German chancellor Olaf Scholz has announced that the federal government will provide €4bn ($4.4bn) towards the Africa-EU Green Energy Initiative by 2030, with an eye to building out renewable hydrogen production capacity.

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The Africa-EU Green Energy Initiative, which is part of the wider EU Global Gateway programme, aims to fund at least 50GW of renewable electricity and support 40GW of electrolysis capacity on the continent, according to documents from November 2022.

The programme is expected to unlock €15bn in funding from public institutions and private investors, €3.4bn of which will come via EU grants.

In a speech at the G20 Compact with Africa summit in Berlin, Scholz further underlined Germany’s commitment to purchase large volumes of H2 produced overseas.

“A long-term partnership also includes a clear message to the Compact states: Produce green hydrogen and you will find reliable buyers in us!” the chancellor remarked.

“I am convinced that this will provide planning security and will encourage significant investments in these countries,” he continued.

The federal government currently targets 10GW of domestic electrolyser capacity by 2030, meaning large-scale imports will be required in order to meet around 65-74% of projected H2 demand at the start of next decade.

Germany is already in the midst of its first state-backed €900m auction for hydrogen imports via the H2Global double-sided auction (see panel below), which is set to award ten-year contracts for producers in the first half of 2024.

However, Scholz noted that development of hydrogen projects in African countries “should of course not only enable exports”, but also facilitate sustainable and affordable energy supply in home markets.

Some non-government organisations, such as Corporate Europe Observatory, have criticised Germany’s push to fund export-oriented green hydrogen projects, many of which are being led by Western developers, as exploiting land and water resources in historically colonised countries for the benefit of European industry, while offshoring the potential health and safety risks of these projects to economically disadvantaged communities.

However, on the other hand, a number of African governments, including South Africa, Kenya, Namibia and Angola, have expressed their support for green hydrogen exports or published strategies that envisage H2 being used to decarbonise their own industry and power.

International developers have also pointed to the major economic benefits that come with building these facilities, from land leases in early stages, to income from levies and taxes on projects once operational, to the localisation of value-add industries such as green iron.

H2Global’s double-sided auction mechanism

Hintco auctions ten-year purchase agreements for hydrogen or its derivatives from suppliers, who competitively bid to offer the lowest possible price.

H2 buyers then bid for sales agreements from the state intermediary company, with the difference in buy and sell prices covered by government funding.

The first three H2Global auctions for imports of green ammonia, methanol and e-SAF respectively are currently evaluating bids, with deliveries from winners expected by the end of 2024.