Green hydrogen: Join us on this exciting journey

Ayear ago to the date, His Excellency Hage G. Geingob launched the 2nd Harambee Prosperity Plan (HPPII) at State House. This manifesto for his second term in office contained a deliberate focus on an urgent and dynamic socio-economic recovery plan. Good governance remains the core of the plan, while the economic advancement pillar, the infrastructure pillar and the international relations pillars bear the brunt of the responsibility to drive an urgent economic recovery with a trying macro-economic backdrop.

The social progression pillar is the pivotal safety net that aspires to take all Namibians along on the journey to and shared prosperity in an industrialised Namibia, with Vision 2030 firmly remaining the guiding lighthouse. Arguably, the most controversial suggestion in HPPII was that Namibia should embark on exploring the synthetic fuels industry as an idiosyncratic spark that could light up a whole new industry, which could catalyse Namibia’s aspiration to grow the secondary sector of the economy, instead of continuing to rely on the primary and extractive industries that to date have borne most of the economic development brunt. So, a year on, what progress has been made with Goal 3, activity 2 of the Economic Advancement Pillar?

This activity had 5 sub-activities, which needed to be pursued diligently for the strategic bet to yield the desired results. The ultimate goal was to kick-start a dearth of much-needed investments, with a promise to unlock prospects for new employment, gross fixed capital formation and improve our next exports position.

First shot

The first sub-activity was the formal establishment of the interministerial Green Hydrogen Council, which was executed by July 2022, and went on to develop a terms of reference for the Green Hydrogen Strategy as well as crafted the vision of the Southern Corridor Development Initiative, meeting the 2nd and 3rd sub-activity. The feasibility study was the 4th subactivity, and was packaged as a key requirement for a request for proposal (RFP/tender). Here, the government demonstrated their willingness to work with the private sector to pursue a national priority, living up to the ethos captured throughout the second pillar, that of allowing economic recovery to be private sector-led.

The last of the 5 sub-activities entailed the coordinated deployment of green diplomacy to unlock support and concessionary funding from various strategic partners at an international level.

The results of these efforts have surprised even Government expectations. Namibia is now hailed as a visionary and strategic enabler in an industry that Goldman Sachs estimates will unlock “US$5.0 trillion of cumulative investments in the clean hydrogen supply chain …… while the TAM (total addressable market) for hydrogen generation alone has the potential to double by 2030E (to US$250 bn) and reach >US$1 tn by 2050Ee next 20 years”. By August 2021, the Namibian government unlocked €40 000 000, which was to be deployed to support the goals of activity 2 of goal 3, namely develop a national green hydrogen strategy, fund various feasibility studies, and get some pilot plants deployed in Namibia as soon as possible. The government, with its strategic partner the Ministry of Education and Research from Germany, also recognised the need to allocate some funding for the development of a scholarship programme, which is to start a comprehensive effort to build the intellectual capacity and skills needed for Namibia to deliver on this ambition, and capture as much of the value chain of this burgeoning new industry as possible. This programme was launched in March 2022, and applications for pilot projects have been allocated €30 000 000, calls for the crafting of the strategy and accompanying studies have been allocated €5 000 000, while the five-year scholarship programme has been allocated €5 000 000. All this was done in less than 12 months after the State conceived an idea that many expected to only unlock benefits to the Namibian economy around 5 to 10 years from 2021.

However, this was merely the tip of the iceberg. The RFP resulted in Namibia receiving nine offers from six global, and by September 2022 from regional and local developers. The winning bid estimated that the cost of delivering the project in the //Kharas region would be about US$9.4 billion, create 15 000 direct jobs during construction, and 3 000 during operation. To estimate the Full Time Equivalent (FTE) number of jobs to be created during construction and during operations, data from South Africa’s Independent Power Producer (IPP) Office on wind and solar PV projects was sourced by international consultants appointed by the winning developer, Hyphen.

Opportunities

Based on data used, the number of direct FTE jobs created during the construction and operation of the renewable energy technology to be deployed (Wind and Solar) was deduced. For all other project components, the estimation of the potential number of jobs to be created was based on the multipliers derived from a proprietary economic model constructed using the Social Accounting Matrix originally developed by the International Food and Policy Research Institute (IFPRI) in 2007, which was updated using the latest available figures from the revised national accounts of Namibia. The only exception from the above was the calculation of jobs to be created by the electrolyser plant during operations. The CE Delft study, completed in 2021, was utilised to approximate the job creation potential of this element of the project.

To estimate labour costs and potential direct income to be earned from the project by households, average salary data for 2018 from the Namibian Statistics Agency was utilised. To ensure that all the figures reported represent 2021 figures, the 2018 average salary figures were adjusted by CPI (2019: 3.7%, 2020: 2.2%). Based on the above modelling, the Corporate Social Plan concluded that 93% of the jobs will be absorbed by Namibia-based labour, mainly in the construction sector.

Detailed information such as average wages, job grades, local SME content, proportion of jobs allocated for the youth etc. were all modelled and were used by the government as a key criteria to score the various proposals that were received.

Contrary to popular belief, Namibians have the skills to develop renewable energy plants and construct mines, bulk infrastructure and operate various elements of this project, as illustrated by the expectation by the developer that 100% of the jobs during operation can be absorbed by Namibians. Some elements of this project may be new, but the government is encouraging us all to start considering which new skillsets we may need to develop.

The Minister of Higher Education and our institutions of higher learning have already responded to this challenge in various ways, and the formation of a Namibian Green Hydrogen Research Institute is but one example of the response.

According to the initial estimates of the proposal, beyond the direct impacts that the project is envisaged to create, which are expected to reindustrialise the economy of the ǃNamiǂNûs constituency and the broader //Kharas region, the project is also expected to contribute towards government revenue to the tune of N$3.7 billion per annum, which is 6.9% of last year’s total revenue.

In addition to the now infamous Hyphen project, other projects in this space are emerging. O&L have found a Belgian partner in CMB. TECH. Their new partnership, Cleanergy, looks to develop a Green hydrogen fuel station in Walvis Bay as a pilot and a €2.5 billion ammonia production plant at the coast, which would be decarbonised by a 1 gigawatt solar plant to be built in Arandis. HDF is investigating the deployment of an 85 megawatt solar/hydrogen hybrid PowerStation to be built in Swakopmund that could result in a N$3 billion capex programme. In 2022, the Namibian government would also expect to receive proposals to build two other pilot projects, using hydrogen and its derivatives that could range from mobility, trains, trucks, etc. to manufacturing metals, fertilisers, etc. In short, the strategic bet to incubate a new synthetic fuels industry is beginning to yield very encouraging results early on. So much work lays ahead, but it is encouraging to see the global community responding to the vision as encapsulated by His Excellency and his Cabinet.

The cherry on top is that this is not a ‘project’ from the Namibian President, but rather a global opportunity with significant momentum and capital behind it, which was recognised early on by the Namibian government, which moved nimbly, resolutely and strategically to capture. The government set up a website to help inform the local and international community on the opportunities which exist in Namibia and globally.

Gh2namibia.com is a resourcerich website that any and all Namibians must access should they wish to scour potential opportunities in this area. The three components of the programme with the BMBF are listed under the JCoI Programme tab, and if one wanted to understand the engineering aspects of Namibia’s natural endowment that makes it a unique resource, one can access two pre-feasibilities studies under the Downloads section. A mustread for Namibians looking to appreciate why Hydrogen is now a geopolitical focus in the energy transition, is a document from IRENA, titled “Geopolitics of the Energy Transformation: The Hydrogen Factor”. Namibia features heavily in the paper, and that is testament to the Government’s efforts to contribute to the global decarbonisation agenda. Namibia has executed three agreements with Germany, Belgium and Netherlands, and more are in the pipeline, most notably an MoU with the European Union, envisioned to be executed at COP27 in Egypt this November. These agreements are critical to de-risk the development of this industry in Namibia, with concessionary funding, off-take agreements and collaboration on policy formulation being at the heart of most of these documents.

Inclusive

Back home, the Namibian President has been deliberate in executing an inclusive information campaign, keeping Cabinet briefed and even going as far as inviting all political parties to State House for a personal briefing on the vision of the project and the broader envisioned synthetic fuels industry. In conclusion, the Namibian Government has displayed a commendable level of innovation, resolve and determination to unlock new opportunities to industrialise Namibia, create employment and crowd in local and international private sector funding and expertise to deliver the socio-economic outcomes that are encapsulated in Vision 2030. At the core of these objectives, greater sovereign autonomy remains a fundamental aspiration. Within this opportunity, Namibia has a realistic chance of becoming energy-independent, and in the process save N$3 billion in foreign reserves we spend to import power every year, contribute to a regional decarbonisation agenda and earn enough stable foreign income, that dare I say could one day allow us to realistically moot floating our own currency? This is but just the beginning of what promises to be a very exciting journey, and we would implore all Namibians to rally behind this President and government, get informed and where possible get involved, deploy risk capital and build the nation that we all want to live in. I already have; I hope you join us too!