(Ecofin Agency) - • African green hydrogen exports to Europe could face higher costs than projected
• Study warns current models overlook country-specific investment risks
• Only 2.1% of potential African sites may reach competitive price targets by 2030

Producing green hydrogen in Africa and shipping it to Europe may turn out to be more expensive than initially thought, according to a new report released on Monday, June 2, 2025. The study, titled Mapping the cost competitiveness of African green hydrogen imports to Europe, was conducted by researchers from the Technical University of Munich, the University of Oxford, and ETH Zurich.

The European Union is counting on affordable green hydrogen from Africa to help cut emissions in industries like steelmaking, chemicals, and transport. The EU hopes to import up to 10 megatons of green hydrogen and has already signed deals with countries including Namibia, Egypt, and Mauritania to develop production sites aimed at export.

While many of these projects are still in the planning or concept stages, the researchers warn that earlier cost estimates have been misleading. Most traditional cost models use the same financing assumptions across all countries. However, this overlooks the fact that investment conditions vary widely between nations, especially in many parts of Africa where financial and political risks are much higher.

To correct this, the research team developed a new way to calculate financing costs, the money project developers need to raise capital for building hydrogen plants. Their model includes not just interest rate environments but also local transport and storage options, legal protections, and political stability in 31 African countries.

The study used geospatial models to estimate what is called the Levelized Cost of Hydrogen (LCOH), assuming that plants will begin operating by 2030. It also factored in that the hydrogen will be turned into ammonia and shipped to the port of Rotterdam. The models considered four different scenarios based on interest rate levels and whether governments offer price guarantees or offtake agreements that reduce investor risk.

Costs may far exceed current estimates

Under current high interest rates, developers would likely face financing costs ranging from 8% to as high as 27%, depending on the country and project. Most existing models, by contrast, had assumed a range of just 4% to 8%.

In this high-interest environment, the cheapest hydrogen produced in Africa for export to Europe would cost €4.9 per kilogram without any policy support from Europe. If European governments were to fully back the projects with price guarantees and purchase agreements, that price could drop to €3.8 per kilogram. In a low-interest scenario, the price would range from €4.2 without government support to €3.2 per kilogram with full policy backing.

Even under the most favorable conditions, African producers would face stiff competition. In 2024, a European Hydrogen Bank auction saw accepted project bids coming in below €3 per kilogram.

Few African sites likely to reach price targets

The researchers also applied their model to 10,300 potential sites across African coastal countries. They found that only 214 locations, or just 2.1%, could potentially reach the €3/kg price point under high interest rates, even if backed by firm purchase agreements. These sites were located in Algeria, Kenya, Mauritania, Morocco, Namibia, and Sudan.

However, the analysis only included national-level security risks. Many promising sites are in politically unstable regions, which could further narrow the number of truly viable and competitive locations.

The study concludes that for African green hydrogen exports to become price-competitive in Europe, EU countries will need to commit to buying fixed amounts at guaranteed prices. Long-term protections against payment default, such as those offered by the World Bank, would also help lower costs and attract investment.