Eline van der Linden
The world talks about the need for a Just Energy Transition (JET). What could or should JET look like in Namibia?
I work in the Green Hydrogen (GH2) and Green Industrialisation space. Oftentimes, I am asked by journalists and representatives from civil society organisations how it can be “just and fair” to export a source of energy when 50% of Namibians have no connection to the electricity grid. It is a fair question that has a reasonably simple answer. Not all energy sources are suited for the power grid, and access to electricity is more closely tied to the power distribution infrastructure than to the source of power.
Let’s break this down
The power grid in Namibia is not currently ‘green’ or ‘clean’. Much of the electricity transmitted on Namibia’s grid (some 45%) is generated by coal-powered, greenhouse gas (GHG)-emitting stations in South Africa. Namibia’s power grid does not reach many corners of the country, and only 20% of households in remote rural areas are connected to the grid. With more than a quarter of all households living in high-density areas, only 70% of urban households are connected to the grid.
In this context, JET would then require a greening of the grid and an expansion of the grid, or alternatively, providing off-grid, reliable renewable energy installations for low-population-density and widely dispersed settlements in rural areas, as well as high-density urban informal areas.
Initially, the aim was to achieve universal access by 2030; however, due to cost, technical capacity, and logistical challenges, the government had to shift this target to 2040. Connecting approximately 432,000 existing and future households to electricity to achieve universal access is a mammoth task estimated to require over N$13 billion.
Breaking this down further, how can we finance this?
We can set aside funds from current tax revenue, promote public-private partnerships, and request grants and concessional funding from our donors. Additionally, we can grow the economy by bringing new sectors, such as green industries and oil and gas, online. These options have their own merits and are not mutually exclusive.
To expand the economic pie by creating new economic sectors is an attractive solution but has its own challenges. The oil and gas sector may contribute to GHG emissions and potentially alter Namibia’s net carbon sink status, depending on investment and activity in the GH2, green industrialisation, and renewable energy sectors. The sizable investments in this sector are likely to bring symptoms of the “Dutch Disease”, whereby oil dollars create inflationary pressure, adversely impacting the purchasing power of Namibians outside the oil and gas sector. Furthermore, access to decarbonisation and green funding sources may be curtailed. Equally, taxes and royalties will boost state revenue.
The GH2 sector will further reduce the carbon footprint of Namibia and that of countries that will import and use our GH2 and its derivatives. Leapfrogging into clean industrialisation will avoid CO₂ emissions. Namibia is likely to attract more decarbonisation and green funding, as well as tax, land lease, and concession fees, and royalties, which will strengthen the fiscus. At the same time, inflationary pressure can also be expected from large projects in this sector, like those in the oil and gas sector.
Unpacking a JET for Namibia is a complex process
What is clear is that neither the oil and gas sector nor the GH2 sector plays an immediate or direct role in the nation’s electrification to achieve universal access to electricity.
Should our offshore gas be used for gas-to-power generation and excess renewable energy from GH2 projects be evacuated into the Namibian power grid, the impact is likely to be mixed. More homegrown electricity will likely be available at a lower cost compared to imports. Electricity from gas and renewables instead of electricity produced from coal will ‘green’ the grid but will not achieve a 100% green status since gas emits CO₂, albeit less than coal.
Green financing may be curtailed, and goods produced using grid power will be less competitive than goods produced with fully ‘clean’ energy. Access to South African and EU markets will be constrained with the tightening of the South African Carbon Tax regime and the introduction of the Carbon Border Adjustment Mechanism (CBAM) in Europe.
Should offshore oil be refined on Namibian soil, promising synergies with the GH2 sector may be realised. GH₂ can replace the grey hydrogen used in the oil refining process, thereby reducing the CO₂ footprint of oil refineries and their derivatives.
A pathway to a JET scenario for Namibia
The principal use case of GH₂ is the hard-to-abate sectors. These include heavy transport on land, sea, and air, as well as the steel industry, other applications of value addition to minerals, and oil refineries, among others. The economic use case for GH₂ as a steady source of renewable electricity supply to the grid is under development, but this is not its primary use case. Even with gas-to-power, this power will only reach the unserved population through substantial investments in transmission lines and distribution infrastructure. A final question mark will then be whether the electricity can be made affordable to the many Namibians currently without access to electricity.
In a growing and expanding economy, the state may be able to subsidise such access, and households that benefit from the upswing may be in a better position to remit part of their income to less-resourced family members, contributing to improved livelihoods, including access to electricity. Namibia’s emerging GH2 and oil and gas sectors are driving economic growth, enabling the state and individual households to support the push towards universal access to electricity.
Other strategies towards JET in Namibia
We could explore ‘access and benefit sharing (ABS)’ opportunities between the GH2 projects and nearby communities. Even where GH2 projects are not located on conservancy land, the successful Community-Based Natural Resource Management (CBNRM) model, setting certain benefits for surrounding communities, is worth exploring. This could be in the form of access to desalinated water through the oversizing of desalination plants for GH₂. Other forms of ABS could include preferred employment opportunities (for selected trades) for members from nearby communities; a fixed quarterly or annual endowment combined with some shareholding (and future dividends) for the community; corporate social investments (CSI) in health, housing, sanitation, community-focused training and enterprise development support; the establishment of an industry JET Facility for, inter alia, co-funding of the national ‘universal access to electricity’ plans; etc.
There are many variations to ‘ABS’, and it is up to the communities and the GH2 project developers to negotiate a mutually beneficial package. At the Namibia Green Hydrogen Programme (NGH2P), we have reached out to the Namibia Development Trust (NDT) to initiate a conversation on ‘ABS’ type of support measures for nearby communities and explore how the Programme and the CSOs active in these communities can best support this dialogue.
In Namibia’s proposal to the Climate Investment Fund (CIF), the establishment of the JET Facility is included with the Sectoral Transformational Investment Plan (sTIP) currently under development, expected to concretise this idea. JET is the buzzword in all calls for proposals in the GH2 sector, and the NGH2P will optimise the JET support opportunities as it engages with various donor-funded facilities such as the EU Global Gateway, the Mitigation Action Facility (MAF) and the Accelerated Partnership for Renewables in Africa (APRA).
JET further takes central stage in the discussions between the Government of Namibia, the NGH2P, Hyphen Hydrogen Energy, and the Luderitz Town Council and Aus settlement regarding the land required for Hyphen to accommodate its employees during the operational phase (up to 3,000) and its warehousing and other infrastructure needs. While Luderitz’s new town goes under development, existing urban infrastructure will be upgraded under the infill or densification strategy, and investments must be made to formalise the high-density areas. In the absence of such social investments in urban improvements, Hyphen Hydrogen Energy and any other investor setting up in Luderitz will have a weak social licence to operate in this town. The same is true for Aus.
For the offshore oil and gas sector, proximity to “nearby” communities may be hard to define. This sector may, however, also wish to contribute to a JET Facility for Namibia, extending its contribution to Namibia, just like the GH2 projects, from direct, indirect and induced employment, local enterprise development, FDI and GDP growth, and fiscal impact to a more immediate impact on the livelihoods of lesser-resourced Namibians.
Optimising a JET for Namibia
With intent, clarity, and creativity, there are numerous promising prospects for JET in Namibia. Alignment between the stakeholders in the GH2 and oil & gas sector will be critical to avoid a fragmented “do good” approach that will not have the desired impact on the JET target communities and households. Pooling ‘ABS’ resources from both sectors into a JET Facility is a preferred approach compared to a string of CSI projects, while well-structured direct ‘ABS’ agreements with nearby communities remain a definite JET option.
*Eline van der Linden is the head of impact & ESG at the Namibia Green Hydrogen Programme and can be contacted at evdlinden@gh2.org.na
