Green hydrogen, produced by splitting water using renewable energy, is emerging as a highly touted pillar of global decarbonization strategies. Yet, despite the optimism, it still accounts for less than 1% of global hydrogen production, with the majority coming from fossil fuels (grey hydrogen). High production costs remain a major bottleneck, but declining renewable energy prices, technological advancements, and economies of scale are steadily improving the economics of green hydrogen.
By 2030, the market is projected to surpass the global liquefied natural gas (LNG) trade in value and could grow to $1.4 trillion annually by 2050.
The Growing Importance of Green Hydrogen and Ongoing Challenges
The potential of green hydrogen in hard-to-abate sectors—steel, chemicals, synthetic fuels, and heavy-duty transport—is undeniable. These industries are deeply dependent on fossil fuels, making decarbonization an uphill battle. Green hydrogen offers an alternative, but its large-scale adoption will require more than just ambitious government pledges and glossy investment roadmaps.
While policymakers worldwide are integrating green hydrogen into their energy transition strategies, we’ve seen before how well-intended climate plans often struggle to gain traction beyond the announcement stage. Hydrogen-powered vehicles, for example, could transform heavy-duty transport, but unless costs drop dramatically and infrastructure challenges are addressed, large-scale deployment will remain difficult.
Several technical hurdles also remain, including electrolyzer efficiency, which still ranges between 60% and 80%, meaning a significant amount of energy is lost in the conversion process. Add to that the massive infrastructure costs—water purification, hydrogen storage, and dedicated transport pipelines—and it’s clear that scaling green hydrogen will be neither cheap nor easy.
It also faces competition from cheaper and more established alternatives like advanced battery storage and direct electrification. While hydrogen makes sense for long-term energy storage and energy-intensive industries, its economic viability in a world of rapidly improving battery technology remains far from guaranteed.
Green Hydrogen’s Potential in Emerging Economies: Reality Check
We’ve been closely tracking the rise of green hydrogen in emerging markets, particularly in Africa, where governments and investors are racing to position themselves as key suppliers. On paper, these regions have a natural competitive advantage—abundant solar and wind resources, vast land availability, and lower production costs.
Compared to Europe, where green hydrogen currently costs $3 to $8 per kilogram (kg) to produce, Africa and other emerging markets could bring this down to $1.8–$2.6 per kg by 2030. In theory, this makes these regions attractive green hydrogen hubs. But securing long-term demand, navigating political instability, and attracting sustained investment are just as important.
Take Africa, for example—our mapping suggests that the continent could capture up to 10% of the global green hydrogen market, generating $120 billion in GDP and 3.7 million jobs.
Several countries are making bold moves, but execution remains key:
Namibia aims to produce 10–12 million tons per year (Mtpa) of hydrogen equivalent by 2050, with its $10 billion Hyphen Hydrogen Energy project expected to deliver 350,000 tonnes of hydrogen and 2 million tonnes of ammonia annually by 2030.
Egypt has committed $40 billion in investments, positioning itself as a major green hydrogen supplier to Europe, with key projects like the $2 billion hydrogen-ammonia facility in the Suez Canal Economic Zone. But whether European demand will materialize as expected remains an open question—especially with EU policymakers wavering on long-term hydrogen subsidy policies.
South Africa has secured a €32 million EU grant and aims to produce 1 Mtpa by 2030.
Meanwhile, the Africa Green Hydrogen Alliance has been launched to encourage regional collaboration.
Key Barriers: Water Supply AND Market Readiness
One of the biggest practical challenges for emerging markets is water availability. Electrolysis requires large volumes of purified water, which could strain local resources in already water-stressed regions. Balancing water security with hydrogen production hasn’t been sufficiently addressed in many of these national hydrogen strategies.
Then there’s the issue of market demand. Many developing economies still rely on cheap fossil fuels, and with hydrogen infrastructure nearly nonexistent, local industrial demand remains weak. Exporting to Europe and Asia is often framed as the solution, but the long-term commitment of these markets is far from certain, especially given geopolitical shifts and potential trade barriers.
Financing: The Elephant in the Room
Even if everything else falls into place, the biggest roadblock remains financing. Establishing a green hydrogen ecosystem requires multi-billion-dollar investments in infrastructure, yet most emerging markets lack the financial firepower to build these projects without significant outside backing.
A 1 GW hydrogen plant costs between €1.4–€1.8 billion, and investors are understandably cautious about deploying capital in volatile markets. Currency fluctuations, regulatory uncertainty, and political risk make financing green hydrogen in emerging markets far from straightforward.
Capex Cost Breakdown for a 1 GW Green Hydrogen Plant
Cost Component | Cost (€/kW) | Percentage of Total Cost |
Electrolyser Stacks | 182 | 13% |
Power Supply and Electronics | 196 | 14% |
Balance of Plant | 210 | 15% |
Civil, Structural & Architectural | 70 | 5% |
Utilities and Process Automation | 126 | 9% |
Indirect Costs | 210 | 15% |
Owner's Costs | 84 | 6% |
Contingency | 322 | 23% |
Green hydrogen in emerging markets has enormous potential, but the gap between vision and execution is still wide. Whether it becomes a global energy game-changer—or another overhyped but underdelivered climate solution—will depend on more than just ambitious targets. Let's watch it closely.
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