Green hydrogen: Southern Africa’s time is now

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Gand capable of decarbonising industries that traditional renewables cannot tackle alone, green hydrogen has been getting a great deal of attention. Additionally, green hydrogen opportunities become even more attractive thanks to several shifts in the global environment.

The world’s steadily growing demand for hydrogen is expected to exceed supply by 2030, making now an ideal time to invest. Green hydrogen’s ability to store renewable energy holds one especially intriguing possibility: it can be transported.

This is achieved by transforming it into a portable product such as ammonia, methanol or an e-fuel, and work is underway to develop a way to transport liquified green hydrogen over long distances without having to transform or reprocess it.

A recent study by global management consultancy Kearney and energy company Uniper notes that Southern Africa – which is one of the geographies with favourable conditions for renewable energy production – will be able to store renewable energy and export it to areas where renewable energy production is technically or economically limited.

Prashaen Reddy, partner at Kearney, says although Southern Africa has a major opportunity to produce green hydrogen, the region’s demand is projected to be lower than the demand centres in Europe and Asia.

“For example, South Africa, the region’s most industrialised country, is projected to reach a demand of only 238 kt by 2030. This means that – with the region’s relatively low demand, the favourable production climate, and the limited impact of transport costs – Southern Africa is poised to become a green hydrogen export hub.”

Winning in Southern Africa’s green hydrogen market

Looking beyond the theoretical merits of green hydrogen to the tangible strategies to meet global demand, Reddy believes five moves can put market entrants on the path to success as they seek to establish green hydrogen production facilities in Southern Africa.

• Gain government support in establishing

a conducive regulatory environment: The government has a central role to play in

Ultimately, green hydrogen production is fundamental to Southern Africa’s just transition away from coal.

the energy transition, with market entrants’ success impacted by the level of government buy-in and a clearly defined green hydrogen strategy. Governments set policies that impact both the speed and direction of the energy transition, and they create the regulatory environment that supports the development of production facilities and the attractiveness of the location for investors.

• Establish public and private partnerships to

de-risk projects: Because of the market’s nascency, any new development will have a variety of project and operational risks, making it more difficult to secure funding for the project itself and any offtakers.

To be successful, market entrants will need to establish three partnerships to attract funders and offtakers: public partners (state enterprises, state agencies and governments), offtake partners and technology partners.

• Overcome infrastructure barriers and

capitalise on the opportunities: As with any major project, significant amenities are required. Sizable green hydrogen projects, such as some announced gigascale projects, also require vast areas of land to produce renewable power. • Secure funding: As with any megaproject, and more so for nascent technologies with inherent risk, securing adequate funding is complex. Funding from multiple sources is often required. Kearney’s market sensing study of the Southern

African renewables ecosystem identified the main archetypes for investors interested in financing renewable energy projects, each with a unique value proposition, risk appetite, and expectations for a return on investment. • Drive the just energy transition: Southern

Africa’s energy mix is predominantly carbonbased. For example, South Africa gets about 90% of its electricity from coal. The coal value chain directly employs about 150 000 people – jobs that are at risk amid the transition to a low-carbon economy. Green hydrogen will be a fundamental part of the region’s just energy transition, which the International

Labour Organization defines as occurring “in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind.”

Success as an early entrant

According to Reddy, South Africa offers an attractive opportunity for new entrants in the green hydrogen sector. With limited local demand expected, the region is poised to be a key exporter to demand centres in Europe and Asia.

However, as a nascent industry in an underdeveloped region, several obstacles will need to be overcome to capture the full benefits. The five success factors mentioned must be carefully considered along with the strategies for enabling success.

There are many benefits and opportunities, as it comes as a complete package, promising profitable enterprise, new jobs and more environmental sustainability in the region.

“Ultimately, green hydrogen production is fundamental to Southern Africa’s just transition away from coal. With an eye on realising shared value, the strategies discussed in this article can be achieved with an integrated approach – achieving commercial success while also locking in a variety of social benefits,” concludes Reddy.