The recent pledge of R628 million by the European Union (EU) to support South Africa’s green hydrogen industry recognises the country’s potential for green hydrogen production but it is not enough to get the industry off the ground, according to Bruce Douglas Young, Senior Lecturer at the Africa Energy Leadership Centre of the University of the Witwatersrand, and Craig McGregor, Associate Professor in Mechanical and Mechatronic Engineering and Director of the Solar Thermal Energy Research Group at Stellenbosch University.

Green hydrogen production is expensive at R89-R143 per kilogram – around five times the cost of hydrogen derived from fossil fuels. It is also three to five times more expensive than oil. For green hydrogen to be cost-effective enough to compete with fossil fuels, the industry will need government subsidies and incentives for manufacturers.

The industry will also need supportive government regulations such as carbon taxes or a requirement to use sustainable chemicals, such as green ammonia, for fertiliser made from green hydrogen. Additionally, substantial international investments will be needed to mitigate the risks that come with building large green hydrogen projects.

South Africa’s future green hydrogen industry depends on government-backed support from the Global North through mechanisms like sovereign guarantees, partial ownership and sharing in the profits and risks.

South Africa will need R410 billion to produce one million tonnes of green hydrogen – a goal outlined in the national Green Hydrogen Commercialisation Strategy. The new grants from the EU represent less than 0,2% of the investment needed to get this done. This means the country does not have the funds to set up a green hydrogen industry. The goal of producing one million tonnes of green hydrogen is entirely dependent on subsidies from the Global North.

Green hydrogen production will require the development of mega projects to create renewable energy infrastructure, electrolysers and water sourcing systems. These expensive projects, often extended by years, carry risks with initial budgets frequently exceeded.

South Africa could become a global green hydrogen leader. The R628 million grant from the EU is very welcome because it highlights the importance of international collaboration in addressing the climate crisis.

However, there is a real danger that the Global South could shoulder most of the risks involved in developing the green hydrogen industry while Global North consumers benefit from the product.