Southern Africa has ‘huge potential’ to benefit from the shift to green hydrogen

4th March 2021 By: Simone Liedtke - Writer

While there is growing momentum across the world around investment in hydrogen and the related import and export value chains, management consulting company Kearney MD Romain Debarre warns that there is still a lack of supply and demand for the hydrogen economy.

While there is a market for hydrogen consumption, and for finding and producing the clean fuel, “there is no real significant market at the moment for new green hydrogen”, he told delegates attending the Africa Gas Forum this week.

There are multiple applications for the use of hydrogen and technology and innovation are likely to accelerate its adoption across various regions globally. This is expected to lead to a mixed global hydrogen economy, which will include storage, conversion and distribution of hydrogen so that end-users reap the benefits of its mobility.

“It’s a nascent economy with a lot of innovation, and [which is] supported by a lot of regions committing to carbon neutrality, with Europe, for example, aiming to be carbon neutral by 2050 and the US returning to the COP21 agreement,” Debarre commented, adding that hydrogen had a role to play in meeting these objectives, as “low-carbon hydrogen can help to decarbonise and reduce emissions across multiple sectors”.

The nascent value chain still faces a lot of uncertainties, he added, noting that this includes challenges such as the cost of electricity, which presents an opportunity for Southern Africa and Africa, which has “huge potential” in terms of its abundant renewable energy resources, especially solar and wind.

Importantly though, is that the right and adequate infrastructure will need to be developed “at the right pace” to support this, Debarre said, as it would be critical to ensure that every kilogram of hydrogen “is going to find an offtaker and consumer” and that it would, effectively, be low carbon.

“We shouldn’t use coal or any other fossil fuel to produce green hydrogen because then it will not be green hydrogen anymore.”

Taking this into account, Power Working Group nonexecutive chairperson Christoph Reimnitz pointed out that “Africa is unlikely to be a leader in the hydrogen economy, despite the huge amount of investment going into the [clean fuel]”.

He explained that, while a lot of funds were, globally, being allocated to the development of hydrogen, “Africa doesn’t need to take a leading role at the moment”, adding that the hydrogen economy drive “needs to play out over the next few years”.

Reimnitz believes that, considering that carbon-free hydrogen is produced using renewable resources, “this is where South Africa has one of the big advantages” owing to abundant space, sunshine and the country’s experience when it comes to solar capacity.

South Africa currently has 2.9 GW of installed capacity from solar, and another 6.8 GW is planned. This was where the country’s opportunity lay, Reimnitz pointed out, as the industry was expected to “grow exponentially over the next few years”.

He cautioned, however, that should government be involved, there needed to be a clear decision as to where this hydrogen (produced using South Africa’s renewable resources) would be deployed and what it would be used for.

While many are anticipating an energy divide between countries that adopt hydrogen, and those that do not or are delayed, Reimnitz believes that because of the opportunity that presents itself, “creating lots of solar generated power means that there is a huge chance for South Africa to play a role here through potentially offering itself as part of a map, and to explore with companies and other countries”.

The key element, however, will be to drive down the cost of electricity.

South Africa’s other competitive advantage was the country’s robust legal environment, as well as attractive labour costs, which Reimnitz said was “something South Africa should leverage”.

Clear regulatory principles from the outset would be critical, as “red tape” would deter international investors from South Africa.

PwC South Africa hydrogen market lead Jonathan Metcalfe, meanwhile, commented that while it is common to downplay South Africa by saying that it is behind the curve with regard to technological developments, specifically hydrogen, “it is worthwhile to recognise that [the country] has been relatively progressive in certain areas in the hydrogen space”.

He referred to South Africa’s platinum group metals (PGMs) reserves, considered to be the largest in the world, noting that local PGM players “have been quite pioneering in the hydrogen space”.

For example, diversified miner Anglo American intends to pilot the first hydrogen-fuelled heavy haulage mining truck at its Mogalakwena mine, in Limpopo, which will be a world first for on-site generation and use of hydrogen.