While the commercial production of indigenous gas depends on the probability of it being discovered and exploited, the commercial production of hydrogen depends on the certainty of decisions to exploit South Africa’s solar and wind resources.
“In that context, gas could save the planet, people and profits,” says Craig Morkel, chairperson of the SA Oil and Gas Alliance’s Gas Economy Leadership Group.
He sees a natural path for hydrogen to help the country achieve net zero carbon by 2050 if only everyone would remember that H2 (hydrogen) is indeed a gas.
“South Africa’ Gas Act defines ‘gas’ to mean ‘natural gas’ (CH4) and ‘hydrogen-rich gas’ (H2) among others. Given the existential threat to the planet, people and profits from global warming. In addition to poverty, unemployment and inequality, and besides the COVID-19 pandemic, a just energy transition should include a planned and orderly switch from natural gas to hydrogen to achieve net zero carbon by 2050,” said Morkel speaking with ESI Africa.
“Initially Liquefied Natural Gas (LNG) imports could establish a gas market and cleaner energy mix as a substitute for dirtier fossil fuels, such as coal and oil-based petroleum products, within the next 5 to 10 years.
“Regional gas, for example from Mozambique, and indigenous gas, for example, coal bed methane, could then replace LNG in the energy mix until green hydrogen through renewable energy-powered electrolysis becomes price competitive on a levelised cost of energy basis after 2030.”
“The levelised cost of hydrogen is projected to decrease significantly due to an anticipated increase in the en masse diffusion of electrolysers and fuel cells within the global market after 2030,” said Morkel.
Introducing hydrogen into the energy mix will be a gradual process
He believes certain hard-to-electrify sectors would still require carbon-free thermal energy even as the country’s energy mix becomes dominated by renewable energy (such as solar and wind) supported by energy storage.
During the transition to net zero carbon by 2050, natural gas is expected to be a transition fuel to fill the gap baseline gap whenever the sun does not shine and the wind does not blow. However, energy storage systems charged through solar and wind energy are expected to displace this grid balancing role of gas as batteries become more price competitive.
Thus he expects gas applications to transition from natural gas-only to co-firing of natural gas with hydrogen until hydrogen-only technologies mature sufficiently.
While Morkel believes the concept of least cost would be determined not only by the commodity price of fuels but also its carbon cost to the planet, he thinks the just energy transition (JET) would also need to realise a socio-economic transformation for the people of South Africa. The JET would need to include meaningful ownership, genuine management and employee equity, sustainable job creation, critical skills development, pro-active supplier and enterprise development, targeted local content and consultative community development.
Made in South Africa could take on a whole new meaning in a green economy
He believes green hydrogen and its derivative products such as green ammonia and green steel, could eventually be produced in South Africa at scale and these could become globally competitive export products that could earn foreign currency, realise socio-economic benefits and contribute to the country’s Nationally Determined Commitments to achieving net zero carbon by 2050.
Morkel thinks the switch to using hydrogen will be driven by factors within both public and private sectors. “The SA government has already established a carbon tax regime that would increase the lifecycle cost of producing or buying carbon-intensive goods and services. Simultaneously, financiers will increasingly reject applications for the financing of carbon-intensive goods and services, including economic infrastructure procured by government.
“Foreign governments and regional economies are expected to introduce carbon taxes on goods imported across its borders, resulting in similar imported goods with different carbon impacts no longer being competitive with each other, such as carbon-intensive steel vs green steel.”
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While it might, in his opinion, be easier for public sector procurers such as Eskom, municipalities or PetroSA to determine hydrogen local content requirements as minimum qualification criteria, it may become necessary for government to incentivise private sector procurers to purchase green hydrogen goods and services by means of tax rebates or similar financial solutions to section 12L of the Tax Act.
“Such procurement carrots and sticks could also be applied to realise the mass deployment of ‘made in South Africa’ electrolysers and fuel cells by 2030 or sooner,” said Morkel. ESI
Listen to Craig Morkel defend his position on hydrogen on a roundtable on 1 September. Click below to register for your front-row seat.