South African green hydrogen developers urged to bid for €270m in German grant funding to close project ‘bankability gap’

29th January 2024 By: Terence Creamer - Creamer Media Editor

South African green hydrogen developers urged to bid for €270m in German grant funding to close project ‘bankability gap’

South African developers of mature green hydrogen or derivatives projects are potentially eligible for non-refundable grant funding being extended under Germany’s €270-million Power-to-X (PtX) Development Fund, set up to close “bankability gaps” standing in the way of implementing industrial-scale projects in seven eligible developing countries.

Funding for the platform, which was established in 2023, is being made available from the German Ministry for Economic Cooperation and Development and the fund’s first call for expressions of interest (EoI) is open for projects in Brazil, Egypt, Georgia, India, Kenya, Morocco and South Africa.

German development bank KfW has appointed KGAL Investment Management to manage the fund and the EoI has a project-submission deadline of 12:00 on March 1.

KfW’s Stefan Hediger tells Engineering News that the PtX Development Fund is part of a portfolio of instruments available for projects in developing countries and beneficiaries are not precluded from accessing other concessional and grant funding schemes being made available by Germany, including those funding commitments made in support of South Africa’s Just Energy Transition Partnership Investment Plan (JET-IP).

KfW has already concluded a €23-million grant funding agreement with the Industrial Development Corporation to support early-stage “catalytic” green hydrogen projects, and some South African project developers are also aiming to access concessional loans under the JET-IP, as well as the subsidised long-term purchase agreements being extended under the H2Global framework.

The PtX Development Fund’s niche, however, is to support advanced projects that require grant funding to close any residual gaps preventing the project from advancing to financial close.

PtX Development Fund head Thomas Engelmann, who is also head of energy transition at KGAL, tells Engineering News that up to €30-million could be dispersed to individual projects should these meet the scheme’s technical, environmental and social eligibility criteria.

The fund is particularly keen to support industrial-scale projects with a total investment cost of over €100-million, and which are geared towards supplying sectors where the usage of hydrogen is hard to avoid.

These could include products developed to use green hydrogen – produced using renewable electricity in an electrolyser to split water into hydrogen and oxygen – as a feedstock in the manufacture of green ammonia, green methanol, green synthetic fuels, and green hydrogen-based chemicals.

The platform, Engelmann says, can be used to finance any part of the project’s PtX value chain, from renewable energy generation and electrolysis, through to hydrogen compression, storage and transportation, as well as the distribution infrastructure.

He expects the full €270-million to be dispersed over two to three bidding rounds to between eight and ten projects and reports that significant interest has already been shown by project developers in the various eligible countries since the launch of the EoI in December.

Once a project is submitted, the PtX Development Fund will evaluate the project against the scheme’s eligibility and exclusion criteria before selecting preferred projects to support.

The planned investment horizon for the PtX Development Fund is between 2024 and 2027.

Hediger is confident that there are projects in South Africa at a suitable level of maturity to qualify for the grant and reports that every effort is being made to market the opportunity to potential participants, with a webinar scheduled for February 13.

KfW’s Kelly Slaffa highlights that Germany’s promotion of Green Hydrogen not only focusses on the development of the nascent industry in South Africa but importantly the promotion of skills transfer, development and job creation.