<h3 dir="ltr">Introduction</h3>
In August 2024, Egypt unveiled its long-anticipated low-carbon hydrogen strategy, marking a significant milestone in its efforts toward sustainable energy solutions (Enterprise, 2024). This unveiling followed the nation's pledge to introduce its national strategy for green hydrogen production at the 2022 UN Climate Change Conference (COP27) convened in Sharm El-Sheikh. (Kandil, 2022). The strategy set an ambitious target to capture up to 8% of the global tradable amount by 2040 (Advisian Group Limited, 2024).&nbsp;
Before the publication of the strategy, Egypt had taken several steps towards promoting the low-carbon Hydrogen Economy in Egypt.&nbsp; On January 27, 2024, the Cabinet of Ministers approved Law No. 2 of 2024, which provides incentives for projects producing green hydrogen and its derivatives. Consisting of eight articles , this law details the scope, types, and conditions of both tax and non-tax incentives. It took effect on January 28, 2024. (M.Nasser &amp; Partner, 2024).&nbsp;
By March 2024, Egypt had signed more than 30 memorandums of understanding (MoUs) with partner companies to develop hydrogen production plants, waiting to be turned into contracts. Moreover, during the 2022 COP27 summit, Egypt inked nine partnership agreements with leading international developers (UNIDO, 2024).&nbsp;
The commentary highlights areas for improvement in Egypt's low-carbon hydrogen strategy. Although it does not provide a comprehensive analysis or cover all aspects that could be enhanced, such as the governance structure, It will briefly analyze two important areas for improvement: Value chain and competitiveness through transportation. It is important to note that the analysis in this commentary is based on a short version of the strategy, which includes key messages but lacks technical details.&nbsp;
<h3 dir="ltr">Low-carbon hydrogen strategy analysis&nbsp;</h3>
The strategic plan for Egypt's hydrogen production aims to produce 1.5 MTPA of green hydrogen, increasing to 5.8 MTPA by 2040. The country also has a more ambitious scenario that targets 3.2 MTPA by 2030 and 9.2 MTPA by 2040. This shift could boost Egypt's GDP by $10-18 billion USD by 2040 and create over 100,000 jobs. The strategy proposes a phased approach, starting with a pilot phase in the 2020s, followed by scale-up in the 2030s, and full implementation in 2040 (Advisian Group Limited, 2024).
The development of a strategy aims to maximize the value creation from the hydrogen economy. The strategy emphasizes that "Egypt should target greater involvement in the value chain, such as completing a greater proportion of the assembly within Egypt" (Advisian Group Limited, 2024). However, the strategy did not focus on this aspect. For instance, it only mentioned electrolyser manufacturing once without specifying any targets. There is a lack of a roadmap for local assembly or manufacturing of components in the hydrogen value chain. Additionally, the progress track section failed to provide any key performance indicators (KPIs) to track the progress of local components in Egypt.
Egypt's low-carbon hydrogen strategy should place greater emphasis on local value creation. This can be achieved through a comprehensive value chain evaluation to determine local supply and manufacturing opportunities. Additionally, a target should be set for local electrolyser manufacturing. As per the strategy, Egypt aims to achieve a minimum electrolyser capacity of 13GW by 2030, which is adequate for establishing a 1GW electrolyser factory. It is pertinent to acknowledge that the current global electrolyser manufacturing capacity almost reached 11GW in 2022 (IEA, 2023). Establishing a 1GW electrolyser factory could significantly bolster Egypt's position as a prominent global player in the hydrogen economy and&nbsp;facilitate export opportunities to African nations harbouring ambitious green hydrogen production goals (Yohannes, 2022).
Egypt has expertise in green hydrogen production but lacks local manufacturing capability. Collaboration and technology transfer can address this. As an example, In June 2020, Morocco and Germany entered a partnership to advance green hydrogen production and related research projects. The agreement outlined two initial projects: the "Power-to-X" project by the Moroccan Solar Energy Agency (MASEN) and the "Green Hydrogen and Applications" platform at the Research Institute on Solar Energy and New Energies (IRESEN). Their goal is to establish the first industrial green gas production plant in Africa (IRENA, 2020).
<h3 dir="ltr">Competitiveness and hydrogen transportation</h3>
The strategy outlines that Egypt boasts two significant competitive advantages, positioning it as a major hydrogen exporter to Europe and global markets. These advantages include abundant renewable capacity, which leads to low-cost renewable electricity, and a strategically advantageous geographical location in close proximity to Europe with access to global maritime traffic through the Suez Canal. It's important to note that these advantages also extend to the entire North African region.
Hydrogen must be stored, transported, and distributed before it can be utilized. The associated transport and storage costs will significantly impact hydrogen's competitiveness. If hydrogen can be utilized near its production location, these costs could be minimal. However, if hydrogen needs to travel long distances before use, as in the case of hydrogen export to Europe, the transmission and distribution costs could be three times higher than the cost of hydrogen production (IEA, 2019).&nbsp;
Effective hydrogen transportation is crucial for the export of low-carbon hydrogen. For distances less than 1,500 km, transporting hydrogen as a gas by pipeline is likely the cheapest delivery option, while for distances above 1,500 km, shipping hydrogen as ammonia or a Liquid Organic Hydrogen Carrier (LOHC) is likely to be more cost-effective (IEA, 2019).
The current strategy fails to address this challenge effectively. It should recommend further studies to identify ways for Egypt to reduce transportation costs. One option is to construct a hydrogen pipeline from Egypt to Europe. Alternatively, Egypt could become a hub&nbsp; for Gulf countries to build a pipeline connecting the Gulf to Europe. Studies suggest that linking the Gulf to Europe with a hydrogen pipeline from Qatar via Saudi Arabia, Egypt, and the Mediterranean Sea is feasible, as shown in Figure 1. (AFRY &amp; RINA, 2023). Another action is to investigate the cheapest option for shipping hydrogen and develop a plan to construct or repurpose the existing infrastructure or add new capacities to accommodate the expected trade volume.&nbsp;
Marine transport is another realm that could bolster Egypt's competitiveness and elevate its status as a prominent global contender in the hydrogen market. While Egypt's low-carbon hydrogen strategy entails an assessment of priority applications, it overlooks the marine transport as one of the most pivotal applications that could furnish Egypt with unparalleled competitive advantages.
The Suez Canal is a critical waterway for the shipping industry due to its strategic significance. It plays a vital role in global trade, processing 10-12% of the world's total trade volume. Furthermore, around 30% of the world's container trade and 9% of the global oil demand traverse this vital maritime route (Garc&iacute;a-Vazquez, 2024).&nbsp;
The shipping industry accounts for about 3% of global greenhouse gas emissions and 9% of transportation-related emissions. In comparison, maritime shipping comprises 80-90% of international trade (IRENA AND METHANOL INSTITUTE, 2021). In July 2023, the International Maritime Organization (IMO) set new decarbonization targets for international shipping, aiming for net-zero greenhouse gas emissions by 2050. By 2030, at least 5% of energy should come from zero or near-zero GHG emission technologies, increasing to 10% thereafter (IMO, 2023).
The IMO decarbonization targets offer Egypt the chance to supply renewable fuels to the global shipping industry, establishing it as a key bunkering hub. During COP28, Waleid Gamal El-Dien, Chairman of the Suez Canal Economic Zone, Alaa Hagar, Head of the Egyptian Minister of Petroleum's Technical Office, and Terje Pilskog, CEO of Scatec ASA, signed a memorandum of understanding to provide green fuel bunkering services for Scatec in East Port Said (SAFETY4SEA, 2023). Despite this progress, the strategy lacks clarity in defining the significance of this opportunity and establishing specific attainment objectives for green bunkering.
Looking into Singapore's strategy, for example, it is evident that it emphasizes bunkering in its hydrogen initiatives. In 2021, the Port of Singapore was the busiest container transhipment port, handling over 2.8 billion gross tons and supplying nearly 50 million tons of marine bunker fuel as the world's largest bunkering hub. The Maritime and Port Authority of Singapore (MPA) is investing in tools to enhance maritime capabilities for a low-carbon future and is collaborating with other port authorities to create green and digital shipping corridors for sustainable vessel operations (Ministry of Trade and Industry Singapore, 2022).
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfFjIVgc48MT_n3pbuGqQy0se5fgS1z5wDWpWzwGiCmwFCnF-2nUtyPUHZYatiQ6sy8pNiDz4bR-8jmWhbXs5SqRPp9KxhvEZNq7zlyPpfs05qzflyezxYA0ZcHqEwzO5XFglcPOZWqinySDutLhSg?key=N9PFc-pd64Ua-Nvk91o4SkZI" width="629" height="441">Source: (AFRY &amp; RINA, 2023)
<h3 dir="ltr">Conclusion</h3>
Egypt has the potential to be a key player in the low-carbon hydrogen market, thanks to its abundant renewable energy and closeness to demand centers. With a goal to capture 8% of the global market share, the strategy aims to leverage these strengths, though it has some shortcomings that may hinder success.&nbsp;
With the announced goal of hydrogen production, Egypt should consider domestic manufacturing of all components within the value chain to fully leverage the hydrogen economy's potential benefits. It is suggested that the market possesses sufficient capacity to realize economies of scale through efficient manufacturing. Initial steps could involve fostering bilateral collaborations with countries possessing the requisite technologies and demonstrating a willingness to engage in cooperative ventures.
One critical area that requires enhancement is hydrogen transportation. Notably, the expenses associated with hydrogen transport surpass the costs of its production, which necessitates a thorough evaluation of the most efficient methods for delivering hydrogen to demand centers in order to sustain the advantages of low-cost production. Furthermore, it is essential to capitalize on Egypt's strategic geographic position by advocating for the utilization of the Suez Canal and facilitating green bunkering services. This approach will serve to establish and reinforce Egypt's status as a leader in the market.
<hr>
References
<ul>
<li dir="ltr">Advisian Group Limited, 2024. Egypt&rsquo;s National Low Carbon Hydrogen Strategy &ndash; Short Version, s.l.: Government of Egypt.</li>
<li dir="ltr">AFRY &amp; RINA, 2023. Hydrogen pipeline from the Gulf to Europe: use case and feasibility considerations, s.l.: AFRY &amp; RINA.</li>
<li dir="ltr">Choksi, A. M., Meeraus, A. &amp; Stoutjesdijk, A. J., 1980. The planning of Investment Programs in The Fertilizer industry. s.l.:The Johns Hopkins University Press, Published for the World Bank.</li>
<li dir="ltr">Enterprise, 2024. Enterprise. [Online] Available at: <a href="https://enterprise.news/climate/en/news/story/bffd28ae-87e0-457f-be92-16c28d9e947a/egypt-publishes-its-national-low-carbon-hydrogen-strategy">https://enterprise.news/climate/en/news/story/bffd28ae-87e0-457f-be92-16c28d9e947a/egypt-publishes-its-national-low-carbon-hydrogen-strategy</a> [Accessed August 2024].</li>
<li dir="ltr">Garc&iacute;a-Vazquez, G., 2024. OEC. [Online] Available at: <a href="https://oec.world/en/blog/suez-canal">https://oec.world/en/blog/suez-canal</a> [Accessed September 2024].</li>
<li dir="ltr">IEA, 2019. The Future of Hydrogen, s.l.: International Energy Agency.</li>
<li dir="ltr">IEA, 2023. Electrolyser. [Online] Available at: <a href="https://www.iea.org/energy-system/low-emission-fuels/electrolysers#overview">https://www.iea.org/energy-system/low-emission-fuels/electrolysers#overview</a> [Accessed September 2024].</li>
<li dir="ltr">IMO, 2023. 2023 IMO Strategy on Reduction of GHG Emissions from Ships. [Online] Available at: <a href="https://wwwcdn.imo.org/localresources/en/OurWork/Environment/Documents/annex/MEPC%2080/Annex%2015.pdf">https://wwwcdn.imo.org/localresources/en/OurWork/Environment/Documents/annex/MEPC%2080/Annex%2015.pdf</a> [Accessed September 2024].</li>
<li dir="ltr">IRENA AND METHANOL INSTITUTE, 2021. Innovation Outlook: Renewable Methanol, Abu Dhabi: International Renewable Energy Agency.</li>
<li dir="ltr">IRENA, 2020. Green Hydrogen Cost Reduction: Scaling up Electrolysers to Meet the 1.5⁰C Climate Goal, Abu Dhabi: International Renewable Energy Agency.</li>
<li dir="ltr">IRENA, 2024. Green hydrogen strategy: A guide to design, Abu Dhabi: International Renewable Energy Agency.</li>
<li dir="ltr">Kandil, A., 2022. AhramOnline. [Online] Available at: <a href="https://english.ahram.org.eg/News/479175.aspx#:~:text=Egypt's%20green%20hydrogen%20strategy%2C%20implemented,in%20a%20statement%20on%20Saturday">https://english.ahram.org.eg/News/479175.aspx#:~:text=Egypt's%20green%20hydrogen%20strategy%2C%20implemented,in%20a%20statement%20on%20Saturday</a>. [Accessed August 2024].</li>
<li dir="ltr">M.Nasser &amp; Partner, 2024. M.Nasser &amp; Partner. [Online] Available at: <a href="https://mnasserlaw.com/green-hydrogen-in-egypt/#:~:text=A%20cash%20investment%20incentive%20known,the%20project%20or%20its%20expansions">https://mnasserlaw.com/green-hydrogen-in-egypt/#:~:text=A%20cash%20investment%20incentive%20known,the%20project%20or%20its%20expansions</a>. [Accessed September 2024].</li>
<li dir="ltr">Ministry of Trade and Industry Singapore, 2022. Singapore's National Hydrogen Strategy, s.l.: Ministry of Trade and Industry Singapore.</li>
<li dir="ltr">SAFETY4SEA, 2023. SAFETY4SEA. [Online] Available at: <a href="https://safety4sea.com/suez-canal-aims-to-be-the-new-hotspot-for-alternative-fuel-bunkering/">https://safety4sea.com/suez-canal-aims-to-be-the-new-hotspot-for-alternative-fuel-bunkering/</a> [Accessed September 2024].</li>
<li dir="ltr">UNIDO, 2024. Mapping of financial and technical assistance of Clean Hydrogen, s.l.: United Nations Industrial Development Organisation (UNIDO).</li>
<li dir="ltr">Yohannes, B., 2022. United Nations. [Online] Available at: <a href="https://www.un.org/osaa/news/green-hydrogen-%E2%80%93-viable-option-transform-africas-energy-sector">https://www.un.org/osaa/news/green-hydrogen-%E2%80%93-viable-option-transform-africas-energy-sector</a> [Accessed September 2024].</li>
</ul>

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Energy

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Inclusive Development

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