The South African government met senior EU officials on Friday to begin a series of talks that could see European countries ramping up their investment in South Africa’s renewable energy sector, with hydrogen power taking centre stage.
Potential deals brought about by the high-level discussions, which centre on the SA-EU Clean Trade and Investment Partnership (CTIP) could bring South Africa a step closer to its aim of reforming the electricity sector and building about 14,500km of new transmission lines in the next decade.
The CTIP, launched last November, aims to “promote investment opportunities in clean supply chains and create mutual benefits for the EU and South Africa” by ramping up investment in supply chains that are deemed important in the fight against climate change.
The main focus is on green hydrogen, which electricity & energy minister Kgosientsho Ramokgopa sees as central to South Africa’s plans to diversify its energy sources away from coal.
Green hydrogen is produced by splitting water into its constituent hydrogen and oxygen molecules using renewable power, resulting in an entirely carbon-emissions-free process.
Decarbonisation
While it has not yet been scaled up to a replacement level, the process can help decarbonise sectors that are difficult to electrify directly, such as heavy industry and shipping.
South Africa’s green hydrogen commercialisation strategy (the Hydrogen Society Roadmap), launched in 2022, sets a goal of producing 500,000 tonnes a year of green hydrogen by 2030. A report by the National Business Initiative suggests that South Africa could produce the fuel at one of the lowest costs worldwide.
According to the report by National Business Initiative, South Africa could produce green hydrogen for $1.60/kg by 2030, one of the lowest costs worldwide. A number of potential hubs for green hydrogen production were identified in the Hydrogen Society Roadmap.
The CTIP talks also looked at ways to invest in South Africa’s expansion of its electricity grid, sustainable aviation fuels and critical raw materials. It hopes that the involvement of senior government officials will help to align regulatory frameworks and give companies clarity on shifting trade policies.
The CTIP’s ultimate aim is to support the EU’s decarbonisation efforts by fostering investment in a number of partnering countries that are committed to the transition. South Africa is the first of these partner countries.
The agreements could deepen a critical relationship for the country. The EU contributes more than 40% of South Africa’s foreign direct investment, with trade flows amounting to €45bn last year.
The potential for more capital flows comes at an opportune time for the nation’s energy sector, with Eskom in the process of opening itself up to private sector investment in a bid to turn around its performance.
Eskom is being unbundled into three entities responsible for generation, transmission and distribution in an overhaul announced in 2019.
The unbundling has since achieved functional separation and the establishment of the National Transmission Company South Africa (NTCSA), Eskom’s transmission unit.
In recent months, Eskom has also turned to the private sector to help it sharpen security on the national grid. The utility has also asked private sector players to put forward proposals to provide it with tactical response operations, security business intelligence, investigative services and integrated security systems.
