Key Benefits of Renewable Hydrogen for Developing Countries: Energy Access, Industrial Growth, and Climate Resilience

Renewable hydrogen production, driven by electrolysis using renewable energy sources, is gaining attention globally as a key technology for the transition to a low-carbon economy. For developing countries, the production and utilization of renewable hydrogen can offer a wide range of benefits that go beyond economic growth, encompassing social and environmental dimensions. These benefits—often termed "co-benefits"—align with global sustainable development goals (SDGs), presenting an opportunity to address critical challenges such as energy access, industrial development, job creation, and climate resilience.

However, the realization of these benefits requires careful planning and management of local contexts, particularly in terms of balancing export opportunities with domestic energy needs, managing water resources, ensuring fair employment transitions, and developing local value chains. This report explores the major benefits that renewable hydrogen could offer to developing countries and highlights key challenges and opportunities for maximizing these benefits in a sustainable and equitable manner.

1. Enhanced Energy Access

Energy access remains a significant challenge in many developing countries, where populations often lack reliable and affordable electricity. Renewable hydrogen has the potential to transform energy systems by leveraging renewable energy resources, such as wind and solar, for large-scale hydrogen production through electrolysis. This process generates hydrogen without carbon emissions, making it a clean energy source.

In regions where renewable energy infrastructure is still developing, the production of hydrogen could help increase access to clean and reliable energy. By investing in renewable energy projects such as wind or solar farms, which are essential for hydrogen production, countries can expand their domestic energy capacity. This can result in dual benefits: supplying energy for hydrogen production while also providing electricity to local communities.

However, there is a risk that prioritizing hydrogen exports for global markets could lead to competition for scarce renewable energy resources, potentially hindering energy access for local populations. Developing countries must carefully plan the allocation of renewable energy between domestic needs and export-driven hydrogen production. Strategic investments in energy infrastructure should focus on enhancing local energy access while tapping into international hydrogen markets to generate economic returns.

2. Industrial Development and Value Chain Expansion

Developing a renewable hydrogen economy offers significant industrial development opportunities for developing countries. The production and export of hydrogen can stimulate economic growth, promote industrialization, and foster technological innovation. However, for these benefits to be realized, it is important that countries avoid an over-reliance on exporting raw hydrogen without investing in domestic industrial infrastructure and value chains.

To maximize benefits, developing countries should aim to expand their value chains both upstream and downstream in the hydrogen industry:

• Upstream Development: This includes local manufacturing capabilities for essential components used in hydrogen production, such as electrolyzers, fuel cells, and renewable energy equipment. By establishing local supply chains, developing countries can create domestic industries that reduce dependence on imported technologies, thereby fostering local economic growth and building technological expertise.
• Downstream Development: This involves processing renewable hydrogen into higher-value products such as renewable ammonia, methanol, or green iron. These products can serve as feedstocks for industries such as agriculture, chemicals, and steel production, which can boost local industrial output and generate export revenue. For example, renewable ammonia is essential for the production of green fertilizers, and green steel has a growing market as industries decarbonize.

Developing a robust domestic hydrogen economy will not only drive local industrial development but also strengthen the capacity to compete in global markets. Building comprehensive value chains also ensures that the hydrogen sector contributes to broader economic development, reducing the risk of underdeveloped local markets in favor of export-driven strategies.

3. Job Creation and Skills Development

Job creation is one of the most significant potential benefits associated with renewable hydrogen development. The transition to large-scale hydrogen production requires significant infrastructure investments, which can create jobs across the value chain, from construction and operation of renewable energy facilities to hydrogen production and downstream industries.

For developing countries, this presents an opportunity to generate employment in both urban and rural areas, where job opportunities may be limited. Renewable hydrogen projects can stimulate economic activity by creating jobs in sectors such as engineering, construction, manufacturing, and operations. Additionally, the growth of the hydrogen economy will drive demand for skilled workers in technology and engineering fields, providing opportunities for education and skills development.

However, the sources highlight uncertainties surrounding the actual number and distribution of jobs in developing countries. While renewable hydrogen infrastructure projects have the potential to create significant employment, automation and technological advancements could influence job creation patterns. Large-scale hydrogen production may rely on automated systems, reducing the number of low-skill jobs traditionally associated with energy projects.

To address this, developing countries should invest in capacity building and education to ensure that local workforces are equipped with the necessary skills to participate in the emerging hydrogen sector. Governments, industries, and educational institutions can collaborate to develop training programs that prepare workers for the demands of the hydrogen economy, ensuring that job creation benefits are distributed equitably.

4. Climate Change Mitigation and Environmental Sustainability

Renewable hydrogen can play a crucial role in helping developing countries meet their climate goals by decarbonizing key sectors such as energy, transportation, and heavy industry. By producing hydrogen using renewable energy sources, developing countries can significantly reduce their greenhouse gas emissions, contributing to global efforts to mitigate climate change.

Moreover, hydrogen can serve as a flexible energy carrier, enabling the storage and transportation of renewable energy over long distances. This is particularly beneficial for countries with abundant renewable energy resources but limited infrastructure to utilize or export that energy directly. Hydrogen offers a way to capture and store surplus renewable energy, which can then be used to power hard-to-abate industries or exported to other countries as a clean energy carrier.

However, the environmental benefits of hydrogen production must be balanced with potential risks, particularly regarding water resources. Hydrogen production through electrolysis requires substantial amounts of water, which could strain local water supplies in regions that are already water-scarce. To mitigate this risk, sustainable water management practices, such as water recycling and desalination, should be incorporated into hydrogen projects. Countries must also prioritize the development of hydrogen production technologies that are suited to their specific environmental contexts.

5. Ensuring a Just Transition and Social Equity

While the hydrogen economy presents significant opportunities for economic growth and industrial development, it is important to ensure that the transition to renewable hydrogen is just and equitable. The shift towards hydrogen could lead to job losses in carbon-intensive sectors, such as coal mining and fossil fuel production. Developing countries must address these potential disruptions to ensure that workers in affected industries are not left behind.

A just transition requires governments and industries to invest in retraining programs, social support, and economic diversification strategies to provide alternative employment opportunities for workers displaced by the shift to renewable hydrogen. Collaboration between stakeholders—governments, private sector actors, labor unions, and international organizations—is critical to ensuring that the benefits of renewable hydrogen development are shared equitably across society.

Transparency in decision-making and the involvement of local communities in planning processes can help build trust and support for hydrogen projects. Openly sharing information about the potential economic and social impacts, including job creation assumptions, will foster more inclusive and accountable development.

6. Strategic Partnerships and Capacity Building

Finally, developing countries must establish strategic partnerships to fully capitalize on the potential of renewable hydrogen. Collaboration between governments, industries, international organizations, and research institutions can facilitate technology transfer, knowledge sharing, and access to financial support. Such partnerships will be critical for building the necessary infrastructure, developing local expertise, and ensuring that hydrogen production aligns with global standards.

Investing in capacity building is essential for enabling developing countries to participate in the global hydrogen economy. This includes not only technical training and education but also institutional capacity building to create regulatory frameworks that support hydrogen development. Developing countries should leverage international financing mechanisms and public-private partnerships to mobilize the resources needed to scale up hydrogen production.

Conclusion

Renewable hydrogen offers immense potential for developing countries, providing opportunities to enhance energy access, drive industrial development, create jobs, and mitigate climate change. However, the realization of these benefits requires careful consideration of local contexts, sustainable water management, and efforts to ensure a just transition. By fostering strategic partnerships and investing in capacity building, developing countries can position themselves to capitalize on the global shift towards a hydrogen economy while promoting sustainable development goals and social equity.