Why African hydrogen struggles to secure offtake

From the newsletter

An Egyptian 100 MW green hydrogen project began exporting to Europe and the US last month, becoming one of three African initiatives to reach production. While a milestone, most projects remain stalled, with a recent Energy Industries Council report citing missing offtake agreements as a critical barrier to the continent’s green hydrogen ambitions.

• Offtake agreements commit buyers to purchasing green hydrogen, providing producers with revenue certainty to secure financing and ensure stable returns

• Without such agreements, capital-intensive hydrogen projects stall, as investors are unwilling to commit funding without guaranteed buyers, leaving many announced projects on paper.

More details

• Africa has the renewable energy resources to power a thriving green hydrogen economy, yet most projects struggle to attract buyers and financing. Of more than 100 announced green hydrogen initiatives tracked by Hydrogen Rising, only Namibia’s HyIron Oshivela facility, Cleanergy Solutions’ Hydrogen Dune site, and Egypt’s 100 MW project have reached production. The challenge is not a lack of resources but offtake, as buyers commit to molecules rather than potential, leaving many African projects a step short of global technical, financial and logistical standards.

• Part of the challenge lies in cost competitiveness. Africa’s hydrogen pipeline is dominated by large, capital-intensive projects where high upfront costs push up production prices and make securing offtake more difficult. A 2025 study by the Technical University of Munich estimates minimum production and export costs between $4.54 and $5.30 per kilogram depending on interest rates and political conditions. These costs exceed what many European buyers can absorb, particularly as competition intensifies from more politically stable and investor-friendly producers such as Australia and Chile. With EU industries balancing stringent decarbonisation targets and cost pressures, African hydrogen will require substantial cost reductions to compete. The EIC report warns that over-reliance on large-scale projects is risky, recommending instead smaller, phased developments that can lower initial costs, reduce risk and progress more quickly to execution.

• Beyond production costs, geography and logistics add another layer of constraint. Near-term hydrogen demand is concentrated in Europe, driven by decarbonisation mandates and industrial policy. North African projects in Egypt and Morocco benefit from geographical proximity, shorter shipping routes and the potential for pipeline or ammonia exports into Europe. By contrast, many sub‑Saharan projects are focused on producing green ammonia for export, often targeting Asian markets such as Japan and South Korea. These longer supply chains increase transport costs and delivery uncertainties, complicating negotiations with risk-averse buyers who seek early and reliable volumes.

• Underlying these economic and logistical constraints is a structural infrastructure gap. Many projects are still at early development stages, without firm engineering, procurement and construction (EPC) contracts, grid connections or port infrastructure in place. This lack of enabling infrastructure amplifies uncertainty for buyers around delivery timelines and operational reliability, often outweighing theoretical production advantages. The scale of this gap is reflected in EIC data showing Africa’s proposed electrolyser capacity at around 38 gigawatts supported by $194 billion in planned investment. While Europe has more capacity planned, total capital expenditure is lower at roughly $166 billion, reflecting the extensive infrastructure still required before African projects can reach bankability and secure offtake.

• Infrastructure shortfalls feed directly into project maturity concerns as offtakers increasingly prefer projects approaching final investment decisions with permits secured, infrastructure defined and financing largely arranged. In Africa, developers often seek offtake agreements early to unlock financing, creating a circular dependency whereby buyers wait for bankable projects while projects wait for buyers to become bankable. These overlapping gaps in infrastructure and project readiness have left many initiatives stalled in pre-FID phases, preventing African hydrogen projects from progressing from concept to execution.

• Beyond project-level constraints, policy uncertainty remains a barrier, undermining buyer confidence and limiting offtake. Several African countries have announced hydrogen strategies, but regulatory frameworks remain uneven and demand-side support mechanisms such as contracts for difference, price guarantees or sovereign backstopping are limited. To date only Morocco, Mauritania and Egypt have made meaningful progress in establishing clearer frameworks. By contrast, European and Asian buyers operate in markets where governments actively de-risk hydrogen demand, making long-term purchasing commitments easier. At the same time, global hydrogen demand remains nascent, with many industrial buyers delaying commitments until pricing, standards and certification frameworks are clarified. 

• Looking ahead, Rebecca Groundwater, the EIC’s global head of external affairs, argues that governments must focus on fundamentals. “Investors need clear rules, stable policy and faster permitting,” she said. “Governments also need to get the basics in place on grid and water, use finance tools that share risk, and bring in development lenders while costs remain high. Just as importantly, project timelines must match what export buyers can realistically absorb. Without that, much of this will not move beyond concept.”

Our take

• With at least 100 announced projects and only three in production, Africa needs to shift from ambition to implementation and close the gap between potential and actual delivery. This calls for commitment to addressing the structural, financial and policy barriers that continue to stall its hydrogen projects.

• A practical way to do this is to walk a mile in the shoes of the offtakers and, early on, ask, "If I was a buyer, what conditions, timelines and assurances would convince me to commit to an offtake agreement for this project?" By taking this perspective, Africa can design projects that align with buyer expectations and are more likely to secure long-term offtake.