Hydrogen projects turn to vertical integration amid congested grids

From the newsletter

As national grids across Africa reach capacity limits, green hydrogen developers are increasingly building vertically integrated, self-contained infrastructure. In South Africa, KAHRE Renewable Energy has proposed a 450km private “Greenlink” corridor designed to bypass Eskom’s constrained transmission network and directly link renewable generation to coastal processing and export facilities.

• Hydrogen projects need huge amounts of power. In many countries, planned renewables projects already exceed grid capacity, forcing developers to build their own plants and transmission lines.

• Private corridors could allow utilities and independent power producers to share transmission capacity to evacuate power along the route, creating wheeling revenue for hydrogen projects.

More details

• The 450 km KAHRE Greenlink corridor will run alongside the existing Sishen–Saldanha railway line, linking Northern Cape generation sites with coastal processing and export facilities. The multi-purpose route is designed to carry high-voltage electricity, hydrogen or ammonia through dedicated pipelines, as well as water and data infrastructure, in a single integrated corridor. 

• Africa’s national grids are increasingly becoming a bottleneck for energy-intensive green hydrogen projects. Many power systems on the continent are legacy networks designed for historical industrial and residential loads, not the high-capacity demands of electrolysis and associated industrial processing. In South Africa, Eskom’s grid constraints are well documented: despite abundant solar and wind potential in the Northern Cape, available capacity for new generation is extremely limited without substantial grid upgrades.

• Private-led solutions are emerging in response. Between 2023 and 2025, nearly 4.7 GW of privately contracted renewable projects above 5 MW reached financial close in South Africa, with a further 18 GW in the pipeline, according to the South Africa Electricity Traders Association. Power traders are increasingly aggregating supply and managing risk, signalling a broader shift: when grids cannot keep pace, developers are building self-sufficient, integrated infrastructure.

• The scale of modern hydrogen projects amplifies these challenges. At 20 GW, KAHRE’s planned capacity would be vast by South African standards and significant compared with many African power systems. Feeding such volumes into an already congested grid would require years of upgrades and approvals. A dedicated corridor reduces that risk by linking generation directly to demand.

• Similar constraints are emerging across other key African hydrogen markets. In Kenya, integrating large renewable power plants into the national grid has posed challenges. The Lake Turkana Wind Power project, Africa’s largest wind farm, encountered delays in transmitting its output early on due to lagging transmission infrastructure, highlighting how grid build‑outs can lag generation capacity. For energy‑intensive projects such as green hydrogen facilities, transmission limitations could increase operational and financial risk, especially if networks are not upgraded to handle high volumes of variable renewable power.

• In Egypt, ambitious plans to become a regional hydrogen and Power‑to‑X hub are unfolding alongside broader energy system challenges. The country needs significant additions to renewable generation and transmission capacity to support both rising industrial demand and future hydrogen production. Analysts note that without parallel investment in grid expansion and dedicated infrastructure, the integration of large new loads could stretch high‑voltage networks and complicate planning for both domestic electrification and export‑oriented hydrogen clusters.

• Across these markets, the common denominator is bankability. Electrolyser projects rely on stable, high-load-factor electricity over multi-decade horizons. Transmission constraints, including potential curtailment and competition with domestic demand, increase financial risk and could delay or prevent projects from reaching financial close.

• KAHRE’s net‑zero industrial corridor in South Africa exemplifies the private‑sector response to these grid limitations. Across the continent, other major green hydrogen initiatives are also advancing integrated elements of generation, supply and export infrastructure. In Namibia, Hyphen Hydrogen Energy’s large green hydrogen‑to‑ammonia project combines renewable generation, electrolysis and supporting logistics, positioning the country as a potential hydrogen export hub. In Egypt’s Suez Canal Economic Zone and in Morocco’s planned Nador West Med PtX cluster, developers are pursuing projects that link hydrogen production with coastal processing and export facilities. In South Africa, initiatives such as the Coega Green Ammonia Project and planned Boegoebaai hydrogen cluster similarly aim to integrate generation with industrial processing and logistics.

• However, while vertically integrated corridors enhance project viability, they create a deeper structural tension by forming energy islands or quasi project-states, self-contained industrial systems managing power, water, logistics and export infrastructure independently of national grids. Hydrogen corridors are typically located in resource-rich but sparsely populated regions, with power flows directed toward coastal processing hubs and export terminals. If surplus generation is not integrated into national systems, the broader domestic economy may see limited benefit from large-scale renewable build-out, reinforcing enclave-style industrial development.

Our take

• While integrated corridors offer efficiencies and competitive advantages, they also place strain on Africa’s infrastructure and regulatory frameworks. Success of the KAHRE project could validate the integrated model, while failure may reinforce modular, standalone approaches until energy and industrial systems mature.

• For regulators, private bypasses highlight a key tension; hydrogen development may advance independently of grid strengthening, risking parallel energy systems rather than reinforcing national transmission infrastructure.