In a groundbreaking endeavor set to redefine the global hydrogen landscape, Egypt has forged a partnership with Saudi Arabia’s ACWA Power to embark on a US$4 billion green hydrogen project strategically situated in the Suez Canal Economic Zone (SCZONE).
This initiative will not only harness Egypt’s renewable energy potential but also propel the nation into the forefront of the rapidly expanding green hydrogen market. With an ambitious target of US$1.7 per kilogram by 2050 and a visionary goal of claiming 8% of the global green hydrogen market, Egypt is positioning itself as a key player in the sustainable energy transition.
Over US$4 billion in initial investment
The genesis of this transformative project can be traced back to a landmark memorandum of understanding created in December 2022 which has now been crystallized into a concrete reality through a comprehensive framework agreement. The inaugural phase, underpinned by wind and solar plants, is set to produce a substantial 600,000 tonnes a year of green ammonia – an essential hydrogen carrier.
The initial investment of over US$4 billion highlights the scale of this green shift. However, Egypt’s ambitions extend beyond this target with a potential second phase aiming to catapult production capacity to an astounding 2 million tonnes a year, cementing the nation’s standing as a green hydrogen powerhouse.
This agreement signifies a strategic collaboration between ACWA Power, a stalwart in water, power, and green hydrogen ventures, and a consortium of Egyptian state-owned entities. The Sovereign Fund of Egypt, the Suez Canal Economic Zone, the Egyptian Electricity Transmission Company, and the New and Renewable Energy Authority will collectively wield their influence thus emphasizing the pivotal role this project has in Egypt’s broader clean energy aspirations. The combination of expertise and resources in this collaboration is a testament to the shared commitment to propel Egypt to become a sustainable and influential force in the global energy landscape.
Hydrogen industry between challenges and driving force
Jessica Obeid, an energy policy consultant, sheds some light on Egypt’s green hydrogen industry, recognizing the challenges but also pointing out the key enablers. Egypt’s experience in hydrogen, its participation in the trade market, and the country’s vast renewable resources all play a crucial role. In addition, its strategic location near Europe, particularly in view of the Russian invasion of Ukraine, puts North Africa in a favorable position. Europe’s focus on green hydrogen, both in production within EU states and export, offers opportunities for the region. Obeid stresses the importance of political and institutional support, exemplified by Egypt’s national hydrogen strategy.
Despite acknowledging the challenges such as cost-competitiveness, infrastructure, storage, transport, and standardization, Obeid also highlights the sector’s potential. She delves into the bankability of green hydrogen projects by focusing on factors such as renewable energy generation capacity costs and electrolyzer scale and expense. These are critical considerations, especially given Egypt’s economic challenges – higher interest rates, reduced lending capacity, and increased system component costs.
Obeid suggests optimizing project value through local content requirements. Egypt’s national hydrogen strategy, with a 20% minimum local content requirement and promised tax credits, is an encouraging start. Ensuring technology transfer, local capacity building, and incentivizing local manufacturing of system components could, she believes, pave the way for a robust green hydrogen industry in Egypt.
Egypt as a global hydrogen production hub
Egypt has been partnering with international entities such as C2X, a Maersk subsidiary, to boost its green hydrogen sector within the SCZONE. These partnerships, including a US$3 billion investment for a green fuel facility, aim to make Egypt a global hub for hydrogen production. Additionally, the National Council for Green Hydrogen was established in August to promote green investment and sustainable development.
Dr. Sameh Noman, a renowned Professor of Engineering and an expert in renewable energy, confirms that Egypt is well-equipped with the essential components required for the production of renewable energy. This includes its wealth of experience, favorable climate, technical capabilities, and the networks that will facilitate the transportation of energy from any production site. As a result, energy can be generated in various locations and transported to stations that will produce green hydrogen.
In a conversation with DevelopmentAid, Dr. Noman pointed out that Egypt has desalination stations along the coasts of the Red and Mediterranean Seas which are crucial for generating the water needed for the equipment involved in green hydrogen production. Another key element is that the water desalination devices, which operate based on water salinity levels and varying electrical energy requirements, adhere to international standards for hydrogen extraction.
“The nation needs cutting-edge technology for renewable energy, water desalination, and advanced water analysis capabilities. To meet this need, Egypt has introduced a comprehensive package of incentives for companies involved in green hydrogen production. These incentives include a profit percentage ranging from 33% to 55% of the company’s earnings,” Dr. Noman emphasized.
He added that these incentives are complemented by exemptions from future taxes, with the exception of private cars. Other benefits include customs-free exports, facilitation for company establishment, hydrogen exports, and the importation of the necessary equipment. There are also exemptions for buildings that are dedicated to green hydrogen production as well as streamlined licensing processes.
Required infrastructure available
Explaining Egypt’s strategic position in global hydrogen competition, Dr. Noman remarked:
“In response to the global competition in hydrogen production, which is superior to fossil fuels, Egypt has designated a specific area for hydrogen production in the Suez Canal.”
He further explained that this area is intricately connected to one of Egypt’s major international gateway ports, Ain Sokhna, through a dedicated land corridor for green hydrogen. A specialized berth for hydrogen exports and storage facilities within the berth have been established, ensuring that the requisite infrastructure for this project is readily available. Recognizing the technical hurdles, particularly the equipment for water analysis, Dr. Noman highlighted their pivotal role in the manufacturing process. Although he acknowledged the initial high costs linked to establishing renewable energy stations, he stressed the necessity of collective efforts from a significant number of investors in the early stages. Dr. Noman explained that, over time, these costs would substantially diminish, fostering sustainable growth within Egypt’s green hydrogen industry. This holistic strategy, in his view, holds the potential to establish a resilient green hydrogen industry in Egypt.
