President Cyril Ramaphosa, Netherlands Prime Minister Mark Rutte, and Denmark Prime Minister Mette Frederiksen have concluded a Heads of Agreement to launch a new SA-H2 Fund, which aims to secure $1 billion (R18bn) in funding for Green Hydrogen.
SA-H2 is a blended finance fund that will facilitate and accelerate the development of a green hydrogen sector and circular economy in South Africa.
The fund is supported by finance investment firm Climate Fund Managers (CFM) and Invest International (II) of the Netherlands, Sanlam Limited of South Africa (Sanlam), the Development Bank of Southern Africa (DBSA), and the Industrial Development Corporation of South Africa (IDC), in collaboration with other strategic partners.
In a statement yesterday, CFM said the reason the fund was for hydrogen was that to reach net zero by 2050, the world needed power from renewable energy sources as well as the decarbonisation of other energy systems.
“Renewable energy will be the backbone, generating electrons and producing green hydrogen (H2). Hydrogen is a versatile energy carrier that is vital for decarbonising key sectors of the economy, including hard-to-abate industries like steel and chemicals. The development of the green hydrogen industry will have a profound and positive economic, social, and environmental impact,” it said.
According to CFM, the SA-H2 Fund initiative will aim to secure $1bn in funding, to be raised directly in South Africa or indirectly via other channels.
“A partnership of private and public enterprises and international and domestic institutions, SA-H2 reflects the immense potential of blended finance in tackling the climate crisis. Its focus will be to fast-track the mobilisation of funding towards the development and construction of large-scale green hydrogen infrastructure assets across South Africa,” it said.
Andrew Johnstone, the CFM CEO, said to achieve Net Zero by 2050, urgent and unprecedented action was needed.
“We believe that green hydrogen is both the pathway and the solution to the global energy transition. South Africa combines deep technical and capital markets with world-class conditions for generating renewable electricity through solar and wind power, key drivers in the production of green hydrogen.
“Fitting within the framework of the Just Energy Transition, SA-H2 will help empower South Africa to claim its rightful place as a world leader in this exciting and necessary sector,” Johnstone said.
He said SA-H2, once established, would join the recently announced SDG Namibia One Fund, which aims to secure $1bn in funding to be raised directly in Namibia or indirectly via other channels, as the second-of-its-kind, regional blended finance fund to develop and fund green hydrogen projects.
“Hydrogen replaces carbon-intensive fuels, reducing emissions and environmental impact. It also enables efficient storage and utilisation of energy from renewable sources which can be more intermittent, ensuring a reliable supply.
“Hydrogen energy production provides a clean, versatile, and efficient energy source that can drive the transition to a low-carbon economy, helping end the climate crisis and secure a more sustainable and prosperous future,” said Johnstone.
DBSA Group executive: project preparation Catherine Koffman said succeeding in a Just Transition to cleaner energy rested on the ability to create a viable marketplace that attracted and mobilises public and private capital, and this fund would do just that.
“We will create and use innovative blended finance architecture and structure to build a substantial pipeline of green hydrogen projects in South Africa. This will give private-sector developers access to risk capital from an early stage of development, throughout construction and into operations,” Koffman said.
She said the fund was a significant addition to national efforts to leverage the existing renewable energy infrastructure.
“With a national target of $250 billion investment in green hydrogen by 2050, this sector is projected to amplify the development impact of the renewable energy industry. It is an exciting development that, in accelerating the development of critical green hydrogen infrastructure, will stimulate the economy, train new skills, create jobs, generate export revenues, and facilitate the decarbonisation of our economy and industry,” she said.
Sanlam Investment Group CEO Carl Roothman said: “Green hydrogen offers huge promise for solving our energy challenge and, as a company that believes in a just transition to clean energy, our country and our continent’s journey to finding clean energy alternatives will be boosted.
“The fund will help many important, large-scale projects get underway and will create jobs and stimulate local economies and communities.”
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