In light of the current global geopolitical tensions, including the Russia-Ukraine war, the Israeli attacks on Gaza, and the tensions in the Red Sea, which significantly affect oil and natural gas supply chains, along with the accelerating climate changes threatening the stability of the global ecosystem, the need to transition to sustainable energy sources is becoming increasingly urgent. Traditional fossil fuels, contributing to approximately 90% of carbon dioxide emissions, are the primary cause of climate change. Despite international efforts to achieve a 45% reduction in greenhouse gas emissions by 2030, the world has yet to meet these goals.
In this context, green hydrogen emerges as an innovative solution for achieving the transition to sustainable energy. It is produced through electrolysis using renewable energy sources such as solar and wind energy, making it a completely clean source. Its versatility is highlighted through applications across multiple sectors, including transportation (hydrogen cars and trucks), industry (green steel), and electricity generation (hydrogen turbines), in addition to its potential to replace natural gas in residential uses.
Egypt, with its abundant renewable energy resources and strategic geographical location, aims to become a leading regional and international hub for green hydrogen production and export. The Egyptian government has already launched a national strategy for green hydrogen production in July 2021, as well as another strategy for localizing low-carbon hydrogen in August 2024, enhancing Egypt’s chances of achieving significant economic and environmental gains. However, localizing the green hydrogen industry faces several challenges related to the provision of necessary infrastructure, ensuring adequate supplies of clean electricity, and the need to foster international cooperation and investments to support innovation and technological development.
Introduction: The Nature of Green Hydrogen and Its Uses
The world is currently witnessing an increasing trend towards low-emission hydrogen as one of the promising solutions to combat climate change and reduce carbon emissions. Forty-four governments worldwide have announced national strategies for developing green hydrogen and its derivatives, with many countries working to formulate new plans to integrate hydrogen into their national energy strategies. As ambitions rise to foster greater uses of this clean source, it is globally recognized that low-carbon hydrogen represents a crucial opportunity to decarbonize sectors where emissions are hard to reduce while also enhancing energy security and diversifying sources.
Despite these efforts, low-carbon hydrogen currently accounts for less than 1% of the global hydrogen production. To align with net emissions targets by 2030, green hydrogen production must grow over one hundredfold. Major economies, including the European Union and the United States, have adopted industrial strategies aimed at enhancing the role of green hydrogen in sectors like industry, transport, and environment. In light of these global developments, Egypt has taken significant steps to contribute to this transition by implementing effective measures towards sustainable energy, launching various strategies for producing and localizing both green and low-carbon hydrogen projects, and establishing the National Green Hydrogen Council headed by Prime Minister Mostafa Madbouly in 2023.
Regarding the nature of green hydrogen, it is a type of carbon-free fuel produced using renewable energy sources such as solar or wind energy. It is obtained through the electrolysis of water, where water molecules are split into hydrogen and oxygen using electricity generated from renewable sources. Green hydrogen is distinguished as a clean energy source, as it does not produce carbon dioxide during its production or use, rendering it an ideal fuel for industrial and transport applications. Furthermore, hydrogen plays a vital role in supporting global efforts to combat climate change due to its ability to store and transport energy efficiently, contributing to the stability of electricity networks reliant on renewable energy sources. Green hydrogen is also considered a practical and effective alternative in high-emission industrial sectors like oil refining, steel, and ammonia production, thereby enhancing prospects for decarbonization in these vital sectors.
Advantages of Transitioning to Green Hydrogen
Green hydrogen offers a range of advantages that make it a strategic choice for the future in promoting energy sustainability and reducing dependence on fossil fuels. Transitioning to green hydrogen presents the following benefits:
First, it is a clean and environmentally friendly energy source. The production of green hydrogen is achieved by separating water into hydrogen and oxygen through electrolysis. This process does not emit any greenhouse gases or toxic substances, making it more environmentally friendly compared to traditional energy sources like fossil fuels, which emit significant quantities of carbon dioxide and other pollutants. This advantage positions green hydrogen as a cornerstone in global efforts to mitigate global warming and achieve sustainable development goals.
Second, green hydrogen plays a pivotal role across many industries, such as steel production, oil refining, and fertilizer and ammonia production. It can serve as a clean heat source in steel factories, helping to eliminate the need for coal and reduce harmful emissions. Additionally, it can be used for producing liquid ammonia, a primary fuel for shipping, thereby enhancing maritime transport efficiency and reducing the environmental impact.
Third, one of the significant advantages of green hydrogen is its ability to store large amounts of energy over long periods, surpassing traditional batteries that face challenges in long-term energy storage. Hydrogen can be used to generate electricity via fuel cells, providing a flexible solution to secure energy during peak and emergency times, ensuring the stability of the energy grid. It can also alleviate the burden on electrical networks during high-pressure periods.
Fourth, studies have demonstrated that using green hydrogen to power electric vehicles significantly increases their efficiency compared to traditional gas engines. According to a study from Columbia University’s Climate School, hydrogen fuel cells are 2-3 times more efficient, and the charging duration is much shorter, taking only about four minutes. This factor positions green hydrogen as a cost-effective and practical option for improving vehicle performance and reducing pollution generated from the transport sector. Furthermore, it can provide a sustainable energy source for heavy industries like steel production, as burning hydrogen generates considerable heat, making it a practical alternative to coal and consequently reducing carbon footprint and supporting higher environmental standards in these industries.
Fifth, as hydrogen is the most abundant element in the universe, accounting for about 90% of atomic components, its production from water is considered economical due to renewable energy sources like solar and wind, which reduces production costs compared to fossil fuels. This ability to produce hydrogen from renewable natural sources enhances energy security while reducing reliance on conventional energy sources susceptible to market fluctuations. In addition, the development of hydrogen production and storage infrastructure can generate new job opportunities in research, development, engineering, and green industries, further enhancing countries’ competitiveness in the realm of sustainable energy.
Sixth, the ability to blend green hydrogen with natural gas up to 20% opens avenues for its use in powering household appliances, heating, and cooking, which contributes to energy consumption rationalization and reduced dependence on natural gas. This usage flexibility means existing infrastructure can be easily adapted to support this new energy type without requiring significant investment in network upgrades.
Lastly, green hydrogen offers nearly limitless potential for energy production, as long as water and electricity from renewable sources are available for generating heat and electricity. This potential positions green hydrogen as one of the optimal solutions to meet future energy needs, especially amid the rising challenges of climate change and increasing energy demand.
In summary, transitioning to green hydrogen is not only an environmental and economic option; it is a necessity for achieving a sustainable and efficient energy future. Supporting this shift will contribute to a radical change in how energy is consumed and produced across various sectors. Thus, embracing this transition enhances technological innovation and creates new investment opportunities, contributing to sustainable economic growth and providing green jobs for the future.
Problem Description: Challenges in Localizing Green Hydrogen Industry
The green hydrogen industry faces numerous technical and economic challenges that hinder its localization across various sectors. Among the most notable challenges are:
1-the flammability of hydrogen poses significant safety concerns. Much like fossil fuels such as gasoline and natural gas, hydrogen is considered highly combustible and even poses greater risk due to its very light weight, being about 57 times lighter than gasoline. This lightness allows hydrogen to disperse quickly in the air, greatly increasing its ignition possibilities. Consequently, hydrogen production and storage require stringent safety measures to control risks of leakage and ignition, necessitating precise security systems and high expertise in the transportation and industrial usage of hydrogen to avoid potential disasters.
2- the transportation and storage of hydrogen present considerable challenges due to its physical properties. Transporting hydrogen requires either cooling it to -253°C to convert it to liquid form or pressurizing it to 700 times its normal volume for it to be transported as compressed gas. These processes are not only complex but also costly, requiring specialized infrastructure such as pipelines or custom trucks operating at very low temperatures. This increases logistics costs and complicates the possibility of hydrogen being transported both internationally and within national borders.
3- the fragility of hydrogen transportation infrastructure poses another significant issue. Although hydrogen can be mixed with natural gas for pipeline transportation, this solution is far from ideal because hydrogen reacts with the steel materials used in pipelines, leading to fragility and cracks that contribute to hydrogen leakage, posing safety hazards. Overcoming this challenge necessitates the development of specialized hydrogen transportation infrastructure that aligns with its physical properties, whether by enhancing materials used in pipelines or constructing new independent transportation systems.
4- the high cost of hydrogen fuel cells presents a major barrier. Hydrogen fuel cells rely on expensive catalysts, such as platinum, making their production quite costly. These cells are employed in splitting hydrogen and converting it into electrical energy, a process requiring large quantities of platinum to effectively catalyze. The high costs associated with this technology remain a significant obstacle to its widespread use in sectors like transportation and industry. Although efforts to find cost-effective alternatives to platinum are underway, sufficient economic solutions have yet to be developed.
5- the limited number of hydrogen refueling stations poses a challenge. Despite the global shift towards using green hydrogen, the supporting infrastructure remains limited; for instance, the United States has around 46 hydrogen refueling stations, with the majority located in California. This scarcity makes it difficult for users to depend on hydrogen as a fuel for their vehicles, often requiring long travel distances for refueling. Additionally, the cost of refueling vehicles with hydrogen is significantly higher compared to conventional fuels, discouraging widespread adoption.
6- there is economic competition with gray hydrogen; producing green hydrogen presents substantial economic challenges due to its high costs compared to gray hydrogen produced from fossil fuels. The process of producing green hydrogen necessitates costly renewable energy sources, heightening production costs and making green hydrogen less competitive in the market compared to fossil fuel-derived hydrogen. However, the shift towards decarbonization and the transition to clean energy sources could help decrease green hydrogen costs in the long term, though this requires further economic and political incentives.
In Egypt, the challenges hindering the dissemination and localization of green hydrogen projects include several key aspects. A notable barrier is the lack of necessary funding for manufacturing electrolysis systems, impacting the potential for green hydrogen production. Additionally, hydrogen transportation and storage require specific safety standards, necessitating the development of specialized infrastructure. Moreover, the scarcity of water resources poses a challenge as producing 1 kg of green hydrogen requires approximately 10 cubic meters of water. Given Egypt’s reliance on Nile River freshwater, the use of seawater is currently unviable due to its detrimental effects on electrolysis systems from corrosion, and desalination requires significant investments. Lastly, Egypt faces stiff competition in the global export market from other countries like Saudi Arabia, which are also enhancing their roles in green hydrogen markets. Thus, Egypt must effectively market its production by offering competitive advantages like its strategic geographical location.
Egypt as a Regional Energy Hub: Opportunities for Developing a Green Hydrogen Economy
Since May 2022, the Egyptian government has announced projects with an annual cumulative capacity for green hydrogen production amounting to 2.1 million tons. These projects will elevate Egypt’s total planned hydrogen production to 3.6 million tons, placing Egypt second after Australia, which aims for 9.2 million tons. This development has propelled Egypt to pursue becoming a regional hub for natural gas production and trade, as well as being an active player in the gas market.
Egypt’s potential for developing a hydrogen economy is immense, enabling it to lead the Middle East and North Africa in developing the green hydrogen market and its derivatives. The country possesses substantial renewable energy resources, such as solar and wind energy, with relatively low production costs for electricity generated from these renewable sources, making Egypt a robust competitor against traditional energy sources. Approximately 40,000 square kilometers of land have been allocated for establishing renewable energy projects, which will be linked to hydrogen production and trade projects. Additionally, Egypt’s strategic location, proximity to European and Middle Eastern markets with expected high demand for hydrogen in the forthcoming years, is a supportive factor. The European market, which is the primary importer of hydrogen, is anticipated to see a surge in demand for green hydrogen, increasing from 3% to about 20% in the coming years.
To enhance its status as a regional energy hub, Egypt signed an agreement between the Egyptian Sovereign Fund, Norwegian renewable energy company Scatec, and the Dutch-Emirati Fertiglobe. This agreement aims to construct and operate a green hydrogen production facility as a raw material for producing green ammonia, situated in Ain Sokhna. This project represents a first step towards expanding green investments in Egypt. Furthermore, hosting the United Nations Climate Conference COP 27 in Sharm El-Sheikh in 2022 underscores Egypt’s political commitment to the issue of climate change and the transition to clean energy. Egypt has also set several urgent development goals to increase the share of green investments through green bonds and has prepared a national strategy for combating climate change, in addition to implementing a solid waste management system.
Government Incentives for Developing Hydrogen:
To encourage the private sector and investors, the Energy and Environment Committee at the Egyptian Parliament approved the “Hydrogen Incentives Law,” which includes VAT and income tax exemptions for companies executing green hydrogen projects over five years, provided that approximately 70% of their financing comes from foreign lenders. These companies will also receive exemptions from taxes and fees on machinery and equipment used in these projects. The law provides cash investment incentives for companies, ranging between 33% and 55% of the income tax paid from their activities, making these incentives a significant financial support to enhance the attractiveness of investments in this sector. Furthermore, they will be exempt from property tax and stamp duty, and they will be allowed to import raw materials and spare parts without needing to register in the importers’ registry, as well as exporting their products without restrictions. The law also includes reductions in maritime port and shipping costs by up to 30% and reductions of up to 25% in the value of land usage rights allocated for hydrogen and its derivatives production facilities, in addition to granting grace periods for settling usage rights obligations on lands.
Infrastructure Development for Projects:
Since 2014, Egypt has been working on enhancing the necessary infrastructure to support renewable energy projects, including the development of roads, transportation means, natural gas transmission lines, electricity networks, and interconnection lines with neighboring countries. This infrastructure development strengthens Egypt’s capacity to accommodate the large anticipated renewable energy capacities required for hydrogen production projects. Moreover, the industrial zone in the Suez Canal comprises four industrial areas and six pivotal ports that serve global trade, providing an optimal environment for hydrogen projects. This area is expected to account for about 2 million tons of hydrogen produced in Egypt, supporting Egypt’s target to become a leading hydrogen trading market in the region. Thus, Egypt continues to attract investments in renewable energy and green hydrogen through financial and tax incentives, alongside developing infrastructure. Egypt is on track to achieve a leading position in the hydrogen sector, reinforcing its standing as a regional energy hub for the future.
Conclusion and Recommendations
These recommendations aim to maximize potential benefits and achieve a radical transformation in the clean energy landscape, enabling Egypt to play a key role in sustainable energy markets.
First, activating incentives to encourage the private sector to invest in green hydrogen by providing clear economic incentives for private sector investment in green hydrogen production, such as tax exemptions for plants and companies investing in this field. For instance, support could be provided to cover up to 30% of the total cost for establishing green hydrogen production facilities, offering a ten-year tax exemption for these plants.
Second, developing an integrated infrastructure for green hydrogen refueling stations by establishing a network of hydrogen refueling stations across various governorates, starting with major industrial areas like Suez and Ain Sokhna, where renewable energy projects are planned. A specified budget should be allocated for developing these stations to ensure geographic coverage across all industrial and residential areas to encourage the shift towards hydrogen-dependent transportation.
Third, fostering international cooperation and activating strategic partnerships in the field of renewable energy and green hydrogen, aiming to benefit from the expertise and experiences of leading countries in green hydrogen, such as Germany and Japan. Strategic partnerships should focus on technology transfer and enable Egypt to access international funding programs to support hydrogen projects, while agreements should emphasize facilitating knowledge exchange and financing for major initiatives like the Ain Sokhna renewable energy complex.
Fourth, employing a white certificate system as an incentive mechanism. By implementing a white certificate system that requires suppliers and energy distributors to take energy efficiency measures or pay penalties for non-compliance, these certificates can serve as part of an incentive plan for factories and companies investing in green hydrogen, promoting further investment in this field and ensuring a quicker transition to clean energy sources.
Lastly, establishing strategic partnerships with major hydrogen markets by forming partnerships with leading markets that will rely on green hydrogen in the future, such as the EU, Japan, and South Korea. These partnerships should focus on securing long-term agreements for exporting green hydrogen to these countries, reinforcing Egypt’s position as a primary source of renewable energy.
Ultimately, the transition to green hydrogen is not merely an economic or environmental choice; it is a strategic necessity in addressing increasing global challenges such as climate change and the energy crisis. Egypt possesses all the necessary components to become a leader in this field, from its unique geographic location granting it access to European and Asian markets, to its rich solar and wind energy resources enabling low-cost green hydrogen production. Consequently, Egypt can emerge as a key player in the global green hydrogen market, thereby enhancing its economic and geostrategic standing while reinforcing its commitment to achieving sustainable development goals and reducing carbon emissions.