There is a lot of heat being generated by the Green Hydrogen Summit in Cape Town this week. President Cyril Ramaphosa launched it, and the meeting has been animated by discussions and plans and strategies for positioning SA to play a large role in the production of green hydrogen, an important fuel for the future.
Our green hydrogen (GH2) ambitions formed a large part of the Just Energy Transition Investment Plan (JET-IP) we presented to the COP27 climate summit in Egypt in early November. The JET-IP has secured $8.5bn of the $98bn Ramaphosa reckons the just transition is going to cost.
Fortunately, the one thing successive ANC governments haven’t yet broken is the power of the sun, but they’re working on it. The green hydrogen chapter of JET-IP is revealing. In scenarios where we export GH2, it says “up to 1.8-million more jobs could be created by 2050 than in scenarios without”. It says up to 10-million tonnes a year (Mtpa) of demand for local production “could be in play” by 2050, creating a $20bn market, more than 650,000 “job years” (defined as one job for one year) and more than 50,000 permanent jobs.
We’ve seen this movie before. “The target of 3.8Mtpa by 2040 will require a total investment of $164bn,” the JET-IP calculates. By 2050 SA could “aggressively pursue deeper decarbonisation by seeking a GH2 demand uplift to 7Mtpa, “which will displace 541Mt CO2 and require an additional investment of $133bn” — a lot of money when you consider that the basic ingredients of GH2 are sun and water. Still, Western economies seem happy to pay us.
Eskom CEO André de Ruyter recently explained why to the Financial Times. “Mitigating a tonne of carbon in SA is a 10th of the cost of mitigating a tonne of carbon in Europe,” he said. That’s because we produce it so inefficiently. If you’re German, you get rid of carbon in SA far more cheaply than back home.
We’re happy to play that game even as the energy minister tries tirelessly to keep fossil fuels well in the field of play, and the industry minister tries to pretend it isn’t happening. It’s a sideshow in the greater scheme of things. Agora Energiewende, a well-regarded German energy think-tank, said in 2021 that “hydrogen from renewable energy has all but taken over as the darling of deep-decarbonisation”.
Not least in SA. Hydrogen is the new natural gas, and while Agora doesn’t see it reaching the intensity in Europe that liquefied natural gas (LNG) has now, that’s because there are things that can’t easily be (renewably) electrified. Some petrochemical industry processes, steel making and aviation fuel, for example. Passenger cars may be another. And all you need is (renewable) electricity, an electrolyser (platinum) mined (presumably) with renewable power, and water. Switch on, separate the hydrogen and oxygen, and voila!
Needless to say, we’re late. The Australians are well ahead of us. And the Chileans. Namibia has landed its first supply contract already. The Germans will open their first hydrogen terminal in 2026 to take imports from Saudi Arabia. Eventually everyone will be doing it. New solar panels can generate power in the dark.
Trade, industry & competition minister Ebrahim Patel’s default is to over-plan and over-promise. There’s a whole port to be built at Boegoebaai in the Northern Cape north of Port Nolloth, and Patel’s contribution to the JET-IP says we will need 100GW of renewable power, and more than 60GW of electrolyser capacity, to realise the JET-IP dream. Those are just staggering numbers. He will want to localise all the parts and machines and when he does he will rapidly begin to miss his targets.
Part of his problem is that Gwede Mantashe at mineral resources & energy, and a big section of industry, including Sasol, are also hot to install new LNG infrastructure as a “transition” fuel. Business has already published a plan to build LNG terminals at Richards Bay, Durban and Coega, and in a sleight of hand the JET-IP mentions that there may need to be “upgrades at those ports”.
“These projects span a range of use cases and require significant capital for deployment for the early incubation of SA’s GH2 ecosystem.”
“Range of use cases” my ass. The JET-IP is lying here, but if international funders are happy to be deceived then that’s up to them. South Africans will have to fight the LNG plans on our own.
Can LNG infrastructure even be used for hydrogen? Sadly, Agora thinks it can. The “technical requirements for conversion appear to be both feasible and relatively trivial”, it reported in 2021.
Others disagree: “The perceived advantage of hydrogen is its resemblance to natural gas — it exists as liquid or gas, flows through pipes, stores in tanks and burns in engines,” argued Canadian academics Johanne Whitmore and Paul Martin earlier this year. “However, hydrogen-ready LNG terminals do not actually exist today because both gases have different properties which require different infrastructure.”
The most encouraging hydrogen investment in SA thus far is in Coega in the Eastern Cape, where the UK’s Hive Energy is building a $4.6bn green ammonia plant in the special economic zone (SEZ) around the port. It will use desalinated water from the nearby Cerebos salt plant, construct a huge 1,350MW solar plant on a farm nearby, and suck nitrogen out of the air to mix with the hydrogen it makes from the solar power to produce 780,000 tonnes of easily transportable green ammonia a year.
It’ll be exported and used in fertilisers or broken back down into green hydrogen again. And beyond a few minor subsidies and the privileges SEZs offer, it’ll cost SA nothing. Offering investors who know their stuff an opportunity to do it here, or going out to the world with a begging bowl for $300bn to do much the same thing ourselves? What a terrible dilemma.
• Bruce is a former editor of Business Day and the Financial Mail.
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