German utility RWE has withdrawn from Namibia’s flagship green hydrogen scheme, dealing a setback to the country’s ambitions of becoming a major exporter of the fuel.

Green hydrogen refers to hydrogen produced using renewable energy — typically wind or solar power — through a process called electrolysis. RWE said on September 29 that it would not proceed with the $10bn Hyphen Hydrogen Energy project, citing weaker-than-expected demand for hydrogen derivatives in Europe, Reuters reported.

“We can confirm that RWE is currently not pursuing any further projects in Namibia … we have reviewed the relevant projects at RWE. This included the project with Hyphen in Namibia,” the company said in a statement quoted by Reuters.

The project, led by Hyphen, had envisaged producing green ammonia for export, with plans to ship about 300,000 tonnes annually from 2027 under a nonbinding MoU signed with RWE in 2022.

Hyphen said no final offtake contract had been signed with RWE, noting that the agreement remained exploratory. The project has also faced opposition from indigenous Nama communities, who argue that the planned development would encroach on ancestral lands inside the Tsau//Khaeb National Park.

RWE stressed that its withdrawal was a commercial decision unrelated to the land dispute or political sensitivities.

Namibia is targeting billions in foreign investment to harness its abundant wind and solar resources for the production of green hydrogen, which the government has promoted as a key driver of economic diversification. RWE’s exit could undermine investor confidence in the country’s hydrogen ambitions.

The flagship Hyphen Hydrogen Energy project was designed as a vertically integrated development with goals of producing 1 MTPA of ammonia by 2028, scaling to 2 MTPA by 2030, under the planned investment of up to $10 bn.

Before the pullback, Hyphen had also secured contracts from China’s state-owned No. 7 Construction (subsidiary of China National Chemical Engineering) for FEED (Front-End Engineering and Design) and EPC (Engineering, Procurement and Construction) work on a 3 GW green hydrogen and ammonia project.