Hydrogen can revolutionise SA and transform it into an exporter of green energy
Coherent government policy will ensure exports of hydrogen-enabled chemicals, fuels and products to Europe and Asia
All over the world interest in hydrogen as a vector for clean energy is growing as industries and governments investigate and implement national decarbonisation strategies. With the rapidly falling costs of wind and solar power, the opportunity to produce zero-carbon hydrogen has caught the attention of global energy players. With the world increasingly turning towards countries that have optimal renewable energy resources to provide the clean energy of the future, SA is in an extraordinary position to revolutionise its own economy.
These are some of the highlights from PwC SA’s inaugural “Unlocking SA’s Hydrogen Potential” report released earlier in the week, which concluded that as the world becomes more reliant on renewables as its primary source of energy, hydrogen offers an unparallelled solution for the transport, storage and efficient utilisation of clean energy.
With renewables playing an ever-growing role in primary energy generation, production will become geographically constrained, necessitating increased cross-border transportation and storage of green energy. With the impracticality of long-distance electricity transmission and the prohibitive cost of large-scale battery storage, the best option for the transport, storage and efficient utilisation of clean energy is hydrogen.
Hydrogen is exceptionally energy-dense per unit of weight, and through its direct combustion, its use in fuel cells and its use as an industrial feedstock, it can decarbonise a greater range of sectors than renewable electrical energy alone. Importantly in the context of global climate change, the use of hydrogen produced from renewable energy adds no carbon emissions.
Hydrogen is receiving an unprecedented level of international traction as the cost of renewables decline and carbon emissions are penalised. At the beginning of 2020 the global hydrogen project pipeline stood at $95bn and progress has been made with the launch of national policies and government funding initiatives. Strategic memorandums of understanding between countries that are ideally suited to the production of hydrogen and countries that have aggressive decarbonisation targets and want to use hydrogen, are clear signs of traction.
SA has world-class renewable potential that can be leveraged to supply clean energy to the world and transform the domestic economy. Hydrogen is categorised into three broad types: grey, blue and green — based on the quantity of carbon that is emitted in their production and the production process itself. Most investor attention is now focused on green hydrogen. This production method uses electricity generated through renewable energy (wind, solar or hydro) to split pure water through an electrolysis process into hydrogen and oxygen molecules.
If SA can properly leverage its world-class renewable energy resources and combine it with a fertile investor and regulatory environment, the country could transition to an exporter of green energy to the world, alongside decarbonising large sectors of its own economy. Hydrogen has the ability to revolutionise the entire energy space.
For SA, focusing on fuel cells alone is missing the bigger opportunity:
- Transportation — Across road and rail, fuel cell technology can outperform fossil fuels and battery counterparts through better power to weight efficiencies, faster refuelling times and longer ranges. In aviation and shipping, hydrogen’s ability to produce carbon neutral fuels that can run through existing technologies such as diesel engines and jet turbines, makes it unmatched as decarboniser;
- Building heat and power — In countries that have existing natural gas networks, hydrogen offers a simple decarbonisation alternative. In areas where access to power or reliability of power is problematic, hydrogen solutions are already being used to provide an alternative to carbon-intensive diesel generators;
- Industrial heat and feedstock — Either combusted on its own or in combination with oxygen, hydrogen can produce extremely high temperatures and is also already widely used at the feedstock for the production of fertiliser (ammonia) and in the production of liquid fuels. Sourcing green hydrogen in these industrial processes would offer a significant decarbonisation opportunity; and
- Energy sector — An issue facing the renewable energy sector is how best to efficiently store the energy created, to achieve smooth supply and maximise asset utilisation. Hydrogen can help solve this through using electrolysis to convert excess electricity into hydrogen during times of oversupply. This hydrogen can then be used to generate power through either fuel-cell or direct combustion in gas turbines when it is needed.
As part of SA’s economic recovery plan the country needs to develop new competitive industries in global markets. If SA is able to leverage our world-leading renewable power potential it will be well-positioned to secure its own domestic supply of energy that will anchor economic growth, but more importantly become a net exporter of energy in the form of hydrogen-enabled chemicals, fuels and products to high-demand markets in Europe and Asia.
Coherent government policy will be necessary to support the pace of hydrogen development and correctly incentivise the move towards fully green hydrogen. Progress is being made in the SA hydrogen space, with the first government-led hydrogen road map under development and the Green Hydrogen Atlas-Africa initiative highlighting the country’s potential to the global community. However, to fully realise the benefits of the hydrogen economy the following steps need to be taken:
- Finalise the SA hydrogen strategy and road map — where to play, how to start, how we support and incentivise;
- Clear ministerial direction over which government department will champion hydrogen;
- Assess the need for regulation in enabling a competitive market;
- Incentivise early investment and a just transition from red, to blue, to green hydrogen;
- Fast-track renewable energy licensing used for hydrogen production;
- Review the strategy for local content and local skills development; and
- Sign collaboration agreements between hydrogen producers, off-takers and technology players.
If SA commits to a certain, transparent, stable and accountable policy environment for hydrogen the country can reap the significant rewards on offer.
• Metcalfe is Africa South market lead for hydrogen and economist in PwC’s strategy & business unit.
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