SA hopes to become a big player in the global supply of green hydrogen and products such as green ammonia, but project developers say that the government should do more to support the development of a green hydrogen economy.
It is estimated in SA’s R1.5-trillion Just Energy Transition Investment Plan, which identifies green hydrogen as one of three priority areas, that R320bn would have to be spent up to 2027 on research and developing the infrastructure needed to support the production, use and export of green hydrogen.
Given its abundant supplies of platinum (used in the manufacture of electrolysers) and renewable energy resources, SA has the potential to produce between 4-million and 8-million tonnes of green hydrogen by 2050.
Green hydrogen is produced by splitting water into hydrogen and oxygen through electrolysis using renewable energy such as solar or wind power. It is seen as an essential fuel source or enabler for the decarbonisation of hard-to-abate sectors such as aviation, shipping, and steel and cement production.
Government estimates show that a green hydrogen economy could add an estimated 3.6% to SA’s GDP by 2050 and create at least 370,000 jobs.
But the country was in a race with competitors in Australia and South America to prove it could be a credible supplier of green hydrogen and products such as green ammonia (a fuel source and fertiliser made using green hydrogen) to global markets in the short term, said Masopha Moshoeshoe, ministerial adviser on green hydrogen within the ministry in the presidency for electricity.
For the world to achieve the goal of reaching net-zero greenhouse gas emissions by 2050 green hydrogen would have to play a role. “Places such as Europe, Japan and South Korea will not be able to meet their own demand for green hydrogen but there are many parts of the world that are competing, alongside SA, to meet this demand, said Moshoeshoe, speaking at a recent green hydrogen economy discussion hosted by Resources 4 Africa in Johannesburg.
To capture this potential, SA had to develop 3GW-5GW of electrolyser capacity over the next three to five years that would require building 6GW-10GW of renewable energy capacity, he said.
SA has a pipeline of green hydrogen projects valued at more than R300bn, but Moshoeshoe said it remained to be seen how many of those will reach financial close given their high development costs.
John Nutt, technical director for Hive Energy Africa, said at the discussion the government’s aspiration for building a green hydrogen economy was not being backed up with sufficient support.
Developing hub
Hive Energy Africa is developing a $6bn green ammonia hub in Gqeberha to produce about a million tonnes of green ammonia per year for the export market. They intend to reach a final investment decision in late 2025 with construction starting in about 2026, Nutt said.
“The problem is there is a disconnect between what government wants and what the legislation says vs the availability of funding and support,” he said.
They have also seen “tardiness from the government to expedite the development of the green hydrogen economy”, he said. One example of this was the delay in finalisation of a virtual wheeling policy. Hive Energy Africa’s project will be powered by renewable energy plants being developed in the central parts of the country. The electricity will be delivered to the plant in Gqeberha using virtual wheeling contracts that would involve the power being generated being wheeled over Eskom’s transmission network.
“We have been waiting to get the wheeling policy announced by Eskom and the National Energy Regulator of SA. It was due in July last year, but now we believe it will only be available towards the end of this year. This delays our progress towards a point where we can get to a final ammonia pricing scenario,” said Nutt. Having the policy in place would introduce a standardised wheeling tariff.
Andries van der Linde, head of renewable energy at SSC Group, which is developing a wind farm to power a green hydrogen production plant near Jeffreys Bay, Eastern Cape, said successfully developing a green hydrogen project in SA is all about scale.
They initially intended to develop a 117MW project, which was scaled up to a 225MW one, and they are now considering upping it to 450MW.
“As soon as we went larger scale we found investors were beginning to take us more seriously,” he said.
Limited system
But, said Van der Linde, to develop a local offtake market for green hydrogen in SA the country would have to address hydrogen logistics issues. “In Europe, they are looking at repurposing gas pipelines for hydrogen but in SA our gas pipeline system is limited and mainly located in Gauteng,” he said.
The mining industry presented a huge opportunity for green hydrogen use in SA, but the challenge was getting the product to the mines.
Moshoeshoe said government’s position is to facilitate the development of private-sector projects.
“We don’t foresee a case where the SA government will try to build the infrastructure necessary for a green hydrogen sector in SA or try to build these projects.”
The supporting infrastructure, such as renewable energy, was seen as a private sector competence too.
“Even the strategy about how we develop huge amounts of transmission infrastructure speaks to a model of significant private sector participation,” he said.
“There are fiscal constraints and given the huge amount of investment needed to roll out this infrastructure it is not something the state can do on its balance sheet.”
The government has already had some successes in securing international co-operation and potential offtake agreements to support the green hydrogen sector, including with the Netherlands, Germany and Japan, he said.
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