As the Egypt-EU Investment Conference kicks off this Saturday, the spotlight will be on Egypt's ambitious EUR 76 bn green hydrogen deal pipeline. This partnership offers a golden moment for both Egypt and the European Union to propel their sustainable energy agendas. For the EU, securing green hydrogen is crucial for achieving its climate neutrality targets and reducing reliance on fossil fuels. For Egypt, it promises economic growth, job creation, and strategic export advantages.

Egypt and the EU are already closely intertwined in trade, with the EU being Egypt's top trade partner, accounting for about 37% of Egypt’s exports and 25% of imports in 2022. The EU's demand for green hydrogen is soaring, driven by robust climate policies like the European Green Deal, the Fit for 55 package, and the EU Emissions Trading System. The REPowerEU Plan further outlines the EU's need to import 10 mn tonnes of green hydrogen by 2030 – targeted for provision from various sources to ensure resilience.

This dovetails perfectly with Egypt’s ambitions to become a regional green hydrogen hub, targeting 8% of the global market by 2040 and reaching 5.5 mn tonnes per annum of production capacity by 2030. In 2023, Egypt launched its first green hydrogen production facility in the Suez Canal Economic Zone (SCZone), with major stakeholders including Scatec, Fertiglobe, Orascom Construction, and the Sovereign Fund of Egypt involved. The hydrogen produced here will be used to create green ammonia at Fertiglobe’s ammonia plants.

Several factors give Egypt a competitive edge in this arena. Firstly, its environmental conditions are ideal for low-cost renewable energy generation, with a goal of renewables making up 42% of the energy mix by 2035. Geographically, Egypt's proximity to EU markets ensures more efficient export routes. Logistically, Egypt's ports and terminals, including those within the SCzone, and existing and refurbished gas pipelines provide the base infrastructure needed to accelerate regional hydrogen trade. Finally, the quasi-government institutional setup of the Sovereign Fund of Egypt enables it to co-invest with the local and international private sector to derisk such investments.

However, realizing this potential requires taking the leap with significant commitment on all sides. Currently, green hydrogen production costs are about three times higher than natural gas due to technology costs. These costs are expected to drop to twice that of natural gas by around 2030 and achieve cost competitiveness between 2040 and 2050. Securing off-take agreements is vital for project sustainability, as stakeholders recognize the strategic and decarbonization value of green hydrogen.

The path ahead involves overcoming cost challenges and securing these crucial offtake agreements. Yet, the foundation for a thriving green hydrogen market between Egypt and the EU is clearly being laid. This collaboration not only promises mutual economic and environmental benefits, but also positions Egypt as a pivotal player in the global green hydrogen landscape.

Get in touch with the BCG team at the conference.

Co-authors:

Bassem Fayek, Managing Director and Partner at Boston Consulting Group (BCG), Cairo

Francesco Palmieri, Managing Director & Senior Partner at BCG, Milan

Esben Hegnsholt, Managing Director and Partner at BCG, Copenhagen

Erik Rakhou, Associate Director at BCG, Green Energy, Amsterdam

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