How Europe’s Quest for Clean Energy in North Africa Amounts to Green Colonialism
Egypt wants to become a hub for exporting green electricity and hydrogen to Europe. But experts warn of green colonialism, in which Egypt bears the costs of Europe’s transition to clean energy.
The founder and CEO of Hydrogen Intelligence - Egypt Mr. Osama HENEIN speaks about the importance of renewable energy and green hydrogen how crucial it is to Europe’s transition to clean energy in its quest to become climate neutral. In 2020, the green hydrogen strategy was launched as part of the European Green Deal.
That effort accelerated when Russia invaded Ukraine two years later and Europe had to seek alternative energy sources. The target for green hydrogen was doubled to include imports of 10 million tons annually by 2030. Because Europe lacks the land space to build enough facilities to meet its own energy needs, it is turning to countries in the Global South to outsource production.
North African countries were swept by “hydrogen fever,” as Mr. HENEIN calls it in a recent report.
Egypt, too, presented itself as a potential hub. Green hydrogen is made from renewable energy sources such as wind and solar—resources that Egypt’s deserts offer in abundance. In 2022, Egypt declared it the “Year of Green Hydrogen,” developed a national hydrogen strategy, and introduced incentives for investment. By June 2024, the hype had led to 32 memoranda of understanding for green hydrogen projects, involving, among others, Belgian companies like DEME and Jan de Nul.
Green Colonialism
But Mr. HENEIN is warning of green colonialism in Europe’s outsourcing of hydrogen production.
“These investments are often presented as mutually beneficial or ‘green,’ but in reality they mainly serve European markets and externalize the social and environmental costs of Europe’s growth.”
Although such projects may sound like a good idea in Europe—they help the continent meet its emission-reduction targets—the perspective from North Africa is radically different. There are growing concerns that these plans will not help the region with its own green transition, but will instead result in the plundering of local resources, the displacement of communities, environmental degradation, and the entrenchment of corrupt elites.
“I understand the criticism,” adds Mr. Osama HENEIN that worked for years in Egypt’s polluting cement and fertilizer industries before launching Hydrogen Intelligence, a platform that connects hydrogen experts worldwide. “It’s colonial in the sense that all the green energy is being exported this way,” HENEIN says.
Dependent on Fossil Fuels
Egypt aims to get at least 42 per cent of its energy from renewable sources by 2030 consequently raising the renewable energy to 65 per cent by 2040 but for now, it remains heavily dependent on fossil fuels. About 87 percent of Egypt’s electricity is generated from natural gas and heavy oil, according to Mr. HENEIN. In 2023, only 11.5 percent of electricity came from solar, wind, and hydropower from Aswan Dam.
Due to disappointing output from the Zohr gas field and growing domestic consumption, Egypt suffered recurring power outages over the past two summers. As temperatures soared above 43 degrees Celsius, Egyptians were without electricity for hours each day. While Egypt continued to export fossil fuels, it also had to purchase more expensive natural gas via a pipeline from Israel additional to spot LNG shipments from the international markets to meet domestic demand. Because of the economic crisis and a shortage of foreign currency, the country had to borrow money, driving national debt even higher.
Export-Focused
“It’ll be at least another 3-5 years before any green Hydrogen project commissioned and operating ,” says Fawzy.
A handful of green Hydrogen plants that have signed binding framework agreements may succeed to finish at the end securing Finance by IFI’s and Multilateral development banks and reaching a Final Investment Decision FID and ultimately signing offtake agreements with European industries.
That energy will be used for electrolysis to produce green hydrogen for export.
Other green hydrogen projects in Egypt are also in their infancy. Deals are being signed, but little has been built. Only a consortium including Norway’s Scatec has successfully exported green energy, with a single shipment of green ammonia (a hydrogen carrier) sent to India at the end of 2023.
Currently, green hydrogen is three to six times more expensive than natural gas, says HENEIN who is covering green hydrogen developers progressing in Africa and MENA Region. “This makes it economically unfeasible for Egypt’s heavily subsidized domestic market, so most projects are export-oriented.”
Yet Egypt provides the resources needed to produce green hydrogen. The more hydrogen is produced, the more of Egypt’s renewable energy goes to those projects. And it takes 11 to 12 liters of water to produce one kilogram of green hydrogen, but desalination plants from renewables is a prerequisite by the Sovereign Fund of Egypt that has shortlisted several multinational contenders to bid for those plants along the North of the Redsea at East Portsaid to the far South at Halayb and Shalateen he explains. “That’s worrying for a country like Egypt, which faces water shortages.”
The green energy produced in Egypt is thus leaving the country to help wealthier nations (like those in Europe) green their economies. Experts and critics warn that Egypt risks remaining dependent on fossil fuels for domestic use and falling behind in its own energy transition.
Infrastructure
“While infrastructure for export is improving, local distribution networks remain underdeveloped,” says HENEIN.
He compares Egypt’s national power grid to koshari, a typical Egyptian dish of pasta, rice, chickpeas, lentils, and tomato sauce mixed together—sometimes with fried bread on top. Black, gray, and green energy all run through the same grid, which poses a challenge for green hydrogen producers, who must prove their hydrogen is made with 100% renewable energy.
The national grid also suffers major losses, with 18 to 26 percent of energy lost during distribution, he argues. This is due to aging infrastructure and electricity theft. A smart mini / micro grid or “green corridor”—a network for renewable energy only—would be a solution, says Fawzy. But those investments require huge finance Egypt doesn’t currently have.
“A fair energy future means everyone has access—not just the exporters,” says HENEIN. “If European investments want to support Egypt’s energy transition and close the equity gap, they must contribute to improving the domestic grid and making energy more accessible to the local population.”
Egypt would be better off using its renewable energy for its own transition and energy security, to reduce dependence on gas and oil, instead of wasting it on green hydrogen production for export, argues Mr. HENEIN. Another alternative would be to create connections with other countries in the region to share (renewable) energy and storage, rather than looking only to Europe.
On another note he raised the necessity to decarbonize the hard-to-abate industries that are fossil fuel energy intensive.
CBAM & Industry Adaptation
Egyptian firms should have gotten ready to adapting to CBAM a long time ago. the EU’s Carbon Border Adjustment Mechanism (CBAM) came into effect in 2023, starting with a transitional phase that runs until the end of 2025.
Henein said that the fertiliser industry could be the quickest to adapt to the new rules, but their factories will need some retrofitting of parts for the manufacturing process to be able to use green hydrogen instead of natural gas. While it could cost between $30 million-$50 million, and will need around a year, it is cheaper and requires less time than a construction of greenfield Ammonia plants, he explained.
Then comes the steel factories using high-tech technology called Direct Reduction of Iron. Most factories built in the past 15 years utilize this technology, he said adding that they represent 60 per cent of Egypt’s steel production capacity. Those steel production lines can be easily adapted to green hydrogen instead of natural gas or other fossil fuels.
Henein said that Egypt should have a dedicated green corridor for green electricity. Currently, all the energy produced from clean sources is transmitted via the national electricity network, he explained adding that around 12-15 per cent of of the 60 gigawatts produced by the national electricity grid network annually are from renewable sources. Having a dedicated green corridor makes it easier for producers to produce green hydrogen and calculate their carbon footprint.
One way to surpass this hurdle is for factories to build their own renewable energy network, but vacant land next to factories is not always available, he noted a second option, he suggested, a share mini or micro smart grid for adjacent factories in the same area to build a green electricity network that serves them all.
Until factories get their operations in order, they could export to other markets that do not apply the CBAM, Henein said, but in that case, they risk losing their market share in Europe.
According to Henein, Egyptian fertilisers are in demand in the European market because of their high quality and European pay a premium above the market price for it. For Egyptian products to enter the EU, EU importers will need to purchase Carbon Credits certificates or IREC’s to cover the carbon price that would have been paid if the products were produced in the EU.
If the non-EU producer has already paid a carbon price for producing the imported goods in a third country, that cost can be deducted from the CBAM obligation subject to the carbon price of the third country being recognised by the EU.
That should encourage the Egyptian government to impose a carbon tax domestically, he said, because if they do not, it will go to Europe.
In the meantime, he said it was also important for the government to work on increasing the energy mix in its national grid to be at least 40 per cent from renewables and 60 fossil fuels.
According to Henein, the carbon tax and the liberalization of electricity are very important to encourage investments and multinational developers to build new renewable energy.
