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Mozambique’s hydrogen potential: a lot of hot air?

Given the abundance of renewable resources in many African countries, green hydrogen has been labelled by some as “Africa’s next great resource”

Currently Mozambique generates more electricity than it can use at the Cahora Bassa hydroelectric dam, pictured. Credit: Rich Beilfuss, International Rivers

As a major exporter of green electricity within Southern Africa, Mozambique is theoretically well placed on the continent to capitalise on the energy transition by using its renewable power generation to create green hydrogen. But there are major obstacles that mean it may never happen.

Western countries, notably the United States and European Union member states, see green hydrogen as critical to achieving net zero carbon emissions and controlling global warming, while meeting global energy demands. Hydrogen is already burned in various industrial processes and can also be used to power vehicles; it can also be used to store energy without the need for batteries, and is easier to transport over very long distances when converted into methanol or ammonia and shipped. Burning hydrogen produces only water vapour and warm air as waste products.

Making hydrogen green offers the potential to decarbonise carbon-emitting industries such as steelmaking and fertiliser, which currently use so-called grey hydrogen. This is made from natural gas and generates carbon dioxide as a waste product when produced. Grey hydrogen production caused 900m tonnes of CO2 in 2020, according to the International Energy Agency (IEA).

Given the abundance of renewable resources in many African countries, green hydrogen - produced by splitting water molecules into hydrogen and oxygen via electrolysis powered by electricity from renewable sources — has been labelled by some as “Africa’s next great resource” and the IEA suggests that Africa could become a leading player globally in hydrogen produced from renewables in order to limit global warming.

Most hydrogen production plants are located next to the industrial facilities they serve, and hydrogen is not traded globally on a large scale like oil. But the IEA forecasts that global demand for hydrogen, currently in the region of 90m tonnes a year, will increase several times over between now and 2050, raising the potential for new players to come in and meet demand. Exactly how much demand is by then will depend on how much governments bet on hydrogen as opposed to other routes to decarbonisation, specifically electrification. Germany, which among European countries is one of the most advanced and proactive in preparing to use hydrogen, forecasts that it will need 95-130 TWh of hydrogen by 2030. Depending on conversion factors, this is equivalent to about 2.5-4m tonnes.

To give an idea of the power requirement involved, if the entire 1.5GW output of the forthcoming Mphanda Nkuwa hydropower plant were to be used to produce green hydrogen, then it could theoretically produce in the region of 188,000 tonnes of green hydrogen in a dry year, taking into account its load factor (how much power it is expected to generate relative to its installed capacity) and current electrolyser efficiency.

“There’s not a global hydrogen market at the moment; it doesn’t exist… we do see a global market developing, but that’s going to take a few years, or more than a decade” says Hector Arreola, principal analyst at energy consultancy Wood Mackenzie.

Currently Mozambique generates more electricity than it can use at the Cahora Bassa hydroelectric dam, which it exports to South Africa, Zimbabwe and other neighbouring countries. But its renewable generation capacity is set to massively increase when the Mphanda Nkuwa hydro plant, due for completion in 2030, comes online. Plans may also be restarted to increase the generating capacity at the Cahora Bassa dam by adding turbines to the site at the north bank of the reservoir. This could add another 1.25GW.

The Mozambican government has expressed interest in the potential of producing green hydrogen, and last year sought to commission a feasibility study on hydrogen production at Mphanda Nkuwa. Zitamar News understands that the government plans to take preliminary conclusions from this study to the United Nations’ COP 28 climate change conference in November.

Price gap

The problem with using this power to generate hydrogen, however, is that it would probably be too expensive. For now, green hydrogen currently costs more to produce than grey: in 2021, the price difference was between $1.50 and $8 per kg according to IEA figures. Unless it is subsidised, therefore, customers have no incentive to use green hydrogen while they are still allowed to produce grey hydrogen. The US offers tax credits to green hydrogen producers, and the EU plans to hold auctions for hydrogen at subsidised prices. But these schemes are aimed at local producers, and are not expected to last for decades like those for wind and solar power generation.

The cost of green hydrogen is expected to fall over time, as the electrolysers used to produce it become bigger and more are built. But the biggest factor in the cost of green hydrogen is electricity, which accounts for about 65% of the cost. The IEA estimates that, if the cost of solar electricity falls to $14 per MWh by 2030, hydrogen produced using it will be competitive with grey hydrogen. The existing Cahora Bassa hydroelectric plant currently charges around $40 per MWh, and Mphanda Nkuwa is expected to have to charge more than that in order to cover its estimated $4.5bn cost.

It is therefore unlikely that Mphanda Nkuwa’s electricity will ever be cheap enough, even though the dam is likely to produce electricity more constantly than solar or wind farms with cheaper tariffs, a factor which improved its economics.

Arreola notes that already today, some countries are generating cheap enough renewable energy to produce green hydrogen at a competitive price. Green hydrogen production facilities are still only at the development or construction phase, but Mphanda Nkuwa is not due to begin generating electricity before 2030, by which time green hydrogen could be in production at competitive prices from cheaper sources.

Markets and transport

An alternative would be to produce green hydrogen from other renewable sources, such as solar or wind power. A British company, Jearrard Energy Resources, is planning to do just that, with ambitious proposals to construct a 12GW solar-to-green-hydrogen facility in Inhambane province, and a 125km pipeline to transport the hydrogen to the coast. The company aims to export hydrogen to other southern African countries, including South Africa. This would require an installation of solar panels on a scale not before seen in Mozambique, and larger than some green hydrogen projects in developed markets. At the end of 2022, Mozambique had only 60MW of solar farms in operation.

But these grand plans, still at an early stage, would have to overcome various challenges to move forward. Solar power in Mozambique is not currently very cheap either: the Dondo solar farm, expected to be commissioned by the end of the year, will sell power at $52.45 per MWh. The cost of shipping also needs to be added before making a comparison. Maritime shipping is estimated to add $1 to $2.75/kg, while pipeline transport for shorter distances would add an estimated $0.18/kg per 1,000 km for new hydrogen pipelines and $0.08 for retrofitted gas pipelines.

An energy industry consultant, who spoke on condition of anonymity, argued that some countries enjoy an advantage as green hydrogen producers because of their cheap renewables such as Chile, or location to markets such as Morocco, where there are proposals to build a hydrogen pipeline to Spain to serve Europe. Mozambique is more distant from Europe than many African countries, its renewable electricity is not very cheap, and it has relatively little oil and gas pipeline infrastructure that could be adapted to carry hydrogen, putting it at a disadvantage. “I don’t think Mozambique is better positioned for green hydrogen,” they argued.

Demand from southern Africa is likely to be much smaller, with the exception of South Africa. There, the government plans for green hydrogen to replace polluting fuels in road transport. But South Africa itself intends to become a net exporter of green hydrogen, doubling its hydrogen production from 2% of global demand today to 4% by 2050, according to its Hydrogen Society Roadmap published in 2021. South African petrochemicals firm Sasol is itself planning to become a major green hydrogen producer, with its first project at Sasolburg due to become operational by the end of this year. On the other hand South Africa is currently short of electricity supply, and faces problems in finding the necessary power for these ambitions.

In this context, with many factors weighing in the balance against the chances of Mozambique becoming a commercial-scale producer of green hydrogen, the cautious words of the Mphanda Nkuwa project office’s director Carlos Yum when the feasibility study was announced — “we do not intend to become a hydrogen player” — look pragmatic. The results of the study remain to be seen, but if they confirm that it would be unfeasible to produce green hydrogen from Mphanda Nkuwa’s power, it would strengthen the Mozambican government’s position as it focuses on developing gas reserves, and support the argument that gas rather than hydrogen is Mozambique’s fuel of choice for the energy transition.

Blue hydrogen?

An alternative to producing green hydrogen would be for Mozambique to produce so-called blue hydrogen from its gas fields. This is like grey hydrogen, but involves carbon capture and storage technology to prevent the polluting waste gases, carbon dioxide and carbon monoxide, from entering the atmosphere, and storing them instead. Like green hydrogen, blue hydrogen has not yet been commercially produced on a large scale.

“I would think Mozambique should maybe monetise blue hydrogen,” the energy industry consultant said. “I believe Mozambique, with the gas they have, could reach [a hydrogen price of] a dollar a kilo, which can be competitive in the market”.

The consultant added that blue hydrogen production could make use of the infrastructure to store and transport liquefied natural gas (LNG) from Mozambique’s proposed multi-billion-dollar LNG projects, when and if they are delivered. Carbon capture facilities would need to be added. But this would require the cooperation of the companies that own the concessions to produce gas from the gas fields in the offshore Rovuma Basin, led by TotalEnergies of France, Eni of Italy and the United States’ ExxonMobil. So far, these firms are not thought to have shown any interest in making hydrogen out of their gas, and their existing development plans agreed with the government do not include it.

Unless the economics of producing green hydrogen in Mozambique change, green hydrogen thus looks unlikely to take off in the country, and unless gas developers embrace blue hydrogen, it too will be undeliverable in the foreseeable future.

This article by Zitamar News was supported by the African Climate Foundation.