eThekwini Municipality in South Africa has issued a Request for Information (RFI) to kickstart the development of a hydrogen supply chain infrastructure.
This ambitious endeavor aims to support municipal operations, cater to industrial consumption, and tap into the growing hydrogen export market. The eThekwini Municipality’s efforts come on the heels of its regional hydrogen strategy launch at the Energy Transformation Summit earlier this year, which has attracted considerable interest from both local and international private companies.
According to Sbu Ntshalintshali, representing the eThekwini metro’s energy office, the municipality has been designated as a demand center by South Africa’s Hydrogen Valley project under the Department of Science and Innovation (DSI). However, their approach to implementation is unique, likely involving a public-private partnership (PPP) model and potentially a special purpose vehicle (SPV) at its core.
While no specific projects within the municipality are currently earmarked for national funding, Ntshalintshali notes that cooperation between eThekwini and investors is underway. He anticipates formal partnerships once shovel-ready hydrogen projects have been identified and ringfenced.
One of the key advantages of eThekwini as an investment destination, according to Ntshalintshali, lies in its hydrogen strategy’s foundation on circular economy principles, a key factor for the bankability of hydrogen projects. The municipality also boasts sustainable feedstock resources, which can lead to a lower cost of deploying supply chain infrastructure.
Moreover, eThekwini already possesses essential infrastructure to support hydrogen development, including transmission and distribution grid access, available land, port capacity, multiple gas and fuel pipelines, and repurposed oil refineries. The strategically located Cato Ridge Dry Port, only 160 km from eThekwini, offers additional benefits due to its renewable energy sources and proximity to the N3, the country’s primary supply chain artery.
Ntshalintshali emphasizes that the hydrogen industry, while promising, faces significant barriers to entry, including feedstock access, high costs, and complex regulatory frameworks. However, eThekwini’s existing infrastructure, which can be repurposed for hydrogen projects, positions KwaZulu-Natal favorably to reach the final investment decision (FID) stage.
To manage hydrogen contracts effectively in this emerging market, the municipality has conducted extensive benchmarking exercises. The rollout is expected to follow a PPP model or a memorandum of understanding (MOU) between the municipality and potential hydrogen investors. The eThekwini Municipality is also exploring the establishment of contracts for difference (CfDs) to bridge the price gap between low-carbon hydrogen and counterfactuals, providing incentives for sustainable practices.
Hydrogen projects have gained traction globally in cities from both developed and developing nations, including Saudi Arabia’s NEOM development and Italy’s hydrogen-powered bus procurement initiatives. As eThekwini embarks on this exciting journey towards sustainable energy, it joins the ranks of cities pioneering hydrogen solutions, contributing to the global transition to cleaner and more efficient energy sources.