Deloitte: Green hydrogen is SA’s ticket to decarbonisation

In a recent poll conducted during a webinar on climate change, delegates were asked to offer their thoughts on how much ice, measured in bottles of wine, is melting per second in Greenland. Three options were given: 1-million, 17-million and less than 10,000. Most delegates went with the alarming figure of 1-million; some optimists among us thought it would be less than 10,000; and the correct figure, it turned out, was 17-million. 17-million bottles of wine per second. Let that sink in.  

Not only does the evidence show, but such fact-based data dictates, that reaching net-zero global greenhouse gas emissions by 2050 will require decarbonisation to take place far faster than is now the case. Green hydrogen can be a game changer that will help us attain this goal.  

It is accepted that clean hydrogen is crucial for us to achieve climate neutrality in line with the Paris Agreement since it replaces carbon-intensive fuels, thus reducing emissions and environmental impact. It also offers a solution for decarbonising those sectors with a heavy reliance on fossil fuels, the so called hard-to-abate, such as heavy industry and transportation.  

Hydrogen energy production provides a clean, versatile and efficient energy source that can drive the transition to a low-carbon economy, helping to not only work towards ending the climate crisis and secure a more sustainable and prosperous future, but also help SA achieve its just transition goals.  

These goals consider the crucial requirement to balance the reduction of carbon emissions and the effect this transition has on employment, with the need to develop long-term green energy jobs, especially as it relates to affected communities that have a current heavy reliance on fossil fuels. With the recent announcement of a $1bn SA H2 fund, we can.  

Enormous potential

Deloitte’s recently released report, Green Hydrogen: Energizing the path to Net Zero, notes that the global hydrogen market is expected to grow to $1.4-trillion per year by 2050, with green hydrogen dominating supply. It also goes on to project that at about the same period, developing countries will account for nearly 70% of the market, supporting up to 1.5-million jobs per year in developing economies between 2030 and 2050, and up to 2-million jobs per year globally between 2030 and 2050.  

The potential for green hydrogen in SA is enormous, and the opportunity for a just energy transition that much more real. SA already has a direct industrial application for hydrogen, with industrial players like Sasol and others making use of hydrogen in their manufacturing processes.  

Coal remains the primary source of energy for the country, but for SA to reach its carbon emission reduction targets this must change. As such, investing in the development of carbon-neutral technologies is an absolute imperative, while reskilling the existing workforce and educating the future workforce.  

Green hydrogen has also been recognised for its potential to overcome the limitations of electrification, including load-shedding. Additionally, production costs are expected to decrease significantly, making it the most cost-competitive technology by 2050 — good news for the energy, resources, and industrials sectors. It is fair to say that the clean hydrogen economy presents a competitive and diversified market, distinct from the concentrated and volatile nature of the oil and gas industry and appropriate for the creation of sustainable jobs in these sectors.  

However, the just transition to a clean and inclusive market requires concerted policy efforts and decisive support from the government and public services industry. By aligning policies, scaling up production and ensuring cost competitiveness, governments can catalyse the shift towards green hydrogen as a crucial element in achieving climate neutrality, and provide policy support needed for green hydrogen to compete with fossil-based alternatives on the ever-pivotal cost factor.  

Future-focused policy should focus on components that take into cognisance factors such as laying the foundations for a climate-orientated market, this through national and regional strategies as well as shared certification processes. It should also work towards creating a compelling business case with targeted policy instruments, long-term offtake mechanisms and price stability, as well as gradually tighten climate standards to improve the environmental footprint of clean hydrogen production processes.  

National and regional hydrogen strategies, along with clear visions, ambitious targets and comprehensive support tool kits, can unlock the market ramp-up and attract private investment for economies of scale, as well as drive the transition towards a thriving and sustainable hydrogen economy.  

The consumer industry, specifically the automotive and transportation sectors, will be pivotal in the transition to a sustainable future. SA’s investment in green hydrogen technologies offers versatile solutions for decarbonising these sectors, especially in long-haul and heavy-duty applications.  

Embracing green hydrogen enables the consumer industry to not only reduce carbon emissions, drive innovation and contribute to SA’s decarbonisation goals, but to also develop long-term jobs. The transport sector alone is expected to become a significant contributor to green hydrogen demand, accounting for 36% of the total demand by 2050. 

Africa poised for growth

In a recent conference hosted by Deloitte on managing risk and the opportunities these may provide, Admassu Tadesse, president and MD at the Eastern & Southern African Trade & Development Bank (TDB), a former executive at the Development Bank of Southern Africa (DBSA), noted that while the continent faces challenges, there are still serious opportunities that need to be looked at, and several countries are advancing on those opportunities. Green hydrogen is one such opportunity.  

Regions in Africa that are now able to produce cost-competitive hydrogen in quantities that exceed domestic needs are already positioning themselves as future hydrogen exporters — supplying other less-competitive regions and helping to smoothly facilitate the energy transition. Notably, global hydrogen trade is projected to generate more than $280bn in annual export revenues by 2050, with North Africa expected to benefit the most ($110bn per year) due to its high export potential. Other areas across Africa are exploring export opportunities, such as Namibia and SA, which have an abundance of solar and wind availability. 

Considering that Deloitte’s 2023 global green hydrogen outlook projects that the global hydrogen market is poised for growth, reaching maturity by 2050 as green hydrogen supply capacities scale up to meet soaring demand, this rapid expansion creates a compelling opportunity for the investment and financial services industry to play a pivotal role in financing the required infrastructure and unlocking the immense potential of the hydrogen economy.  

Thus, the new R18bn fund to boost SA’s green hydrogen projects could not have come at a better time; not only because it will help speed up the process of accessing a clean, versatile and efficient energy source, but also to boost a just energy transition.  

• The authors are with Deloitte Risk Advisory Africa.