Green manufacturing fuels renewables demand

From the newsletter

Namibia is set to build a $4.05 billion green steel plant. This will be the country's second fully carbon-neutral steel mill, leveraging green hydrogen technology. The first was commissioned in April this year. It is part of a push for green manufacturing, including but not limited to the steel sector, which is one of the most polluting industries in the world.

• Steel production is highly energy-intensive. Energy can account for up to 40% of production costs in such industries, which can become uneconomical when relying on volatile fossil fuels. 

• Namibia itself relies on steel imports from South Africa. But new market dynamics are positioning it as a leader in green steel production, and it aims to tap into its renewable energy potential (wind and solar) to support this initiative.

More details

• The project, which has been in preparation since 2023, is expected to create between 3,500 and 4,000 jobs at its peak. It will focus on technical training, women's participation, and sourcing local materials. Industrial land in Omaruru has already been secured for the plant and its downstream processes.

• Globally, there is a push towards green manufacturing across various sectors, with steel garnering significant attention due to its high energy consumption and polluting nature. As Africa develops, its steel production is projected to grow at a Compound Annual Growth Rate (CAGR) of 3.10% between 2025 and 2034, potentially reaching 51.86 million tonnes annually by 2034. This growth will demand increased power.

• Without the use of renewables, this presents a considerable risk to Africa's growth. The EU's implementation of the Carbon Border Adjustment Mechanism (CBAM), which aims to impose taxes on imports from carbon-intensive products, means that a delayed transition to green manufacturing could result in a 0.91% reduction in Africa's GDP growth, equivalent to at least $16 billion. South Africa, as Africa's leading steel producer, would be the most affected, potentially seeing national exports cut by up to 10%.

• This situation, however, presents a significant opportunity for Namibia. The country has been actively developing wind and solar projects to support hydrogen production. As a steel-importing nation, this allows Namibia to bypass traditional, more carbon-intensive steel production methods. Given the scale of its hydrogen production projects, this can substantially support the steel sector.

• Namibia commissioned its first green steel manufacturing facility this year. This facility is powered by 20 MW of solar PV and 18 MW of wind, with plans for expansion to 140 MW already underway. As hydrogen production requires power, renewables will fulfil this need.

• Across Africa, commercial and industrial customers are increasingly adopting renewable energy sources to power their production, largely due to the volatility and high cost of fossil fuels. South African manufacturers are at the forefront of this transition to renewables. Their electricity regulatory environment has evolved, enabling manufacturers to procure power from any available independent power producer (IPP) and wheel it through the Eskom grid.

Our take

• As Africa's infrastructure grows, so too will its steel demand, requiring more power. Renewables can meet this need, either by directly powering existing factories or generating hydrogen for new ones.

• Leading steel producers like Egypt, South Africa, and Algeria are poised for significant demand, with their ideal locations for hydrogen generation positioning them as strong contenders in green steel manufacturing.

• However, Namibia's early progress, including its operational green steel facility, provides a crucial first-mover advantage, potentially securing its lead in this emerging market.