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South Africa: A potential green hydrogen powerhouse

By Kieran Whyte, Partner, Head of the Energy, Mining & Infrastructure Sector Group, Baker McKenzie Johannesburg

Hydrogen markets in Africa are expected to grow exponentially in the mid- and long-term and companies that invest in hydrogen today will be able to capture this growth, become technology leaders and shape the future of the sector in Africa. However, there are still multiple barriers to the widespread development of decarbonised hydrogen and each investment will face challenges in the form of infrastructure gaps,  policy, regulatory, economic and financial barriers.

According to a report, “Africa’s Extraordinary Green Hydrogen Potential” published by the European Investment Bank, International Solar Alliance and the African Union, Africa’s green hydrogen potential is economically viable at EUR 2/kg and can accelerate low-carbon economic growth across continent and reduce emissions by 40%. The report noted thatusing Africa’s solar power to produce 50 million tons of green hydrogen a year by 2035 would help to secure the global energy supply, create jobs, decarbonise heavy industry, enhance global competitiveness and transform access to clean water and sustainable energy.

In order to do this, Africa needs to address its energy infrastructure and supply chain infrastructure gaps, as well as implement new technologies and upskill engineers and technicians. The African Continental Free Trade Area could also play a vital role in ensuring the seamless movement and trade of green hydrogen across the continent, but in order for this to happen, transport and utilities infrastructure must also continue to be developed across the continent.

The most recent development in the green hydrogen space is the announcement in June 2023, that South Africa is partnering with the governments of the Netherlands and Denmark to form a dedicated blended finance fund, SA-H2, to raise USD 1 billion for the construction of green hydrogen projects in the country. The fund will enable the development of large-scale green hydrogen infrastructure, directly or through public-private partnerships and domestic and global finance institutions. It is supported by a joint venture between Dutch development bank FMO, Sanlam InfraWorks and Invest International (owned by the Dutch Ministry of Finance), as well as the Development Bank of Southern Africa, the Industrial Development Corporation (IDC) and others. Once established, the SA-H2 will join the SDG Namibia One Fund to offer a blended finance solution for Southern African’s green hydrogen sector.

In 2022,  South Africa, alongside Egypt, Kenya, Morocco, Mauritania and Namibia, launched the Africa Green Hydrogen Alliance, with the intention to foster collaboration and ensure the continent is able to lead in the development of green hydrogen for energy transition.

The South African Hydrogen Society Roadmap (HSRM) was published in 2022, an important milestone in the launch of South Africa’s hydrogen economy. The Roadmap is aligned with the country’s Integrated Resource Plan, the Integrated Energy Plan and the Renewable Energy Policy, all of which acknowledge the important role of hydrogen in South Africa’s just energy transition, which aims for net zero emissions by 2050.

At COP 27 in November 2022,  Masopha Moshoeshoe, a green economy specialist in the South African Presidency’s Investment and Infrastructure Office, said that the country was seeking to attract investment worth USD 250 billion for the development of its green hydrogen energy economy by 2050. Moshoeshoe said the industry could create around 1.4 million jobs and USD 30 billion in annual revenue by 2050, but that renewable-power generation capacity of between 140,000 MW and 300,000 MW was needed to supply the green hydrogen sector. The country currently has renewable energy capacity of around 40,000 MW.

This is good news for the country, which is now well on its way to becoming a green hydrogen powerhouse in the years ahead.