Hyphen Hydrogen Energy (Hyphen)last week concluded a multibillion-dollar agreement with the Namibian government to construct the much-hyped US$10 billion green hydrogen project in the Tsau //Khaeb National Park. Hyphen has proposed erecting sub-Saharan Africa’s largest, and its only fully vertically integrated, green hydrogen project. 

This week New Era’s Head of Business and Lifestyle, Edgar Brandt (EB), sat down with Hyphen’s CEO, Marco Raffinetti (MR), to discuss the next stage of the project’s development and how Namibia will benefit once it is completed. 

EB: What is the next phase for Hyphen’s green hydrogen project? 

MR: What we will be doing during the next two to two and a half years is put the project together. We know this project is viable from a commercial and technical perspective. Namibia has the best renewable resources in the world. We have done an enormous amount of work during the last 18 months since we were awarded preferred bidder status for the project. Effectively we now have to take the broad plan we have and do the detailed technical design and completion of the environmental studies. 

During this phase we will bring on board all the partners necessary to physically build out the project including the equipment suppliers and engineering, procurement and construction contractors . 

A large amount of the equipment needed for the construction of the project and the construction contractors will need to be brought in from outside Namibia, as these supplies and services are not available in Namibia at the scale required. We will however be maximizing as far as possible the use of local suppliers, services providers and contractors where the capacity exists in Namibia or can be created.. We will during this phase sign up all the contracts with customers and raise all the financing. 

Government will be responsible for putting together the legal, regulatory and fiscal framework to provide for the industry broadly, with Hyphen being the first project to be implemented under this new legislation. This framework is for the first of many projects that will be producing green hydrogen for Namibia. 

EB: How is the process of securing off-takers or customers for the project progressing? 

MR: We recently announced we signed letters of intent or memorandums of understanding with a number of customers in Europe and Asia. We’ve signed up about a million tonnes, which is roughly equivalent to phase 1 of our project. We have a large number of discussions ongoing with other customers which haven’t yet been concluded. Ultimately the goal is to have all those contracts fully signed up and negotiated within the next two years. 

EB: What percentage of the customers needed to make this project viable have been confirmed? 

MR: Our project is 2 million tonnes of ammonia. So, you make the hydrogen then you convert that to ammonia by combining it with nitrogen and it’s a million tonnes per phase. We have sufficient letters of intent signed up for the first phase. We would like to sign up additional volumes to cover the full production volume of both phases of the project. 

EB: How much experience does Hyphen have in setting up a project of this nature? 

MR: There are two shareholders behind Hyphen with very different skill sets. On the one side you have one of the largest wind renewable energy producers in Germany and one of the pioneers of green hydrogen production, . They commissioned their first project in 2011 and as far as we are aware it is now the longest running wind to green hydrogen production facility in the world. For this first project they had to develop their own electrolysers as you could not purchase electrolysers in the market at that time. 

The process of using electricity to produce hydrogen from water is well-known having first been used in the 1800s. It’s a question of commercialising and the scaling up of the technology that and it’s never been cost effective to do that because wind and solar generation capacity wasn’t cheap enough, but now it is. 

Then the other shareholder has very deep infrastructure development experience in Africa. As an example, the company owns the largest independent rail operator in Africa, the only company that has secured rights to operate on South Africa’s railway network as that network opens up for third parties. 

So, you effectively have two companies where one is very commercially focused on mega-scale infrastructure projects on the continent and the other is a highly technical partner in the development of green hydrogen. 

EB: How did Hyphen manage to get its foot in the door for this massive project? 

MR: How that journey started is we were looking at jurisdictions for the development of green hydrogen globally going back to 2020. It is only around this time that the the world started to make policies to support green hydrogen production as it became clear that decarbonization goals would not be achieved without hydrogen. Without the world saying we need green hydrogen in our energy mix and pushing for it through policies, the industry was not going to get there organically on its own. 

We were one of the first companies to come into the picture in 2021, along with a number of other developers. We met with NIPDB (Namibia Investment and Promotion Development Board). We said we are interested in green hydrogen and they said they are running an open and transparent procurement process for the first projects. We participated in market sounding process that government ran to test the market and then we submitted bids as part of the subsequent bidding process. We were very pleased to win both land parcels tendered in the first round. 

EB: Does a project of the scale that Hyphen is proposing exist anywhere else in the world? 

MR: Of a large scale, there is only one under construction in 

Saudi Arabia. Most of projects in operation or under construction currently are very small where they use maily hydro-electricity but those are not scalable because of the limited hydro supply in comparison to the enormous amount of wind and solar available. This is ultimately where the majority of green hydrogen will come from because water is so scarce. We believe that our project is the most advance large scale green hydrogen project in Africa and one of the most advance in the world. 

EB: Whataresomeofthechallenges that smaller green hydrogen projects are experiencing? 

MR: Because they are small, they are not very economical as it’s all about economies of scale. Effectively you are setting up a big factory so if you think you need to build up a port to export product, if you have a small amount of product then your port costs will be very high. Ammonia synthesis, the process to combine the hydrogen and the nitrogen to make ammonia for export, there is also economies of scale on that so if you have a small plant then its uneconomical. It is also quite difficult to move ammonia around because its a dangerous product and has very high safety standards. 

To really achieve decarbonisation with green hydrogen you need large scale projects. 

EB: Will this project be the first of its kind in the world? 

MR: Yes, it will certainly be in terms of the way its structured commercially. If you look at Saudi Arabia, it was a self-developed project and here in Namibia the government has gone out with a clear strategy to run an open tender process to select bidders in an open and transparent manner. Government has also been very clear about developmental objectives in terms of socio-economic development and economic participation in the project. 

What I think is very unique is if you look at how government has structured this. All value outside the socio-economic development, like jobs and local procurement, which is driven into the local economy is being consolidated within government. So for example, land on which rent will be paid belongs to government, royalties will be paid to government, the company will pay taxes to the State. And ultimately equity ownership, which government is interested in, will be bought for what is effectively a nominal value. 

The reason we are doing the project is to make a positive contribution but obviously to get a return for our shareholders. 

What is unique is all of that value is consolidated within government and will either go directly to Treasury or to the Sovereign Wealth Fund. That is very different from some of the other models used globally and ultimately that is what is sustainable because it drives the right behaviour. It is owned by government on behalf of the people in a centralized way so it can be appropriately managed and controlled. We think that’s probably the single best design feature of the entire programme. 

EB: How long before the first energy is produced from this project? 

MR: It is a very big project. So, the detailed design and engineering and raising the financing will take about two or two and a half years. Once you put shovels into the ground and start building it will take another two years for the first phase. We have to build port infrastructure, facilities to bring in all the abnormal cargo, like wind turbine blades. We have to put up facilities in Lüderitz, together with Namport, we have to build roads, accommodation for our permanent and temporary staff. It is an enormous project and we are responsible for building up the entire integrated value chain to be used by future projects. The second phase should follow two years after the first phase 

EB: How will the cost of producing electricity through this project compare to conventional and traditional renewable sources? 

MR: Renewable energy is the cheapest in the world and this is where Namibia’s strategic advantage comes in. Your onshore wind is more extreme than the offshore wind in the North Sea. That ultimately means that Namibia’s cost of producing electricity will be the lowest in the world which will mean your hydrogen cost will be the lowest in the world. And the solar resource is world-class but it is really a combination of solar and wind and how those two are negatively correlated to each other. Ultimately you are running a factory that makes hydrogen and you want that factory running as close to full capacity as possible, which you get when the sun shines in the day and the wind blows at night. 

EB: How much of the electricity produced through this project will be consumed in Namibia? 

MR: 100% of it will be used locally. We will build a power station and some of the power will be sent to the electrolyser but we can never use all of our power because you have peaks and troughs due to seasonal variations. So, there will be excess electricity and if we provide that excess power and depending on how we do that, Namibia can actually eliminate the need for the importation of electricity just from this one project. Future projects of this nature will probably export electricity into the region. 

EB: How much of the profits that Hyphen makes through this project will be reinvested into Namibia? 

MR: Our project is two phases so until the second phase is executed everything is reinvested. We would like to see if there is opportunity to eventually expand further but that depends on what the market would look like at the time. Theoretically production can be expanded beyond the first two phases. It is a very environmentally sensitive area and we have focused on how we responsibly and ethically and sensitively develop the first two phases. We haven’t applied ourselves on how we can expand the project past phase two at this stage from an environmental perspective. 

EB: Where are you actively working to secure customers to purchase the ammonia that will be produced? 

MR: We are looking at those big economies that are driving the decarbonization agenda because ultimately, they will pay a premium to achieve their agendas. Namibia will have to secure that premium to ensure it is being appropriately compensated for its natural resources. It is incredibly important that the balance is correct. 

The large energy consumers are located in the northern hemisphere and the way we see the market is that Europe, Japan and Korea are massive industrial centers that are big carbon emitters. They do not have the natural resources to make their own green hydrogen at the required scale or at all for some of them. If you wanted to build our project in German, as an example, for every wind turbine we out up in Lüderitz you would need two to three in Germany and for every solar panel you install in Namibia you would have to put three in Germany. That is the order of advantage that Namibia has so it simply would not be cost effective to produce in those jurisdictions. And then you won’t have the land because to accommodate that much infrastructure your land requirements will increase exponentially making it very inefficient elsewhere. 

EB: How many green hydrogen projects does the world need to meet its decarbonisation goals? 

MR: If you look at the current forecast for green hydrogen, we need somewhere in the order of 550 million to 660 million tonnes of green hydrogen per year by 2050, and we are at 350 000 tonnes. That is equivalent to the annual consumption of one large steel production plant. The world will need 3000 Hyphen sized projects just to meet the hydrogen-energy mix in 2050 to reach net zero. We will need another 6000 Hyphen sized projects for direct electrification to replace gas fired and coal power plants. Hyphen and the Government of Namibia think Namibia could potentially develop up to 50 of these projects.