mix, and as NAMPOWER undertakes its unbundling. Namibia has a range of supporting and enabling policy that can help steer the way to a green hydrogen economy. Namibia is on course to develop a green and blue economy as articulated under the national documents such as NDP’s and HPP2. For Namibia, climate change is as much an economic question as it is an environmental, or existential one. A key consideration for policymakers is what a circular economy looks like for Namibia. As the country braces for a low carbon future, it needs to pool adequate investments towards renewables, to scale up the universal access of clean electricity to avert climate disasters. The early November 2022, Namibia launched Green Hydrogen Council as well as green hydrogen strategy, which supports the country’s commitment to the Paris Agreement on climate change, with the ultimate goal of reducing emissions to net zero by 2050.This is a good move.
Financing Hydrogen Revolution
Namibia secures 540 million euros ($544 million) in climate finance from the Dutch government and the European Investment at just ended COP27. The COP27 serves as an opportunity for African leaders to voice their unique needs in the climate crisis. This new fund is premised on the principles of an innovative blended finance platform to facilitate and accelerate the development of a green hydrogen sector and economy in Namibia. The Dutch grant comes from infrastructure funding vehicle Invest International, while the European Investment Bank facility will be used to build green hydrogen and renewable energy projects in Namibia. According to Andrew Johnstone, CEO Climate Fund Managers: “We’re about to lose the battle against climate change. We believe that green hydrogen is the energy transition pathway and the solution.” Namibia has world class conditions for generating renewable electricity through solar and wind power, which are key drivers to reduce the production cost of green hydrogen. To exploit and benefit from this potential, the Namibian Government has high ambitions for both building large scale solar and wind farms and producing green energy carriers and raw materials.
Therefore, the Namibian Government commissioned Climate Fund Managers and Invest International to set up a dedicated fund to channel all renewable hydrogen financing in Namibia on behalf of the government. Furthermore, Joost Oorthuizen, CEO Invest International asserted that, “With this fund we want to empower the Namibian government to take control of this unique opportunity. It will help the government in their key role to make strategic decisions about investing in projects that strengthen the local green transition. In that way it contributes to the development of the country in terms of economic growth, creation of jobs and local use of green hydrogen.” His Excellency, Dr. Hage Gottfried Geingob, President of the Republic of Namibia, thank you for promoting our country. You tackled the looming crisis of climate change and degradation of our environment. You are a great man with integrity, values and abilities our country needs. My fellow citizens there are a lot of things that divide us, but one thing that unites us, or should unite us, is that we want to see our country succeed in a green hydrogen economy. We want it to stay great and become even better. It is clear that there is an ideological and political impetus for establishing hydrogen as a key component of the energy mix as part of the movement towards a carbon neutral environment.
Moreover, we should acknowledge what is already being achieved in our country and take a pragmatic and realistic view of what can feasibly be achieved in the short, medium and long term. The road toward a green hydrogen economy will not be an easy one as future demand and the structure of the market remain uncertain. To reach net zero emissions will require significant investment in current and new clean technologies, and away from fossil fuels. Against this background, to realize the true potential of hydrogen locally and to capture the benefits, policy support mechanisms are essential for the penetration of green hydrogen into multiple sectors and encourage sector coupling. I view green hydrogen as the path forward to full decarburization in a way that is reliable. It is important to note that green hydrogen can create more space for renewables by driving electrolysis with energy that would otherwise be curtailed. It is my belief that a green economy can only be achieved through the commitment and actions of multiple sectors and stakeholders in society including government, business and individuals. Decisions at these levels have the potential to transform local and regional economies, while having a pronounced impact on the way in which communities and individuals within society live. In addition a range of enabling conditions, strategic priorities and policy reforms will be required for the redirection of investments and the reconfiguration of infrastructure to support a green hydrogen economy.
In conclusion, with the right support and investment, Namibia will, given time, achieve its own energy transition. A new economic development path is urgently needed.
Therefore, the transition to a green economy will require the adoption of a new economic model and different approach to development, with the reconfiguration of investments. Improved governance with robust policy signals, and regulatory drivers that reinforce the need for the economic system. It is evident that Namibian policymakers need to support a far higher allocation of renewable energy power generation development.
Continued investment by both government and the private sector will have a significant positive impact on Namibia’s green hydrogen energy future, provided that the water is allocated and used in a responsible manner and the relevant policy and regulatory framework is created to support this technology.