Trade & Industrial Policy Strategies says South Africa is well placed to build a new and sustainable export commodity – green hydrogen.
TIPS believes the country can become a key supplier into the rapidly growing international hydrogen market, as the world faces growing pressure to move to low-carbon energy options.
The research institute recently conducted a study on exploiting the emerging export opportunities in the development of green hydrogen.
TIPS researcher and author of the study Muhammed Patel notes that South Africa already has the necessary resources to develop green hydrogen and that green hydrogen offers a complementary pathway to decarbonisation, with applications across a number of sectors.
Particularly, for some sectors such as aviation and shipping, green hydrogen is the only feasible decarbonisation option.
He believes the hydrogen economy has a vital role to play in providing economic growth and employment opportunities for displaced workers, communities and small businesses in the aftermath of the Covid-19 pandemic.
In terms of global demand for green hydrogen, Patel states that many countries and regions have sent signals to the international market indicating their intent to develop hydrogen value chains and engage in the international hydrogen market.
Patel’s research finds that South Africa has key resources to leverage, which can place it as a competitive supplier of green hydrogen. These include the country’s rich endowment of ideal weather conditions for solar and wind power generation, technological capabilities around the Fischer-Tropsch process and access to platinum resources.
This combination places the country at an advantage for developing the hydrogen value chain and being a key supplier into the global hydrogen market.
Already, potential export markets exist including Japan, South Korea and the European Union with demand for hydrogen from other countries anticipated to rise significantly as more and more formulate their policies around hydrogen.
Patel explains that, while the potential exists for South Africa to develop green hydrogen as a key export, developing the green hydrogen value chain will not be easy and will require coordination between the most important stakeholders from government departments, industry, labour unions and civil society.
He points out that a policy roadmap outlining the development of the value chain is under way and says this is vital to provide certainty to investors, as is fast-tracking the necessary regulatory framework.
In elaborating on what is required from a policy perspective, Patel states that the right mix of incentives and penalties is required to generate a hydrogen market.
“Resources and incentives on the supply side can assist in the formulation of pilot projects that feed into existing processes and set up independent production which can be scaled as commercial viability is proven.
“The existing strengths and progress developed through initiatives by the Department of Science and Innovation and Hydrogen South Africa, for example, can be driven further through such policy support.”
In particular, pilot projects in key carbon-intensive production processes by Sasol and PetroSA are also vital to decarbonise existing process and leverage existing assets; and will pave the way for greater investments into green hydrogen.
Patel says that given South Africa’s high dependency on coal, and the combustion of coal being associated with high carbon dioxide emissions, the country will have to transform key value chains towards more sustainable production.
This transformation, he stresses, will not only protect the country’s resources from future climate events but also secure South Africa’s future in the global hydrogen marketplace.
“Ultimately, all countries will have to respond to the imperatives of climate change and this will impact on the nature of trade, production and investment. A failure to follow this path will result in those countries who do not transform being isolated internationally through punitive measures such as trade barriers and reduced foreign investment, thereby incurring severe costs on growth and development,” Patel notes.