{"id":547068,"date":"2022-06-07T03:58:43","date_gmt":"2022-06-07T03:58:43","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/why-egypt-could-lead-the-region-on-green-hydrogen-and-what-we-need-to-do-to-make-it-happen\/"},"modified":"2022-06-07T03:58:43","modified_gmt":"2022-06-07T03:58:43","slug":"why-egypt-could-lead-the-region-on-green-hydrogen-and-what-we-need-to-do-to-make-it-happen","status":"publish","type":"goinggreen","link":"https:\/\/enterpriseam.com\/egypt\/goinggreens\/why-egypt-could-lead-the-region-on-green-hydrogen-and-what-we-need-to-do-to-make-it-happen\/","title":{"rendered":"Why Egypt could lead the region on green hydrogen \u2014 and what we need to do to make it happen"},"content":{"rendered":"

<\/a> Why Egypt could lead the region on green hydrogen \u2014 and what we need to do to <\/strong>make it happen: <\/strong>Last week, we laid out how green hydrogen has burst onto the scene<\/a> as the hottest new sector in our regional energy hub ambitions \u2014 with more than USD 10 bn<\/a> of preliminary agreements for projects signed with international partners, further announcements expected at this year\u2019s COP27, and a national green hydrogen strategy in the works. Today, we look at what makes Egypt well-suited to grow a green hydrogen industry \u2014 and where the bottlenecks are in getting these projects off the ground.<\/p>\n

First up: Why all the green hydrogen buzz in our market? <\/strong><\/p>\n

#1- The tech is new and developing quickly\u2026<\/strong> In the last 8-12 months, the global push to use renewable energy to power electrolysis has really started in earnest as electrolyzers (the key hardware<\/a> in making green hydrogen) see huge technical improvements, says Lekela Power General Manager Faisal Eissa. he says. \u201cThe idea of combining electrolyzers with green energy has changed everything. This was what everyone had dreamed of: to generate energy from water,\u201d Eissa tells Enterprise.<\/p>\n

\u2026And so no one has the edge on us:<\/strong> At the moment, Egypt is effectively neck-and-neck with other countries in terms of preparing to launch green hydrogen projects, note several sources. \u201cWe\u2019re all starting at a similar time,\u201d says EBRD managing director for the SEMED region Heike Harmgart.<\/p>\n

#2- Egypt\u2019s cost-competitive and abundant renewable energy stocks make us an appealing host, <\/strong>say several sources including Harmgart. \u201cEgypt, like Morocco, has many advantages because of its cheap renewables,\u201d Harmgart tells Enterprise.<\/p>\n

Green hydrogen projects could be key offtakers for our renewables:<\/strong> We don\u2019t need more energy for the grid \u2014 and so the government has directed private sector renewables firms that all the power they generate should be fed straight into green hydrogen and desalination projects, Mohamed Mansour, co-founder and CEO of Infinity, tells Enterprise. This could be a strategic way of tackling Egypt\u2019s overcapacity issues, independent energy analyst Ahmed Abbas tells Enterprise.<\/p>\n

#3- And gov\u2019t is on the ball:<\/strong> New incentives on offer to the private sector are designed to spur renewable energy production, Vice President of the New and Renewable Energy Authority (NREA) Ehab Ismail tells Enterprise. The government recently widened<\/a> the scope of the 2017 Investment Law so companies working on green hydrogen and green ammonia production, storage and export can deduct 30-50% of their investment costs from their tax bills, pay a flat 2% customs rate on imported machinery, and benefit from a five-year exemption from stamp duty and notary fees on certain expenses.<\/p>\n

#4- We\u2019re already a top global fertilizer supplier \u2014 so switching our existing customers onto ammonia made with green hydrogen should be relatively straightforward: <\/strong>European countries \u2014 as one example \u2014 have ambitious emissions reductions targets to meet, and we\u2019re already a key supplier of fertilizer. If Egyptian companies can switch to \u201cgreenify\u201d their fertilizers, they could boost their exports even further, Eissa says. (Green hydrogen is the crucial ingredient that puts the \u201cgreen\u201d in \u201cgreen ammonia\u201d \u2014 and our first green hydrogen plant<\/a>is set to produce feedstock for an export-focused green ammonia facility).<\/p>\n

So, what\u2019s holding things up? Cost is key:<\/strong> Green hydrogen currently costs some USD 5-6\/KG to produce, while gray hydrogen costs less than USD 2\/KG, says Abbas. \u201cThe whole industry is focused on reaching the threshold where green hydrogen production falls below USD 2\/KG,\u201d he says. \u201cThis is linked to the price of electricity, along with the development of green hydrogen technology \u2014 like electrolyzers \u2014 and the scale-up of production capacity, which is currently very low.\u201d<\/p>\n

But costs could come down fast: <\/strong>The cost of green hydrogen production should decrease rapidly \u2014 as we saw with solar \u2014 to become commercially viable as the tech advances, Harmgart predicts. \u201cGiven all the research behind this new technology, I think costs will come down quickly and steeply,\u201d agrees Mansour. Still, while costs remain a barrier to entry, some concessional financing and grants will need to be mobilized \u201cin the initial stage,\u201d Harmgart notes. The EBRD is in \u201cvery active discussions\u201d with two or three consortia of developers on financing green hydrogen projects, Harmgart previously told Enterprise.<\/p>\n

What we really need now is regulation:<\/strong> Regulation will be essential for competitively pricing the electricity generated by green hydrogen projects \u2014 which the government is expected to set, says Abbas. That means key questions will need to be resolved on how state-owned and private firms will partner in these projects, and how land is allocated to them.<\/p>\n

And more incentives to get things off the ground:<\/strong> Equipment for local green hydrogen facilities is currently limited, says Abbas, and scaling up its production would have to be done in collaboration with major producers \u2014 making more regulatory incentives essential, Abbas adds.<\/p>\n

Putting regs in place will take time:<\/strong> The EBRD is aiming at a five-year timeline to put a legal framework in place as it helps the government develop its green hydrogen strategy, Harmgart told us previously. Putting regs in place to allow green hydrogen to be used locally is a \u201cmedium to long-term\u201d project, says Eissa \u2014 hence why pilot projects all focus on producing for export.<\/p>\n

Though less can be more: <\/strong>Simple guidelines issued now and updated regularly could be better than detailed regulation that takes a long time to put together, Eissa adds.<\/p>\n

Even producing for export comes with its challenges: <\/strong>We\u2019ll need to prove the green credentials of hydrogen headed to Europe by securing Guarantees-of-Origin (GoOs)<\/a>, energy certificates that label sources of energy for customers, says Harmgart. That also means we need to be able to trace back all the energy that goes into a green hydrogen plant to a renewable source \u2014 meaning we might have to count out renewables projects that are already connected to Egypt\u2019s grid, says Eissa, as there\u2019s no way of proving that the electricity came from a renewable source. \u201cMy understanding is that electricity used for green hydrogen production will need to be dedicated to this,\u201d he says.<\/p>\n

We might try and address barriers to export at COP27:<\/strong> Egypt could call for an easing of EU green content certification during COP27 to open up pathways for export to Europe, Eissa predicts.<\/p>\n

The good news: Gov\u2019t is engaging with stakeholders transparently<\/strong>, says Mansour: \u201cEveryone that wants information has access to it,\u201d he adds.<\/p>\n

And for once, renewable energy companies and oil and gas companies share a common goal<\/strong>, says Eissa. \u201cIt\u2019s an exciting and challenging prospect. We\u2019re merging two technologies, two industries, together \u2014 and the backgrounds are completely different.\u201d<\/p>\n

But we shouldn\u2019t sit on this and let momentum fade<\/strong>. \u201cWith decisive leadership, Egypt can get projects set up quickly,\u201d Fortescue Future Industries (FFI) CEO Andrew Forrest tells Enterprise. \u201cBut time is of the essence, because a number of other countries are doing the same thing.\u201d<\/p>\n

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