Policy Considerations for Namibia’s Green Hydrogen Economy
Namibia is moving rapidly to capitalise on its renewable energy potential and the growing hydrogen market. The Namibian Green Hydrogen Initiative has a global springboard, in light of international climate change initiatives that call for cleaner energy, and it has the local political will behind it. Alongside the on-the-ground activity, the development of an enabling regulatory framework for green hydrogen will serve as a key support mechanism for Namibia’s green hydrogen economy.
Leading nations such as the United Kingdom (UK), South Korea, Germany and Australia have all taken policy initiatives to develop their hydrogen economies. These countries will provide insights into the policy tools that can be used to promote stronger governance, build local demand for hydrogen, and position Namibia as an export hub. This article will open by taking a look at the mentioned nations and close by drawing strategic considerations for the development of a green hydrogen policy for Namibia.
A look at the UK, Australia, South Korea and Germany
Although many nations have simply paid lip service to climate change objectives, the UK’s Climate Change Act 2008 places a legislative obligation on the state to achieve net-zero by 2050. The Act achieves this by establishing a Committee on Climate Change (CCC), which has the obligation of monitoring state policies, providing recommendations which government must follow or submit justifications as to why the recommendations were not implemented.
Namibia may be able to draw a lesson from the UK and re-establish the Green Hydrogen Council of Namibia as a creature of statute with legislative powers to promote the development of the green hydrogen economy, either with a purely economic objective or a climate change objective. Any policy to this effect will need to be carefully drafted to avoid overlap with the powers of the Electricity Control Board (ECB) under the Electricity Act. Such policy will need to focus on separating, on the one hand, the use of electrolysers, production of ammonia and transportation of hydrogen and, on the other hand, the renewable energy projects that will underpin green hydrogen production and the use of hydrogen fuel cells for energy storage. Any step towards building a regulatory framework will begin here.
Australia put forward its National Hydrogen Strategy in 2019. Although this strategy advocates for the use of hydrogen and avails AUD 18 billion for the development of the industry, it does not provide any definitive timelines within which Australia wishes to implement their hydrogen economy. The one clear thing is that Australia aims to position itself as a hydrogen export hub. Australia plans to establish six national hydrogen hubs and has identified Asia as a key market for exports.
Namibia has similar ambitions of becoming an export hub and has identified Europe as a key market. Understanding the Australian approach to positioning itself as an export hub, including its investment and supply chain consideration will help the Namibian case. It will be valuable to analyse the Australian green hydrogen policy environment as it develops.
South Korea has set hydrogen fuel cell technologies at the core of its Hydrogen Economy Plan 2019. This plan aims to increase the number of fuel cell vehicles to 6.2 million by 2040, which will require over 1,000 additional refuelling stations. The plan further aims to establish 40,000 hydrogen buses, 30,000 trucks and 80,000 taxis – although it does not stipulate the policy mechanisms it will use to incentivise such rapid adoption. South Korea sets up an ambitious blueprint for developing a local market for hydrogen and decarbonizing their energy mix. Namibia will do well to keep an eye on this policy environment and pursue its climate change obligations in a similar fashion, after revenues from hydrogen exports begin to flow into state accounts.
Germany has put forward their National Hydrogen Policy 2020 which provides for an overhaul of its energy mix. It is expected that by 2030 Germany will have a demand for 90-110 TWh of hydrogen. Germany plans to produce 14TWh of green hydrogen locally and import the rest of its demand. This plan presents a massive opportunity to secure an off-taker for Namibian green hydrogen. Germany has further proposed 38 measures to supplement its green hydrogen strategy. These measures include a carbon tax on fossil fuels, the repurposing of existing unused natural gas infrastructure, and the introduction of auction rounds for offshore hydrogen facilities. This is bolstered by €9 billion in available funding for the creation and integration of the hydrogen market. Germany has a robust policy system and Namibia has already entered a strategic partnership with Germany to assist in the development of the Namibian green hydrogen economy.
Strategic Considerations for Namibia
The green hydrogen economy needs tailored policy support. Unlike solar and wind power, green hydrogen production is driven by operational expenditure, not capital expenditure. Up to 80% of the cost of green hydrogen depends on the electricity price. Subsidies to promote large-scale deployment might bring down the cost of electrolysers, but this will not necessarily make green hydrogen production cheaper.
One needs an electricity price that is expensive enough to make renewable power bankable for investors and low enough to make the hydrogen produced from it competitive once the cost is passed through. This balancing act will fall within the ambit of the ECB.
An often overlooked aspect of developing a hydrogen economy is the involvement of local town councils. Although a policy may be developed at a national level, there must be efforts at a regional level to reap the benefits of hydrogen. A prime example is Lüderitz, this town stands to be the epicentre of the Namibian hydrogen economy because of its strategic location. Lüderitz is close to the ocean, which is essential for the placement of an electrolyser, it also receives high wind speeds for wind energy generation and has solar power potential as well. Lüderitz is also home to a shipping port which will be crucial for shipping hydrogen to international markets. Walvis Bay has similar prospects. Both towns stand to receive an influx of employment opportunities, infrastructure investment and business activity. This opportunity will require both towns to drive town council resources towards preparing their people and infrastructure for this influx.
Two of the hurdles faced by Namibia with respect to its hydrogen development is the lack of local market and lack of infrastructure. The construction of electrolysers, fuel cell storage facilities and unique transportation facilities will be costly and the lack of a local market introduces increased market risk for investors.
However, Namibia has the expected benefit of being able to produce green hydrogen for as low as $1.50 by 2030. Even after factoring in the cost of exporting hydrogen to consumers in Europe, Namibia still maintains a competitive price with hydrogen produced in European markets. This competitive price point will make the costly infrastructure projects palatable to investors and it opens up enough of an international market to compensate for the lack of a local market. Despite this silver lining, there is still some way to go before the hurdles can be cleared.
States around the world have shown a willingness to develop a regulatory framework for an industry that still does not have a fully functioning market and Namibia stands to benefit from doing the same.
Namibia will likely aim to build its hydrogen value chain at an upstream level first, to benefit from export revenues. The UK and Australia will provide valuable policy lessons in this regard. After success in the upstream, then Namibia can build a local market and focus on decarbonising its industries in the same ways that Germany and South Korea have opted to.
Namibian policymakers will do right to analyse how the policy and legislative tools used in the above countries evolve over the years, and then collaborate with stakeholders like the ECB and town councils, among others, to develop tailored strategies for Namibia.
About the Author
Zach Kauraisa holds a Bachelors’ Degree in Law (LLB) from the University of Namibia and a Masters’ of Law Degree (LLM) from the University of Dundee. He currently serves as a Country Director for an NGO that specializes in advising governments in Africa on governance issues and he works in private legal practice at a leading corporate law firm.
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Namibia's Green Hydrogen Initiative Website - https://gh2namibia.com/downloads/