By Lehlohonolo Lehana.
It was recently announced that South Africa's Hydrogen Society Roadmap (Roadmap) is expected to be submitted to the South African cabinet for approval at the end of 2021, or in early 2022. The Roadmap will explain how the country's resources, including reliable sources of renewable energy, such as solar and wind, as well as its ample supply of Platinum Group Metals, can be effectively harnessed to produce green hydrogen.
According to Kieran Whyte, Partner and Head of the Energy, Mining and Infrastructure Practice at Baker McKenzie in Johannesburg, South Africa began the process of creating policy for the green hydrogen market by implementing the Green Hydrogen Atlas-Africa initiative in July 2020. As part of this, the Roadmap is intended to provide a guide for the country's transition to a hydrogen-based energy system. The Roadmap will be a policy document outlining the costs, challenges, gaps, benefits and potential of green hydrogen, with the aim of eventually incorporating this into the country's renewable energy plan.
A recent report by global law firm Baker McKenzie - Shaping Tomorrow's Global Hydrogen Market (report) outlines how, despite regulatory challenges, legal complexity and the current lack of incentives to invest in decarbonized hydrogen without government support, important opportunities exist for businesses seeking to reap first-mover advantages.
According to Whyte, South Africa's green hydrogen potential could produce significant advantages for investors and the country, but legal certainty is needed, and infrastructure shortfalls must be addressed.
"While it is still early in the process, transactions have begun around the world and investors are starting to look at what governments are doing to support hydrogen initiatives. As such, the Roadmap is eagerly anticipated by the energy sector," says Whyte.
Baker McKenzie's report outlines how countries have been rapidly concluding that a successful decarbonization path cannot solely rely on renewable electricity and that a zero-carbon hydrogen solution is needed. The report explains how governments around the world are supporting decarbonized hydrogen, as they did with renewables, to drive down cost. .
For example, the report outlines how hydrogen-related research and development (R&D) budgets in China, the EU and Australia, for example, are on the rise. In 2018, funding for hydrogen-related technology research and pilots increased by 8%, representing more than 50 billion in USD equivalent. This rise in global R&D funding can be largely attributed to an increase in spending from China, whose budget almost quintupled in only three years.
This year (2021), the European Union is expected to institute a long-lasting and ambitious hydrogen research programme as part of its "Horizon Europe", including a new "European Partnership" for hydrogen. This partnership is, in essence, an R&D association specifically dedicated to hydrogen research and whose objective is to address "Market failure for first movers".
Australia adopted a National Hydrogen Strategy in 2019, which sets a path to build Australia's hydrogen industry. The government plans to accelerate the commercialisation of hydrogen, reduce technical uncertainties and build up its domestic supply chains and production capabilities. The Australian Renewable Energy Agency (ARENA) has identified renewable hydrogen as one of its three investment priorities.
In 2019, Japan adopted a new strategic roadmap for hydrogen making the development of hydrogen technology one of its centre pieces and is working toward decreasing the cost of decarbonized hydrogen production tenfold by 2050. Also, in 2019, South Korea announced its Hydrogen Economy Roadmap and Ulsan's Future Energy Strategy, with a primary focus on leading the hydrogen vehicles and fuel cell industry as well as establishing a system for hydrogen production and distribution.
Whyte explains that hydrogen is considered to be essential in South Africa's new energy mix, due to its important role in combatting climate change and delivering on decarbonisation targets.
According to the Baker McKenzie report, there is a growing consensus among academia, industry and political leaders that a decarbonization path based (quasi-)exclusively on electricity networks (an "electricity only" model) is unrealistic and would be too expensive. Deep decarbonization will require hydrogen to satisfy current industrial demand; "no molecules, no deep decarbonization.
Clean hydrogen also allows countries to meet the goals outlined in the Paris Climate Agreement. The report notes that hydrogen is way for countries to reduce emissions and to limit global warming to well below 2 degrees Celsius.
The report notes that within just a few decades, all the world's energy needs, electricity, industry, transport, buildings and agriculture, will have to come from carbon-free sources. This will require huge changes in little more than a single generation, and will need innovative solutions, technologies and policies. Hydrogen will play a crucial role in making this fundamental change to the globe's energy systems.
The current hydrogen market is already big and growing, with total demand listed in the report at around 115 million metric tons in 2018, representing USD 135.5 billion. Hydrogen also holds long-term promise and is expected to reach USD 25 billion by 2030. Future applications include road transport, maritime and air transports, buildings and energy-intensive industries.
Whyte notes that South Africa has an excellent renewable energy capacity, especially in wind and solar, which can be used to generate the energy needed to split water into hydrogen and oxygen. However, the current renewable energy programme will have to be upscaled to increase capacity.
"Additionally, clear policy and a regulatory environment that encourages investment will enable South Africa to be part of this energy transition and benefit considerably from exporting green hydrogen to other parts of the world. Green hydrogen could also be utilised to grow South African's clean energy supply via a decarbonised energy system," he notes.
To export green hydrogen, South Africa needs to develop the infrastructure necessary to store and transport the product. And while capital outlay and investment are needed, jobs could also be created by new income generating ventures," says Whyte.
So far, developments in the hydrogen market in South Africa have most come through the mining sector. The country's ample supply of Platinum Group Metals is an advantage as PGMs can act as catalysts during the electrolysis process that converts water into hydrogen and oxygen. As such, a zero-carbon hydrogen solution is one of the key evolving end-uses for platinum group metals
"New solutions are urgently needed to address Africa's power crisis and boost its post-pandemic recovery. Such solutions must consider the energy transition and the global drive towards a decentralised, decarbonised and secure energy supply that addresses climate change and stimulates economic growth. Green hydrogen can lower energy costs, increase the power system's flexibility and facilitate the decarbonization of African industries. Its benefits are ample and the opportunities it will create, not only for South Africa but other African countries, look very promising," adds Whyte.