This is the opening keynote address by Trade, Industry and Competition Minister Ebrahim Patel at the second “Renewable Hydrogen and Green Powerfuels” webinar, hosted by EE Business Intelligence and the British High Commission to South Africa on 13 April 2021.
by Ebrahim Patel, Minister of Trade, Industry and Competition, South Africa
I wish to acknowledge the business leaders who are assembled here today, including Mr. Fleetwood Grobler, the CEO of Sasol, Mr. Andrew Kirby, the CEO of Toyota South Africa, our global participants, and experts, including Dr. Fernando de Sisternes, senior energy specialist on green hydrogen at the World Bank, other distinguished presenters, and guests, and more than 2000 participants who have joined us online.
The way we power the world is changing. Through the centuries, as our technologies developed, we've turned to wood, coal, oil, water, nuclear fusion, and to the sun and wind to power our communities and our industrial endeavours. Today, we stand on the brink of a new development in our efforts to bring cheaper and more accessible energy solutions to the world, in the form of hydrogen energy.
The hydrogen economy is not just for South Africa, but for the world at large. It could provide to us a just transition with the potential to decarbonise various industry value chains and provide security of energy supply. It can also contribute towards the achievement of the Sustainable Development Goals. Hydrogen can decarbonise a greater range of sectors compared to renewable electrical energy alone. For that reason, this initiative today is to be very strongly welcomed.
The global production of hydrogen varies between 50- and 70-million tonnes a year, half of which is used to make ammonia. But as technologies develop, the production of hydrogen to bring energy transformation is opening-up new opportunities. At present, hydrogen for energy purposes is estimated to represent between 1% and 2% of global energy consumption. The outlook for global demand for hydrogen points to a seven-fold increase by 2050, spread across various industries.
The Hydrogen Council, a global CEO led initiative, estimates that the hydrogen economy will achieve annual revenues of more than US$2,5-trillion, and create more than 30-million jobs globally by 2050. Countries are now mobilising resources to deal with the climate crisis. The crisis is real, pressing, and needs addressing.
There is a growing international interest and momentum in green hydrogen to produce clean energy. This is a key factor involved in hydrogen’s use for solving daunting decarbonisation challenges, and transforming high carbon-emitting industries, such as steel, cement, transport, and petrochemicals, towards cleaner production. Hydrogen is potentially the missing piece in the puzzle towards attaining net zero emissions by 2050, in line with the Paris Climate Agreement of 2015.
South Africa is well positioned to capitalise on the rapidly developing global hydrogen economy. We can become an exporter of cost-effective green hydrogen to the world. South Africa's rich endowment of renewable resources of solar, wind and biomass for power generation, together with the technological capabilities and skills around the Fischer-Tropsch process, and access to platinum resources, places the country at an advantage for developing the green hydrogen value chain, and being a key supplier into the global hydrogen market.
Our country has the potential to be an important player in this new space by exporting to countries that have limited renewable energy resources to produce hydrogen competitively. In addition to good environmental conditions, we are also well endowed with a key ingredient critical for the hydrogen economy. The platinum group metals, or PGMs, are used in the electrolysers needed to produce green hydrogen as a fuel in hydrogen fuel cell electric vehicles.
South Africa has more than 80% of the world's platinum reserves and is home to the largest platinum mining companies in the world. There is strong interest in supporting the long-term sustainability of the industry and developing new markets and applications for platinum. Our resource endowment must be translated into a competitive advantage for value-added manufacturing that can contribute to job creation, investment and the export of hydrogen and value-added platinum-based fuel cells.
South Africa's involvement in the hydrogen economy started in 2008, when Hydrogen South Africa (HySA) was officially launched by the Department of Science, Technology and Innovation. Its mission and vision for innovation has been driving the development of the hydrogen roadmap for South Africa. It aims to integrate and create an inclusive hydrogen society, so that an enabling compact between industry, labour, communities, and government can be developed.
Several government departments play a role in the hydrogen economy, including supporting climate change commitments through policies and a range of public strategies. They include, inter alia, the 2019 Integrated Resource Plan for electricity (IRP 2019), the green transport strategy, the South African Renewable Energy Masterplan (SAREM), and the Renewable Energy IPP Procurement (RMIPPP) programme.
Another key initiative in collaboration with the private sector includes a feasibility study to develop a hydrogen valley from the platinum group mines (PGM) in Limpopo, stretching along the industrial corridor from Johannesburg to Durban. The study, which is driven by the Department of Science, Technology and Innovation, will identify tangible opportunities to develop hydrogen hubs and infrastructure which could supply industrial users and fuel cell electric vehicle end-users.
The aim is to create a sustainable local manufacturing sector for hydrogen production and PGM-based fuel cells, by beneficiating South African PGM minerals through mechanisms that can support a local and global market. We must think beyond the opportunities locally but utilise the skills and capabilities here.
Following several years of collaborative work and investment in technology development, we are pleased that mineral-based green energy solutions are gaining momentum, with a few key projects being pursued. Our department, the DTIC has supported fuel cell demonstrations and component production, and there is an enormous opportunity in this to boost the industrialisation of South Africa. Of course, this is through the production of both new energy components and the various elements of the hydrogen economy, and by powering established industries in new ways.
For example, Vodacom used imported fuel cells for its South African network. Working closely with the international firm that supplied them, we secured an agreement which resulted in the company opening a US$10-million plant in a trade port in KwaZulu-Natal which will create a manufacturing facility with an initial capacity of 1500 fuel cells per annum. The technology is based on low temperature proton exchange membrane fuel cells, which is the same technology used by the world's automakers for fuel cell electric automobiles for forklifts, buses, trucks and, of course, by governments for various military applications.
These fuel cells use platinum and palladium and contribute to PGM beneficiation. In that way, they increase demand for the metals and support sustainability of the mining industry and jobs in South Africa. The company has further collaborated with Invest South Africa to start the process of deeper localisation with the initial local suppliers, which include printed circuit board assembly, wire harnesses, pressure tanks, shield metal manifolds and vacuum formed ducts identified for inclusion in that supply chain.
These examples show on small scale what is possible – not what we may be able to do, but what we are we currently doing. Imagine what more we can do when we scale up our ambition. These locally produced fuel cells will complement in servicing the world's second largest deployment of fuel cells – 300 units in the Vodacom South African network alone. The industry reports that the fuel cells provide more reliable and more robust power compared to batteries and diesel generators.
The fuel cell market’s biggest enabler will be the global rollout and application of fuel cells in transport. Electric vehicles powered by hydrogen fuel cells offer many benefits given their technology attributes, especially for long distance and heavy vehicle transport, such as buses and trucks. These include compatible refuelling times and long ranges, as well as space and weight efficiency.
Transportation initiatives with major fleet owners and OEMs offer an opportunity for the country to demonstrate and introduce green transport solutions using fuel cell electric vehicles for the domestic and export markets. The Green Transport Strategy seeks to facilitate South Africa's transition to eco-mobility, and there are a range of measures on transport greening fuels and technologies, including, hydrogen fuel cells powering public transport buses.
We are working with several automotive OEMs through the platform of the South African Automobile Master Plan to accelerate the development of manufacturing capabilities for new energy vehicles in South Africa. In August 2019, I posed a challenge to the large car makers in South Africa to take the continent's largest car making sector – which we have here – and future-proof it using green technologies. The goal is electric vehicles, and as a transition, we should now focus on hybrid vehicles using a combination of electric and internal combustion engine technologies.
Toyota has made strides in this area, and later this year, by about October, I hope President Ramaphosa will step into the first hybrid vehicle to roll off the production line from our large-scale commercial production facility at Toyota. We've had demonstration vehicles, and we've had small-scale production, but this will be the first big commercial-scale production. I hope Andrew and his team can be enticed to see this as the first welcome step, to be followed rapidly by the next and bigger step – the shift to electric driven cars using green hydrogen technologies.
Now, to unlock these opportunities, industry and government will need to tackle head-on the relatively high cost of green hydrogen, and the infrastructure and fuel cell challenges. Global uptake, driven by greenhouse gas commitments and growing green finance options will, in time, unlock the required volumes and economies of scale to become economically viable. The rollout of enabling infrastructure will be essential to position South Africa to take advantage of the increased demand. We look to global partners like the governments of the United Kingdom, the European Union and Japan, among others, to join us in the funding required for this journey.
What their citizens gain is a significant reduction in harmful emissions, as well as the use of those technologies to assist in bringing down and meeting the commitments that we've all made on emissions. This will then assist with the development and commercialisation of an important technology that will be used across the world.
The DTIC, through a special economic zone programme, offers incentive support for investments and exports. There is now a proposed fuel cell hub linked to the Gauteng Industrial Development Zone that is undergoing environmental impact assessment. The intention is that this initiative will build on current partnerships and skills capabilities to leverage supporting infrastructure for fuel cell manufacturing and deployment.
As part of government's strategic beneficiation objectives, the DTIC is working with other departments, with the Industrial Development Corporation (or the IDC as we call it) and with industry, to support the hydrogen economy and fuel cell developments. The private sector is critical in driving this. Our role as government is to support and enable this, to be there as a cheerleader, and to back the emergence of technologies and cost-effective ways of rolling this out.
The IDC is working actively with other parts of government and the private sector to support these enormous opportunities, and the potential that these technologies hold for the world and for our economy. In the past year, the IDC has invested in feasibility studies and in early-stage companies in this space.
The IDC was a founding shareholder of Sasol. The support of the IDC was critical to the development of Sasol and the unique technologies that it has available, which has been world-beating in its area, creating South Africa's largest industrial company with significant employment.
Of course, at the time when the technology choices were made, the world had not been as aware of the reality of climate change. But as times change, we need the IDC to address that reality – the reality of climate change.
In 2011, we mandated the IDC to step up its funding to the renewable energy programme. Government had just launched the Renewable Energy IPP Procurement programme, and there was some scepticism in the market about the political will to back wind and solar energy. The IDC stepped in and actively financed those early renewable energy projects. This exposure helped to give the private sector, particularly the finance sector, the confidence to participate actively, and today we have a large and growing renewable energy platform.
Over a ten-year period, the IDC alone advanced funding of R14-billion in 21 renewable energy projects. In a similar manner, we now need a focused effort to explore the opportunities in green hydrogen.
I have highlighted two examples, one in more traditional areas – coal to oil, and the other one in the green economy space – which is renewable energy. The IDC will be the commercialisation champion for the hydrogen economy, linked to the Hydrogen Society Roadmap which was developed by the Department of Science, Technology and Innovation.
The IDC’s business model will incorporate the integration and enhancement of project development activities, including the creation of a focused industry planning and projects unit. As part of this, the IDC will drive the development of an industrial plan aligned to the roadmap that I spoke of, to coordinate the efforts in developing the hydrogen economy.
The IDC will focus on identifying investment opportunities that will be progressed to enable pilot projects to be implemented in the short term. It will focus on creating the public-private linkages that will be critical to the development of the entire green hydrogen value chain. And I should say that will also enable the extraction of value from that value chain.
The IDC will seek to partner with the private sector in funding opportunities across the green hydrogen value chain, with a view to stimulating early adoption and creating traction, to fast-track the development of a viable and inclusive local green hydrogen economy.
If the 20th century was the century of crude oil and nuclear energy, the 21st century will be known as a century of renewable energy and hydrogen.
Government is committed to working with all stakeholders to advance the development and creation of an enabling environment for the development of this new industry. Together with our collaborative partners, we will continue to support the development of the hydrogen economy and fuel cell manufacturing capabilities.
As countries reconstruct their economies beyond Covid-19, renewable energies and renewable technologies will play a critical role. The pandemic reminded us that, in a globalised world, if we get it wrong, the price all of us pay is huge. Climate change offers that same challenge. The technologies we're talking about provide an opportunity and a solution, and this allows South Africa to play to its advantage.
South Africa's economic reconstruction and recovery plan announced by President Ramaphosa in October last year, places the issue of industrialisation, jobs, investment, and new industrial opportunities along the renewable energy value chain, strongly on our agenda. In the annual performance plan of the Department of Trade, Industry and Competition, and all its 17 entities for this new financial year, I have included the green economy as a key performance indicator. The green hydrogen economy, if made commercially viable, offers enormous opportunities. We must strive to leverage our resources to grow this exciting industry and the economy of South Africa.
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