A new study led by the Technical University of Munich (TUM), in collaboration with the University of Oxford and ETH Zurich, has found that only 2% of 10,000 African locations assessed would be economically viable for exporting green hydrogen to Europe—and only if bolstered by significant European policy guarantees.
This analysis, which departs from earlier, more optimistic cost models, incorporates country-specific financial, legal, and political risks to assess the true cost of capital for hydrogen production projects in 31 African nations. The findings challenge widespread assumptions that Africa’s solar and wind potential alone can secure its place as a global hydrogen supplier.
The key differentiator in the TUM study is its emphasis on context-specific financing costs. While previous models often assumed uniform capital costs in the 4–8% range, the new model accounts for interest rates that could reach up to 27% in politically unstable or high-risk environments. Even in the best-case scenarios under current market conditions, the study estimates financing costs for African hydrogen projects at a minimum of 8%.
Under these more realistic financing conditions, green hydrogen production costs in Africa—assuming conversion to ammonia and shipping to Europe—could reach €5/kg. Only with offtake guarantees and price stabilisation mechanisms from European governments could that price drop to approximately €3/kg, the minimum threshold for competitiveness with domestic European projects that recently secured support under the European Hydrogen Bank.
Of the 10,000 potential production locations assessed, just 200 sites—mainly in Algeria, Kenya, Mauritania, Morocco, Namibia, and Sudan—could theoretically produce green hydrogen at or near €3/kg with support mechanisms in place. However, even these figures are optimistic, as the model only factors in national-level security risks, leaving unaddressed the local instability that often characterizes many resource-rich areas.
The policy implications are stark. Without a robust framework of loan guarantees, price supports, and offtake contracts, Africa’s participation in the emerging global hydrogen trade risks being limited to pilot projects without long-term viability. Instruments like World Bank loan default guarantees or EU-backed contracts for difference would be needed to bridge the financing gap and attract private capital.
The study warns against the risk of policy-led hype without structural support, noting that failure to deliver stable contracts or equitable local value creation could undercut development objectives and public trust. Many African governments have pinned industrial policy hopes on the green hydrogen sector, linking it to job creation, energy security, and climate targets.
The findings add an important layer of caution to the international conversation around Africa’s role in Europe’s hydrogen strategy. While the continent holds clear renewable energy advantages, the financing gap, coupled with risk exposure and infrastructure constraints, may restrict hydrogen trade flows without significant intervention from the EU and multilateral institutions.
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