Egypt is a strong candidate for implementing the technology of blending green hydrogen into its national natural gas grid. This is due to the large number of green hydrogen projects underway in the country and the capacity of its natural gas network, which spans nearly 100k km, supplying natural gas to over 14 mn homes, 25k commercial units, and 3k industrial units.

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In a part two to last week’s Hardhat looking at why Egypt is a good candidate for green hydrogen blending, we look at the challenges and solutions to its adoption here in Egypt by talking to industry insiders to get the inside scoop.

In case you're in need of a recap, green hydrogen blending involves mixing hydrogen produced from clean energy sources — think wind, power, and hydro — with natural gas in existing natural gas pipes. It presents an attractive way to diversify and greenify a country’s energy mix that is both gradual and with little up-front costs as it makes use of existing infrastructure. As a clean fuel source, the more green hydrogen sent through the pipes means less emissions as it reduces the amount of natural gas in the mix.

But before you get carried away, hydrogen blending is only a temporary transitional solution: Blending green hydrogen with natural gas is a temporary solution for Egypt's energy transition. In the long term, there is a need to develop a dedicated hydrogen transmission network. EU countries, for example, are working on creating hydrogen-dedicated pipelines alongside blending hydrogen into gas grids, investing heavily to avoid leaks due to hydrogen’s lower density compared to natural gas, industry insiders told us.

One thing going for us is the amount of green hydrogen projects in the pipeline: Since 2021, Egypt has signed around 32 MoUs for green hydrogen production, 15 of which have been converted into binding contracts with the Egyptian government and 17 lapsed due to a lack of commitment, Osama Fawzy, founder of hydrogen market intelligence platform H2lligence, told EnterpriseAM. Two additional agreements were signed on the sidelines of the European Investment Forum in Egypt, bringing the total to 17 binding agreements with an investment volume of USD 83 bn and a production capacity of 3 mn tons of green hydrogen.

But it’s far from guaranteed that a lot of the green hydrogen produced will go towards the local market: “Although 15 international companies committed to significant green hydrogen investments in Egypt under the framework agreements signed at COP27 in November 2022, they are not obliged to supply any portion of their production to the local market, which is a significant flaw in these contracts,” Fawzy told us. So even if Egypt achieves its target of capturing a 5-8% share of the global hydrogen market by 2040, there is a big question mark as to how much would be available for use by the country.

There’s certainly a demand from the country’s energy-intensive industries for blended green hydrogen — and even for factories powered solely by green hydrogen: Planned green hydrogen projects are distributed among many of Egypt’s main industrial zones and areas set for massive developments, opening up the possibility of these projects helping power nearby industries. There are planned green hydrogen projects in the vicinity of factories producing glass, ceramics, fertilizers, cement, and chemicals in East Port Said, Sokhna, Ras El Hikma, and more, which could be initially connected with connected by pipelines of 40-50 km in length until a dedicated hydrogen network is established, Fawzy said. The priority should be given to energy-intensive industries, followed by power generation plants, the commercial sector, and finally, the residential sector, which consumes less than 5% of the country's natural gas, Fawzy added.

Incentives would go a long way in ensuring the supply of green hydrogen to the domestic market: The government should incentivize the supply of green hydrogen to the domestic market by entering into long-term supply contracts with investors for the Ministry of Electricity to power its plants, according to Fawzy.

EU-centric financing is also skewing the industry towards export: Most of the green hydrogen production projects planned for Egypt are funded by the EU and financial institutions with the goal of exporting the entire output to Europe. This deprives projects aimed at supplying the local market from accessing funding, according to Fawzy. The solution lies in turning to regional financial institutions like the African Development Bank, Afreximbank, New Development Bank, and the Asian Infrastructure Investment Bank.

High costs remain, but are expected to decrease: The current cost of producing green hydrogen is three times higher than that of natural gas due to technological costs. However, this cost is expected to decrease to just twice the cost of natural gas by 2030, and cost competitiveness could be achieved between 2040 and 2050, according to the Boston Consulting Group.

But until prices are competitive, the state needs a carrot-and-stick to get local industry on board: The government can gradually compel energy-intensive industries to go green by using hydrogen blends in gas networks by imposing a carbon tax. While on the supply side, the state can encourage hydrogen producers to allocate a portion of production to the local market by offsetting shipping costs, Fawzy tells us. If Egypt can support the supply of hydrogen to energy-intensive industries and incentivize hydrogen developers in Egypt by giving them a premium over the world’s lowest production costs, it could secure a share of the production.

Thorough technical studies are also still needed before we can start blending green hydrogen into the network: The feasibility of hydrogen blending needs to be evaluated both technically and environmentally. One key issue is safety, as hydrogen blending can alter the pressure dynamics in the gas distribution system, which needs modifications to the existing network to ensure safety. Hydrogen can also cause damage to some metals — weakening pipelines and equipment — so these areas in the network need to be identified and replaced. Hydrogen also burns at a higher temperature than natural gas, potentially causing issues for end-users like factories with specialist equipment calibrated for unmixed natural gas, Fawzy told us.

Your top green economy stories for the week:

  • E-scooter startup Rabbit Mobility raised USD 1.3 mn in a new investment round led by VC firm 500 Global and Untapped Global. The funds will drive Rabbit's growth in Egypt and North Africa, expand its EV fleet, enhance user experience, and boost local micromobility access.
  • The Suez Canal Economic Zone will begin construction on fivelarge-scale green hydrogen projects within a year, set to be completed in four years.
  • Egypt will supply and install a 276.5 kw solar plant in Djibouti under a bilateral agreement signed between the two sides. The plant is part of efforts to support Djibouti’s sustainable development plans, and will be implemented alongside training programs to transfer local expertise to Djibouti.
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