South Africa’s Ambitious Green Hydrogen Boost

Dutch and Danish Collaborations

By Raine St. Claire

To support South Africa’s challenging goal of attracting $250-billion (R4.6-trillion) in green hydrogen investments by 2050, the Dutch government has made a significant contribution of R18-billion to fund support.

The Netherlands is Europe’s second-largest hydrogen producer and home to the world’s largest hydrogen research facility. Additionally, the country has a robust network of dedicated hydrogen pipelines and is actively retrofitting its 136,000-kilometre natural gas grid to establish a ‘national hydrogen backbone,’ with completion targeted for 2030.

Businesses across the Netherlands are playing a pivotal role in shaping the global approach to the clean energy transition, and the Dutch government has set ambitious targets for achieving net-zero emissions, including a 49% reduction by 2030 and an impressive 95% reduction by 2050, relative to 1990 levels.

Trilateral Partnership

During a joint visit to South Africa in June 2023, the Prime Minister of the Netherlands, Mr. Mark Rutte, and the Prime Minister of Denmark, Ms. Mette Frederiksen, prioritised strengthening diplomatic relations in the fields of green hydrogen, renewable energy, and a just energy transition.

President Ramaphosa emphasised the significance of this visit in promoting cooperation, especially in the energy sector. This resulted in the signing of a memorandum of understanding on green hydrogen between South Africa and the Netherlands, along with an updated agreement on energy cooperation between South Africa and Denmark, with a specific emphasis on expanding low-carbon energy technologies, including wind and electricity.

The new fund, known as SA-H2, closely aligns with South Africa’s goals for a just transition and the growth of the green hydrogen industry. It also contributes to the broader global effort to achieve net-zero emissions by utilising renewable energy for hydrogen production, thereby reducing carbon emissions and environmental impacts. This fund will receive support from various entities, including Climate Fund Managers, the Dutch government’s Invest International, South African company Sanlam, the Development Bank of Southern Africa, and the Industrial Development Corporation (IDC), among others. Their collective objective is to raise $1 billion within an 18 to 24-month period, with specific funding details pending finalisation.

To kickstart the fund, the Dutch government’s Invest International will provide an initial $50-million (R920-million) in grant capital. Once the $1-billion target is reached, the funds will be allocated to support large-scale green hydrogen projects over a period of three to four years. This innovative finance mechanism, managed by Climate Fund Managers, leverages public sector funding to mitigate project risks and attract additional private sector investments.

It took approximately 12 months to establish the fund and assemble strategic partners. Joanne Bate, the COO of the IDC, emphasised the pivotal role of increasing green hydrogen projects in South Africa’s overall development. South Africa’s potential in the green hydrogen sector is substantial, partly due to existing industrial applications from Sasol and other key industrial players that use hydrogen in their processes.

To further advance the partnership’s shared objectives, Invest International also announced a concessional finance package aimed at water and energy-related public infrastructure. Denmark’s Copenhagen Infrastructure Partners (CIP), who recently acquired a majority stake in renewable energy developer Mulilo Energy Holdings, led to the official inauguration of the new Mulilo headquarters in Cape Town in June 2023. President Ramaphosa announced that the partnering entities would commit $200-million (R3.7-billion) to establish a New Funds Market, specifically dedicated to investments in green energy infrastructure.

Netherlands Eco-Morphosis: Go Green or Face the Consequences

Taking action on ideas and words often requires a push in the right direction. This became evident when the Netherlands Supreme Court upheld a 2014 court ruling brought by environmental groups, compelling the Dutch government to immediately reduce emissions to 25% below 1990 levels by the end of 2020. This landmark case was the first climate change lawsuit to drive government policy changes, potentially setting the stage for future similar cases.

In response, the Dutch government has committed to lowering greenhouse gas emissions by 2030, while simultaneously also striving for carbon neutrality by 2050. A comprehensive set of climate policies aimed at reducing annual carbon emissions by nearly 10 megatons was unveiled. These policies include the closure or limited operation of several new coal power plants, a €3 billion spending package to support renewable energy projects and home renovations, as well as various policy adjustments related to livestock numbers, reforestation, and the national speed limit.

To achieve these emissions reduction targets, the Dutch government introduced a climate transition fund:

• A total climate transition fund of €35-billion has been established for the next decade.

• From this fund, €5-billion is dedicated to constructing two nuclear power plants by 2035 to address past climate goal shortfalls.

• €28-billion for offshore solar power fields and tax incentives for eco-friendly industries is committed to achieving 2030 climate objectives targeting a 55% reduction in CO2 emissions compared to 1990 levels.

• Over 120 measures are being implemented by the government to reduce greenhouse gas emissions. These measures encompass higher CO2 taxes for industrial companies and €600-million in subsidies for second-hand electric cars, home insulation, and solar panels.

• To effect carbon neutrality in the energy sector by 2035 plans involve transforming gas power stations to use hydrogen, connecting wind farms to storage batteries, and constructing offshore solar fields with a total capacity of 3 gigawatts.

• Energy-intensive industrial companies are expected to achieve carbon neutrality by 2040, with a focus on increased hydrogen use in production processes and promoting the use of recycled materials, especially in plastics production.