The decarbonization of industry in Germany requires a stable supply of green molecules. Green hydrogen (GH2) in the form of its derivative green ammonia is especially relevant in this context. Since Germany will remain a net energy importer in the future, it is now important to actively promote the development of green hydrogen projects abroad. As a lesson from the Russian war of aggression, Germany should increasingly cooperate with other democracies in the development of this new energy industry and not once again make itself dependent on energy imports from individual authoritarian states. Countries in the global south that are democratically governed, respect human rights, guarantee freedom of the press and at the same time have excellent solar and wind conditions, such as Namibia, are particularly suitable for this. On behalf of the Climate Neutrality Foundation, EY has prepared a study on possible political instruments to promote a sustainable supply of “Green Fuels” to Germany, using the example of green ammonia from Namibia.

The initiative for the development of a hydrogen economy came from the Namibian government. A consortium called Hyphen, in which a German company is involved, prevailed in a competitive bidding process. The study examines potential barriers to the GH2 project and develops policy support tools. The study identifies first-mover disadvantages, lack of investor attractiveness, bankability, and implementation speed as the main risks. Although Namibia offers excellent conditions for renewable energy and green hydrogen production, the success of the green hydrogen project largely depends on the interest rates it has to pay in international capital markets. Since Namibia is a developing country, borrowing money for an investment always comes with a risk premium. Due to the large project size of approximately US$10 billion (roughly equivalent to Namibia’s GDP), even small changes in the interest rate have a large impact on the final price of green hydrogen ($/kg). The study concludes that a combination of instruments is needed to reduce project risk and thus project financing costs: a contract for difference (CfD) that provides a minimum price for ammonia; sending government policy and project planning representatives to Namibia; timely development of the necessary import infrastructure in Germany; and finally, a quota for GH2/green ammonia in Germany or Europe.

‍