IPPR weighs in on green hydrogen plans

There are high hopes for the establishment of a green hydrogen industry in Namibia, but researchers warn that a lot needs to be done before that can materialise.

07 January 2022 | Business

ELLANIE SMIT

WINDHOEK

The Institute for Public Policy Research (IPPR) has highlighted many of the challenges Namibia will have to face in getting a green hydrogen industry off the ground, but this may also have positive impacts on the broader investment environment.

In its Quarterly Economic Review for October to December, the IPPR says these issues include taxation, regulation and strategic stakeholders.

“If Namibia is to develop a top-class international green hydrogen brand, it will have to make sure the development is clean in a political as well as an environmental sense.

“Furthermore, the tax regime will need to be clear from the beginning. Like other countries, Namibia has displayed a tendency to chop and change tax rules in the mining sector. As soon as profits arise, government claims it is being cheated, whereas when losses are sustained government is nowhere to be seen.”

Namibia last year announced its plans to develop a US$9.4 billion vertically integrated green hydrogen project in the Tsau //Khaeb National Park. It will ultimately produce around 300 000 tonnes of green hydrogen per year.

The preferred bidder, Hyphen Hydrogen Energy, is set to start production in 2026 and will have the rights to the project for 40 years, once the necessary feasibility processes are concluded.

Ambitious

The firm says the four years of construction are likely to create 15 000 direct jobs and 3 000 more during full operation - and that 90% of them will be filled by locals.

“The scale and ambition of what is being proposed to develop a globally competitive green hydrogen and ammonia industry in Namibia is like nothing the country has ever seen before,” says the IPPR.

“Rather than tread a proven path already taken by other countries that have successfully achieved rapid growth and development, Namibia is aiming to take a great leap forward and become a global leader in an almost totally new industry.”

It says the strength of this vision is that, unlike many past plans, it is based on some economic fundamentals, such as the country’s abundant solar and wind resources and the ample availability of land next to the ocean as well as some existing port infrastructure.

It pointed out, however, that much of the technology is required at a scale that is untested and that needs more development.

Furthermore, the IPPR says that Namibia also possesses little industry expertise, which means foreign expertise will have to be imported.

Government involvement

“Although expertise can be purchased, it means Namibia will find itself in a weak position to develop capacity itself.

“The project entails a wide range of considerable risks: technical, capacity, legal, financial, economic, political, environmental and reputational.”

It says Namibia seems to have accepted that it is going to be the private sector that pioneers and drives this development and bears the financial risks associated with it, although it is not yet clear how the project is going to be financed.

“It is hard to see how the Namibian government is going to play a role of any significance given the current state of the public finances but it would not be a surprise to see the GIPF strong-armed into providing funding.”

According to the IPPR, due to the strategic nature of the investment, it would make sense for the government to hold a stake in the project, rather than assorted individuals chosen for their connections to Government or the ruling party.

“At the same time government is unlikely to be able to contribute much towards funding. If it does contribute, it will have to make sure it is covered if the private developer fails to deliver. Government does not want to be left paying the bills or left with half-completed infrastructure or a severely damaged environment.”

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