R628m in EU grants to support South Africa’s goal of building green-hydrogen ecosystem

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The European Union (EU) has announced R628-million (€32-million) in grant funding to support the development of South Africa's nascent green-hydrogen industry, as well as to facilitate net-zero-related investments across Transnet's rail, port and pipeline operations, including to prepare them for the production and storage of green hydrogen.

The grants are additional to the EU's Just Energy Transition Partnership funding with South Africa and were confirmed by European Commissioner for Energy Kadri Simson at a briefing in Pretoria on Monday, where she also met South Africa's Electricity and Energy Minister Dr Kgosientsho Ramokgopa and Trade, Industry and Competition Minister Parks Tau.

The financing is being made available by EU development finance institutions in line with a 2013 infrastructure programme agreement with South Africa and would be disbursed in partnership with South Africa's Industrial Development Corporation.

The precise mechanism for distribution had not yet been finalised but Simson confirmed that the funding was immediately available to support both initiatives.

Simson said the R490-million grant to support the development of a green-hydrogen industry was "highly additional" and was expected to leverage R10-billion in private and public funding across value chain, including production, transportation, storage and downstream industries.

The R138-million grant to Transnet, meanwhile, would be channelled through AFD, of France, and would be used for feasibility studies and pilot projects focused on the production and storage of low-carbon hydrogen.

Confirmation of the new grant funding came ahead of the launch of an EU matchmaking platform to link European offtakers of green hydrogen with non-European producers, including those that could emerge in South Africa and Namibia. The platform is scheduled to be launched in 2025.

Simson indicated that Europe's current yearly demand for hydrogen stood at about 10-million tons of mostly grey hydrogen, which would need to be progressively replaced with green hydrogen in line with EU policy and, thus, created a ready-made market. This, even before any rise in demand associated using hydrogen to displace fossil fuels in hard-to-abate sectors.

Tau welcomed the funding and indicated that South Africa saw potential to become a leading producer of green hydrogen and derivative products, as well as for associated green industrialisation by way of South Africa becoming a producer of renewable-energy and electrolyser components.

Green hydrogen is produced by using renewable electricity in an electrolyser to split water, including desalinated water, into hydrogen and oxygen.

Ramokgopa, meanwhile, highlighted South Africa's ambition to become a global green-hydrogen production hub while cooperating with countries such as Namibia, which housed similar ambitions.

Ramokgopa argued that through infrastructure- and knowledge-sharing South Africa and Namibia could improve their overall competitiveness as green-hydrogen investment destinations.

Prior to her visit to South Africa, Simson addressed the Global African Hydrogen Summit in Windhoek, Namibia, and announced three Global Gateway funding initiatives, including a dedicated green-hydrogen investment facility.