"Super Hydrogen H₂igh Road" offers win/win for economy and environment

A new study shows how green hydrogen can lead to a "Win, win" for South African employment and for the government's decarbonization goals.

The global information and insight company IHS Markit (NYSE: INFO) today publishes the results of a detailed, sector-by-sector study of South Africa's future opportunities to use the country's resources of wind and sun to produce low-carbon hydrogen—for export and for use in the home economy.

The independent study was commissioned by Agora Energiewende, a non-profit thinktank supporting the energy transition.

The study's research, grounded in today's realities of South Africa's coal-dependent energy and industrial systems and of current economic and social challenges, concludes that South Africa is well-placed to pursue a national strategy based on low-carbon hydrogen.

• A global context. IHS Markit is respected worldwide for its knowledge and analysis of major global industrial sectors: refining, chemicals, steel, energy. These are set to be transformed as the developed world introduces increasingly stringent measures to reduce greenhouse gas emissions.
• Hydrogen as key to deep decarbonization. "Renewables in the power sector with progressive coal retirements can directly eliminate only 40 to 45% of total South African CO₂ emissions," says the study. "Gradual adoption of electrification alone will not be sufficient. Green hydrogen enables a push to deeper decarbonization."
• A "H₂igh Road" scenario. As costs for producing green hydrogen drop worldwide, South Africa's resources of wind and sun can be developed to deliver benefits beyond the power sector. They can combine with the country's industrial expertise and existing investments to create a new-generation synfuels industry, backed by hydrogen electrolysis. A "hydrogen high road" offers both an economic boost - and thus an increase in jobs - and a deeper and faster route to decarbonization.
• More jobs, lower emissions. The study compares this scenario to a scenario of "inertia" based on South Africa's current industrial and power sector trajectory. The "high road" scenario quantifies the potential increase in employment at over 370,000 additional jobs[1] by mid-century - benefitting all regions of the country[2], and spreading across a range of employment sectors. Emissions of CO₂ would also decrease by 70 percent.

Export markets and the home economy

Export opportunities will be available as European and Asian countries recognize they need large-scale imports of green hydrogen to meet their own decarbonization targets. The study favourably compares the economics of transporting green hydrogen from South Africa to the Netherlands and to Japan with other potential hydrogen exporters in the Middle East, North Africa, and Australia.

Key domestic sectors that would become major users of hydrogen include the synthetic fuels industry (saving 48 million tonnes of CO₂ emissions per year), steel (saving 10 million tonnes of emissions), and chemicals and refining (saving 1.5 million tonnes). Remote- and heavy-duty vehicles would see, where battery solutions are not viable, a savings of 8 million tonnes with a 25% shift to hydrogen fuel cells. Industrial processes where electrification cannot meet their specific combustion or heat needs would realize a savings of up to 4 million tonnes.

Policy and regulatory framework

A national hydrogen strategy will provide an important framework for working towards these goals. Such a strategy would look to adapt the policy and regulatory environment to provide support to risk-taking private sector capital. Key insights from the study include:

• Grid integration, and new rules to allow better wheeling of electric power, are important for obtaining the best synergies between hydrogen manufacture from electrolysis and variable (wind and solar) renewable power generation.
• Funding support can preferentially be targeted from green-focused recovery programs in Europe and other OECD countries, especially where these look to support host country import needs or offer markets for their technology. South African state funding would not need to be a frontline policy.
• Government-led mandates for sustainable product and material usage, and corporate pledges to improve supply chain sustainability, have a significant role to play and need encouragement.
• Each major development for hydrogen supply (the study identifies several "early stage" low-regret projects) should be sized to give additional capability to prime and support smaller-scale use in domestic "Hydrogen Zones" for green product manufacture and fleet-fuelling stations. Coordination of anchor demand loads and of storage facilities can be a valuable supportive aim of policy.

The study concludes that with a supportive commercial and policy environment, a production of 3.8 million tonnes per annum of hydrogen could be developed in South Africa by 2050 (0.75 mtpa by 2030). Of this, over 2.0 mtpa would be for domestic consumption - equal to between 6 and 8 percent of final energy demand. This share is in line with study authors' IHS Markit projections for leading developing economies globally.

IHS Markit's Senior Advisor for Global Energy Dr. Andy Barrett, lead author of the study, said: "The conclusion of our work is that these goals represent a serious and feasible ambition to deliver the combined economic and decarbonization benefits of low-carbon hydrogen for South Africa. A national hydrogen strategy in line with this ambition will bring planning for hydrogen up to speed with and comparable to the way that some 20 countries and regions around the world are already approaching this new and exciting industrial opportunity.

"We would expect such hydrogen development to be aligned with other measures for decarbonization including aggressive renewables penetration of the electricity sector, efficiency improvement and progressive electrification of industry energy use and acceleration of electric vehicle penetration into the LDV fleet."

Jesse Scott, International Director of Agora Energiewende, said: "The goal of a hydrogen strategy would be to underpin the drive for country-wide decarbonization, and to support the achievability of a mid-century net zero target for GHG emissions."

Learn more about IHS Markit research on hydrogen.

[1] 76,000 in operational positions for renewables and hydrogen production; 22,000 long-term sustainable construction jobs; and over 290,000 in manufacturing and logistics supporting input and services in the enhanced green economy. The study estimates that 25% of these additional jobs can be realized by 2030.

[2] Gauteng Province benefits most, with a 130,000 net employment gain. Cape provinces gain 93,000, and Mpumalanga Province, which bears the largest impact in terms of employment moving away from coal (around 7,000 would need to be redeployed) gains 36,000 alternative jobs.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.