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Powering our way out of the carbon economy and into a green hydrogen future

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Powering our way out of the carbon economy and into a green hydrogen future

The Ministry of Trade, Industry and Competition has mandated the Industrial Development Corporation to be the commercialisation champion for South Africa’s hydrogen economy. It will look to partner with the private sector in funding opportunities across the green hydrogen value chain, stimulating early adoption and fast-tracking the development of a viable and inclusive local green hydrogen economy.

This is an edited version of his keynote address at the 2nd Renewable Hydrogen and Green Powerfuels Webinar for South Africa, hosted by EE Business Intelligence and the British High Commission to South Africa on 13 April 2021.

The way we power the world is changing. Through the centuries, as our technologies developed, we’ve turned to wood, to coal, to oil, to water, to nuclear fusion, and to the sun and wind to power our communities and our industrial endeavours. Today, we stand on the brink of a new development in our efforts to bring cheaper and more accessible energy solutions to the world, in the form of hydrogen energy.

The hydrogen economy is not just for South Africa, but for the world at large.

It could provide a just transition with the potential to decarbonise various industry value chains and provide security of energy supply. It can also contribute towards the achievement of the Sustainable Development Goals. Hydrogen can decarbonise a greater range of sectors compared to renewable electrical energy alone.

The global production of hydrogen varies between 50 and 70 million tons a year, half of which is used, of course, to make ammonia. But as technologies develop, the production of hydrogen to bring energy transformation is opening up new opportunities. At present, hydrogen for energy purposes is estimated to represent between 1% and 2% of global energy consumption. The outlook for global demand for hydrogen points to a seven-fold increase by 2050, spread across various industries.

The Hydrogen Council, a global CEO-led initiative, estimates that the hydrogen economy will achieve annual revenues of more than $2.5-trillion, and create more than 30-million jobs globally by 2050. Countries are now mobilising resources to deal with the climate crisis. The crisis is real, it’s pressing, and we need to move on it.

There is a growing international interest and momentum in green hydrogen for the production of clean energy.

This is a key factor involved in hydrogen’s use for solving daunting decarbonisation challenges and transforming high-emitting industries, such as steel, cement, transport and petrochemicals, towards cleaner production. Hydrogen is potentially the missing piece in the puzzle towards attaining net-zero emissions by 2050 in line with the Paris Climate Agreement of 2015.

South Africa is well positioned to capitalise on the rapidly developing global hydrogen economy. We can become an exporter of cost-effective green hydrogen to the world. South Africa’s rich endowment of renewable resources of solar, wind and biomass for power generation, together with the technological capabilities and skills around the Fischer-Tropsch process and access to platinum resources, places the country at an advantage for developing the green hydrogen value chain, and being a key supplier into the global hydrogen market.

Our country has the potential to be an important player in this new space by exporting to countries that have limited renewable energy resources to produce hydrogen competitively. In addition to good environmental conditions, we are also well endowed with a key ingredient critical for the hydrogen economy. The platinum group metals, or PGMs, are used in the electrolysers needed to produce green hydrogen as a fuel in hydrogen fuel cell electric vehicles.

South Africa has more than 80% of the world’s platinum reserves and is home to the largest platinum mining companies in the world.

There is a strong interest in supporting the long-term sustainability of the industry and developing new markets and applications for platinum. Our resource endowment has to be translated into a competitive advantage for value-added manufacturing that can contribute to job creation, investment and the export of hydrogen and value-added platinum-based fuel cells.

The start, of course, of South Africa’s involvement in the hydrogen economy dates back to 2008, when Hydrogen South Africa (HySA) was officially launched by the Department of Science, Technology and Innovation. Its mission and vision for innovation have been driving the development of the hydrogen roadmap for South Africa. It aims to integrate and create an inclusive hydrogen society so that an enabling compact between industry, labour, communities and government can be developed.

A number of government departments play a role in the hydrogen economy,

including supporting climate change commitments through policies and a range of public strategies. They include, and by no means is this a full list, the 2019 Integrated Resource Plan for electricity, IRP 2019, the green transport strategy, the South African Renewable Energy Masterplan (SAREM), and the Renewable Energy IPP Procurement (REIPPP) programme.

Another key initiative in collaboration with the private sector includes a feasibility study to develop a hydrogen valley from the PGM mines in Limpopo, stretching along the industrial corridor from Johannesburg, all the way down to Durban. The study, which is driven by the Department of Science, Technology and Innovation, will identify tangible opportunities to develop hydrogen hubs and infrastructure that can supply industrial users and fuel-cell electric vehicle end-users.

The aim, of course, is to create a sustainable local manufacturing sector for hydrogen production and PGM-based fuel cells, by beneficiating South African PGM minerals through mechanisms that can support a local and global market.

We have to think beyond the opportunities locally, but use the skills and capabilities here.

On the back of several years of collaborative work and investment in technology development, we are pleased that mineral-based green energy solutions are gaining momentum, with a number of key projects being pursued. Our department, the Department of Trade, Industry and Competition (the dtic), has supported fuel cell demonstrations and component production and there is an enormous opportunity in this to boost the industrialisation of South Africa. Of course, this is through the production of both new energy components and the various elements of the hydrogen economy, and also by powering established industries in new ways.

Let me use an example. Vodacom used imported fuel cells for its South African network. Working closely with the international firm that supplied them, we secured an agreement for the company to open a local factory in a trade port in KwaZulu-Natal. Last year, the company opened a $10-million plant that will create a manufacturing facility with an initial capacity of 1,500 fuel cells per annum. The technology is based on low-temperature proton exchange membrane fuel cells, which is the same technology used by the world’s automakers for fuel-cell electric automobiles for forklifts, buses, trucks and, of course, by governments for various military applications.

These fuel cells use platinum and palladium and contribute to PGM beneficiation.

In that way, they increase demand for metals and support the sustainability of the mining industry and jobs in South Africa. The company has further collaborated with Invest South Africa to start the process of deeper localisation with the initial local suppliers, which include printed circuit board assembly, wire harnesses, pressure tanks, shield metal manifolds and vacuum-formed ducts identified for inclusion in that supply chain.

I’m pointing to this because they show on a small scale what is possible — not what we may be able to do, but what we are currently doing. Imagine what more we can do when we scale up our ambition. These locally produced fuel cells will complement in servicing the world’s second-largest deployment of fuel cells — 300 units in the Vodacom South African network alone. The industry reports that fuel cells provide more reliable and more robust power compared with batteries and diesel generators.

The fuel cell market’s biggest enabler will be the global rollout and application of fuel cells in transport. Electric vehicles powered by hydrogen fuel cells offer many benefits given their technology attributes, especially for long-distance and heavy vehicle transport, such as buses and trucks. These include compatible refuelling times and long ranges, as well as space and weight efficiency.

Transportation initiatives with major fleet owners and original equipment manufacturers

(OEMs) offer an opportunity for the country to demonstrate and introduce green transport solutions using fuel-cell electric vehicles for the domestic and export markets. In this regard, I can point to the Green Transport Strategy, which seeks to facilitate South Africa’s transition to eco-mobility. And there is a range of measures there on transport greening fuels and technologies, including hydrogen fuel cells powering public transport bus fleets.

We are working with a number of automotive OEMs through the platform of the South African Automobile Master Plan to accelerate the development of manufacturing capabilities for new energy vehicles in South Africa. In my first meeting with the sector during this administration in August 2019, I framed the challenge to the large carmakers in South Africa, namely to take Africa’s largest car-making sector which we have here, and future-proof it through the embrace of green technologies. The goal is electric vehicles, and as a transition, we are now focusing on hybrid vehicles using a combination of electric and internal combustion engine technologies.

… at the time when the technology choices were made, the world had not been as aware of the reality of climate change. But as times change, we need the IDC to address that reality — the reality of climate change.

Toyota has made strides in this area, and later this year,

by about October, I hope the first citizen, in the form of President Cyril Ramaphosa, will

step into the first hybrid vehicle that rolls off the production line from our large-scale

commercial production facility at Toyota. We’ve had demonstration vehicles, and we’ve

had small-scale production, but this will be the first big commercial-scale production. I

hope the Toyota team can be enticed to see this as the first welcome step, to be followed

rapidly by the next and bigger step — the shift to electric-driven cars using green hydrogen technologies.

Now, to unlock these opportunities, industry and government will need to tackle head-on

the relatively high cost of green hydrogen, and the infrastructure and fuel cell challenges.

Global uptake, driven by greenhouse gas commitments and growing green finance options

will, in time, unlock the required volumes and economies of scale to become economically

viable. The rollout of enabling infrastructure will be essential to position South Africa to

take advantage of the increased demand. We look to global partners like the governments

of the United Kingdom, the European Union and Japan, among others, to join us in the

funding required for this journey.

What their citizens gain is a significant reduction in harmful emissions,

as well as the use of those technologies to assist in bringing down and meeting the

commitments that we’ve all made on emissions.

This will then assist with the development and commercialisation of an important technology that will be used across the world.

The dtic, through a special economic zone programme, offers incentive support for

investments and exports. There is now a proposed fuel cell hub linked to the Gauteng

Industrial Development Zone that is undergoing environmental impact assessment.

The intention is that this initiative will build on current partnerships and skills capabilities

to leverage supporting infrastructure for fuel cell manufacturing and deployment.

As part of the government’s strategic beneficiation objectives, the dtic is working with

other departments, with the Industrial Development Corporation (or the IDC as we call it)

and with industry, to support the hydrogen economy and fuel cell developments.

The private sector is absolutely critical in driving this. Our role as government is to

support and enable this, to be there as a cheerleader, and to back the emergence of

technologies and cost-effective ways of rolling this out.

The IDC, in particular, is working actively with other parts of government and the private

sector to support these enormous opportunities, and the potential that these technologies

hold for the world and for our economy. In the past year, the IDC has invested in

feasibility studies and in early-stage companies in this space.

I want to point out two initiatives of the IDC to illustrate what is possible, and to use this

platform to announce an enhanced role for the IDC in the green hydrogen economy.

The first relates to coal-to-oil technologies. The IDC was a founding shareholder of Sasol.

The support of the IDC in those early years, and since, was critical to the development of

Sasol and the unique technologies that it has available, which has been world-beating in

its area, creating South Africa’s largest industrial company with significant employment.

Of course, at the time when the technology choices were made, the world had not been

as aware of the reality of climate change. But as times change, we need the IDC to

address that reality — the reality of climate change.

The IDC will focus on identifying investment opportunities that will be progressed to

enable pilot projects to be implemented in the short term.

It will focus on creating the public-private linkages that will be critical to the development

of the entire green hydrogen value chain.

And I should say that will also enable the extraction of value from that value chain.

In 2011, I mandated the IDC to step up its funding to the renewable energy programme.

Government had just launched the Renewable Energy IPP Procurement programme, and

there was some scepticism in the market about the political will to back wind and solar

energy. The IDC stepped in and actively financed those early renewable energy projects.

This exposure helped to give the private sector, particularly the finance sector, the

confidence to participate actively, and today we have a large and growing renewable energy platform.

Over a 10-year period, the IDC alone advanced funding of R14-billion in 21 renewable energy projects.

In a similar manner, we now need a focused effort to explore the opportunities in green hydrogen.

I have pointed to these two examples, one in more traditional areas — coal to oil, and the other one in the green economy space — which is renewable energy.

I can announce today that I have now mandated the IDC to be the commercialisation

champion for the hydrogen economy, linked to the Hydrogen Society Roadmap that was

developed by the Department of Science, Technology and Innovation.

The IDC’s business model will incorporate the integration and enhancement of project

development activities, including the creation of a focused industry planning and projects

unit. As part of this, the IDC will drive the development of an industrial plan aligned to the

roadmap that I spoke of, to coordinate the efforts in developing the hydrogen economy.

The IDC will focus on identifying investment opportunities that will be progressed to

enable pilot projects to be implemented in the short term. It will focus on creating the

public-private linkages that will be critical to the development of the entire green

hydrogen value chain. And I should say that will also enable the extraction of value from

that value chain.

I have further mandated the IDC to look actively to partner with the private sector i

n funding opportunities across the green hydrogen value chain, with a view to stimulating

early adoption and creating traction so as to fast-track the development of a viable and

inclusive local green hydrogen economy.

If the 20th century becomes known as the century of crude oil and nuclear energy, the

21st century will be known as a century of renewable energy and hydrogen.

Government is committed to working with all stakeholders to advance the development

and creation of an enabling environment for the development of this new industry.

Together with our collaborative partners, we will continue to support the development of

the hydrogen economy and fuel cell manufacturing capabilities.

As countries reconstruct their economies beyond Covid-19, renewable energies

and renewable technologies will play a critical role. Covid-19 reminded us that in a

globalised world, if we get it wrong, the price all of us pay is huge.

Climate change offers that same challenge.

The technologies we’re talking about provide an opportunity and a solution, and this allows South Africa to play to its advantage.

South Africa’s economic reconstruction and recovery plan announced by President

Ramaphosa in October last year places the issue of industrialisation, jobs, investment and

new industrial opportunities along the renewable energy value chain, strongly on our

agenda. In the annual performance plan of the Department of Trade, Industry and

Competition, and all of its 17 entities for this new financial year, I have included the green hydrogen economy as a key performance indicator.

The green hydrogen economy, if made commercially viable, offers enormous

opportunities. We must strive to leverage our resources to grow this exciting industry and the economy of South Africa.