Lack of legal framework threatens green hydrogen projects

Namibia’s ambitious green hydrogen projects are facing a significant hurdle as new research reveals they are currently being rolled out in a regulatory vacuum.

This research has been compiled by Oliver Ruppel from Stellenbosch University, and Magano Katoole, a senior legislative drafter at the Ministry of Justice.

Supported by the Hanns Seidel Foundation, the research highlights the insufficient legal and regulatory framework regulating Namibia’s emerging green hydrogen industry.

It warns that the capital costs and technological complexities associated with green hydrogen production require a supportive legal environment to foster investment security.

“Namibia must therefore urgently create a legal and regulatory framework that evokes reasonableness, equity and non-discrimination, while taking steps to ensure that in the enforcement of its laws, any negative impact on investment in green hydrogen is mitigated,” the researchers say.

Namibia’s existing renewable energy policies, according to the research, fall short in providing the necessary fiscal instruments to incentivise the adoption of green hydrogen among the general populace.

The research also warns that this gap in the regulatory framework also hampers the potential growth of the industry.

“Understandably, investment security can only be assured when there are appropriate enabling laws. However. To secure the necessary funding, investors need a fair measure of legal certainty, which would help to safeguard their investments,” the researchers say.
As hydrogen is an explosive and flammable gas, it adds to the risk of production, storage and transport.

“For optimal protection of Namibia’s environment, hydrogen needs to meet strict regulatory requirements, including being subject to impact assessment and classified installations,” the researchers say.

They are calling for a sound legal and political framework, which should also incorporate technical and customs regulations and transmission fees.

“This is a multisectoral initiative that should accompany a proper planning exercise for green hydrogen development in Namibia, the ultimate objective of which is to overcome regulatory gaps and uncertainties, which can be powerful deterrents to investors,” they say.

According to minister of justice Yvonne Dausab, the government has a time frame of 24 months to address regulatory shortcomings.
Dausab, speaking at the launch of the research paper, emphasised the importance of a comprehensive legal and regulatory framework to enable the implementation of a green economy.

She said green hydrogen cuts across many aspects of legislation, including the tax regime, environmental permitting, health and safety, urban and regional planning, the energy sector and education.

Dausab said laws such as the Water Resources Management Act of 2004, the Water Resources Management Act of 2013, the energy regulatory authority bill of 2019, the new equitable economic empowerment bill of 2016, the Standards Act of 2005 and the Electricity Act of 2007 may have to be revisited.

“As a government, we must also commit to providing some policy and legal certainty as we continue on this journey,” she said.

Meanwhile, Hyphen Hydrogen Energy’s chief executive, Marco Raffinetti, yesterday at a separate event said the green hydrogen and derivatives industry has the potential to dominate the Namibian industrial landscape.

However, Raffinetti said while Namibia holds a competitive advantage in natural resources, geopolitical stability and democratic values, it lacks the financial resources to kick-start the industry and would be reliant on foreign direct investment. He said Namibia has a relatively high cost of capital.

This, he said, can be offset to some extent by superior renewable resources, but driving down the cost of capital remains a top priority.

“To benefit first movers, the government is incentivised to keep charges as low as possible,” Raffinetti said.