IRENA report suggests potential lead role for African hydrogen

From the newsletter

A July 2025 report by the International Renewable Energy Agency (IRENA) says Africa could become a global leader in green hydrogen trade by 2050, thanks to its vast renewable energy potential and critical raw materials. However, high capital costs could prevent the continent from fully participating in the emerging hydrogen economy.

• Under equal financing conditions, Africa could be a top global exporter of green hydrogen, alongside Latin America and the Middle East.

• But when real-world financing risks are factored in, Africa’s advantage declines, allowing lower-risk economies with weaker resources, such as the United States, Australia and China, to dominate hydrogen trade flows.

More details

• The report, “Analysis of the Potential for Green Hydrogen and Related Commodities Trade,” explores the techno-economic potential for trading green hydrogen and its associated commodities such as ammonia, e-methanol and direct reduced iron (DRI) by 2050, using a cost-optimisation approach.

• The analysis highlights the strategic opportunity Africa holds in the global energy transition. With abundant solar irradiation, high-quality wind resources and access to key raw materials such as iron ore and biogenic carbon, many African countries are technically well-positioned to produce green hydrogen and its derivatives at competitive cost.

• In a scenario where all countries face the same financing conditions, specifically, a uniform weighted average cost of capital (WACC), North Africa and sub-Saharan Africa emerge among the leading global exporters of green hydrogen and related commodities, including ammonia, methanol and DRI.

• In the uniform WACC scenario, North Africa alone accounts for around 13% of global hydrogen-related commodity exports by 2050, nearly equal to the European Union’s projected import share. Sub-Saharan Africa adds another 7%, placing the continent among the top exporting regions globally. 

• However, the picture changes significantly in the Differentiated WACC Scenario, which applies real-world financial risks. Africa’s competitive edge is weakened by comparatively higher capital costs and perceived investment risks. In this more realistic scenario, countries such as the United States, China and Australia, despite having less favourable renewable resources, emerge as dominant exporters, benefitting from lower WACC values and stable financial environments. 

• According to IRENA, developing the global green hydrogen economy will require an estimated $2.5 trillion in investment by 2050, spanning renewable generation, electrolyser deployment, storage and transport infrastructure. For Africa to secure a meaningful share of this future market, the continent must urgently address its financing barriers.

• To lower financing costs and attract capital, IRENA recommends improving access to blended and concessional finance, especially through multilateral and development finance institutions. The report also calls for the development of risk-mitigation instruments tailored to hydrogen infrastructure, which could help reduce country-specific risk premiums. Strengthening public-private partnerships will be essential to lower project development costs and increase bankability.

• Beyond financing mechanisms, African governments are further encouraged to adopt clear, actionable hydrogen strategies. These strategies should not only focus on export goals but also align with domestic development priorities such as energy access, industrialisation and employment. This alignment can help ensure that hydrogen investment contributes to broader economic transformation and resilience.

• IRENA recommends that infrastructure planning be integrated and forward-looking, particularly in coastal regions with access to global shipping routes, as these locations are critical for enabling hydrogen exports and building regional value chains. The report highlights that positioning such infrastructure strategically will enhance trade competitiveness, especially for countries like those in Africa.

• The Abu Dhabi-based agency also emphasises the importance of deepening international cooperation, noting that Africa can become a key supplier to importing regions, such as the European Union, which is expected to import up to 20% of its hydrogen demand, provided it aligns with emerging global certification systems and sustainability standards related to carbon intensity and traceability.

• Ultimately lowering financing costs through policy reform, institutional de-risking and strategic international partnerships will determine whether Africa can compete on equal footing with lower-risk economies. If these conditions are met, the continent could unlock large-scale investment, accelerate infrastructure deployment and secure long-term export agreements.

Our take

• Africa’s success hinges not just on its natural resource base, but on its ability to fix finance. Without intervention, the continent risks missing a rare opportunity to trade globally.

• If Africa succeeds in fixing its financing challenges, it could not only become a key player in the global hydrogen economy but also use that opportunity to drive a more inclusive and resilient energy future.

• Financing has been repeatedly highlighted as the key barrier to Africa’s hydrogen ambitions, a challenge once more underscored by the IRENA report. It’s time Africa moved from recognising the problem to resolving it.