The developer of South Africa’s R105 billion green hydrogen-to-green ammonia project in the Eastern Cape is witnessing a surge in demand for green ammonia from power plants.
Coal Industry Impact Yet to be Seen
However, this emerging trend in Europe and the Far East won’t immediately affect South Africa’s coal industry, emphasized Colin Loubser, GM of Hive Hydrogen, during a Zoom interview with Engineering News & Mining Weekly.
Hive Hydrogen South Africa, chaired by former Eskom CEO and ex-Standard Bank chairperson Thulani Gcabashe, has advanced from mid-stage to late-stage development with Phase 1 of the ambitious green hydrogen-to-green ammonia project at the Coega Industrial Development Zone in Gqeberha, Nelson Mandela Bay.
“This is a truly exciting time for us,” Loubser expressed enthusiastically.
Pre-FEED Studies Completed, RFI Process Initiated
With the renewable energy green electron assets on track, Hive has completed pre-front end engineering design (pre-FEED) studies on the green hydrogen molecule component and has initiated the request for information (RFI) process with both global and local engineering procurement and construction companies.
Unexpected Revolution in Power Generation
In addition to the exponential growth in maritime demand for green ammonia to combat unacceptable sea pollution, the world is experiencing an unforeseen revolution in the power sector.
“We’ve begun to see ammonia turbines emerge that are ready for deployment, so we envision green ammonia power plants replacing coal-fired power stations and new power station demand for green ammonia, which is a truly exciting development,” Loubser stated.
“We recently engaged with a European project that would require our entire annual production of green ammonia to fuel a planned green ammonia power station. This nascent market has started to mature into an early-stage industry. It’s gaining traction now in global plans.”
Green Ammonia Reshaping the Maritime Industry
The most prominent topic currently is how green ammonia will reshape the maritime industry in particular.
The maritime sector is a significant contributor to ocean pollution. The use of heavy fuel oils and diesels not only pollutes the air but spills also contaminate the water, and the sector faces major carbonization challenges.
“Examining the shipping industry now, we observe an exponential increase in the number of ships commissioned to run on green ammonia as a maritime fuel. The technology readiness levels of green ammonia engines for shipping have reached level nine, meaning they are bankable and of high quality,” Loubser explained.
Strategic Investor Interest and Offtake Agreements
Another key advancement has been the visit of strategic investors to South Africa. “We’ve hosted a delegation of 19 individuals from Japan. We have more delegations arriving from Europe, and potentially from the US as well. The project has considerable momentum and is progressing at the right pace and in the right direction.”
Hive signed a memorandum of cooperation with Itochu last December, emphasizing offtake agreements.
“Speaking with offtakers is almost a daily activity for me. That’s going exceptionally well. We are highly confident of securing offtake in Europe and the Far East.”
“In the next few weeks, we’ll see the direction of how contracts will look for Korea and Japan.”
“We’re also witnessing substantial shifts in green ammonia demand from the European fertilizer industry and increasingly from industries seeking to crack ammonia back into hydrogen.”
“We’re primarily focused on Japan, Korea, and the green fertilizer industry in Europe. What is exciting for future phases, and perhaps even a bit for the first phase of our project, is the growing interest in offtake within South Africa. We need to find a balance and comply with all the regulatory regimes that Japan, Korea, and Europe are implementing.”
“So, it’s ideal timing. We’ve anticipated the nascent marketplace well, it’s now emerging as a concrete plan, and fortunately, we believe we’ve made the right call,” Loubser added.
Funding Structure and Final Investment Decision (FID)
Regarding funding, Hive is striving for a slightly improved 70/30 debt-to-equity ratio, potentially involving developmental funding from DFI institutes. The FID date remains on target for the end of next year.
“A tremendous amount of work remains, with numerous planning processes underway, particularly balancing the molecule and electron aspects. We must ensure we can deliver the electrons for the molecule portion, and some of that involves a time-consuming process.
We’ve been highly encouraged by Eskom’s approach and collaboration, and the recent consolidation of the Ministry of Energy and Minister of Electricity into one portfolio will be a further boost.
On July 1st, the national transmission company began operating independently from Eskom’s distribution and generation, so all the right things are happening for the project from a regulatory and process standpoint.
The time it takes also reflects the scale and size of the project, as well as the necessary internal processes, which are quite standard. South Africa is not posing any obstacles to our progress.”
Renewable Energy Capacity and Grid Integration
Construction of Hive Hydrogen’s 3.6 GW renewable energy capacity will commence in 2026, following full environmental approval and the completion of all necessary processes.
The project will inject power into the grid in the central part of the country, primarily around De Aar and Beaufort West.
Due to the project’s requirements, the grid is being strengthened according to the published transmission development plan, along with smaller components that Hive is contributing, which will enable other independent power producers (IPPs) to connect to the grid.
Eskom’s progress in grid strengthening and expansion plans is encouraging and beneficial to the project, potentially reducing some of the financial burden.
Overall, the government is embracing both the hydrogen economy and the electrical requirements, with further developments expected in the coming months.
Prioritizing Lowest Cost Green Ammonia
Producing the lowest cost green ammonia remains a fundamental pillar of Hive Hydrogen’s strategy. While countries like Australia and the United States have subsidy programs, South Africa faces disadvantages in this regard.
Hive believes that South Africa’s unique advantages, such as abundant wind and solar resources and a well-integrated grid, will keep it competitive. Additionally, they hope to see more support for developing countries from Europe and the US.
Alignment with the Just Energy Transition
Hive Hydrogen’s green hydrogen-to-green ammonia project is strongly aligned with the principles of the Just Energy Transition, although significant action in this area has yet to be seen.
The company is committed to maximizing local content and labor, aiming for 99% to 100% local components with local labor.
They have engaged with potential factory developers, labor unions, and other stakeholders to achieve this goal.
The project aims to provide local jobs, electricity, and water to disadvantaged communities, particularly in Nelson Mandela Bay, which has suffered in the past.
Potential for a Hydrogen Valley
Hive Hydrogen envisions sparking a hydrogen valley in the Nelson Mandela Bay area, potentially leveraging the region’s automotive industry.
While the shift from internal combustion engines to hydrogen fuel cells in automobiles may be a few years away, interest is already growing, particularly for larger, heavier vehicles that face challenges with battery technology.
Developing a hydrogen valley will require further infrastructure development, including pipelines and internal projects. While the world is still in the early stages of the hydrogen economy, South Africa is well-positioned to capitalize on this opportunity.