Mozambique expands hydrogen ambitions with German support

From the newsletter

The southern African nation of Mozambique has become the latest entrant in the continent’s green hydrogen race after signing a financing agreement with Germany to support an indigenous sector. Under the deal, Berlin will provide an initial $540,000 to fund market studies for green hydrogen initiatives and potential investment opportunities.

• Though late to the party, Mozambique boasts abundant renewable resources, including hydropower, solar and wind, providing the useful conditions for competitive green hydrogen production.

• While the feasibility study is a big first step, the country faces challenges such as political instability, unclear policies, inadequate regulatory frameworks and financing gaps.

More details

• Signed on March 29 in Maputo between the country’s power supply company Eletricidade de Moçambique (EDM) and the German Development Bank (KfW), the agreement aims to lay the groundwork for Mozambique’s green hydrogen industry, with production supporting both local energy needs and exports of surplus hydrogen and its byproducts to international markets.

• The funds will be used to hire specialised consultants to assess the technical and economic feasibility of green hydrogen production in the country. The study, expected to take six to nine months, will be followed by an international tender for the project development.

• “The promotion of green hydrogen in Mozambique can help diversify the energy supply, create job opportunities and boost industrial and infrastructure development,” Ronald Münch, Germany’s Ambassador to Mozambique said in a joint statement.

• If the study proves successful, the country could launch its second green hydrogen project. Already, UK-based renewable energy developer Jearrard Energy Resources (JER) Group announced in July 2023 its plans to develop the country’s first green hydrogen facility in Inhambane province, Southern Mozambique

• Mozambique’s abundant renewable energy resources, particularly its 12 GW hydropower potential and 12 major river basins, position it as a strong candidate for green hydrogen production. The Cahora Bassa plant, supplying over 72% of the country’s electricity and the upcoming Mphanda Nkuwa hydropower project further strengthen its role as a regional energy hub.

•  The country’s energy sector is also diverse, holding the largest natural gas reserves in Sub-Saharan Africa, over 180 trillion cubic feet. With natural gas a key economic driver, the country’s expertise in large-scale energy projects, infrastructure planning and export logistics offers a unique advantage. This experience could be leveraged to develop a green hydrogen ecosystem, allowing the country to scale its hydrogen industry more efficiently compared to nations starting from scratch.

•  However, while Mozambique has the right resources, it remains in the early stages of development compared to other African nations advancing in green hydrogen, such as Namibia and Morocco. Namibia has already attracted billions in investment for hydrogen projects, while Morocco has dedicated extensive land and policy incentives to accelerate production. Yet, the country’s untapped potential, coupled with its geographical advantages and proximity to Namibia and South Africa, two regional hydrogen leaders, could help it catch up.

• Its strategic location on Africa’s eastern coastline is one of its biggest strengths. It provides direct access to major global shipping routes, making it easier to export green hydrogen and its derivatives, such as ammonia. This logistical advantage positions the country as a potential key supplier to both Europe and Asia, which are leading global hydrogen demand.

•  Despite these advantages, Mozambique faces considerable challenges that could slow its hydrogen ambitions. Political instability and security concerns, particularly the ongoing insurgency in Cabo Delgado, have already disrupted major energy projects, including LNG developments. A similar situation in the hydrogen sector could deter investors and delay large-scale projects.

•   In addition to security concerns, the Southern African nation must address significant infrastructure limitations. While it has a relatively well-developed power sector compared to some African nations, integrating large-scale renewable projects with hydrogen production will require extensive investment in new grid infrastructure, desalination facilities and storage capacity. Overcoming these barriers will be crucial to ensuring the viability of its hydrogen industry.

•  Beyond physical infrastructure, Mozambique also faces a shortage of skilled professionals in the hydrogen sector. Unlike other established regional players who have more established energy industries with experienced workforces, the nation will need to invest in workforce development, technical training and knowledge transfer programs to build the expertise required for green hydrogen production. Without a skilled labor force, the country may struggle to develop and operate large-scale hydrogen projects efficiently.

• Germany's investment in Mozambique’s hydrogen market study reflects the growing role of international collaboration. As a key financier of green hydrogen initiatives across Africa, Germany aims to secure future energy supplies while supporting the continent’s economic growth. Recent investments in Morocco, Namibia and South Africa highlight Germany’s expanding influence in Africa’s hydrogen future.

Our take

• While the initial German funding is small, it suggests Mozambique is now on the radar for larger future investments—provided it can address its security, infrastructure and policy challenges.

• Mozambique’s vast hydropower resources give it a unique advantage in green hydrogen production, but it's overreliance on hydro also presents risks. Climate variability and the need for diversified renewable energy sources could impact long-term hydrogen viability if not strategically managed.

• Mozambique’s entry into the green hydrogen race highlights Africa’s growing importance in the global energy transition. As more nations invest in hydrogen, the continent is positioning itself as a key supplier, leveraging its renewable resources to meet rising international demand.