Green Hydrogen: The Cost of An ‘Entertaining’ Analysis

Global warming and climate change are not only the concern of a few lobbyists but are a serious threat to humanity’s livelihood, recognised by 196 countries, including Namibia.

It is therefore regrettable to see an article by economist Rowland Brown downplaying the impact of this crisis on Namibians, suggesting it may be a lobby-driven hoax to push for renewable energy investments.

It is the Namibian government’s responsibility to consider and deal with the effects of climate change and its debilitating impact on our citizens as well as the broader global community.

I write this piece from Hamburg, where Namibia and Germany have just returned from New York having led the world on a precarious pathway in establishing a new ‘Pact for the Future’.

A redesigned multilateralism partnership with climate change, equitable distribution of resources, and more sustainable consumption of our natural resources are at the core of this new endeavour, which is set to replace the United Nations Sustainable Development Goals (SDGs) by 2030.

However, it is incumbent on us as public servants to provide some basic tenets on how our government has pursued social-economic transformation as it relates to green industrialisation with green hydrogen as a key catalyst.

THE ROLE OF THE PRIVATE SECTOR

From the onset, the government has emphasised that a private sector-led economic recovery is key.

Green hydrogen was not labelled as the only game in town to help Namibia emerge from the debilitating pandemic, but rather as one of the key strategic bets in the 2nd Harambee Prosperity Plan – together with Namibia’s emerging oil and gas industry and opportunities in the mining sector.

Namibia is home to several critical raw materials required in the energy transition.

A relatively small investment in time and cost, predominantly financed by donor funding, in exploring the economic viability of this opportunity may have an outsized and asymmetric payoff.

Rowland Brown has touted the opportunity as “pie in the sky” and a 2030 phenomenon that would not impact Namibia.

Three years on, Namibia has raised more than N$2,2 billion in grant funding, established multiple green hydrogen pilot projects, and has found Namibia elevated to the forefront of global research and development efforts with various Namibians pursuing postgraduate and doctoral studies in this field.

Not in 2030 but in 2024.

A ‘PRISTINE AND UNTOUCHED AREA’

An argument raised by Dr Chris Brown of the Namibia Chamber of Environment (NCE), and echoed by Rowland Brown, is that the Tsau //Khaeb is a pristine and untouched national park whose biodiversity ecosystem would be destroyed beyond repair through the establishment of green hydrogen projects.

Dr Brown has previously stated that he thought the green hydrogen projects would affect 40% of the park.

According to Hyphen Hydrogen Energy (a company formed to develop green hydrogen projects in Namibia), the project will, at most, have a 0.07% footprint and aims to reduce this further, with more than 90% of this impact in the least environmentally sensitive areas of the park.

Tsau //Khaeb is a multi-use park and as such has been the economic backbone of the Namibian economy since the early 1900s.

Excavating billions of tons of earth was required to mine diamonds in the same park, a process that has been crucial to the Namibian economy.

Today, more than 0.76% of the park has supported mining activities for diamonds and currently supports mining prospecting licences for various minerals such as rare earth elements, to name but a few.

Despite these activities, the ecosystem of the park has not been destroyed.

Further, in 2017 parliament passed an amendment to the Nature Conservation Ordinance, which stipulates that the minister (responsible for environment) may “establish a renewable electricity source (in the park) for the purposes of the … protection of the environment or the combating of climate change”.

The intention has always been to strike a delicate balance between conservation and socio-economic development, as is true for any project.

It is also paradoxical to me that both Browns have received funding from the hydrocarbon sector.

Also, both Dr Brown and Mr Brown have lobbied for establishing oil and gas assets in the same park, some of which, like Kudu gas, may increase the emissions of the entire Namibian energy sector more than 15 times, an estimate published by Cirrus Capital, Rowland Brown’s research firm.

PROJECTS IN THE PIPELINE

To claim that an estimated 0.07% footprint in the park – proposed to be developed to the highest international environmental standards, with care taken to locate development in areas of least environmental significance, a luxury mining companies do not have – will cause irreversible damage to a 22 000 square kilometre area, more than twice the size of Qatar, has yet to be subjected to the ‘true/false’ test.

The government takes any impact on our nation’s biodiversity seriously, and has commissioned a Strategic Environmental and Social Assessment (Sesa) to gather facts on potential developments within the park.

This study is not solely for green hydrogen developments but also for projects supporting the emerging oil and gas industry: The five permitted wind projects, the proposed gas-to-power plant, and the expansion of Lüderitz, which will need to grow to accommodate these new industries.

The Sesa study will help the the government evaluate the potential impacts on the natural environment and corresponding social effects.

ECONOMIC VIABILITY

Rowland Brown urged the government not to subsidise what he terms perpetual loss-making green hydrogen endeavours.

This shows a lack of appreciation of what the opportunity entails.

What should be clear is that the government is not building nor funding the five green hydrogen projects currently pursuing feasibility activities.

Rather, the government merely provides a platform and an invitation (a right to conduct a feasibility study and in the case of one project, access to land, on a compensated basis) for private sector players to explore the technical, environmental and economic feasibility of establishing various clean molecule applications in Namibia.

Should none of these projects prove feasible, the basic law of project finance dictates that they will not unlock the required equity and debt funding to proceed to implementation.

For instance, the US$8,4 billion NEOM green hydrogen project in Saudi Arabia raised US$6 billion in bank funding before it started construction, and H2Green Steel in Sweden similarly raised €6,3 billion in funding for its project, including €4,2 billion in debt.

Given the absolute size of the government, there is no subsidy it could provide to make an unfeasible project feasible, nor has it ever said it is seeking to provide financial subsidies to any project in Namibia and to suggest so is incorrect.

GREEN HYDROGEN VS INDUSTRIALISATION

Rowland Brown talked a lot about the volumetric energy density of hydrogen compared to alternative fuels.

Yet, none of the existing export-focused business cases we have seen so far are looking to export hydrogen as a fuel.

Most are looking to export green hydrogen in the form of green ammonia or to use hydrogen to add value to minerals and/or other resources in the country and export green products.

For example, ammonia is a 200 million ton a year market, projected to grow to more than 600 million tons by 2050, as ammonia is used to decarbonise hard-to-abate sectors such as shipping.

Considering this, the cost of green steel compared to the total components of a vehicle means a 25% increase in the cost of steel (green steel) results in a 0.5% to 1% increase in the final price of the vehicle to the end-consumer.

H2 Green Steel, a Swedish project, has attracted equity players that include auto manufacturers like Mercedes Benz.

Namibia’s own HyIron project has had some engagements with auto manufacturers such as Toyota.

In our review of emerging policies looking to stimulate the demand and supply of green hydrogen and the potential customers, we are encouraged by the progress being made despite the complexities.

It would be remiss of me not to point out that it is not the government’s responsibility to develop individual business cases for each green hydrogen project in Namibia.

The government’s role is to review business cases, assess their viability, and consider how commercially viable projects can be supported and integrated into Namibia’s broader economic growth and SDGs.

Should a private sector player say they would be willing to produce pink hydrogen (hydrogen made with nuclear energy), the viability of their plan would be considered in the same way as any other endeavour.

Angola for example, has just announced that CWP will develop a green hydrogen project using their abundant hydroelectricity.

CONCLUSION

As we head to Berlin, the chancellor of Germany, various German state secretaries and other members of government have reconfirmed their commitment to pursuing a climate neutral economy and helping Namibia establish competitive clean industries that capitalise on Namibia’s natural resource advantage.

As Green Hydrogen Council Chair, travelling the length and breadth of the world, and living and breathing this industry since its conception in 2021, I believe the government may have a better appreciation of the prospects of this emerging industry than some analysts.

This is indeed a complex new industry and these projects are not easy to realise, but hold transformational opportunities for many of our country’s natural and corporate citizens.

Analysts would do better to collaborate with the government in conducting indepth research on the challenges in this sector.

Together, we can unlock meaningful, transformational opportunities for the nation. I invite the Browns to join hands with us.

– Obeth M Kandjoze, NPC director general and chair of the Green Hydrogen Council