Egypt finalises law for renewable H2 incentives

Market: Hydrogen
31/01/24

Egypt's President Abdel Fattah el-Sisi has signed into law a bill that will provide incentives to stimulate renewable hydrogen production.

The bill outlines incentives for production of green hydrogen, which it defines as being "produced from electrolysis of desalinated water based on renewable energy" and derivatives, as well as for associated infrastructure and equipment. The reference to desalinated water is probably intended to ensure projects use seawater rather than fresh groundwater, given Egypt is facing freshwater scarcity in many regions.

Projects will benefit from a "cash investment incentive" that provides a credit of 33-55pc of the tax paid for a project. The incentive would be approved by Egypt's authority and would apply to income generated from the project and potential expansions. Cairo will also provide value-added tax (VAT) exemptions on machinery, equipment, devices, raw materials, supplies and means of transportation, except for passenger cars, required for green hydrogen projects.

Developers will be entitled to a 30pc reduction on fees for use of seaports and maritime transport, a 25pc reduction on the value of industrial land rights to set up hydrogen production plants and a 20pc reduction on land rights for storage sites at ports.

To be eligible for the incentives, projects would need to start operations within five years of concluding "project agreements" and developers need to secure 70pc of financing from abroad. They are expected to use at least 20pc of domestically produced components and to ensure foreign employees constitute not more than 30pc of its workforce.

The incentives will be granted to desalination plants and renewable power assets provided these provide at least 95pc of their output to hydrogen plants. They will also be available specifically to transport, storage or distribution projects. With the explicit approval from the council of ministers, projects for manufacturing "inputs" necessary for production plants could be eligible. This could refer, for instance, to electrolyser manufacturing.

Egypt aims to bring 3.2mn t/yr of renewable hydrogen production capacity on line by 2030, which would require 5.4 trillion Egyptian pounds ($175bn) investment in 32 projects, according to a government strategy document published earlier this month.

The country has signed a number of preliminary agreements with domestic and international companies for development of projects to produce renewable hydrogen or derivatives, such as ammonia or e-methanol, especially in the Suez Canal economic zone. Many of the plans are at very early stages, but the incentives could help them move closer to realisation.

By Akansha Victor

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