Ester Mbathera
Cirrus Capital, a corporate advisory, capital raising, and research company, has warned against public borrowing or any use of taxpayer subsidies for the development of green hydrogen initiatives.
In a commentary released last week, the company’s founder, Rowland Brown, said the warning stems from the risks surrounding green hydrogen.
“We further note that Namibians should hope that the hydrogen hype delivers. However, using Namibian public funds for this is nothing short of reckless, especially given the ample other, very real, demands on the public purse. Using Namibian tax-payers funds, whether from the revenue of today or through borrowing from the future, should be an absolute red-line,” said Brown.
In his complementary Brown notes that the green hydrogen initiative, once seen as the country’s “post-COVID recovery plan,” now faces challenges.
Brown points out that the government may be shifting away from relying solely on donor funds to potentially using public finances for these projects.
In a recent document produced by GH2Namibia titled “Namibia Green Hydrogen Sector Development: Frequently Asked Questions,” a question was asked about whether government debt will increase due to investments in GreenH2 projects.
The response was that government debt may increase depending on the nature of funding received or used.
“If funding from donor sources is tapped into, then the debt is not growing. However, when concessionary capital backed by government guarantees is used, then the size of the debt will grow. However, the critical factor is the cost of the debt. If the government taps into normal loan facilities at the current cost of capital, then the debt burden grows. However, when cheaper and concessionary capital sources are used, the debt burden is smaller,” responded GH2Namibia.
According to Brown, GH2Namibia’s responses are both dodging the question and factually incorrect in places.
“The answer was not a resounding ‘no’. Thus, it seems the sentiment is now shifting from ‘we will use donor funds’ to ‘we might use Namibian tax-payers funds’ to develop this industry, be these the tax funds of today or tomorrow’s taxpayers. This is deeply concerning, and thus it is now time to raise alarm bells,” he said.
Brown further expressed concerns about the low global demand for hydrogen, particularly as a fuel source, and added that the uncertain uses of heating and transportation are largely responsible for the predicted demand increase.
Cirrus also identified the risk of the country having to subsidize the sector, which could significantly strain its finances.
“Given that demand for green hydrogen is largely linked to the north-western sub-hemisphere and that the sector needs to be subsidised, there is no conceivable reason that Namibia should be providing these subsidies. Indeed, if there is a need for subsidisation, and this is not forthcoming from those who most want the transition, it should raise some red flags as to the actual commitment to this space from the governments of Europe,” he said.
According to Brown, because of the uncertainty surrounding green hydrogen as a future fuel source, the large-scale infrastructure planned for Luderitz may well be a white elephant.
He further questioned the environmental sustainability of Namibia’s green hydrogen projects, particularly the transformation of national parks into solar farms.
Despite promises of employment creation in the green hydrogen space, according to Brown, there is low employment, with limited Namibian inputs and limited Namibian uses for the output product in the space.
“Before we borrow from future generations, perhaps we should assess if there is any technical veracity to these green hydrogen claims. Perhaps it is time for more people to assess this space through a “true or false” filter and set aside, at least for a moment, the safety of the consensus,” warned Brown.
Green Hydrogen Commissioner, James Mnyupe, during a recent international engagement, admitted that significant investments in infrastructure and a robust regulatory framework are essential to the country’s ability to scale up green hydrogen production.
Mnyupe acknowledged that financing remains a major hurdle.
“Significant investments are required in power generation and logistics, especially for renewable energy and transport infrastructure. There is a need to establish a robust legislative framework to attract investment and support green hydrogen projects,” he said.
Apart from the financial constraints, Mnyupe said the country will need to focus on upskilling its workforce to meet the demands of the green hydrogen sector.
Mnyupe pointed out that the country is already working on training initiatives to build local expertise in renewable energy.
“Numerous initiatives are underway to develop and enhance skills through targeted training programs,” he said.
Despite these obstacles, Mnyupe said Namibia will continue to push forward with its Green Hydrogen Programme.
He added that the next steps include building on these partnerships to secure sustainable mineral supply chains for green energy development, an outcome of the Minerals Security Partnership (MSP) Forum last month.
