SASOL PLAYING LEADING ROLE IN DEVELOPING SA’S GREEN HYDROGEN POTENTIAL

Sasol’s target for first production of sustainable aviation fuel (SAF) by 2025 signals a shift towards a fossil-free future. Counted among the worst greenhouse gas emitters in the country, the energy and chemicals producer has set itself a 30% carbon-reduction target by 2030 with a net zero ambition by 2050.

A cumulative sustainability capital expenditure of between R25bn and R35bn up to 2030 is projected, although it is not immediately clear how it is disbursed across the various projects. In its response to the ESG Barometer survey, Sasol emphasised that the amount was inclusive of maintaining feedstock and decarbonisation costs.

The petrochemical giant is guided on its mission to produce SAF by Sustainable Development Goals (SDG) 13 and 17, where SDG 13 is about taking action to combat climate change and SDG 17 focuses on creating global partnerships for sustainable development.

Given it has been using its proprietary Fischer-Tropsch (FT) technology to produce fuel and chemicals from coal and gas for more than 70 years, Sasol views itself as distinctly placed to produce SAF and other climate friendly products. In 2021 it established Sasol ecoFT specifically to drive the company’s aspirations to produce sustainable jet fuel for the hard-to-abate aviation industry. The sector is said to be responsible for about 3% of global emissions.

Sasol ecoFT is set to leverage FT technology to produce SAF and other chemicals via the power-to-liquids (PtL) process, using sustainable carbon and green hydrogen as feedstock. The PtL process uses unavoidable carbon sources from solid waste, biomass or direct air capture (DAC) and converts them to carbon monoxide. While green hydrogen is produced through electrolysis powered purely by renewable energy generated from solar or wind. In the end green hydrogen and carbon monoxide are transformed into SAF using Sasol’s FT technology.

To ensure first SAF production by 2025, Sasol has signed several memorandums and entered into partnerships including a joint venture with German electricity producer, Uniper. Dubbed SkyFuelH2, the joint venture aims to produce SAF from green hydrogen and biomass through FT. As per the memorandum of understanding (MoU) signed in November 2021, Sasol has committed to supply the FT catalyst, technical services and marketing of the product on behalf of the venture.

For the HyShiFT SAF project, Sasol has gone into partnership with German chemicals company, Linde, German renewable company Enertrag and South African green hydrogen investment company Hydregen. The HyShiFT project involves repurposing the Secunda operations to produce jet fuel by transitioning it from predominantly using coal to progressively integrating more sustainable feedstocks.

Transitioning operations to use only sustainable feedstock will require 20GW of electrolysis capacity, which will take time. So to begin with 200MW of electrolysis capacity and 400MW of renewable energy will be utilised to produce 50,000 tonnes of SAF a year, depending on sustainable carbon feedstock, potentially curbing up to 500,000 tonnes of carbon dioxide per annum. Last year the German government granted the HyShiFT consortium €15m to support the project.

Sustainable Aviation Fuel

In February Sasol announced it had signed an MoU with a global supplier of decarbonisation technology, Topsoe. The MoU set out the companies’ intent to form a 50/50 joint venture in 2023 to produce SAF. Sasol president and CEO Fleetwood Grobler said the MoU furthered Sasol's long-term global SAF ambition. "We are fundamentally transforming our business by focusing on decarbonising our operations, while preserving and growing value," he added.

Sasol and Topsoe have been strategic partners for 25 years and are set to employ Sasol’s FT and Topsoe's SAF technologies to produce jet fuel from green hydrogen, sustainable sources of CO2 and/or biomass.

Green hydrogen is clearly essential in the production of SAF but also widely considered an enabler to achieving global net zero commitments. Considering Southern Africa’s endowment of renewable energy, Sasol believes the region has the potential to produce green hydrogen competitively and for this reason the multinational has taken it upon itself to play a leading role in transitioning the region to a green hydrogen economy.

In March 2022, Sasol approved a project to produce green hydrogen towards the end of 2023 using existing chlor-alkali electrolysers at its Sasolburg site. “There will be a ramp up in the production of green hydrogen linked to the start-up and ramp up curve of the Msenge 69MW renewable energy curve, with green hydrogen production reaching 3.5 tonnes per day in quarter one of 2024 when renewable energy is at full capacity,” media relations manager Matebello Motloung says.

In addition, Sasol signed a memorandum of agreement with the Northern Cape government to lead a 24-month pre-feasibility study to explore Boegoebaai's potential as an export hub for green hydrogen and its derivatives. “This project at full-scale could create significant direct jobs, as well as further indirect jobs across the ecosystem, unlocking unprecedented economic growth for the Northern Cape region,” Sasol maintained in its climate change report.

Gazetted

In December 2022 government gazetted the HyShiFT project, the Boegoebaai study along with the renewable energy project as strategic integrated projects. “This designation enables the programmes implementation to be expedited, demonstrating government's commitment to supporting the private sector in developing the new green hydrogen economy,” said Grobler during the interim results presentation.

As critical as green hydrogen is to the production of sustainable jet fuel, so is renewable energy in the production of green hydrogen through electrolysis. For this reason Sasol has signed power purchase agreements bringing cumulative renewable energy to be procured to about 550MW. Among the agreements is one with TotalEnergies and its partner, Mulilo, signed in January 2023 for 260MW, for which TotalEnergies and Mulilo are set to create a 140MW capacity wind project and 120MW solar project.

All renewable energy projects, including the 69MW Msenge Emoyeni wind farm intended to power the Sasolburg operations, are set to be operational in 2025 subject to regulatory and financial approvals.

"This puts Sasol well on its way to achieving its ambition to procure 1,200MW of renewable energy capacity by 2030,” said Priscillah Mabelana, executive vice-president of Sasol's energy business.

As Sasol progressively moves away from using coal as a feedstock, gas will be utilised as a bridge energy source, even though it is a fossil fuel, until cleaner alternative feedstocks are fully integrated into the production process. Sasol views gas along with renewable energy as springboards to green hydrogen, and has extended its gas plateau to 2028.

Venture Capital Fund

A new corporate venture capital fund was launched in February. Named Sasol Ventures, it has targeted investment of €50m over the next five years to complement research and development, as well as pursue investment in start-ups developing breakthrough technologies for sustainable energy and chemical solutions.

Sasol has roped in global venture capital firm Emerald Technology Ventures as investment advisor and to identify and evaluate opportunities to grow the fund portfolio. As part of the partnership, Sasol has invested directly in Emerald's global energy transformation fund to propel its innovation opportunities.

With its fossil-free vision mapped out, Sasol counts stringent policies and regulations, carbon tax in particular, among its risks in the short to medium term.

South Africa ratified the Climate Agreement in 2016, signalling its commitment to a just transition towards a climate-resilient, low-carbon economy. Via the emitter pays principle, carbon tax attaches a cost to GHG emissions and has proved effective in getting large emitters to change behaviour. SA’s carbon tax regime finally came into effect in 2019 after it was delayed by consultations and debates. Its implementation was then further delayed by the Covid-19 pandemic.

In his 2022 budget speech, Finance Minister Enoch Godongwana announced an increase in the carbon tax rate to R144 per tonne carbon dioxide equivalent emissions effective as of 1 January 2022 from R120 previously. The rate would increase by at least US$1 each year until it hit $20, Godongwana said. From 2026 the cost would increase rapidly every year to reach at least $30 by 2030 and $120 beyond 2050.

The second implementation phase of the carbon tax regime was originally meant to kick off in January 2023 but the minister extended the first phase by three years to 31 December 2025. Until then taxpayers will continue to receive tax-free allowances which reduce their tax liability.

Sasol along with Business Leadership South Africa, Business Unity South Africa and other groupings are calling on government to consider higher carbon tax rates only after 2035; to delay the annual tax hikes until at least 2030; and they want to retain and increase the tax-free allowances that reduce their tax liability.

Judged by international standards, the proposed tax rates are low. Still Motloung argues that the recently proposed $20 carbon tax rate by 2026 and $30 by 2030, with an aggressive removal of allowances, will have an adverse financial impact on Sasol.

“National Treasury has indicated that the proposal is still subject to public input. In a conservative scenario, assuming all allowances fall away and the increase in price is applied, we would need to consider trade-offs to balance the people, planet and profit agenda. At this stage, there is still uncertainty on what rate, trajectory and allowance phase-out will be applied. We are awaiting further clarity from the ongoing government consultation process.”

Sasol also counts the affordability of sustainable carbon feedstocks among the risks it faces. Sustainable carbon feedstocks are critical if the company is to optimise its FT PtL advantage. The plan is to decrease reliance on coal and gas by gradually incorporating sustainable carbon sources such as biomass, recycled CO 2 and captured atmospheric CO 2. Currently the cost of DAC is not suitably competitive for large-scale application, consequently small quantities of carbon derived from biomass are being accommodated in the existing gasifiers. A new set of gasifiers will be required if higher quantities are to be incorporated. In addition, effective biomass sourcing will call for collaboration to ensure optimal land and water use as well as logistics. Various partnerships as well as enterprise supplier development in this area are currently being sought.

Technological advancement as well as the costs attached to it present a headache for Sasol. The cost of technologies such as DAC and Carbon Capture Utilisation and Storage (CCUS) are currently not economically viable to the point Sasol has not built in CCUS into its energy roadmap to 2030, though foundational work towards the 2050 net zero ambition is under way.

On the upside, Sasol has identified market opportunities for SAF and other sustainable products in the European Union, North America, Middle East and Australia. Grant funding for the various projects has been applied for to counter the high costs of advancing its fossil-free vision.

Community Relations

Sasol has some work to do to improve relations with its fenceline community in Secunda, where Sasol’s plant is said to be the biggest source of greenhouse gas emissions from a single site in the world. MS Environmental Projects, a community-based activist group which works in the area, has levelled some criticism at the company. Although it has been active since early 2019, it only started working on a community air quality awareness project with Sasol in April 2022.

“People in the fenceline community of eMbalenhle suffer from various respiratory diseases and cancer,” said the organisation’s coordinator, Khehla Mahlangu.

In response Motloung said: “We are aware of the link between our activities and air quality and the need to act responsibly in managing air quality impacts in the regions where we operate.”

She explained that Sasol’s approach to air quality management is informed by internationally accepted practices including ongoing efforts to prevent pollution and air quality degradation. The approach also complies with the National Ambient Air Quality Standards that establishes ambient concentration levels for tolerable or permissible human health risk as informed by the World Health Organisation, Motloung added.

Administrator at the activist group, Fana Sibanyoni, added to the criticism saying Sasol is not a willing participant. “They are only involved in this air quality awareness project because it is a condition of their licence. We had to push them to work with the community.” Mahlangu adds that Sasol “did not recognise the value of working with community-based organisations, preferring to work with international organisations instead”.

Motloung disagrees, insisting that Sasol is a responsible corporate citizen whose efforts extend beyond compliance to its licences. The project, she clarified, is in its second iteration after it initially concluded in 2019. It was initiated following consultation with the Gert Sibande District Municipality and the Department of Education.

The scope of the project was expanded to include 27,000 primary school pupils; 11,000 high school pupils and approximately 7,600 households in eMbalenhle and Lebohang.

The project educates the community about the harmful effects of pollution and covers various pollutants including sulphur dioxide, PM10 and PM2.5 particles that can cause a spectrum of health issues from mere irritation of the eyes, nose and throat to more serious lung issues.

The project also aims to raise awareness of how community members contribute to the air pollution in the area when they use coal to cook, for instance.

MS Environmental Projects acknowledged Sasol’s value as an employer and taxpayer, Sibanyoni said, but the company had to invest more in its fenceline communities given the profits it makes from the area.

Motloung says that over the years Sasol has implemented various projects in eMbalenhle including educational support at local schools through the Osizweni Science Centre as well as handing over educational resources and mobile classrooms. It upgraded a clinic in Ext 14; built a clinic in Bethal; handed over two mobile clinics; provided medical resources to various clinics and hospitals and conducted health care outreaches; provides SMME support via the Bridge To Work programme; and has upgraded electricity substations and provided capacity building to NPOs in the area.