South Africa’s inexperienced hydrogen hub: EU grants not almost sufficient to get trade going, say chemical engineers – TechnoNews

South Africa is poised to turn out to be a serious participant within the world power transition, because of its huge renewable power sources (solar and wind) and its plans for inexperienced hydrogen manufacturing.

Inexperienced hydrogen is produced by electrolysis, the place renewable electrical energy splits water into hydrogen and oxygen. In contrast to grey hydrogen, which is derived from fossil fuels, inexperienced hydrogen emits no greenhouse gases—solely water vapor. It’s seen as various to fossil fuels in sectors which are laborious to impress, corresponding to heavy trade, aviation and long-haul transportation.

We’re chemical engineers, with over 5 a long time of mixed expertise within the petrochemical trade, who’ve researched the potential for inexperienced hydrogen commercialization in South Africa.

The European Union’s latest pledge of €32 million (R628 million) in grants to help South Africa’s inexperienced hydrogen trade reveals that the nation’s potential is being acknowledged. Nevertheless, our analysis reveals that it’s not sufficient. Getting a inexperienced hydrogen trade began will want greater than this grant.

Inexperienced hydrogen manufacturing is dear, costing between US$5 and US$8 (R89-R143) per kilogram—round 5 occasions the price of hydrogen derived from fossil fuels.

It’s also three to 5 occasions costlier than oil. If inexperienced hydrogen is to be cost-effective sufficient to compete with fossil fuels, the inexperienced hydrogen trade will want authorities subsidies and incentives for producers. It would additionally want supportive authorities rules, corresponding to carbon taxes or a requirement to make use of sustainable chemical compounds corresponding to inexperienced ammonia for fertilizer constructed from inexperienced hydrogen.

Aside from this, substantial worldwide investments might be wanted to mitigate the dangers, corresponding to price overruns, that include constructing large inexperienced hydrogen initiatives. The truth is, South Africa’s future inexperienced hydrogen trade depends upon government-backed help from the worldwide north, by mechanisms like sovereign ensures—a promise by a authorities to cowl the monetary obligations of a challenge if it fails to satisfy its debt repayments—or fairness stakes—partial possession, sharing in each the earnings and dangers.

European Union grants

The European Union has offered two grants, totaling €32 million (R634 million). The primary is a R490 million grant to assist arrange a regional inexperienced hydrogen hub within the southern Africa area.

The European Union, and South Africa’s ministries of Commerce and Business and Electrical energy and Vitality, say this grant goals to “leverage R10bn in private and public sector finance across the hydrogen value chain”. In different phrases, this grant is predicted to entice traders to inject funds into inexperienced hydrogen manufacturing, transportation, storage and downstream industries (together with inexperienced metal and airplane gas).

A second EU grant of R138 million is meant to draw extra funding to spice up the state utility Transnet’s ports, railways and pipelines. That is in order that inexperienced hydrogen may be exported effectively.

South Africa’s inexperienced hydrogen commercialization technique goals to supply a million tonnes a yr of inexperienced hydrogen by 2030, rising to seven million tonnes a yr by 2050.

If it does this, by 2050 the inexperienced hydrogen trade may probably contribute R75 billion yearly—6.5% of South Africa’s gross home product. It may generate R24 billion in tax income, and create as much as 370,000 jobs.

The European Union grants are a step in direction of this. However they pale compared to the estimated R410 billion (roughly €20 billion) wanted to supply a million tonnes of inexperienced hydrogen by 2030. We calculate that the brand new grants characterize lower than 0.2% of the funding wanted to get this executed.

There’s a huge monetary hole that should be addressed. South Africa doesn’t have the funds to arrange a inexperienced hydrogen trade. The complete a million tonnes a yr of inexperienced hydrogen that South Africa goals to supply by 2030 is solely depending on world north subsidization.

We imagine that the European Union grants will cowl early stage research to evaluate the feasibility of organising the inexperienced hydrogen trade, reasonably than any capital investments.

Inexperienced hydrogen dangers

Inexperienced hydrogen industries rely upon megaprojects: renewable power infrastructure, electrolysers and water sourcing methods. Every megaproject usually prices over US$1 billion (R19 billion).

The inexperienced hydrogen trade may also rely upon a world provide chain in order that the product may be exported. This provide chain will want pipelines and ports in addition to long run agreements with importing international locations.

Megaprojects carry well-known dangers—they regularly exceed their preliminary budgets by 20%-30%, and deadlines are sometimes prolonged by years.

Unanticipated delays, tools failures, or the necessity for added infrastructure may dramatically enhance prices. This would go away South African challenge builders struggling to cowl the cash they’d invested within the initiatives. Traders is also left with stranded belongings if the demand for inexperienced hydrogen didn’t materialize due to competitors from different power applied sciences, regulatory adjustments, or slower-than-expected adoption.

The European Courtroom of Auditors lately known as for a “reality check” on inexperienced hydrogen, warning of those excessive prices, infrastructure bottlenecks and over-optimistic expectations surrounding the hydrogen market.

If the worldwide north subsidizes or buys shares in these initiatives, it may cut back monetary dangers for South African builders. Nevertheless, the chance of price overruns and schedule delays is extraordinarily excessive. These might be pioneering megaprojects they usually may very well be worth harmful—the place their returns might be beneath the price of capital.

The European Union hopes to import 10 million tonnes every year of inexperienced hydrogen by 2030. We imagine the EU ought to bear the dangers and use subsidies to pay for this.

Options

South Africa skilled frequent energy cuts between 2007 and 2024 that hampered financial progress. Critics of inexperienced hydrogen argue that renewable power needs to be used domestically earlier than being channeled into producing inexperienced hydrogen for export.

As inexperienced hydrogen researchers, we imagine that South Africa can put aside renewable power for native consumption whereas increasing inexperienced hydrogen capability on the identical time.

South Africa may also must be sure that native communities profit from the inexperienced hydrogen trade.

As world curiosity in inexperienced hydrogen accelerates, the true check might be organising the suitable partnerships to drive each financial growth and the world’s power transition.

South Africa may turn out to be a worldwide chief in inexperienced hydrogen. The €32 million grant from the European Union could be very welcome as a result of it highlights the significance of worldwide collaboration in addressing the local weather disaster. Nevertheless, there’s a actual hazard that the worldwide south may shoulder many of the dangers concerned in creating the inexperienced hydrogen trade whereas world north shoppers profit from the product.

This text is republished from The Dialog below a Inventive Commons license. Learn the unique article.