De-risking is key to green hydrogen competitiveness

From the newsletter

A new study by the Technical University of Munich (TUM) finds African green hydrogen exports to Europe are not economically viable without policy support. However, researchers found that implementing de-risking strategies and selecting politically stable, strategically located sites could slash costs by 2030, making imports competitive.

• European decarbonisation deadlines are fast approaching, yet its domestic hydrogen supply remains limited. This opens a window for African producers, but only if they can match or beat costs from global competitors. 

• Africa’s advantage lies in its natural resources, but investors need proof of bankability. De-risking alone isn’t enough. Governments must also ensure project pipelines, transparency and infrastructure readiness to translate ambition into investable projects.

More details

• The study, Mapping the Cost Competitiveness of African Green Hydrogen Imports to Europe, published in Nature Energy, presents a stark reality check: Despite Africa’s abundant renewable energy resources, green hydrogen exports to Europe will remain uncompetitive unless there is deliberate and large-scale intervention. 

• However, the research also outlines a transformative pathway forward, identifying two levers capable of dramatically shifting the cost curve by 2030, comprehensive de-risking strategies and the deliberate selection of secure, strategically located production sites.

• At present, the economic case for exporting African green hydrogen to Europe remains unconvincing. Drawing on geospatial levelised cost modeling, the 12-page study estimates that, depending on prevailing interest rates and political conditions, the minimum production and export cost ranges between $4.54 and $5.30 per kilogram. 

• These figures significantly exceed what European buyers can afford, particularly given mounting competition from more politically stable and investor-friendly producers like Australia and Chile. With EU industries navigating tight decarbonisation targets and cost constraints, African hydrogen will need a significant cost reduction to compete in global markets.

• A primary barrier to achieving these lower costs is the high perceived risk of investing in large-scale infrastructure in many African countries. Political instability, inconsistent regulations, currency volatility and inadequate infrastructure all contribute to elevated financing costs. Double-digit interest rates, common across the continent, make renewable energy and hydrogen projects considerably more expensive to develop than in lower-risk countries.

• To overcome this, the study recommends robust de-risking strategies. While it doesn’t prescribe specific policies, it emphasises instruments like long-term offtake agreements that guarantee a buyer for hydrogen, political risk insurance to protect against instability, concessional loans and the establishment of transparent and consistent regulatory frameworks. 

• The study highlights 214 promising hydrogen production zones across six African countries—Mauritania, Morocco, Egypt, Namibia, South Africa and Algeria—where projects could become viable if effectively de-risked. These locations combine abundant solar and wind resources, access to water and port infrastructure and comparatively lower political risk. Notably, Mauritania emerges as the lowest-cost producer under optimal conditions, with costs as low as $3.48 per kilogram.

• Yet even with risk mitigation, many of these sites are located in areas with ongoing or potential security concerns. That’s why the second lever, strategic location selection, is equally crucial. The research stresses that having abundant renewable energy is not enough; green hydrogen hubs must also offer long-term political stability, solid governance and infrastructure resilience. Investors seek predictability over multi-decade project horizons and regions without it, no matter how resource-rich, may be deemed too risky.

• This finding challenges the prevailing narrative that hydrogen development potential is evenly distributed across Africa. Instead, the study argues for a more granular, subnational approach to hydrogen planning, one that prioritises regions with favorable risk-return profiles. For African policymakers, this means moving beyond broad national targets and focusing on governance, stability and infrastructure readiness at the regional level.

• The message for Europe is equally direct: to secure affordable, clean hydrogen imports, it must share the early-stage risks of African projects. Tools such as the EU Global Gateway, the European Hydrogen Bank and bilateral climate finance must be scaled up and targeted toward de-risking African hydrogen supply chains.

• Crucially, the study highlights that hydrogen development is about more than molecules. Success will depend on coordinated investment across water sourcing (e.g., desalination), transport infrastructure, energy grid integration and financial systems. Roads, ports and power lines are just as critical as electrolysers. Without this systems-based approach, even the best-located projects may fail to deliver on their potential.

Our take

• The study isn’t just a warning—it’s a roadmap. With deliberate site selection and coordinated action, Africa can become a credible green hydrogen hub, advancing both climate goals and economic development.

• It is also a wake-up call for African policymakers. Regulatory clarity, cross-border alignment and security guarantees must be front and center. Without them, even the most resource-rich hydrogen zones risk being sidelined by investors wary of instability and unclear market signals.

• Hydrogen development will hinge on more than national blueprints. Only regions that pair strong resources with security and institutional reliability will draw investment. Policymakers must shift focus from ambition to execution, or Africa’s most promising zones will remain undeveloped.