Industrial Development Corporation (IDC) divisional executive for mining, metals, energy, and infrastructure Reginald Demana
JOHANNESBURG (miningweekly.com) – South Africa is drafting a green hydrogen position statement for the upcoming twenty-seventh United Nations Climate Change Conference (COP27), which is scheduled to take place in Egypt from November 7 to 18.
Industrial Development Corporation (IDC) divisional executive for mining, metals, energy and infrastructure Reginald Demana revealed this in response to EY Parthenon Africa executive director Paul O’Flaherty during the Hydrogen Economy Discussion. The other participating panelists were European Investment Bank (EIB) regional representation deputy head Nadège Hopman, Norfund investment manager Rivatshiny Mandavha, and International Finance Corporation (IFC) Climate Business market research officer Elizabeth Minchew.
Demana described the IDC as the leading government agency developing South Africa’s hydrogen commercialisation strategy and drew attention to the IDC’s Mahandra Rooplall, who was in the audience and who is presently developing the national hydrogen commercialisation strategy, key objectives of which are to secure global export market access, develop the domestic market to help to decarbonise the South African economy, and to secure long-term energy security.
With the macro strategy accepted by Cabinet, developing regulations and publishing projects as well as infrastructure requirements are seen as the next steps that need to be urgently taken.
“There are already a number of projects covering the entire country. We need to mobilise enough funding to fund the development of these projects and hopefully in a month or two, we should be coming up with a package.
“That will then allow people to openly start applying for funding but if you look at the pipeline of projects already there, it covers the full spectrum across the entire country,” said Demana.
“These are massive projects – the multi-billion-dollar Boegoebaai project, for the port, rail and renewable energy production plant and the Sasol project.
“If you look at the Hydrogen Valley, spearheaded by Anglo American from Mogalakwena platinum group metals (PGMs) mine, and then the logistics and mobility involving buses and long-distance trucks all the way to Durban, these are massive projects.
“What we’ve decided to do is pick some of the top 20 catalytic projects that cover different products, be it ammonia, aviation fuel, hydrogen itself, so that we can see what’s doable, what’s bankable,” Demana added.
Under way is a review of the policy and regulatory environment to ensure that the appropriate legal framework is adopted.
Existing frameworks are being reviewed to see whether they can be realigned to fit in hydrogen and under scrutiny are green ammonia, methanol, aviation fuel, green steel – in Saldanha Steel, for example – and mobility, particularly relating to trucking, busing, railing and shipping.
It is estimated that South Africa’s share of the export market could be in the region of six-million tonnes to ten-million tons of green hydrogen in 2050. Meanwhile, the German government is talking about possible offtake two to three times the market size originally contemplated to counter gas reduction.
“We see a lot of opportunities for South Africa. We have ports. Most of the projects that we are sponsoring are located around the coast. We can access that infrastructure and export to Germany, alongside the Namibians.
“Domestic demand is very interesting. Although it’s small and the development of the domestic market will lag export, it’s an important aspect for decarbonisation.” said Demana.
The likes of Sasol, Eskom and many other high emitters will not be able to decarbonise without the help of green hydrogen and projects, such as Anglo American’s nuGen truck, require that green hydrogen production is co-located on site.
“Those projects will run ahead of most others, maybe even ahead of export, so we’re supporting that,” said Demana during the discussion covered by Mining Weekly.
"The way we look at funding opportunities is across the value chain, from PGMs mining, in which we are investing very hard. We have a big renewable energy business with a billion dollars of investment, we want to double that, and then you look into manufacturing, whether it be setting up the plant for components. You then go onto the demand side, which is fuel cells for trucks.
“We want to invest across the value chain. We are providing equity for feasibility studies right now, and we are mobilising grant funding. We think, just before we go to COP27, we might be announcing significant grant funding secured with KfW, where again Rooplall and team will be running that,” said Demana. KfW is a German development finance institution.
“We have a lot of projects. I think we have 20 projects right now. The most advanced project is Sasol converting grey hydrogen to green hydrogen,” he added.
Mandavha said Norfund would be investing in green hydrogen projects through its new climate investment fund. “We’re ready to walk the journey with our partners and show that we understand the allocation of risk and navigate some of the challenges that I’m sure we’ll experience in getting projects to bankability. We’ve had a couple of conversations with the IDC, and I think the role for us is partnering with local industrial financiers.”
Minchew spoke of the IFC investment in renewable hydrogen being driven by the organisation’s desire to increase the amount of climate investment globally. “All our work is driven these days by the need to decarbonise across sectors and across emerging markets.
“Our vision is to build sustainable local and export economies but all of this going to be driven by the need for long-term financial sustainability. We also want to make sure that the use of green hydrogen to decarbonise is competitive given the variety of technologies available today,” Minchew outlined.
Hopman noted that one of the three pillars of South Africa's just energy transition – involving an $8.5-billion financing deal, discussed at COP26 in Glasgow – is green hydrogen, and also drew attention to the EIB's pledging of €1-billion towards South Africa’s just energy transition.
“We’re quite hopeful that we can put a fair amount of this to support green hydrogen enabling infrastructure, something that would make South Africa take the lead in commencing projects.
“We cover both the public sector and the private sector and signed something like €80-billion last year inside of the EU and around €10-billion outside of the EU. We hope to be part of the solution of this chicken-and-egg dilemma of there being no demand resulting in no supply or being no supply there is no demand. We hope to be able to be the bridge between the demand that is clear in Europe and we have a vested interest in making sure that there is some supply from the rest of the world to supply this 10-million tons a year of hydrogen.
“If you look at all the renewable energy that has ever been installed in South Africa through the Renewable Energy Independent Power Producer Procurement Programme, or REIPPPP, the order of magnitude is 5 GW, which is 300 000 t of hydrogen a year, compared with the ten-million tons that we need. That gives you an idea of the scale of the programme. The pie is just too big. There is no need for competition among financiers. There’s just too much to be funded. We do hope to be able to finance a complete ecosystem to life with demand and the supply through an optimisation of the ecosystem,” said Hopman.