Hyphen project will produce far more green hydrogen than the domestic market can consume

Namibia together with Hyphen Hydrogen is developing the biggest green hydrogen plant in sub-Saharan Africa. The plant is expected to come in production by 2026 and create thousands of jobs. In this Q&A, we spoke to Hyphen Hydrogen about the scope of the project. Hyphen Hydrogen says the challenges for this project include the construction and running of this project that will involve laying the foundations via the first project to build out an entirely new sector within the Namibian economy. This includes skills and training for new jobs such as wind turbine maintenance and engineering, procurement and construction contractors needed to construct the project.

Hyphen Hydrogen is currently conducting roadshows across the country. What is the message?

Hyphen and the Government are currently embarking on a national roadshow from August until October 2023.

This roadshow will see members of the government and Hyphen engage with various stakeholders across Namibia to share information on the Hyphen project and the Socio-economic Development (SED) Framework recently launched at an event in the //Kharas regional capital of Keetmanshoop.

The roadshow commenced in the Khomas region on Tuesday, 22 August 2023, and will subsequently tour major towns spanning all fourteen (14) regions nationwide.

We’re looking forward to engaging with different stakeholders to explain more about the project and share information about how the SED Framework can benefit Namibians.

For the benefit of several Namibians, can you explain the difference between hydrogen and green hydrogen?

Hydrogen is the most abundant element in the universe and is a colourless and odourless gas.

Green hydrogen is made through electrolysis powered by renewable energies such as wind or solar. Electrolysis involves using an electrical current to break down the water molecule into oxygen and hydrogen by electrodes.

Given the ambitious goal of the US$10 billion green hydrogen production plant, can you provide a breakdown of the project’s phases and their respective timelines?

The pioneering Feasibility and Implementation Agreement (FIA) is split in five broad sequential phases:

Preliminary phase: Lasting up to six months to allow for all conditions precedent to the FIA to be met and for GRN to exercise its option to acquire up to a 24% interest in the project.
Feasibility phase: A two-year feasibility period in which Hyphen is tasked with undertaking the assessment of the feasibility of developing the project.
Validation phase: The Namibian Government has 120 days following Hyphen’s submission of the Feasibility Report to consider and validate (if appropriate) the final project design.
Financing and construction phase: Hyphen will raise finance for the project and construct the project.
Operational phase: Hyphen will be responsible for the operation and maintenance of the Project, and for its eventual decommissioning at the end of the term.

How does the project plan to secure the necessary financing, and what strategies are in place to mitigate financial risks?

The total budget of this project up to the Final Investment Decision (FID) is €93 million. This €93 million will be spent preparing and assessing the project and its viability before construction begins. On 20 June, the government exercised its right to take up a 24% interest in the Hyphen project up to FID, which is €23 million.

In raising the necessary funding for Namibia’s hydrogen ambitions, the government has sought partners to assist in its realisation and has developed relationships with international partners.

At the date of the FID, the entire capex of US$10 billion needs to be funded by equity and debt. Typically, projects are funded by 70% debt and 30% equity. Therefore, significant additional equity commitments will be required.

GRN has secured a letter of intent from the European Investment Bank (EIB) of €500 million in funding, which should be sufficient to fund 100% of the government ‘s equity requirements for phase one of this project.

Given the scale of the project, what assurances are there regarding the availability of critical resources, such as renewable energy sources and water, to sustain green hydrogen production at the projected levels?

Namibia is amongst the world’s top resource-rich locations for co-located onshore wind and solar energy, with the cost of renewable energy being the single largest driver of the cost of green hydrogen production.

Could potential supply chain risks, such as critical materials or equipment shortages, affect the project’s progress?

Hyphen will work with all our partners and contractors to ensure we have all the necessary materials and equipment to construct this project.

Can you provide details on the readiness and maturity of the green hydrogen production technologies employed in the project / Have pilot projects or feasibility studies been conducted to validate the chosen technologies on a similar scale before implementing them in this significant project? / How does the project plan to address potential technological challenges and uncertainties during implementation?

Hyphen is currently conducting several feasibility studies to investigate the readiness and effectiveness of the technology to be deployed in this project.

Challenges for this project include the construction and running of this project that will involve laying the foundations via the first project to build out an entirely new sector within the Namibian economy. This includes skills and training for new jobs such as wind turbine maintenance and engineering, procurement and construction contractors needed to construct the project.

This project is in the advanced stages of development, with the front-end engineering design already commenced with a clearly defined timeline targeting the production of 1Mt of ammonia by 2028 (phase 1) and a further 1Mt by 2030 (phase 2).

Progress to date includes:

Full pre-feasibility study and most pre-FEED engineering studies completed.
Meteorological measurement equipment is currently being deployed across the project area.
Initial concept studies completed.
Initial concept engineering is complete on wind turbine, solar PV, battery energy storage systems, electrolysis, ammonia loop and storage.
Hyphen has been ramping up internal technical and human resources.
Appointed ILF as Owner’s Engineers and is currently onboarding them.
Scaling up the local team with head office in Windhoek and site office in Luderitz.

What market research or assessments have been conducted to gauge the demand for green hydrogen in the intended export markets, and how does the project plan to capture a share of that demand? / How does the project address potential global competition from other green hydrogen producers?

Energy is an internationally traded commodity.

Most of the world’s high energy demand is in the northern hemisphere.

With certain exceptions, these countries do not have the natural resources to develop their green hydrogen production at a sufficient scale to enable them to achieve global decarbonisation goals.

This presents an opportunity for countries in the southern hemisphere, like Namibia, which has significant supplies of renewable wind and sun, to participate in meeting these countries’ green hydrogen energy needs.

Namibia is a small economy with modest energy demand. The Hyphen project will produce far more green hydrogen than the domestic market can consume. However, many pilot projects are being developed to stimulate the use of green hydrogen in Namibia.

Namibia is one of the world’s top locations for co-located wind and solar, making this some of the most cost-competitive green hydrogen in the world.

What renewable energy sources will be used to produce green hydrogen in Namibia, and what is the expected capacity of these sources?

Wind and solar power will be used to produce green hydrogen.

Phase 1: 3.5GW renewable (wind and solar) and 1.5GW electrolyser
Phase 2: 3.5GW renewable (wind and solar) and 1.5GW electrolyser

Will Hyphen Hydrogen manufacture green hydrogen only? If not, what other by-products does Hyphen Hydrogen want to develop?

Hyphen’s project will create green hydrogen, which will be converted into green ammonia and shipped internationally.

Are there concerns about overreliance on a single export market (Europe) for green hydrogen, and how does Namibia plan to diversify its customer base?

Germany is at the forefront of driving Europe’s decarbonisation plans through green hydrogen and is globally an early leader driving the energy transition. As a large, industrialised region, Germany and Europe more broadly require large volumes of imported green hydrogen as Europe does not have the resources to produce all its requirements itself, thus making the European market a key export destination for Namibia’s green hydrogen.

In addition to Europe, Korea and Japan are expected to be critical markets for Namibia’s green hydrogen in the short term and South Africa in the medium term.

Considering the long distance involved, how does the project plan to ensure the security and reliability of the hydrogen supply chain from Namibia to Europe? / Are there concerns about potential disruptions in the transportation infrastructure, such as pipeline attacks or shipping accidents, and what contingency plans are in place?

In large-scale infrastructure projects such as this, there are always going to be concerns over health and safety and other issues. Liquid ammonia can be dangerous, especially during transportation, and Hyphen will work with all relevant authorities and industry bodies to ensure its safe handling.

Given its port connectively to global markets in Europe and Asia, Namibia is a reliable country for green hydrogen export.

On 20 June, Hyphen signed a Memorandum of Understanding (MoU) with the Government of the Republic of Namibia (GRN), Namibian Ports Authority (NamPort), NamPower, the Port of Rotterdam (PoR), Gasunie and Invest International. The MoU builds on the existing relationship between NamPort, PoR and Hyphen in developing the new master plan for the port of Lüderitz, which has been underway for over a year and will be completed in the coming months.

What measures will be taken to address energy security in Namibia if a significant portion of green hydrogen production is earmarked for export?

Hyphen has proposed to the government to supply excess electricity from the project or oversize the electricity production in excess of Hyphen’s requirements to supply excess electricity.

This project will catalyse Namibia’s energy independence and enable the country to become a net exporter of low-carbon energy.

Are there any regulatory or legal challenges in European markets that could affect the import and use of green hydrogen from Namibia? / What are the geopolitical and trade-related risks associated with exporting green hydrogen to Europe, and how are they mitigated?

European markets, particularly Germany and surrounding countries, are moving forward with positive legislative and regulatory mechanisms that support the import of green hydrogen into Europe.

The EU wants to produce 10 million tonnes of green hydrogen and import another 10 million by 2030.

How many MoUs has Hyphen Hydrogen signed so far? Can you give details of the MoUs?

September to May 2023: During this period, Hyphen signed Memorandums of Understanding (MoUs) with several potential customers in Europe and Korea, targeting the supply of over 1,000,000 tonnes of green ammonia annually.

MOU agreements have been signed with:

Hyphen signed an MoU with ITOCHU, one of Japan’s largest general trading and investment companies, to enter into talks on areas of potential collaboration on this landmark multi-billion-dollar green hydrogen project.
Hyphen signed a Letter of Intent (LoI) with Koole Terminals. This covers the proposed import of green ammonia into north-western Europe.
Hyphen signed non-binding MoUs with two major industrial companies with the aim of Hyphen providing them with up to 750,000 tonnes of green ammonia annually. The agreements with a major chemical company and Approtium, a South Korean hydrogen producer, target offtake of up to 500,000 tonnes and 250,000 tonnes a year, respectively.
RWE and Hyphen signed a MoU that could see RWE offtake up to 300,000 tons of green ammonia annually from Namibia.

What guarantees are in place to ensure the project’s long-term sustainability and profitability, considering the changing landscape of renewable energy?

The concession agreement Hyphen signed with the Government on 26 May 2023 governs how Namibia’s first green hydrogen project will be realised and operated for a 40-year term. This agreement is world-leading regarding its clarity for investors and is well ahead of any potential followers in the green hydrogen export market.

How will local communities be involved in the decision-making process, and what benefits will they receive from the plant’s operations?

The government and Hyphen have taken inspiration from economic development frameworks worldwide to ensure the inclusion of the most progressive practices and that the project’s impact is inclusive and beneficial to local communities.

Hyphen will closely partner with central, regional and local government, traditional leadership, local communities, civil society organisations and other key stakeholders impacted by the project to co-create solutions that lead to a comprehensive and transformative socio-economic development strategy.

It is estimated that the project will create up to 15,000 new jobs during the construction phase 3,000 permanent jobs during its operation, with the target for 90% of these jobs to be filled by Namibians and 20% by youth.

The project targets 30% local procurement of goods, services and/or materials during the construction and operational phases.

Estimated figures will be verified in the feasibility phase through baseline studies, transitioning them to firm figures for the government approval under an agreed governance process.

Baseline studies include developing a project workforce and competency and planning model and, conducting a national skills audit, skills gap analysis and undertaking a workforce future planning assessment.

What regulatory and monitoring bodies will oversee the plant’s operations to ensure environmental and safety standards compliance? / How will the green hydrogen production plant ensure minimal environmental disruption and maintain the integrity of local ecosystems?

Hyphen will comply with all environment and safety standards and the various agencies within the government that uphold these standards.

Hyphen has assembled a team of Namibia’s and the region’s most knowledgeable environmental experts to advise and undertake studies on the least impactful manner the project could be developed.

Hyphen has appointed the global environmental consulting firm SLR as its environmental practitioner to guide the project through the environmental process in accordance with Namibian law and international best practices.

SLR will be supported by a team of specialist experts, each a leader in their field, to undertake the various specialist studies. The environmental process for the whole project will be broken into a number of phases and into various sections of the project to be constructed to cater for the complexity of the process and the scale of the development.

Additionally, Hyphen has incorporated the ecology of the project area into the project’s design to avoid highly sensitive biodiversity and bird areas as an example.

Namibia is a country that is proud of its natural heritage and National Park ecosystems and has enshrined within the country’s Constitution the maintenance and protection of the natural environment.

Hyphen and the government are committed to sustainable development in this sensitive environment to the highest international standards (such as the IFC/World Bank Equator Principles) and in compliance with Namibian environmental legislation.

Given Namibia’s arid climate, what measures are in place to guarantee a stable and sustainable water supply for the plant’s operations?

Hyphen will be responsible for procuring its own water supply in accordance with all Namibian laws and subject to all normal licensing requirements.

Hyphen is planning on building its desalination plant for the project (at its cost). It is anticipated that a certain proportion of the desalinated water thus produced for the project will also be made available by Hyphen to the municipality of Lüderitz, which will significantly improve the water supply availability in the area for the benefit of Lüderitz residents.

What initiatives will the project undertake to give back to the local community, such as supporting education or healthcare programs?

Hyphen has proposed to the Government to supply excess electricity from the project or oversize the electricity production in excess of Hyphen’s requirements to supply excess electricity. The exact scale and basis on which electricity could be supplied is to be considered and assessed during the feasibility period of the FIA.

Hyphen has proposed to the government to oversize the desalination plant to supply water to Lüderitz. The exact scale and basis on which water could be supplied is to be considered and assessed during the feasibility period of the FIA.

During the feasibility phase, Hyphen will develop a project workforce competency and planning model to accurately determine the required number of jobs based on job types, skills, and competency levels required for the project’s implementation, operation and maintenance.