Egypt’s Green Hydrogen Policy Navigating the Trade-off Between Exports and the Domestic Energy Transition

Egypt

10 December 2025

120 minutes read

This study examines Egypt’s green hydrogen boom at the intersection of energy transition and climate justice, showing how export-driven policies and fast regulatory changes reshape investment, while domestic energy fragility raises major questions about renewables, strategy and climate equity.

Egypt’s Green Hydrogen Policy: Navigating the Trade-off Between Exports and the Domestic Energy Transition (PDF, 5.79 MB)
Average time to read: 120 minutes
سياسة الهيدروجين الأخضر في مصر بين أولوية التصدير والتحول الطاقي المحلي (PDF, 5.07 MB)
Average time to read: 120 minutes

Publication type: Report

Authors

Mohamed Younes

Executive Summary

This study offers a comprehensive analytical account of the evolution of the green hydrogen sector in Egypt, conceptualising it as a domain that is situated at the intersection of energy transition and climate justice. The prominence of green hydrogen on Egypt’s national energy agenda has emerged primarily as part of an export-oriented industrial strategy that is shaped by European geopolitical realignments following the outbreak of the Russia–Ukraine war, and by the European Union’s pursuit of diversified, renewable, and cost-effective energy sources that are consistent with green certification standards.

Within this framework, Egypt has undertaken rapid action to establish an enabling environment for investment in the green hydrogen sector, including establishing related legislative and regulatory measures – most notably Law No. 2 of 2024, which provides substantial investment incentives – and creating the National Council for Green Hydrogen and its Derivatives (NCGH), which is mandated to coordinate planning processes, regulatory approvals, and technical standards for the sector. These initiatives reflect Egypt’s strategy of attracting foreign direct investment and enhancing foreign exchange inflows in the context of mounting macroeconomic pressures.

Egypt’s key planning document in this area is the National Low-Carbon Hydrogen Strategy, which delineates a three-stage plan for the period up to 2040. Under the strategy, production is primarily oriented towards European markets. To date, approximately 30 memoranda of understanding (MoUs) and 12 binding framework agreements have been signed with international investors. These are predominantly concentrated in the Suez Canal Economic Zone. The production capacities specified in some of these agreements exceed the short-term targets set out in the strategy;

however, on-the-ground implementation is likely to be constrained by overlapping challenges, including the availability of additional renewable capacity that meets European standards, securing long-term offtake agreements, compliance with green financing requirements, and the high cost of capital in the domestic market.

To understand Egypt’s options with regard to hydrogen it is necessary to understand the fragility of Egypt›s energy system. Fossil fuels still account for ap- proximately 95% of the country’s energy supplies, with natural gas dominating electricity generation. Domestic production – particularly from the Zohr gas field – has declined significantly in recent years, transforming Egypt from a net exporter to a net importer of gas, leading to frequent power outages.

Achieving the objectives of the national energy strategy and the National Low-Carbon Hydrogen Strategy willrequire the addition of substantial wind and solar capacity, with current projections of required capacity ranging from 46 to 68 gigawatts (GW) by 2030 (the hydrogen strategy’s ambitious ‘green’ scenario puts the figure much higher, at 90 GW), and potentially reaching 120–170 GW by 2040, to satisfy both domestic demand and export commitments. This will necessitate considerable investment (estimated at billions of dollars) to enhance the electricity transmission grid so as to facilitate the integration of additional renewable energy capacity.

The potential competition between the hydrogen industry and the local energy system over resources such as land and transportation networks presents a physical constraint on potential expansion. While large areas of land have already been allocated to renewable energy projects, hydrogen production remains concentrated in a relatively small area within the Suez Canal Economic Zone, near Egypt’s ports, which positions it to serve ammonia and methanol export chains. While this area also benefits from excellent wind power conditions, it is constrained by a lack of available space, suggesting a potential competition in the Gulf of Suez area between wind farms dedicated to exports and those supplying local electricity.

In regard to the electricity grid, the concept of a dedicated ‘Green Energy Corridor’ for hydrogen projects has been proposed as a way to meet the ‘additionality’ and temporal and geographical consistency requirements under European standards. However, while this model may provide investors with greater regulatory certainty, it carries the risk of establishing isolated networks devoted to serving exports, without regard to the national system and local demand needs. This division could undermine efforts to reduce the overall system-level carbon footprint and could increase the national grid’s reliance on fossil fuels, particularly if the most productive renewable sites are depleted to serve export corridors, instead of enhancing domestic electricity supply.

Egypt’s energy policies are clearly influenced by European market conditions. Pursuing alignment with European green certification requirements, ‘additionality’ regulations, and monitoring, reporting, and verification (MRV) systems, Egypt is in the process of adopting an energy sector model in which wind and solar sites are directly connected to electrolysis units in Egypt’s Free Economic Zones with preferential contracts and tariffs. As indicated in the preceding paragraph, this institutional arrangement leads to the creation of energy ‘enclaves’ or ‘oases’, i.e. projects that are tailored to meeting European compliance standards and minimising investment risks but are only very weakly integrated into the national energy system. This pattern will remain in place unless operational and legal frameworks are introduced to ensure grid connectivity and the allocation of defined local consumption quotas for industrial use and for the national electricity system.

In terms of the applications of hydrogen in Egypt, it can be stated that it offers a complement to direct electrification, rather than being a substitute for it.

For this reason, its use should be prioritised in sectors that are hard to electrify, such as maritime shipping and fertiliser production. Hydrogen has high potential as a fuel for maritime transport, and this is the most commercially viable short-term use case for Egyptian hydrogen, given Egypt’s strategic location along the Suez Canal corridor. By contrast, blue hydrogen pathways are less compatible with Egypt’s context due to the country’s limited natural gas resources and the high cost of carbon capture and storage. It is thus recommended to adopt a transitional approach which entails blending limited amounts of hydrogen into natural gas networks and enabling conventional power plants to operate on hydrogen when feasible, in order to create local demand and absorb early production.

Turning to the issues of sustainability, equity, and benefit-sharing, the current prioritisation of an export-oriented approach to hydrogen risks reproducing existing imbalances in the distribution of land and water resources, and could exacerbate the risk of environmental degradation, unless binding mechanisms to ensure local value-sharing are established. Better still, priorities should be reoriented: moving from an export-led model towards one centred on domestic transformation.

Also linked to sustainability and equity concerns is the fact that the export-oriented hydrogen model currentlybeing pursued will direct the output of Egypt’s most productive wind and solar sites towards export routes. This will intensify competition over high-quality land and diminish the overall carbon reduction impact if the national grid continues to rely on fossil fuels to meet domestic demand. Against this backdrop, sustainability assessments relating to the country’s hydrogen strategy should extend beyond individual projects and account for cumulative national impacts. It is also necessary to ensure transparency and public access to data on emissions, water, and land use – which are key conditions for social acceptance and the long-term continuity of investments.

Based on the study’s analysis, it is recommended to adopt an approach that ensures complementarity between the local energy production and exporting systems , rather than isolating them at the local level. This requires a clear sequencing of priorities, beginning with electrification and increasing energy efficiency in order to reduce reliance on gas, alongside the accelerated strengthening of the national grid – which should be treated as shared infrastructure that should not face competition from isolated parallel systems – so that exports can serve as a supportive element within a broader domestic energy transition, rather than creating additional competition for resources.

Furthermore, there is a need for a more comprehensive vision of Egypt’s energy transition: one that is grounded in the principles of climate justice. This includes negotiating compliance rules, financing arrangements, and green certification standards with European partners to ensure equitable burden-sharing and commitments that are aligned with the capacity of the local economy. A further ambition should be to build mutual understanding and practical coordination among North African countries on these issues, with the aim of enhancing their collective negotiation power, harmonising green compliance standards within a regional framework, preventing a race to the bottom in offering incentives, and opening shared pathways for infrastructure, manufacturing, and value-chain development in hydrogen and its derivatives.