Hydrogen hopes hinge on policy: Africa’s green energy exports face cost barriers

African green hydrogen (H₂) exports to Europe may not be economically viable by 2030 without strong de-risking policies from European governments, reveals a new study published in Nature Energy. The research, titled “Mapping the cost competitiveness of African green hydrogen imports to Europe” uses geospatial cost modeling and four financing scenarios to estimate hydrogen production and export costs from 31 coastal African nations. 

The study clearly states that only with significant policy support and targeted de-risking can African hydrogen become a competitive alternative to domestic European production.

Can African green hydrogen compete with European production?

The study evaluates the cost of producing green hydrogen in Africa and shipping it as ammonia to Europe’s Rotterdam port. In scenarios lacking de-risking mechanisms, the least cost of hydrogen remains above €4.9/kgH₂ - well above production costs in Europe. Under a fully de-risked, low-interest financing environment, that figure drops to a competitive €3.2/kgH₂, notably in Mauritania.

Despite this, the researchers find that only 2.1% of modeled African locations become cost-competitive with European green hydrogen projects when de-risking is applied in a high interest rate scenario. These include parts of Morocco, Algeria, Namibia, Mauritania, Sudan, and Kenya. Without de-risking, the lowest costs observed remain uncompetitive, highlighting how financing conditions dramatically influence feasibility.

The researchers used the GeoH2 model to simulate green ammonia production across 10,300 locations. Ammonia was chosen due to its favorable properties as a hydrogen carrier and compatibility with existing port infrastructure. The least-cost production clusters were found primarily in countries with high wind availability and institutional stability. Morocco, with low country-specific costs of capital (COC) and strong renewable resources, emerges as one of the most competitive under commercial financing conditions. However, when de-risked financing is applied, Mauritania overtakes as the most cost-effective location despite higher inherent risks.

What role do financing scenarios and policy support play?

Four financing scenarios were developed, reflecting combinations of high vs. low general interest rates and commercial vs. de-risked investment environments. The difference in cost of capital between these scenarios was significant, ranging from an average of 15.5% under commercial, high-interest conditions to just 9% with de-risking in the same environment, representing a 42% reduction. This gap, the study finds, has a larger impact on overall hydrogen production costs than interest rates alone.

De-risking mechanisms considered include offtake guarantees from European governments, political risk insurance, and favorable debt terms backed by institutions like the World Bank’s MIGA. These interventions not only reduce the average COC but also decrease the disparity in cost across countries. For example, without de-risking, the COC varied by more than 15 percentage points between countries. With de-risking, this dropped to less than 2 points, effectively leveling the investment landscape.

Shipping costs, often cited as a barrier, were found to have a marginal impact on competitiveness. Even at the furthest modeled distances (e.g., from Mozambique), costs only ranged between €0.09–€0.44/kgH₂, reinforcing that production costs and financing risks remain the dominant factors. As such, improving port infrastructure or repurposing existing pipelines would not substantially change Africa’s comparative position, though they may bring logistical benefits.

What are the practical and geopolitical risks ahead?

Despite the technical feasibility under optimal conditions, the study identifies a range of challenges that could undermine long-term investment viability. Many of the lowest-cost regions are politically unstable, including areas of Western Sahara, Sudan, and the Kenyan-Ethiopian border. These regions face recurring conflict, lack of political guarantees, and often fall outside the coverage of multilateral risk insurance frameworks. As a result, even with favorable economics, private sector investment in these zones is unlikely to materialize without robust international guarantees.

Moreover, the sheer scale of investment required is daunting. For example, Mauritania’s Aman project is estimated to cost US$40 billion, four times the nation’s GDP. Such large-scale projects in countries with limited fiscal capacity and high debt burdens raise questions about implementation and local benefit distribution. Local wind energy development is also constrained by workforce limitations. The continent had just 7.7 GW of wind capacity installed as of 2022, while individual hydrogen production projects may require gigawatt-scale installations.

The authors argue that African countries must prioritize capturing local benefits beyond export revenue. Countries with more advanced industrial ecosystems, like South Africa, Egypt, Morocco, and Kenya, are better positioned to harness green hydrogen for domestic value creation, such as steelmaking or fertilizer production. In contrast, nations focusing exclusively on export risks falling into extractive dynamics that offer little in terms of long-term development.

Furthermore, the study urges African nations to explore regional cooperation on hydrogen production and use. By coordinating infrastructure, trade, and industrial strategies, countries can mitigate individual risk and enhance continent-wide competitiveness. International organizations are advised to support not just exports, but also local and intra-African green hydrogen deployment, which could avoid neocolonial investment patterns and strengthen development outcomes.