Founder: Turnaround Talk
The National Development Plan (NDP) is a key document that identifies and plots the levers of growth that will hopefully transform the South African economy into an African powerhouse by 2030. The NDP was published in 2011 and was adopted in 2012, with visions of economic growth of between 2% and 5% being a regular occurrence. However, we have fallen significantly short of these ideals.
Currently, South Africa is not only facing a crippling energy crisis, the country has been facing a growing unemployment crisis for several years. One of the solutions to address this could be embracing green hydrogen and making it a pillar of economic growth. I recently read an extract of a Moneyweb Podcast with Mike Peo, Head of Infrastructure, Energy and Telecommunications at Nedbank CIB. where this was discussed in more detail.
Subheads were added by Turnaround Talk
Several technologies
Ryk van Niekerk: There are several green fuel-related technologies in various developmental phases. Some are more advanced than others. I immediately think of renewable electricity and even battery technologies, and they seem to be very popular in many industries. How do you see green hydrogen within the future energy mix of the world?
Mike Peo: Right now the absolute ultimate holy grail would be a point at which we use hydrogen as the fuel source to fuel base load [minimum level of demand on the grid] energy generation. So the ultimate end game would be able to replace coal as a fuel source with a completely carbon-free fuel source called green hydrogen. That would be the absolute end game.
That would complement most of the renewal energy technologies which exist today, which are unfortunately not base load. So while we have massive amounts of photovoltaic or solar projects being developed, wind projects being developed in South Africa, the only downside, while the fuel supply – if I can call it that – is free in that we are using either the sun or the wind, we have power from those sources only when the wind blows or when the sun shines.
While we’re seeing a massive improvement in the levels of battery technology and storage technology, solar plus wind plus batteries are unlikely to get us to a perfect replacement for fossil fuels today.
Green hydrogen, however, is the potential fuel source of the future. So while we have to use green energy from PV or wind to create green hydrogen, we will have to build massive amounts of additional energy capacity in building wind farms and PV plants.
Image By: Supplied
The ability to then convert that into green hydrogen will enable us to move to a base load of energy which is predominantly what most industrialised countries need.
We need more base load. Intermittent energy on its own is not a solution for a country that has the size and scale of energy needs that we do.
Transitioning to green energy
Ryk van Niekerk: That’s a very, very interesting perspective because of course we live in a world where there is a lot of effort to try and move away from fossil fuels. How would you see the development of such an industry in South Africa, because coal at the moment is by far the biggest fuel source for our power stations, and of course we would need a lot of hydrogen to fuel those power stations? But how do you see the development of this industry and how our electricity and base-load electricity infrastructure can use it and adopt it as the primary fuel source?
Mike Peo: I think we really have to accept that we are in a climate crisis right now. If we are unable to significantly reduce emissions, South Africa – as well as the rest of the world – faces a number of massive crises, including a whole lot of problems like the ability to actually feed ourselves, etc.
The damage that climate [change] is causing will result in us running out of food sources inside of 20, 30 years. We will see mass migrations of people from areas that are going to become almost entirely desert, etc.
People are going to rush north and south on the continent. And some of the forecasts that institutions like the CSIR put out say South Africa could have an influx of 40 million people in 20 years’ time as a direct consequence of climate change.
So we have to absolutely accept that we need to move from fossil-based fuels like the approximately 50 gigawatts of coal-fired projects in South Africa. We have got to shift away and clean that up.
However, the size and scale of investment that’s required means we have to move through a transition. We cannot switch off coal tomorrow morning, and switch on renewable energy – even if we were able to build the equivalent amount of capacity.
As I mentioned a few minutes ago, we are not replacing like for like. Coal is base load; renewables are not currently base load.
So our view is that we will probably see a gradual decommissioning of coal with a transition to natural gas. Natural gas is approximately 50% of the CO2 emission value of coal. So it’s a 50% improvement, and then ultimately from gas into green hydrogen. And once we have gas-fired generators we move from gas to hydrogen fairly easily, provided the hydrogen is available as a fuel source.
So for South Africa it’s a reasonably long road; but it’s an imperative for South Africa. We are the single largest emitter of CO2 on the continent.
We have two institutions in Sasol and in Eskom that make up 95% of those emissions and we have to focus on the transition of those two institutions. So the imperative is absolutely there.
The way the transition works is that the private sector is currently looking very actively at developing two or three big catalytic projects which become the forerunners of this new industrialisation that I refer to.
Ryk van Niekerk: You’ve referred to several international examples, but are there blueprints we can use [that emanate] from the development of this industry in other countries which may make it clearer exactly how this industry will develop in South Africa?
Image By: Global Energy Ventures
Mike Peo: It’s a very new emerging industry globally. Just two points.
Ammonia has been produced for the past 1 000 years. Hydrogen has been produced and is used in very many processes today. So what we are talking about now really is the scaling up of that. We need to double and quadruple, and double and quadruple again, the quantum of hydrogen and/or ammonia being produced, and we need to build the renewable energy plants to be able to convert that hydrogen or ammonia that is currently being produced from being carbon based to being non-carbon based. And so it’s really the scaling up. So there are a number of examples globally that we can use.
A company called Aqua Power, which is very active in the South African renewable energy market, has got to financial close on the first major project of this nature in the world.
It’s being built in Saudi Arabia, but with exports of that green hydrogen to the United States. So there are a number of examples that are now proving that this can be done at scale. And obviously with any nascent industry the million-dollar trick is to move from a reasonably expensive technology today to a very cheap technology in the future.
We’re bringing down the costs and we have lots of examples of that. We have the LNG industry that developed in the 1970s, we had the mobile telephony business which started evolving 15, 16, 17 years ago. Everybody will remember how expensive the cost of a phone call was 15 years ago compared to its cost today.
Even in the renewable industry in South Africa we have seen about a 60% to 75% reduction in the cost of the technology of building renewable energy projects, so lots of examples which say it can happen.
I really do believe that now the imperative to shift towards green hydrogen is so important that virtually every major current fuel provider or manufacturer of equipment of that scale or nature is now focusing on the green hydrogen opportunity.
Enabling a bright future
Reports indicate that job creation opportunities from projects in the Hydrogen Valley will create about 14 000 (low case) to 32 000 (high case) jobs per year by 2030, should the full vision of the project be realized.
In addition, South Africa can potentially be a net exporter of hydrogen energy. Like the current European demand for our coal, there will be significant demand for South African hydrogen.
Reports point out that hydrogen demand in the Valley could reach up to 185 kt H2 by 2030, or 40% (low demand case) to 80% (high case) of demand in the national hydrogen roadmap. Demand in the Valley has been developed based on a bottom-up assessment of technical potential of off-takers in each hub, complemented by hydrogen uptake curves reflecting the expected competitiveness of hydrogen in each application.
The report points out that the H2 Valley could potentially add between $3.9 to $8.8 billion to GDP (direct and indirect contributions) by 2050 while also creating between 14 000 to 30 000 direct and indirect jobs per year.
This is the kind of change that will power the South African economy in the future if Government is bold enough to embrace it without any hindrances.
