SA’s HYDROGEN ENERGY INVESTMENT STRATEGY A BOOST

By Bridgett Majola, Partner: Banking & Finance; Gavin Noeth, Senior Consultant: Infrastructure & Projects; and Pooja Pundit, Candidate Attorney, CMS South Africa

In recognition of the global proliferation of sustainable energy and considering the COP 27 and South Africa’s international law obligations under the Paris Agreement, South Africa is strengthening its contributions and efforts towards climate change mitigation.

These are crucial particularly to create a clean, affordable, sustainable, and bright energy future. In addition, investing in clean energy will boost economic growth and the attainment of social justice in the country.

In line with this, the Public Investment Corporation SOC Limited (“PIC”) published a media release late last year stating that it has adopted a hydrogen investment strategy to facilitate the development of the hydrogen value chain in South Africa. The announcement means that the government of South Africa, through the Hydrogen Roadmap (“HR”), has identified the PIC as a probable co-investor in hydrogen projects.

What does this investment mean for South Africa?

Green hydrogen seems to be one of the solutions to South Africa’s energy conundrums, in that it is an alternative clean source of energy which supports climate change mitigation and will reduce South Africa’s carbon footprint. In addition to this, green hydrogen has the potential to address the growing gap of the fundamental needs of the majority of the rural country who are without power and, at the same time, facilitate a just transition away from fossil fuels.

South Africa has an abundant source of natural renewable resources, in particular solar and wind, to meet the energy needs of the local market and ultimately contribute to a green hydrogen export market.

The exportation of green hydrogen has the potential to create thousands of direct and indirect sustainable jobs and provide unprecedented stimulation to the economy. It is expected that this investment strategy will go a long way towards addressing the challenges of poverty, inequality, and unemployment in South Africa.

As regards the development of green hydrogen, various ambitious projects have been started. This includes Sasol’s Boegoebaai SEZ project to determine if a green hydrogen global export plant is feasible. And, of course, the Platinum Valley Initiative is geared to establish a Hydrogen Corridor from Limpopo through Johannesburg to Durban to promote hydrogen consumption in the transport industry. In addition, the Coalco2-X Project aims to harness green hydrogen and pollutants from coal-fired boilers to produce value-added products and can aid the transition to a decarbonised energy system.

There is also the sustainable aviation fuels project which is aimed at realising sustainable aviation fuel as an economical and viable product for the aviation industry. The Hive Hydrogen Project in Nelson Mandela Bay is additionally working on a massive power-banking arrangement which has the potential to end load-shedding in 2026 and there is a new project in Jeffreys Bay which is an electrolysis plant that will have green hydrogen production capacity of about 9.8 t/y.

The investment of the PIC in green hydrogen project development is a significant step in South Africa’s energy transition. The PIC is one of the most successful asset management firms in the world and is by far the largest on the African continent. The PIC controls over 10% of the Johannesburg Stock Exchange and has direct and indirect exposure to almost all divisions of the South African economy. While the production of green energy raises some concerns – as demonstrated in this article – innovation will address these issues. The pace of innovation can be expected to increase exponentially with the development of green hydrogen in, amongst other countries, South Africa, Morocco, and Australia. At the same time, we can expect to see a corresponding increase in green hydrogen markets such as Europe, so the demand for the product should certainly prove to be an incentive for producers.