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13 October 2023
Newsletter | Gide Africa
The African continent is considered to be one of four hubs with exceptional potential for green hydrogen production worldwide.
A few days ago, we attended the World Power-to-X Summit in Marrakech, where we witnessed real enthusiasm from public and private players alike, and where the issue of regulation was omnipresent during the debates.
Despite encouraging prospects and the determination of host countries, the absence of appropriate regulations is slowing down the development of several projects. This is a major challenge for the deployment of such initiatives on the continent.
Indeed, the lack of regulation is making exchanges between investors and host countries more complex. Each party tries to defend its interests in an uncertain legislative and regulatory framework, making discussions more complex and slowing down the final investment decision for some sponsors.
Fortunately, most of the jurisdictions in which we operate are taking a proactive approach to this issue, with governments are making considerable efforts.
Among other things, the government of the Kingdom of Morocco is currently finalising the "Morocco Offer" for green hydrogen and is working in parallel to finalise the regulatory texts designed to complete the existing legislation on renewable energy production.
Mauritania, where we have been working with sponsors since 2021 on a green hydrogen production project, is finalising a draft Hydrogen Code. The promulgation of this code should undoubtedly accelerate the pace of development of this operation.
More generally, we note that certain jurisdictions, such as Morocco, where we have a presence, have a comparative advantage in their ability to draw on existing, well-developed legislation.
In other words, countries with the right legal framework for the development of independent renewable energy or water production projects, environmental legislation and proven public-private partnership arrangements have a clear competitive advantage.
In addition, the existence of legal frameworks conducive to attracting investors is a determining factor.
From this point of view, flexible exchange rates, an openness to international capital and lenders, rules governing access to land and the existence of administrative facilitation measures are all decisive factors in making an investment.
For these countries, the challenge will be to clarify or supplement existing legislation to address the legal issues specific to green hydrogen production projects.
For example, the legal status of hydrogen will need to be clarified in certain cases, with legislators also needing to address issues of storage, transport, guarantees of origin and hydrogen certification to ensure traceability and facilitate distribution on a national and international scale.
The governments concerned will also have to develop contractual schemes and an adapted offer to promote private initiative, while also preserving the public interest.
The green hydrogen sector is in competition between four main hubs: Africa, the Americas (USA and Chile), the Middle East (Saudi Arabia) and Oceania (Australia).
According to the International Renewable Energy Agency (IRENA), these are "the continents with the highest technical potential for green hydrogen production."
On a continental scale, Morocco, Mauritania, Southern Africa and Egypt are the main players.
With regard to Morocco, the World Energy Council underlined that it was "one of six countries in the world with great potential to produce green hydrogen and its derivatives, with an estimated market share of at least 4% of global demand by 2030."
In this vein, the government of the Kingdom of Morocco recently clarified its action plan to encourage the development of green hydrogen projects, starting with the publication of a "Green Hydrogen Roadmap".
This will be complemented by the forthcoming launch of a "Morocco Offer" by 2024.
To date, the announced action plan is based on three development phases: from 2020 to 2030 – local use of green hydrogen, with exports of the resulting products; from 2030 to 2040 – lower production costs and the development of projects on a national and international scale; and finally, from 2040 to 2050 – the global and local expansion of hydrogen use, notably for heat production, urban mobility and transport development.
The Moroccan authorities also want to emphasise research and development in this area, through the creation of the Green H2A technology platform, envisaged as the nucleus of the Morocco Hydrogen Cluster. This infrastructure, a first on the African scale, aims to support the industrial deployment of the green hydrogen sector and its applications in Morocco.
On the legislative and regulatory front, we are not aware of any draft code under consideration, and it would seem that the approach adopted would be more to supplement existing provisions on an ad hoc basis. From a practical point of view, and given the timeframe inherent in legislative work, this approach would also be consistent with the government's desire to present the "Morocco Offer" in the near future.*
It is difficult to give a complete answer to this question, as the legal regime applicable to these projects has yet to be perfected.
However, as in all projects involving the development of new infrastructure, it is clear that the experience of public-private partnership schemes must be put to good use.
It is essential to establish a contractual framework to ensure the optimum allocation of risks and responsibilities over the long term. This will facilitate project financing, development and long-term operation, while protecting the interests of governments and local communities.
Moreover, green hydrogen production projects are, by their very nature, complex projects organised around several components (renewable energies, water, storage, transport, industrial, etc.) which generally require the implementation of contractual packages that take into account the roles and skills of the various stakeholders.
From this point of view, the experience of investment projects structured around framework agreements involving the various competent public entities and investors should also serve as a useful precedent.
