The Netherlands is turning its attention towards a unique collaboration with South Africa. This ambitious partnership holds the key to a sustainable future, driven by the promise of green hydrogen.
A recent visit to South Africa by the Dutch royal family, a delegation from The Hague, and members of the Dutch business community underscore the importance of this endeavor.
By 2050, the Netherlands has set an ambitious target: emitting no net greenhouse gases. The means to this end? Green hydrogen, will compensate for the loss of natural gas and find applications as a clean fuel in the steel industry, transportation (especially for trucks), and as ammonia for fertilizer production. But not just any hydrogen will do; to qualify as green, it must be produced through water electrolysis using renewable sources like wind and solar energy.
“The Netherlands is in a unique position,” emphasizes Rene Peters of TNO, a key science agency advising the Dutch government in this domain. With the gradual closure of the Groningen gas field, the country’s gas transport infrastructure stands ready to serve as a crucial asset. The goal is clear: the Netherlands aims to become a strong contender in the emerging green hydrogen market, acting as a transit point connecting the Port of Rotterdam to the Ruhr area.
Offshore wind farms in the North Sea are a linchpin in the Netherlands’ plan to produce substantial quantities of green hydrogen. By 2027, these wind farms are expected to link up with Germany’s pipeline network, facilitating the supply of green hydrogen across Northwest Europe. However, the North Sea’s wind energy alone may not suffice, necessitating the import of up to 60 percent of green hydrogen by 2035 and potentially 70 percent by 2040.
South Africa’s Green Hydrogen Potential
South Africa emerges as an ideal partner for this green hydrogen venture. While the nation currently ranks among significant greenhouse gas emitters, its vast potential for green energy transformation is undeniable. Over 80 percent of South Africa’s electricity is generated from coal, offering a glaring opportunity for modernization.
In the northern regions of South Africa, abundant sunshine, wind farms, and substantial platinum and iridium reserves—essential metals for electrolyzers and fuel cells—promise cost-effective hydrogen production. “The cost of hydrogen production in South Africa is significantly lower than in the Netherlands,” notes Machiel Mulders, a professor of energy economics at the University of Groningen. “This is due to the higher efficiency of solar panels in the region.”
However, the process isn’t without challenges. While producing green hydrogen in South Africa is cost-effective, the costs surge when it’s converted to ammonia for transportation to Europe, partially negating the cost advantage. As Mulders highlights, “The business cases are currently highly unprofitable. Investments depend on government subsidies, guarantees, and infrastructure availability. We’ve calculated that subsidies of 50 to 80 percent are needed to make this trade profitable for the market.”
Rutte-IV, the current Dutch government, appears committed to investing in this partnership. In June, Dutch Prime Minister Mark Rutte and his Danish counterpart, Mette Frederiksen, visited South Africa, announcing a $1 billion investment fund aimed at hydrogen production and infrastructure. The Dutch government initiated this fund with an initial contribution of $50 million, with the rest to be filled by the private sector.
Moreover, the Netherlands is also extending its focus to neighboring Namibia, where a similar $1 billion water fund will boost the hydrogen industry. This expansion envisions the rapid development of factories, pipelines, terminals, and ports in these neighboring nations.
Economic Opportunities and Skepticism
While the Dutch government and businesses are enthusiastic about the collaboration, Moeletsi Mbeki, a prominent economist, and brother of former South African President Thabo Mbeki, raises skepticism. He points out that new industries require entrepreneurs, which South Africa currently lacks in sufficient numbers. Therefore, Western countries must bring their own entrepreneurs into the picture. Most solar fields in South Africa, he argues, have been established by foreign companies.
This raises questions about who will ultimately benefit most from the green revolution in the region, and whether it will have a lasting positive impact on South Africa’s economic landscape.