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Green Hydrogen: Implications for

International Cooperation

With Special Reference to South Africa

Andreas Stamm

Tilman Altenburg

Rita Strohmaier

Ece Oyan

Katharina Thoms

IDOS DISCUSSION PAPER

9/2023

Green hydrogen: Implications for

international cooperation

With special reference to South Africa

Andreas Stamm, Tilman Altenburg, Rita Strohmaier, Ece Oyan

and Katharina Thoms

Bonn 2023

Dr Andreas Stamm is a senior researcher in the “Transformation of Economic and Social Systems” programme

at the German Institute of Development and Sustainability (IDOS).

Email: andreas.stamm@idos-research.de

Dr Tilman Altenburg is head of the “Transformation of Economic and Social Systems” programme at the

German Institute of Development and Sustainability (IDOS).

Email: tilman.altenburg@idos-research.de

Dr Rita Strohmaier is a senior researcher in the “Transformation of Economic and Social Systems” programme

at the German Institute of Development and Sustainability (IDOS).

Email: rita.strohmaier@idos-research.de

Ece Oyan is a researcher in the “Transformation of Economic and Social Systems” programme at the German

Institute of Development and Sustainability (IDOS).

Katharina Thoms is a research associate at the Institute for Technology and Innovation Management at RWTH

Aachen University.

Published with financial support from the Federal Ministry of Education and Research (Bundesministerium für

Bildung und Forschung, BMBF)

Suggested citation:

Stamm, A., Altenburg, T., Strohmaier, R., Oyan, E., & Thoms, K. (2023). Green hydrogen: Implications for

international cooperation. With special reference to South Africa (IDOS Discussion Paper 9/2023). Bonn:

German Institute of Development and Sustainability (IDOS). https://doi.org/10.23661/idp9.2023

Disclaimer:

The views expressed in this paper are those of the author(s) and do not necessarily reflect the views or policies

of the German Institute of Development and Sustainability (IDOS).

Except otherwise noted, this publication is licensed under Creative Commons Attribution (CC BY 4.0). You are

free to copy, communicate and adapt this work, as long as you attribute the German Institute of Development

and Sustainability (IDOS) gGmbH and the author(s).

IDOS Discussion Paper / German Institute of Development and Sustainability (IDOS) gGmbH

ISSN 2751-4439 (Print)

ISSN 2751-4447 (Online)

ISBN 978-3-96021-210-2 (Print)

DOI: https://doi.org/10.23661/idp9.2023

Tulpenfeld 6, 53113 Bonn

Email: publications@idos-research.de

https://www.idos-research.de

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GreenHydrogen:ImplicationsforInternationalCooperationWithSpecialReferencetoSouthAfricaAndreasStammTilmanAltenburgRitaStrohmaierEceOyanKatharinaThomsIDOSDISCUSSIONPAPER9/2023Greenhydrogen:ImplicationsforinternationalcooperationWithspecialreferencetoSouthAfricaAndreasStamm,TilmanAltenburg,RitaStrohmaier,EceOyanandKatharinaThomsBonn2023DrAndreasStammisaseniorresearcherinthe“TransformationofEconomicandSocialSystems”programmeattheGermanInstituteofDevelopmentandSustainability(IDOS).Email:andreas.stamm@idos-research.deDrTilmanAltenburgisheadofthe“TransformationofEconomicandSocialSystems”programmeattheGermanInstituteofDevelopmentandSustainability(IDOS).Email:tilman.altenburg@idos-research.deDrRitaStrohmaierisaseniorresearcherinthe“TransformationofEconomicandSocialSystems”programmeattheGermanInstituteofDevelopmentandSustainability(IDOS).Email:rita.strohmaier@idos-research.deEceOyanisaresearcherinthe“TransformationofEconomicandSocialSystems”programmeattheGermanInstituteofDevelopmentandSustainability(IDOS).KatharinaThomsisaresearchassociateattheInstituteforTechnologyandInnovationManagementatRWTHAachenUniversity.PublishedwithfinancialsupportfromtheFederalMinistryofEducationandResearch(BundesministeriumfürBildungundForschung,BMBF)Suggestedcitation:Stamm,A.,Altenburg,T.,Strohmaier,R.,Oyan,E.,&Thoms,K.(2023).Greenhydrogen:Implicationsforinternationalcooperation.WithspecialreferencetoSouthAfrica(IDOSDiscussionPaper9/2023).Bonn:GermanInstituteofDevelopmentandSustainability(IDOS).https://doi.org/10.23661/idp9.2023Disclaimer:Theviewsexpressedinthispaperarethoseoftheauthor(s)anddonotnecessarilyreflecttheviewsorpoliciesoftheGermanInstituteofDevelopmentandSustainability(IDOS).Exceptotherwisenoted,thispublicationislicensedunderCreativeCommonsAttribution(CCBY4.0).Youarefreetocopy,communicateandadaptthiswork,aslongasyouattributetheGermanInstituteofDevelopmentandSustainability(IDOS)gGmbHandtheauthor(s).IDOSDiscussionPaper/GermanInstituteofDevelopmentandSustainability(IDOS)gGmbHISSN2751-4439(Print)ISSN2751-4447(Online)ISBN978-3-96021-210-2(Print)DOI:https://doi.org/10.23661/idp9.2023©GermanInstituteofDevelopmentandSustainability(IDOS)gGmbHTulpenfeld6,53113BonnEmail:publications@idos-research.dehttps://www.idos-research.dePrintedoneco-friendly,certifiedpaper.IDOSDiscussionPaper9/2023IIIAcknowledgementsThisdiscussionpaperwasmadepossiblethroughfundingfromtheDeutscheGesellschaftfürInternationaleZusammenarbeit(GIZ)GmbHonbehalfoftheGermanFederalMinistryforEconomicCooperationandDevelopment(BMZ)andfromtheGermanFederalMinistryofEducationandResearch(BMBF)throughtheproject“GlobalHydrogenPotentialAtlas”(HYPAT).TheauthorsaregratefultoVidushiDembiandAnnaStamatogiannakisfortheirsignificantcontributionstothisreport;andtoMuhammedPatel,ThaboChauke,GaylorMontmasson-Clair,SimonRoberts,AntonioAndreoni,FlorianGüldnerandYanChenfortheirvaluablecommentsonit.Theresponsibilityforerrorsremainswiththeauthors.IDOSDiscussionPaper9/2023IVAbstractGreenhydrogen–producedwithrenewableenergy–isindispensableforthedecarbonisationofeconomies,especiallyconcerning“hard-to-abate”activitiessuchastheproductionofsteel,cementandfertilisersaswellasmaritimetransportandaviation.Thedemandforgreenhydrogenisthereforebooming.Currently,greenhydrogenisfarmoreexpensivethanfossilfuel-basedalternatives,butmajorinitiativesareunderwaytodevelopaglobalgreenhydrogenmarketandbringcostsdown.Greenhydrogenisexpectedtobecomecost-competitiveinthemid-2030s.Giventheirendowmentwithsolarandwindenergy,manycountriesintheGlobalSoutharewell-positionedtoproducelow-costgreenhydrogenandarethereforeattractinginvestments.Whetherandtowhatextenttheseinvestmentswillcreatevalueandemploymentfor–andimproveenvironmentalconditionsin–thehosteconomiesdependsonpolicies.Thisdiscussionpaperanalysesthepotentialindustrialdevelopmentspilloversofgreenhydrogenproduction,distinguishingsevenclustersofupstreamanddownstreamindustriesthatmightreceiveastimulusfromgreenhydrogen.Yet,italsounderlinesthatthereisnoautomatism.Unlessaccompaniedbyindustrialandinnovationpolicies,andunlessthereareexplicitprovisionsforusingrevenuesforaJustTransition,hydrogeninvestmentsmayleadtotheformationofsociallyexclusiveenclaves.Thepaperconsistsoftwoparts.PartAprovidesbasicinformationontheemerginggreenhydrogenmarketanditstechnologicalramifications,theopportunitiesforcountrieswithabundantresourcesforrenewableenergy,hownationalpoliciescanmaximisetheeffectsintermsofsustainablenationaldevelopmentandhowthiscanbesupportedbyinternationalcooperation.PartBdelvesintothespecificcaseofSouthAfrica,whichisoneofthecountriesthathasanadvancedhydrogenroadmapandhostsseveralGermanandinternationaldevelopmentprojects.Thecountrycaseshowshowanationalhydrogenstrategycanbetailoredtospecificcountryconditionsandhowinternationalcooperationcansupportitsdesignandimplementation.Keywords:Greenhydrogen,energytransition,industrialdevelopment,industrialpolicy,SouthAfrica,JustTransition,technologicallearning,internationalcooperationIDOSDiscussionPaper9/2023VContentsAcknowledgementsIIIAbstractIVAbbreviationsVIIIntroduction1PARTA:Thegreenhydrogeneconomy–opportunitiesandchallenges31Theneedforgreenhydrogen32ThevarietyofhydrogencoloursandwhereEuropepositionsitselfonthecolourspectrum43Theuseofgreenhydrogenfordecarbonisation73.1Wheregreenhydrogencontributestodecarbonisation83.1.1Applicationsinindustry83.1.2Hydrogenandsynfuelsinthetransportsector113.2Wheregreenhydrogenshouldnotplayakeyrole114Economicpathwaysandpotentialsforvaluecreation,employmentandtechnologicallearning124.1Greenhydrogenasanopportunityfordevelopingcountries124.2Pathwaystovaluecreation,employmentandtechnologicallearning124.3Fromfactor-costadvantagestohuman-madecompetitiveadvantages175Uncertaintiesregardingthevisionofaglobalhydrogeneconomy185.1Cantheprojectedfastandsteepscaling-upofrenewableenergygenerationbeachievedincountrieswithverygoodnaturalconditions?195.2Cantheglobalelectrolysingcapacitiesbescaledupasfastasthecurrenthydrogenstrategiesassume?205.3Cantherequiredhugeamountsofhydrogenandderivativesbetransportedinaneconomical,safeandcleanway,giventhelongdistancesbetweenpotentialexportingandimportingcountries?216Germandevelopmentcooperationtosupportgreenhydrogen226.1Capacity-buildingforhydrogentechnologyforesightandindustrialpolicy236.2Technicalandvocationaleducationandtraining246.3Sharingthegainsofhydrogeninvestments:the“JustTransition”dimension256.4Scienceandtechnologycooperation266.5Norms,standardsandregulations276.6MultilateralprogrammesandSouth-Southcooperation27IDOSDiscussionPaper9/2023VIPARTB:ThehydrogeneconomyinSouthAfrica287SouthAfrica’sdualchallenge:Energy-sectorcrisesplusdecarbonisation288TheneedforaJustEnergyTransition299SouthAfrica’spotentialforrenewableenergyandgreenhydrogen3110SouthAfrica’shydrogenambitions3211Opportunitiesforvaluecreation3411.1Ambitiousroll-outofrenewablesandelectrolysis,includingbackwardlinkages3411.2Chemicalconversionintoderivatives,includingforexport3511.3Decarbonisationofdomesticindustriesandtransport3611.4Attractionofforeigndirectinvestmentinenergy-intensiveindustries3712RecommendationsforGermany’sdevelopmentcooperationwithSouthAfricaintheareaofgreenhydrogen37References41FiguresFigure1:Anexpandingnetworkofhydrogentraderoutes,plansandagreements1Figure2:Thehydrogencolourspectrum6Figure3:Industriallinkagesofthegreenhydrogeneconomy13Figure4:Optionsforsharingthegainsofhydrogeninvestments26Figure5:SouthAfrica’senergymatrix(2019)29Figure6:ExportsofPGMmetalsfromSouthAfrica(2015-2021)31TablesTable1:RenewableenergyexpansioninAfrica:Scenarios19IDOSDiscussionPaper9/2023VIIAbbreviationsAEManionexchangemembraneBMBFFederalMinistryofEducationandResearchBMZGermanMinistryforEconomicCooperationandDevelopmentCBAMCarbonBorderAdjustmentMechanismCCScarboncaptureandstorageCCUcarboncaptureanduseCH4methaneCOcarbonmonoxideCO2carbondioxideCOPConferenceofthePartiesDRIdirectreducedironDSIDepartmentofScienceandInnovationEAFelectricarcfurnaceEPCengineering,procurementandconstructionEUEuropeanUnionFCEVfuel-cellelectricvehicleFDIforeigndirectinvestmentGHGgreenhousegasGIZGermanAgencyforInternationalCooperation/DeutscheGesellschaftfürInternationaleZusammenarbeitH2hydrogenHySAHydrogenSouthAfricaIEAInternationalEnergyAgencyIRENAInternationalRenewableEnergyAgencyKfWGermanCreditInstituteforReconstructionkmkilometreLH2liquefiedhydrogenLOHCliquidorganichydrogencarrierMENAMiddleEastandNorthAfricaMJmegajouleMtmilliontonnesMWmegawattNDCNationallyDeterminedContributionPEMpolymerelectrolytemembranePGMplatinum-groupmetalPtXPower-to-XPVphotovoltaicR&DresearchanddevelopmentIDOSDiscussionPaper9/2023VIIISAFsustainableaviationfuelSASOLSouthAfricanSyntheticOilLimitedSEZspecialeconomiczoneSOECsolidoxideelectrolysersTRLtechnologyreadinesslevelTVETtechnicalandvocationaleducationandtrainingTWhterawatt-hourUNFCCCUnitedNationsFrameworkConventiononClimateChangeIDOSDiscussionPaper9/20231IntroductionGreenhydrogenfeaturesprominentlyinpolicyplansofbotholdindustrialisedanddevelopingcountries.Itisanessentialpartofthedecarbonisationoftheglobaleconomy,especiallyfortheso-calledhard-to-abateindustries,suchasironandsteel,chemicalsandcement,aswellasforlong-distancetransport.Demandforgreenhydrogenisthereforesettoincreaseenormously,withsupplylaggingfarbehindforatleastthenexttwodecades.Thisprojecteddemandprovidesvastopportunitiesforallthosecountrieswithgoodrenewableenergyendowments–manyofwhichareinsub-SaharanAfrica,theMiddleEastandNorthAfrica(MENA)region,LatinAmericaandSouthAsia.Thesecountriescanproducegreenhydrogentodecarbonisehard-to-abatesectorsintheirowneconomies,theycantapintotherapidlygrowingworldmarketforhydrogen,andtheycancreatecompetitiveadvantagesandattractinternationalinvestmentsinenergy-intensiveindustriesthatareunderparticularpressuretoreducetheircarbonfootprints.Hence,theycanembarkonavarietyofgreenhydrogenstrategieswithpromisingeconomicco-benefits.Atthesametime,therearerisksinvolved:risksoffailedinvestments,giventheuncertaintiesofanewlydevelopingtechnology;environmentalrisks;andsocio-politicalrisksrelatedtocapital-intensive,large-scaleinvestmentsthatmaydevelopintoenclaveswithminimallocallinkagesandencouragerent-seeking,whichinturnmaytriggerpoliticalresistance.Multipleinternationalagreementshavebeensignedbetweenpotentialimportandexportcountries(Figure1).Figure1:Anexpandingnetworkofhydrogentraderoutes,plansandagreementsSource:InternationalRenewableEnergyAgency(IRENA,2022,p.12)InthecaseofGermany,internationalcooperationisnowheavilyfocussingongreenhydrogen.Multiplehydrogenpartnershipshavebeenestablishedwithpotentialexportcountries,especiallycountriesandregionswithexcellentsolarandwindresourcesaswellasavailable,underutilisedland.ThisincludestheGulfregion,NorthernAfrica,SouthAfricaandNamibia,ChileandIndia,amongothers.Theirmainobjectiveis,ontheGermanside,toaccelerateinvestmentsinexportprojectstosecureimportsintoGermany.ThisdiscussionpaperapproachesthetopicfromaIDOSDiscussionPaper9/20232differentperspective(onethatisalsoechoedinthehydrogenstrategyofGermany’sMinistryforEconomicCooperationandDevelopment,BMZ):thatofdevelopingcountrieswithfavourableconditionsforrenewableenergygeneration.Howcanthesecountriesharnesstheincreasinggreenhydrogendemandforsustainablenationaldevelopment,accumulatenewcapabilities,maketheirindustriesfitforalow-carbonfuture,createadditionalemploymentaswellastaxandforeignexchangeearningswhileminimisingtherisks?HowcangreenhydrogenthuscontributetoaJustTransition?Thepaperalsoexploreshowdevelopmentcooperationcansupportsuchatransition.Thepaperconsistsoftwoparts.PartAprovidesbasicinformationontheemerginggreenhydrogenmarket,theopportunitiesforcountrieswithabundantresourcesforrenewableenergyandhowdevelopmentcooperationcanhelpcountriesexploittheopportunitiesinsupportofsustainablenationaldevelopment.PartBdelvesintothespecificcaseofSouthAfrica,whichisoneofthecountriesthathasanadvancedhydrogenroadmapandhostsseveralGermanandinternationaldevelopmentprojects.Thecountrycaseshowshowspecificcountryconditionsleadtotailoredhydrogenstrategiesand,inthesamevein,discussesthespecificcontributionofabilateralcooperationprogramme.IDOSDiscussionPaper9/20233PARTA:Thegreenhydrogeneconomy–opportunitiesandchallengesPartAconsistsofsixsections.Section1clarifiestheroleofgreenhydrogeninthetransitiontolow-carboneconomies.Section2explainsthevariouswaysofproducinghydrogenwithdifferentcarbonfootprints.Section3dealswiththeeconomicsectorsdemandinggreenhydrogen,whileSection4outlinesroutesthatgreenhydrogenproducingcountriescantaketomaximisedevelopmentco-benefitsanddecarbonisetheirowneconomies.Section5highlightssomeuncertaintiesofthenewlyemergingmarketandhowthosecreaterisksforpotentialexporters.Section6concludesthegeneralpartofthepaperbydrawingconclusionsfordevelopmentcooperation.1TheneedforgreenhydrogenTheterm“hydrogeneconomy”wasfirstcoinedinthe1970sbythechemistJohnBockris(Brandon&Kurban,2017)andwasalreadylinkedatthattimetonon-fossilenergysources(solarandnuclear).Whileseveralindustrialisedcountries,mostnotablyJapan,haveshownstronginterestinthedevelopmentofhydrogentechnologiesintheyearssince,itwasthesteadilydecliningcostsofsolarandwindenergythatturnedgreenhydrogenfromahypotheticaldecarbonisationoptiontoarecentlyhypedone:Forsomehard-to-abateindustries–suchasironandsteel,chemicalsandcement,aswellasforlong-distancepassengerandheavycargotransport–itistheonlymeansofdecarbonisation.Thus,itisanessentialpartofthenet-zeropuzzle.Itisestimatedthatby2050,4-11percentoftheworld’senergydemandwillrunonhydrogen,withtheenergycarrierbeingmoreimportantforEuropethanChina(Riemeretal.,2022).Hydrogenalreadyconstitutesanimportantinputincountrieswithastrongindustrialsector.In2020,globalhydrogendemandamountedto90milliontonnes(Mt),80percentofwhichwaslinkedtoammoniaproductionandoilrefining.Theremainingpartwasusedincombinationwithothergasesformethanolproductionanddirectreducediron(DRI)forsteelproduction(InternationalEnergyAgency[IEA],2021a).TheEuropeanUnion(EU)currentlyusesapproximately9.7Mtofhydrogenannually(Kakoulakietal.,2021),or330terawatt-hours(TWh)(EuropeanUnion[EU],2020,p.6).TheGermanNationalHydrogenStrategyspeaksof55TWhofhydrogenproducedandprocessedinthecountry,whichimpliesthatGermanyaccountsforaround16percentofallhydrogencurrentlyhandledwithintheEU–thelargestshareamongmemberstates.Toachievethenet-zerotarget,notonlywillthehydrogenproducedtodayhavetobereplacedbylow-carbonhydrogen;buttheglobalhydrogendemandisexpectedtoincreaseconsiderably,givenitsenormouspotentialfordecarbonisingindustrialprocessesandtransport.Thebenchmarkof110TWhmentionedintheGermanNationalHydrogenStrategyfor2030translatesinto3.3Mt,twiceasmuchasiscurrentlyused.Forthesameyear,theEUplanstoprocess10Mtofgreenhydrogen(EuropeanCommission,2023).1In2050,demandinGermanyisexpectedtoreach380TWh–asevenfoldincreasecomparedtocurrentlevels–whereasestimatesfortheEUproject2,700TWhofgreenhydrogentobeused(GermanAdvisoryCouncilontheEnvironment[SRU],2021).Giventheexpecteddemand,35countrieshavepublishedorarecurrentlypreparinganationalhydrogenstrategy,withmanymorecountriesundertakingmeasuresinthisregard(WorldEnergyCouncil–Germany[WEC],2022).Twenty-ninepartiesoftheUnitedNationsFramework1TheEUaimstoincreaseannualproductionofgreenhydrogento10milliontonnesby2030.IDOSDiscussionPaper9/20234ConventiononClimateChange(UNFCCC)mentionhydrogenasacontributingfactortoclimatechangemitigationandenergytransitionintheirNationallyDeterminedContributions(NDCs)(ClimateWatch,2023).Althoughmanyofthesestrategieshavebeendraftedonthelevelofnationstates,itisclearthatthegreenhydrogentransitionwillrequirecomprehensiveinternationalcoordination.Someofthebigfutureconsumerslacktherenewableenergypotentialtosatisfydemanddomestically.ThisisespeciallythecaseforEurope,JapanandKorea,whereasotherprospectivebigconsumers–suchasChina,theUnitedStates,CanadaandAustralia–willlikelynotbedependentonimports(Wappleretal.,2022).2ThevarietyofhydrogencoloursandwhereEuropepositionsitselfonthecolourspectrumLargequantitiesoflow-carbonhydrogenareneededtodecarbonisehard-to-abateeconomicactivitiesaroundtheworld.Thechallengeistoincreaseitsuseasanenergycarrierandfeedstockintherespectiveindustriesandtransportsectorsandtoproduceitinthemostclimatefriendlywaypossible.Notallhydrogenisthesame.Correspondingtothewayitisproduced,differenttypes,or“colours”,aredistinguished,withverydifferentcarbonfootprints(seeFigure2).Today,thebulkofhydrogenisproducedfromfossilfuels,representing6percentofnaturalgasuseand2percentofcoalconsumptionandaccountingfor830Mtcarbondioxide(CO2),whichisequivalentto2percentofglobalannualCO2emissionsin2021(IEA,2019a).Steammethanereformingisthepredominantprocessforhydrogenproductionandemployedin95percentofEUhydrogenproduction.Fossilfuelssuchasnaturalgasandpetroleumorcoalareusuallyusedasfeedstock.Underpressureandhightemperatures,thehydrocarbonscontainedintheenergysourcesareconvertedintomethane(CH4),carbonmonoxide(CO)andCO2.Thesesubstancesarethencatalysedtoformhydrogen.Givenitshighcarbonintensity,thistypeofhydrogeniscommonlyreferredtoas“grey”hydrogen.Amuchsmalleramountofcurrenthydrogenproduction–so-calledbrownorblackhydrogen–isbasedonthegasificationofbituminous(black)andlignite(brown)coal,whichisanevenmorepollutingprocess.Yet,hydrogencanalsobeproducedsustainablybyeitherusingrenewableenergyorotherlow-carbonsourcesorbycapturingthegreenhousegas(GHG)emissionsgeneratedintheproductionanduseoffossilfuels.Forgreenhydrogen,renewableenergy–mostlysolarandwindbutalsohydropowerandgeothermalenergy–isusedfordecomposingwaterintooxygenandhydrogenviaelectrolysis.Themostimportantlow-carbonalternativeis“blue”hydrogen,whichisgeneratedfromthesteamreductionofnaturalgas,wherebynaturalgasissplitintohydrogenandCO2,andthelatterisstored(carboncaptureandstorage,CCS)orused(carboncaptureanduse,CCU)forindustries.However,bluehydrogenhasitsownrisks.Environmentally,CCSmustensurethatthereisnoleakageofGHGs,anddoubtsremainduetotheby-productemissions.Schippert,Runge,Farhang-DamghaniandGrimm(2022,p.8)analyseindetailtheGHGemissionsalongthebluehydrogensupplychain.Naturalgasproductionandtransportarethemainstepsinthechainrelatedtomethaneandotheremissions.Thus,forcountriesaimingatusingbluehydrogen,theyrecommendswitchingtheimportproductfromnaturalgastohydrogen,asthissignificantlyreducesoverallGHGemissions.Whetherblueorgreenhydrogenisthemostcost-competitiveoptionforlow-carbonhydrogengenerationdependsonthepricesofnaturalgas–asthefeedstockforbluehydrogen–andontechnologicalinnovationsinbothpathways.AuroraEnergyResearch(2023)calculatesthelevelisedcostsofrenewablehydrogenin2030producedinGermanytobebetweenEUR3.90and5.00/kgH2.HydrogenimportedviashipfromMoroccowouldcostbetweenEUR4.58/kgH2(transportedasliquefiedhydrogen,LH2)andEUR4.72/kgH2(transportedasammonia).ImportsfromMoroccoviapipelinewouldcostEUR3.72/kgH2(AuroraEnergyResearch,2023).IDOSDiscussionPaper9/20235Oni,Anaya,Giwa,DiLulloandKumar(2022)calculatedthecostsofbluehydrogenbasedondifferentparameters(technologies,plantsizeandambitionsofcarbonsequestration).TheyconcludepricesbetweenUSD1.22and2.55/kg.Thisimpliesthatcurrentlybluehydrogenissignificantlycheaperthangreenhydrogen.Thisislikelytochangeinthecomingyears.First,thewillingnessofEuropetoachieveindependencefromRussiawithregardtogasimportswillmakethefeedstockforbluehydrogenapermanentlyscarcecommodity.Technologicalinnovationsaretheotherdriversofashiftintherelativecompetitivenessofbothprocesses.Currently,alotisbeinginvestedintoresearchanddevelopment(R&D)forgreenhydrogen,asvariousworldregionstrytogainanedgeinthistechnologyofthefuture.InJune2021,theUSDepartmentofEnergylaunchedthe“HydrogenShot”initiative,aimingatreducingthecostofcleanhydrogentoUSD1per1kilogramin1decade(“111”)(EnergyEfficiency&RenewableEnergy,s.a.).TheNorwegianelectrolysermanufacturerNELwantstoachieveproductioncostsofUSD1.5/kgalreadybytheyear2025.AnentirelyCO2-freeprocesstoproducehydrogenbasedonnaturalgasismethanepyrolysis:Thethermaldecompositionofmethaneonlyproducescarbonasaby-productof(inthiscase,“turquoise”)hydrogen.Turquoisehydrogenisoftenseenasanotherpotentialbridgetechnologyinthetransitionfromfossilfuelstorenewableenergies.Thereis,however,stillalongwaytogotoconsideritacommerciallyviableoption.Schneider,Bajohr,GrafandKolb(2020)analysethevariousprocessesrequiredforthepyrolysisprocessandseethemattechnologyreadinesslevels(TRLs)ofonlythreetofive.Inaddition,thepoliticalwishtolowertheamountofnaturalgasimportstocentralEuropemayworkagainstthefurtherdevelopmentofthistechnology.Carbon-freehydrogencanalsobegeneratedfromnuclearenergy.Somegovernmentsconsiderthis–variouslynamed“pink”or“red”–hydrogenassustainable.Giventhesafetyconcernsofnuclearenergygeneration,therisksofnucleararmsproliferationandtheunresolvedchallengesregardingthefinaldepositofnuclearwaste,thisishighlycontested.Lastbutnotleast,anothergreenoptionistoproducehydrogenfrombiomassthroughanaerobicdigestion(or“darkfermentation”).Inthisprocess,microorganismsdigestbiomassandorganicwasteandtherebyreleasehydrogen.Advantagesofthetechnologyaretheutilisationoforganicwaste(whichisabundantlyavailableandwouldanywayneedtreatment)andhigherenergy-efficiencyincomparisontowaterelectrolysis.However,althoughdarkfermentationiswell-establishedforproducingmethanefrombiomass,ithasnotbeendeployedforhydrogenproductiononalargecommercialscaleandisenvisagedonlybyafewcountriessofar–notablythosewithastrongbioenergysector,suchasBrazil.IDOSDiscussionPaper9/20236Figure2:ThehydrogencolourspectrumSource:AuthorsGreenhydrogenisthefirst-bestsolutionforcurbingemissionsfromhard-to-abatesectors.Yet,itwillbedifficulttodeployrenewableenergygenerationandelectrolysercapacityfastenoughtomeettheambitiousdecarbonisationtargets.Ifthatisthecase,othervarietiesoflow-carbonhydrogen,notablybluehydrogen,mightbeconsideredasbridgetechnologiestoallowforafastertransitiontowardshydrogen-poweredindustrialprocessesandmodesoftransport:ThegoalofsupplyingEuropewithsustainable,greenhydrogenisundisputed.However,toreachthisgoalasfastaspossible,bluehydrogencouldhelpprovidingsufficientquantitiesofthegasinordertobuildupsupplychainsinthescalingphaseofthehydrogeneconomyfaster.Transportchainsandapplicationscouldrunonbluehydrogeninatransitionphasetobuildupamarketforthecommodityandthengraduallyswitchtogreenhydrogen.(Schippertetal.,2022,p.2)Internationally,thereisnoconsensusonwhichvarietiesofhydrogenqualifyfordecarbonisationroadmaps.Countrieshavedifferentfactorendowmentsandlegacyenergysystems,reflectingpoliticaldecisionsofthepast.Thisleadstodifferentpoliticalinterests.France,forinstance,withIDOSDiscussionPaper9/20237anuclearpowerfleetcoveringnearly70percentofitsnationalelectricitysupply,considersnuclearenergyaviableoptiontoproducehydrogen,whereasothersstrictlyopposethisposition.Norwaygenerates44percentofitstotalenergysupplywithhydropower(IEA,2022a)whilebeingthethird-largestexporterofnaturalgasintheworld.Germanyhasbetonrenewableenergysourcessincearound2000,andwind,solarandbioenergycomprised32.5percentofallelectricityproductioninthecountryin2018.Thesepath-dependenciesarecorrespondinglyreflectedinnationalhydrogenstrategies:TheGermannationalhydrogenstrategyisa“greenhydrogen”strategyinthestrictsense,whereasFranceenvisagestheexistenceofa“low-carbonenergymixsupportedbyalargenuclearfleet”.NorwaydefinescleanhydrogenashydrogenproducedeitherbyusingrenewableenergiesorsteamreformingprocessesinvolvingnaturalgasorotherfossilfuelscombinedwithCCS(NorwegianMinistryofPetroleumandEnergy/NorwegianMinistryofClimateandEnvironment,2020,p.6).Initshydrogenstrategyof2020,itaimsatachievingthesamemarketconditionsforbluehydrogenasforgreenhydrogeninEurope.Hence,nocountrywillwishtoloseitscompetitiveadvantageintheenergysectorthroughtoonarrowadefinitionof“desirable”hydrogen.OntheleveloftheEU,thehydrogenstrategyfrom2020givesprioritytotheproductionanduseofgreenhydrogen,mainlyfromwindandsolarpower.However,italsostatesthatotherlow-carbonhydrogenmaybeneededduringatransitionphaseinordertoquicklyreduceemissionsfromexistingfossilhydrogenproductionandtosupportthesimultaneousdevelopmentofrenewablehydrogentechnology(EU,2020,p.5).TheEUCertifHyinitiativewassetupasacertificationschemetoreachacommonunderstandingondesirableformsofhydrogenproduction.Itspecifiesanupperlimitof36.4gCO2eq/MJ(equivalent/megajoules)forthecarbonfootprintofhydrogenproducedfromrenewableenergy(greenhydrogen)orotherlow-carbonsources(pink,blueorturquoisehydrogen).TheEUCertifHyupperlimitrepresentsaCO2eqreductionof60percentrelativetothe91gCO2eq/MJspecifiedforhydrogenproducedfromsteammethanereforming(greyhydrogen)(CertifHyConsortium,2021).Hence,bluehydrogen–producedfromfossilfuelscoupledwithCCS–willqualify,inmostcases.Thecurrentenergycrisismaysupportthoseinterestedinalessambitiousdefinitionoflow-carbonhydrogen.Forinstance,GermanysignedacontractwithAbuDhabiinMarch2022toensurefirstdeliveriesofbluehydrogen.Forcountriesassessingopportunitiestoexportlow-carbonhydrogentoGermanyandEurope,thisimpliesthattheycandevelopexportoptionsbasedontheirspecificenergymatrixaslongastheymeettheEUCertifHycriterionofanupperlimitof36.4gCO2eq/MJ.Inthelongrun,thismightshifttowardsstricterlow-carboncriteria,oncethemarketramp-uphassignificantlyadvancedandhigherquantitiesofstrictlygreenhydrogenareavailable.3TheuseofgreenhydrogenfordecarbonisationGreenhydrogenisanenergycarrierthatcanbeusedeitherdirectlyforheatgenerationaswellasfornon-energypurposes(e.g.asafeedstockforsteelorbasicchemicalproduction);orindirectly,viatheconversionofgreenhydrogenintoderivativessuchasammonia,methanol,methaneandsyntheticfuels.Furthermore,hydrogencanbeexploitedasameansforstoringrenewableelectricity.Despiteitsbroadapplicability,greenhydrogenwilllikelynotbeusedinallsectorsoftheeconomy;forecastssuggestaglobalhydrogenshareof4-11percentofthefinalenergydemandby2050(Riemeretal.,2022).Onthesectorlevel,transportisprojectedtohavethelargestshareofhydrogenintotalenergydemand(globallybetween10and19percent);however,therearestillmanyuncertaintiesregardingthespecificapplicationareas.Forindustriessuchascementandchemicalaswellasironandsteel,hydrogenconstitutestheonlydecarbonisationoption.Forheatingbuildings,hydrogenisprojectedtoamounttolessthan2percentofthefinalIDOSDiscussionPaper9/20238energydemandinthissector(seeRiemeretal.(2022)foradetailedanalysisacrosssectors).Inthefollowing,wesummarisewheregreenhydrogencontributestodecarbonisationandwhereitdoesnot,duetotheavailabilityofbetteralternatives.3.1Wheregreenhydrogencontributestodecarbonisation3.1.1ApplicationsinindustryHydrogenalreadyplaysanintegralpartinmanyindustrialapplications:asafeedstockforammoniasynthesis(55percentofhydrogendemand),forhydrocrackingandhydrodesulphurisationinrefineries(25percent),andmethanolproduction(10percent)(Quartonetal.,2020;Riemeretal.,2022).Here,greyhydrogenwilleventuallybereplacedbygreenhydrogen.Ontheotherhand,greenhydrogenopensupnewapplicationopportunities:forgeneratinghigh-temperatureheatorasareactantinnewproductionprocesses,suchastheDRIrouteinsteelproduction.Howrapidlygreenhydrogenwillbedeployeddependsonitscosteffectivenessvis-à-visestablishedfossil-energy-basedalternativesandlegacyinfrastructuresaswellasonpolicies.Inthefollowing,wegiveamoredetailedoverviewofthedecarbonisationpotentialinthemainindustries.3.1.1.1IronandsteelindustryTheironandsteelindustryisresponsibleforabout2.6billiontonnesofCO2emissions,whichisaround9percentofglobalannualemissions(WorldSteelAssociation,2021),duetothelargequantitiesofcoalusedincurrentproductiontechnologies.Morethan70percentofglobalsteelproductiontakesplaceinAsia,withChinaaccountingforabouthalfofworldwideproduction(WorldSteelAssociation,2023),followedbyIndia,theUnitedStatesandJapan.With40.1Mtproducedin2021(WorldSteelAssociation,2023),Germanyistheseventh-largeststeelproducerintheworldandthelargestintheEU.Giventhatthedemandforsteelisprojectedtorise,decarbonisingtheindustryisparamountforachievingclimateneutrality.Steelcanmainlybeproducedviatwoprocesses:theblastfurnace–basicoxygenfurnaceroute(accountingforabout70percentofsteelproduction),andtheelectricarcfurnace(EAF)route(about28percentofsteelproduction)(Ahmed,2018;Hornby&Brooks,2021).Themaindifferenceisintherawmaterialsused–blastfurnacesrequireironore,whereassteelscraporDRIisusedinEAFs.Inbothprocesses,greenhydrogencanbeusedasareactantinDRI.Althoughitisthemostdevelopednon-carbontechnologyforDRItodate,itrequirescost-intensiveretrofittingofthesteelplants.Itisestimatedthathydrogen-baseddirectreductionwouldincreasethepriceofatonofsteelbyaboutone-third(Kurrer,2020).Furthermore,theramp-upofthetechnologywouldneedasignificantexpansionofrenewableenergyproduction.Ittakes50to55kWhtoproduce1kgofhydrogen,and50kgofhydrogentoproduce1tonofsteel.ThiswouldmeanthatforGermanytofullydecarboniseitsannualproductionof40Mtofsteel,about100TWhofrenewableenergyarerequired.Thisrepresentsa20percentincreaseintotaldemandforelectricityinGermany.3.1.1.2CementindustryIn2019,theglobalcementindustrywasresponsiblefor2.3billiontonnesofCO2emissions,whichaccountedfor7percentofglobalCO2emissions(Hasanbeigi,2021).ByfarthebiggestcementproducerisChina,withanestimated2.5billiontonnesproducedin2021,equallingmorethanhalfofglobalproduction.Indiacomessecond,with330milliontonsproducedin2021.Duetothebroadavailabilityofthemainmaterials(e.g.limestone),cementcanbeproducedatareasonablepriceinalmosteverycountry;however,itisnotcost-effectivetotransportoverlongdistances(El-Sayed,Faheim,Salman,&Saleh,2021),leadingtoaratherfragmentedglobalmarket.IDOSDiscussionPaper9/20239Themaininputintheproductionofcementisclinker.Theamountofclinkerusedisdirectlyrelatedtothecarbonfootprintofthecement,asitemitsbothdirectemissionsviafuelcombustionforprocessheatandprocessemissionsduetolimestonedecomposition(IEA,2021b).Thus,anydecarbonisationstrategyforthecementindustryshouldtargetbothdirectandprocessemissions.Thesubstitutionoffossilfuelsforcarbon-neutralalternativessuchasgreenhydrogenwouldcutdirectemissions,correspondingto35percentofthetotalCO2emissionsfromthecementindustry(SRU,2021).Regardingprocessemissions,theadditionofmaterialssuchasgypsum,blastfurnaceslag,flyashandpozzolanadecreasestheclinkeramountincement,indirectlysavingCO2emissions.However,forthefulleliminationofprocessemissions,CCStechnologiesareaprerequisite.Cementthusremainsoneofthemostchallengingindustriestocompletelydecarbonise.3.1.1.3ChemicalindustryThechemicalsectoristhelargestindustrialconsumeroffossilfuels,usingthemequallyforfeedstockproductionandprocessenergy.ItranksthirdintermsofdirectCO2emissions,contributing925MtofCO2globallyin2021(IEA,2022b).Abouthalfoftheindustry’semissionscomefromtheproductionofammonia,followedbyhigh-valuechemicalssuchasethylene,propylene,benzeneandmethanol(IEA,2021c).Theproductionofthesebasicchemicalsrepresentstwo-thirdsofthesector’stotalenergyconsumption.Ammonia.Seventypercentoftheammoniaproducedworldwideisusedfortheproductionofsyntheticnitrogenfertiliserssuchasurea,ammoniasaltsandammoniasolutions(IEA,2021c).Itisalsousedintheproductionofplastics,explosivesandsyntheticfibres.Ammoniaisproducedfromhydrogenandnitrogenintheso-calledHaber-Boschprocess.Duetotheuseofgreyhydrogenasafeedstock,ammoniaproductioniscurrentlyhighlycarbon-intensive,accountingforabout2percentoftotalfinalenergyconsumption(IEA,2021c).Decarbonisationeffortsmainlyfocusonmakingexistingproductionmethodsmoreenergy-efficientandreusingCO2emittedduringthecourseofhydrogenproductionfortheproductionofurea(IEA,2022b).2Ashydrogenrepresentsakeyfeedstockforammonia,amainactionpointistoeitherovercomethenecessityofhydrogenasafeedstockforammoniaproductionentirelyordecarbonisetheprocessstepofhydrogenproductionitself.Therearenewtechnologiesonthehorizontoovercometheneedforadditionalseparatehydrogenproductionprocesses,suchastheelectro-catalyticnitrogenreductionreaction,biologicalnitrogenfixationorchemicalloopingprocesses.However,theseprocessesareatalowTRL,anditisunclearifandwhentheywillreachmaturity(Lvetal.,2021;RoyalSociety,2020).Bysubstitutingfossilhydrogeninammoniaproductionwithgreenhydrogeninthefuture,significantCO2emissionscanbeavoided.ThisproductionprocesscurrentlyoperatesataTRLoffivetonine(RoyalSociety,2020).Itsmaineconomicandtechnicalbarriersstronglyoverlapwiththoseofgreenhydrogentechnologies:thecostsandavailabilityofelectricity,electrolysersaswellasplantcapacity.Thereare,however,fertilisercompaniesthathavegreenammoniaprojectsintheirrelativelyshortpipeline.AstudybyRystadEnergy(Oslo)showsthatFertiberiaS.A.fromSpainandtheNorwegianfertiliserproducerYaraareamongthemostambitiousgreenhydrogenofftakers,measuredbythenumberofhydrogenpurchaseagreementssigned(Klevstrand,2023).Duetothecharacteristicsofgreenammonia,suchasdensityandstoragetemperature,itwilllikelynotonlydecarbonisethefertiliserindustry,butalsobeusedasatransportmediumforgreenhydrogenandasubstituteforfossilfuelsin,forexample,heavy-dutytransportandelectricity.Only2Thismakescarboncaptureuseandstorageaparticularlycompetitiveoptionforsubstantialemissionreductionsfromammoniaproduction.Accordingtothe2050SustainableDevelopmentScenariobytheIEA,200MtofCO2–ofwhich83percentareprocessemissions–canbecaptured,outofwhich65percentcanbeusedforureaproductionand35percentarepermanentlystored(IEA,2021c).IDOSDiscussionPaper9/202310recently,anagreementwasmadebetweenCanadaandtheUnitedStatestosupplyGermanywithgreenammoniaasasubstitutefornaturalgasinthefuture(Olk&Scholz,2022).High-valuechemicals.High-valuechemicals,includingethylene,propyleneandbenzene,areimportantrawmaterialsforplasticsandfuelproduction.Atpresent,theyareproducedthroughcrudeoilrefining.SwitchingtheprocesstorenewablesynthesiswouldreduceCO2emissionssignificantly(Miller,Armstrong,&Styring,2022).Onesuchrouteis“greening”therelevantfeedstock,thatis,syngas–amixtureofcarbondioxide,carbonmonoxideandhydrogen–bycouplinggreenhydrogenwithCCUtechnology.Alternativedecarbonisationpathwaysforhigh-valuechemicalsincludetheuseofbio-resourcestoproduce“bioplastics”(IEA,2022b).Methanol.Methanolisaversatilerawmaterialincludedinplastics,paintsandconstructionmaterials,butitcanalsobeusedasaliquidfuelforroadtransport,ships,fuelcells,boilersandcookstoves(MethanolInstitute,2023).E-methanol,producedfromCO2andgreenhydrogen,emitsonlyasmallfractionofCO2andnitrogenoxidecomparedtofossilfuels.Togetherwithammonia,itisthemostpromisingdecarbonisationoptionfortheshippingindustry.Industrial-scalee-methanolplantsarecurrentlyunderconstructioninDenmark(SiemensEnergy,2022)andNorway(IEA,2022c).Box1:GreenhydrogenforfertiliserproductionSeventypercentofglobalammoniaproductionisusedfortheproductionofsyntheticnitrogenfertilisers(IEA,2021c).ThebiggestexportersofnitrogenfertilisersarecurrentlyRussia(12.1percent),China(12.1percent)andOman(7.2percent).Theirleadingpositionsontheglobalmarketarelargelyduetotheirendowmentswithfossilfuelsforhydrogenproduction(InternationalTradeCentre[ITC],2021).Recently,thepricesforfertilisershavebeenfluctuatingheavily,puttingsignificantpressureonglobalfoodsystems:Followingariseofabout80percentonaveragein2021,pricesincreasedaboutanother30percentstartingin2022beforereachingapeakinApril2022(Baffes&Koh,2022;Bourne,2022).Sincethen,priceshavedeclinedbutarestillmuchhighercomparedtothebeginningofthedecade.ThepricespikecanbemainlyattributedtotheRussianinvasionofUkraine,resultinginshortagesofsupplyfromRussia,BelarusandUkraine.RisingpricesfornaturalgasinEuropeandcoalinChinahaveledtoproductioncutbacksofammonia,andthusfurtherincreasedfertiliserinputprices.Furthermore,Chinahasimplementedbarriersandbansfortheexportoffertiliserstoensurethelocalsupply(Baffes&Koh,2022).ThecurrentsituationseverelyaffectstheGlobalSouth:LatinAmericaandsub-SaharanAfricaaretheregionswhereagriculturesectorsareparticularlyvulnerabletofertilisersupplydisruptions.Forinstance,Brazil–oneoftheleadingexportersofsoybeans,corn,beef,chickenandpork(Bourne,2022)–imports85percentofitsfertiliserconsumption,mainlyfromRussia.Greenhydrogencanhelpinreducingacountry’sdependenceoncurrentnitrogenfertiliserexporters.InBrazil,therearecurrentlyfourammoniaprojectsinthepipeline,whileChile,alsoalargeexporterofagriculturalproducts,hasreportedelevenprojects.Mostofthemarestillattheleveloffeasibilitystudies.AnambitiousprojectiscurrentlybeingimplementedinSpain:TogetherwiththefertiliserproducerFertiberiaS.A.,theutilitycompanyIberdrolaS.A.haslaunchedtheGreenH2FPuertollanoIprojectinSpain.Onanalreadyexistingproductionunit,agreenammoniapilotprojectisbeingformedwithsolarpanelswithacapacityof100megawatts(MW),abatteryunitandahydrogenbuffer.Theaimistousesolarelectricityandwatertoproducegreenhydrogenthroughelectrolysis(20MW),whichwillfeedintotheproductionoflow-carbonammonia,andlaternitrogenfertilisers(Iberdrola,2022;IRENA,2021).Fertiberiaalsohasambitiousplansforproducinglow-carbonfertiliserinthenorthernSwedishregionofLuleå-Boden.Theproject,announcedin2021,includes600MWofelectrolysersandagreenammoniaplantthatproduces1,500tonsperdayandanannualproductionofmorethan500,000toflow-carbonfertilisersandindustrialproducts(Sharpe,2021).ThelocationaladvantageofnorthernScandinaviaistheavailabilityofrenewableelectricityatverylowcosts,whichareonlyafractionofthecostsinotherpartsofEuropeandmanydevelopingcountries.Source:AuthorsIDOSDiscussionPaper9/2023113.1.2HydrogenandsynfuelsinthetransportsectorRoadandrailtransport.Fuel-cellelectricvehicles(FCEVs)mightreachsimilar“sun-to-wheel”efficiencylevelsasbattery-electricvehicles(BEVs)iftheyarepoweredwithgreenhydrogenimportedfromcountrieswithabundantsolarenergy(Riemeretal.,2022).ThiswouldmakeFCEVsattractiveforlong-distancerailandheavyfreighttransport(Wietscheletal.,2021).Althoughelectricdrivesarealreadywell-establishedintherail-boundtransportsector,hydrogencouldpotentiallybeusedfornewtracksectionsorwhentheelectrificationofexistingrailroadlinesistoocostly.Similarly,incargotransport,hydrogenmightinthefutureoutcompetebatteries,asfromacertaincapacityonwardstheenergydensityofhydrogenishigherthanforbatteries,andtherefuellingtimesareshorter(Riemeretal.,2022).Maritimeshippingandaviation.Formaritimetransportandaviation,hydrogenrepresentstheonlydecarbonisationoption:Aviationandshippingcause5percentofglobalGHGemissions.Withthesesectorshavingambitiousemission-reductiontargetsby2050inplace,3hydrogenactuallyconstitutesagamechanger.Liquidhydrogenorderivativessuchasammoniaandmethanolwilldrivefuelcellsorinternalcombustionengines(SRU,2021).Foraviation,fuelcellscanbeusedfordistancesupto1,600kilometres(km),whereasthecombustionofsyntheticaviationfuelsuchase-keroseneisforeseenforlongerdistances(Riemeretal.,2022).Inmaritimeshipping,greenammoniawilllikelybethefirstfueloption(IRENA,2021).InJanuary2022,KritiFuture,theworld’sfirstammonia-fuel-readyvessel,wasdeliveredinNewYork.The274-metre-longtankeriscurrentlyfuelledwithheavyoilbutmeetstherequirementstorunongreenammoniainthefuture(MarineInsight,2022).3.2WheregreenhydrogenshouldnotplayakeyroleElectricitygenerationforthegridandforheatingbuildings.Anyconversionprocessalongthehydrogenvaluechainimpliesasignificantlossofenergy:Theelectrolysisprocess–splittingwaterintohydrogenandoxygen–causesalossof20-30percentofenergy,dependingonthetechnologyapplied.Forlong-distancetransport,hydrogenhastobeliquefiedbybringingitdowntoverylowtemperatures(-253°C).Thiscoolingprocessrequiresabout30-40percentofthehydrogenenergyvalue(Chatterjee,Parsapur,&Huang,2021).Alternatively,hydrogencanbeconverted,forexamplesynthesisedtoammonia,whichrequiresfurtherenergy.Iffinalconsumptionrequireshydrogeninitspureform,ammonia(orotherderivatives)hastobere-converted,which,inthecaseof“ammoniacracking”,notonlyimpliesadditionalenergyinput,butalsoaprocess-relatedlossofhydrogen(Chatterjeeetal.,2021).Thismeansthataslongasrenewableenergysupplyisscarce,conversionandre-conversionprocessesshouldbeavoidedwhereverpossible.Thus,inmostcases,itisnoteconomicallyfeasiblenorenvironmentallyefficienttocombustgreenhydrogenforenergygeneration.Theexpansionoftheheatdistrictnetworkandtheuseofheatpumpsarepreferredoptionsforheatingbuildings.Electrificationanduseforlow-andmedium-gradeheatinindustry.Thebestdecarbonisationoptionformanymanufacturingandservicesectorsisthedirectsupplyofrenewableelectricitytodrivemachineriesanddevices–fromsewingmachinesinthetextileindustry,robotsincarmanufacturingtodataprocessingandstorageequipmentinindustrialadministrationandservices.Electrificationisalsothebestalternativefortheproductionoflow-andmedium-gradeheatviaboilersorotherdevices.Anadditionalopportunityfordecarbonisingindustrialprocessescanbetheuseofbioenergyforproducingheat,forinstanceinthefood3TheInternationalAirTransportAssociationisaimingfornetzeroemissionsby2050(InternationalAirTransportAssociation,2021),whiletheInternationalMaritimeOrganizationhassetatargetofreducingannualGHGemissionsby50percentfrom2008levels(InternationalMaritimeOrganization,2018).IDOSDiscussionPaper9/202312processingandpaperindustries,whereorganicby-productsandwastecanbeusedasalow-carbonenergysource.Electrificationofpassengervehicles.Inroadtransport,hydrogencanbeusedinFCEVsoraspower-to-gasininternalcombustionengines.However,especiallyinpassengerroadtransport,batteryelectricvehiclesusinglithium-ionbatteriesandbiogenicfuelsarethedominantincumbenttechnology(Riemeretal.,2022)–incontrasttoheavyfreighttransport(seeabove).AlthoughFCEVshavesomepositivefeatures,suchasshorterrefuellingtimesandlongeroveralllifetimesoffuelcells,batteryelectricpassengervehiclesachievewell-to-wheelefficienciesthataretwiceasmuchasthoseofFCEVsandfourtimesasmuchasthoseofinternalcombustionengines,withthesedifferencesagainresultingfromenergylossesduringconversionprocesses(SRU,2021).4Economicpathwaysandpotentialsforvaluecreation,employmentandtechnologicallearning4.1GreenhydrogenasanopportunityfordevelopingcountriesManydevelopingcountriesareblessedwithabundantrenewableenergyresources,inparticularsolarandwind,andarethereforeattractiveforinvestmentsingreenhydrogen.LargepartsofAfrica,theGulfregion,IndiaandSouthAmericaarewell-endowedwithrenewableenergysources.Asacontinent,Africahasthelargestamountofrenewableenergyresources,inparticularsolar,butalsohydropower(Ethiopia),geothermal(EastAfrica)andwindpower(HornofAfricaandcoastalareas).Thepotentialofonshorerenewableenergygenerationisprojectedtobe1,000timeslargerthantheexpecteddemandin2040;thus,thisallowsthecontinenttobecomeanetexporterofrenewableenergy,therebyenablinggreenjobsandvaluecreation(GermanCreditInstituteforReconstruction,GermanAgencyforInternationalCooperation,&InternationalRenewableEnergyAgency[KfW,GIZ,&IRENA],2020).AsofMarch2023,29partiestotheUNFCCCmentionhydrogenintheirNDCs,24ofwhicharecountriesfromdevelopingregions(ClimateWatch,2023).Manyofthesecountrieshavealreadydraftedtheirnationalhydrogenstrategiesorhavehydrogenroadmapsinplace(WEC,2022).Amongthecountrieswiththehighestpotentialforrenewableenergygeneration,Chileisleadingwithregardtothenumberoflow-carbonhydrogenprojects(28),followedbyEgypt(17),theUnitedArabEmirates(14),Brazil(12)andOman(11).Withnineprojectsinthepipeline,SouthAfricaisthefrontrunnerinsub-SaharanAfrica(IEA,2021d).4.2Pathwaystovaluecreation,employmentandtechnologicallearningRollingoutrenewableenergyprojectsandconvertingelectricityintogreenhydrogenandderivativesopensupmanifoldopportunitiesforindustrialdevelopment.Valueaddedandemploymentcanbegreatlyincreasedanddomestictechnologicalcapabilitiesenhancedifcountriesexploittheircomparativeadvantagesinrenewableenergyendowmenttoproducegreenhydrogen.Thesedevelopmenteffectscanbemultipliedifcountriesdeliberatelyinvestinindustrialforwardandbackwardlinkages(Altenburg,Wenck,Fokeer,&Albaladejo,2022).Inthefollowing,weprovideanoverviewofpotentialindustriallinkagesthatcanbedevelopedinagreenhydrogeneconomy,distinguishingsevenclustersofactivities(Figure3).IDOSDiscussionPaper9/202313Figure3:IndustriallinkagesofthegreenhydrogeneconomySource:AuthorsFirst,renewableenergygenerationandelectrolysis.Theindispensablefirststepisinvestmentsinrenewableenergies(solarandwindfarms,geothermalandhydroelectricprojects,dependingonresourceendowments),inelectricgridsandelectrolysers.Asmostpotentialproducercountriesarewater-scarce,desalinationplantsaretypicallypartofthecoreactivities.Bothwaterandhydrogenrequirepipelinesandtankswithdifferentproperties.Alloftheseactivitiesarerelativelycapital-intensiveandrequireconsiderablescalesofproduction,whichmakesitdifficultfornewcomerstoenterthesemarkets.Inmostdevelopingcountries,thecoreactivitieswillthereforebedominatedbyforeigninvestmentsandimportedtechnology.However,theemploymenteffectscanbeconsiderable,especiallyduringconstructionphases.Technologicallymoreadvancedcountriescanofcoursedevelopindigenouscapabilitiesandcapturevaluelocally,bothinservices(construction,projectdevelopment,windsiting,wheelingservices)andmanufacturing(e.g.steeltubes).Thesameholdsforelectrolysers,forwhichvarioustechnologiesarecurrentlybeingdevelopedinparallel–allwithdifferenttechnologicalentrybarriersandpotentialsforindustriallinkages(Box2).IDOSDiscussionPaper9/202314Box2:TypesofelectrolysersforgreenhydrogenproductionThechemicalandtechnicalbasicsofelectrolysishavebeenknownsincearound1800.Electrolysishasbeenusedforavarietyofpurposes,suchastheelectrometallurgyofaluminium,lithium,sodium,potassium,magnesium,calcium,theproductionofchlorineandsodiumhydroxide,orforpurifyingcopper.Fortheproductionofhydrogen,fourtypesofelectrolysersareavailable,eachentailingspecificadvantagesanddisadvantagesanddisplayingdifferentlevelsoftechnologyreadiness.Thereisnosingleelectrolysertechnologythatperformsbetteracrossalldimensions.Alkalineelectrolysersandpolymerelectrolytemembrane(PEM)electrolysersarealreadycommercial,whereasanionexchangemembrane(AEM)andsolidoxideelectrolysers(SOEC)areatlabscale.1.AlkalineelectrolysersAlkalineelectrolysershaveasimplestackandsystemdesignandarerelativelyeasytomanufacture.Classicandsturdyalkalinedesignsareknowntobehaveveryreliably,reachinglifetimesabove30years.However,alkalinewaterelectrolysisoperatesmoreefficientlyonalowcurrentdensity,withlowhydrogenproductionrates.Moreover,thepressurebetweentheanodeandcathodesidesneedstoremainbalancedtokeepthehydrogenoroxygengeneratedbytheelectrolysisfrompenetratingthediaphragmtotheotherside,resultinginariskofexplosion.2.Polymerelectrolytemembrane(PEM)electrolysersPEMelectrolysersuseathinperfluorosulfonicacidmembraneandelectrodeswithadvancedarchitecturethatallowforachievinghigherefficiencies(i.e.lessresistance).However,usingpreciousmetalsaselectrocatalysts(toprovidelong-termstabilityandoptimalelectronconductivityandcellefficiency)leadstohighcosts.Additionally,PEMelectrolysersaresensitivetowaterimpuritiesandcansufferfromcalcination.Thereliabilityandlifetimecharacteristicsoflarge-scale,MWPEMstacksstillneedtobevalidated.3.Anionexchangemembranes(AEMs)ThepotentialofAEMsliesinthecombinationofalessharshenvironmentfromalkalineelectrolyserswiththesimplicityandefficiencyofaPEMelectrolyser.Itallowsfortheuseofnon-noblecatalysts,titanium-freecomponents,and–aswithPEMelectrolysers–operationunderdifferentialpressurelevels.Untilnow,however,AEMmembraneshavehadchemicalandmechanicalstabilityproblems,leadingtounstablelifetimeprofiles.Moreover,performanceisnotyetasgoodasexpected,mostlyduetolowAEMconductivity,poorelectrodearchitecturesandslowcatalystkinetics.4.Solidoxideelectrolysers(SOEC)Operationathightemperaturesenablestheuseofrelativelycheapnickelelectrodes,reductionsinelectricitydemands,thepotentialforreversibility(operatingasafuelcellandelectrolyser),andtheco-electrolysisofCO2andwatertoproducesyngas.However,hightemperaturesalsoresultinthefastdeteriorationofcatalyticperformance,makingthelong-termoperationofSOECachallenge.SOECaretodayonlydeployedatthekW-scale,althoughsomerecentdemonstrationprojectshavealreadyreached1MW.Source:AuthorsSecond,backwardlinkagesfromrenewablesandelectrolysis.Allthecoreindustriesmentionedaboveinvolvebackwardlinkages,whichmayormaynotaccruelocally.Solarphotovoltaics(PVs)requiresolarcellsandmodulesaswellassteelframes;windparksrequiretowers,bladesandgearboxes;geothermalprojectsrequireturbines,pumps,condensers,coolingtowers,valves,heatexchangers,etc.Energyprojectsgenerallyrequirecablesandenergystoragedevices.Electrolysersrequireelectrodesandelectrolytematerials,membranesandstacks.Countriescanthustrytocapturevalueintheseupstreamindustries,investingintechnologicalcapabilitiesaswellasdemand-sideincentivessuchaslocalcontentrequirements.Someoftheinputsareeasiertoproducelocally(steelstructures,windtowers,pumps,cables),whereasothersarehighlytechnology-intensiveandinmostcasesneedtobeimported,forexamplePVcells(IEA,2022d),windturbinecomponentsandblades(GlobalWindEnergyCouncil,2022).IDOSDiscussionPaper9/202315Third,conversionintoPtX.Asshownearlier,thetransportandstorageofhydrogeniscostly,asitneedstobestoredateitherextremelyhighpressuresorextremelylowtemperatures.Thecommerciallyviablealternativeistoconverthydrogenintoaderivativethatiseasiertostoreandtransport,suchasammonia,methane,methanolorsyntheticliquidhydrocarbons,suchasdiesel,gasolineandkerosene.Thechoiceofderivativedependsonend-uses(e.g.ammoniaforfertiliserproductionandsynthetickeroseneasaviationfuel)andtransportrequirements.Allformsofconversionareagaincapital-intensiveandrequireexperienceinplantengineering.Fourth,exportofgreenhydrogenandPtX.Theabundanceofrenewableenergysourcesputsmanydevelopingcountriesinanadvantageouspositionforexportinghydrogenandderivatives.Thedemandforhydrogenimportsisenormous,especiallyinEurope,KoreaandJapan.Asofnow,Germanyalonehasconcluded22hydrogenpartnerships,mostofwhichwithdevelopingcountries(WEC,2022).WhereasJapanandKoreafocusonOceania,SouthAmericaandNorthAfricaintheirsearchforpartners,Germanyhassigneddealswithcountriesinsub-SaharanAfrica(NamibiaandNigeria)andtheMENAregion(Morocco,Tunisia,SaudiArabia,EgyptandtheUnitedArabEmirates).Exportinghydrogenandderivativesprovidesopportunitiestoincreaseforeignexchangeearningsandtaxrevenues.Throughexports,countriescantapintointernationalenergymarketsand–giventheenormousprojectedhydrogendemandsoftheworldeconomy(seeforinstanceGasforClimateetal.,2021;HydrogenCouncil,2021)–therebytriggerinvestmentsinallthecoreactivities,farbeyondwhatwouldbeneededtodecarboniselocalindustryandtransport.Atthesametime,mostpotentialexportcountrieswillstronglydependonimportsofindustrialequipment,whichmayconsiderablyreducenetexportrevenues.Likewise,taxexemptionsareoftengrantedtoinvestors(whicharetypicallypermittedtooperateinspecialeconomiczones),therebyreducingthehostcountry’staxbenefits.Exportingcountrieswilldifferintermsoftransportmodes,whichinturnimpactsthechoiceoftechnologiesandthepotentialforlocaleconomicspillovers.Countrieslocatednearmajorimportmarketscanexporthydrogenviapipelines,whereasmaritimeshippingistheonly–andmorecostly–optionforproducerslocatedbeyonda“pipelinedistance”ofaround3,000km(JointResearchCentre,2021).Transportincreasesthelevelisedcostsofhydrogenbyatleastafactoroftwo(RolandBerger,2021;Wietscheletal.,2021).Forexample,NorthernAfricacanbeconnectedtoEuropeviapipelines,whereashydrogenfromsub-SaharanAfricaandSouthAmericamustbeeitherliquefied(LH2)orconvertedintoammoniaorliquidorganichydrogencarrier(LOHC),4whichaddstothecostsandmakestheselocationsrelativelylessattractive.Thereare,however,newtransportoptionsunderdevelopment,whichmayleadtodisruptiveinnovationsandcostreductions.Exportingcountriesneedtoinvestinports,pipelinesandstoragecapacities.Anddependingonthechemicalformandaggregatestateusedforinternationaltransport,requiredinvestmentsincludefacilitiesforammoniasynthesis,thegenerationofLOHCorthedeep-freezingofhydrogen.Again,theseinvestmentsaregenerallycapital-andscale-intensive.Employmentcreationintheconstructionphasecanbeexpectedtobesubstantial,yetthepotentialforforwardandbackwardlinkagesandtechnologicallearningisfairlylimited.Astrongexportfocusmaythereforeleadtotheformationofforeigninvestmentenclaveswithonlyverylimitedopportunitiesfordomesticlearningandtheupgradingoffirms.Suchenclavesinnaturalresourceextractionareoftenassociatedwitha“resourcecurse”(Auty,1993)intermsofdisincentivesforothertradablesectors,rent-seekingandinequality(Mien&Goujon,2022).4Itisnotdecidedwhichofthesemodeswilldominatethemarket,whetherdifferentmarketswillhavedifferentmodes(e.g.JapanandKoreaammonia,EuropeLOHC)orwhetherthemodeswillco-exist.IDOSDiscussionPaper9/202316Fifth,decarbonisationofdomesticindustries.Manylocalindustriesandtransportactivitiescanbe–andhavetobe–reengineeredfortheuseofgreenhydrogen.Thisincludestheironandsteel,cementandchemicalindustriesaswellaslong-distancepassengerandheavycargotransport(seeSection3.2).Incentivesfortheuseofgreenhydrogeninthesehard-to-abatesectors–eitherasfeedstockorasanenergysource–stemfromnationaldecarbonisationtargetsorfrominternationalpressureexertedbytradingpartners.Thelatterincludebothtraderegulations(suchastheenvisagedEUCarbonBorderAdjustmentMechanism,CBAM)andcorporatestandardsimposedbyleadfirmsinglobalvaluechains.Usinghydrogenforthedecarbonisationofnationalindustriesis,ofcourse,morerelevantineconomieswithwell-developedheavyindustries,suchasinIndia(ironandsteel,glass),SouthAfrica(coalliquefaction,steel)andChileandColombia(petrochemical),especiallyiftheyareexportingtotheGlobalNorth.Itisalsoimportantforallcountrieswithmajorminingindustries,suchasSouthAfrica,Chile,Mauretania,Namibia,BotswanaandMongolia,astheseindustriesarehighlyenergy-intensiveandmostlyexporttointernationalmarketswithhigherdecarbonisationstandards.Greenhydrogenhasavastpotentialfordecarbonisingmining,drillingandtransport.Overall,decarbonisationmakesproductsgloballycompetitiveinanet-zeroworld.Sixth,decarbonisationoftransport.Inmanylow-andlower-middle-incomecountries,transportcontributesmuchmorethanindustrytoGHGemissions.Moreover,outdateddieseltrucksandbusesreleaseparticulatematterandareresponsibleforurbanairpollution.Thus,electrifyingtransportisanimportantapproachtoclimateprotection,cleanairandpublichealth.Forlightvehicles,battery-electricdriveswillmostlikelybethetechnologyofthefuture,whereasforlong-rangebusesandheavy-dutycargotransportFCEVsandalsopossiblythecombustionofhydrogenininternalcombustionenginesoffertechno-economicadvantages.Theshiftfromdiesel-poweredtolow-orzero-emissionvehiclesrequirestheadaptationofexistingbusandtruckindustries.Many–especiallylarger,emerging–economieshavedevelopeddomesticindustriesthatproducebusesandtruckswithdieselengines.Shiftingtoelectricenginesandfuelcellsiscostly,andthetechnologiesforlithiumbatteriesandfuelcellsarenotlocallyavailable.Mostdevelopingcountriesarethereforecurrentlydependentonimportedlow-carbontransporttechnologies(e.g.battery-electricbuses,trucks,urbanrailsystems).Toaligndecarbonisationwithlocalvaluecreation,countrystrategiesareneededtoidentifypromisingpathwaysandpolicies:•Forcountrieswithlargemarketsandrelativelydiversifiedindustries,developinglocalindustrialcapabilitiesinlow-carbontransporttechnologyisanoption.Chinapromotedelectricbusesearlierthantherestoftheworldandnowdominatestheglobalmarket,takingmarketshareawayfromthedominant“Northern”busmultinationals(Altenburg,Corrocher,&Malerba,2022).Brazilistryingtodevelope-bustechnologyinjointventureswiththeleadingChinesebusmakers.ChinaandIndiaareusinglocalcontentrequirements,procurementandresearchpoliciestobuildcapabilitiesinurbanrailtechnologies(Asimeng&Altenburg,2022).•Theremaybepromisingnichetechnologies.ChileandSouthAfricaaredevelopingfuel-cellmininghaultrucks.SouthAfricaiswell-positionedtoexploititsendowmentwithplatinum-groupmetals(PGMs)andknow-howincatalyticconverterindustriestoproducemembranesandotherinputsforfuelcellsandelectrolysers(seePartBbelow).•Anothersolution,whichisalsowithinreachforsmallercountries,istoretrofittraditionalvehicles,forexampledieselbuses,withlow-carbonenginesanddrivetrains,beitbattery-electric,fuelcellsordirectcombustion.Thiscouldcreateasignificantnumberofjobsandleaveatleastpartsofthetransition-inducedvalueadditioninthehostcountries.IDOSDiscussionPaper9/202317•Anotherpromisingopportunityistoproduceandexportsustainableaviationfuel(SAF)producedfromgreenhydrogenincombinationwithanorganiccarbonsourcesuchasdedicatedenergycropsoragriculturalresidues.Thiscreatesalinkbetweentheenergyandagriculturesectorsandtherebycanbeveryemployment-intensive(WWF,2019).CountrieswithexcellentgreenhydrogenconditionscannotonlyexportSAFbutalsostrengtheninternationalairtraffichubsintheircountries.Seventh,attractionofforeigndirectinvestment(FDI)inenergy-intensiveindustries.Manyindustries,especiallyintheGlobalNorth,haveambitiousplansfordecarbonisingtheirentireglobalvaluechainswithinthenexttwodecades.Emissionstradingandenvironmentaltaxescreatestrongincentivesfordecarbonisation.Incountrieswithlimitedsuppliesofrenewableenergyandgreenhydrogen,thiscreatesanincentivetosourceenergy-intensivepartsandcomponentsfromcountrieswithabundantsuppliesoflow-carbonenergysources.Industriesproducingforexamplealuminiumorcarbon-fibreparts,greensteelorenergy-intensivechemicalsmaythereforerelocateto,orsourcefrom,countrieswithanabundant,low-costrenewableenergysupply.Sofar,thereisonlyanecdotalevidenceofsuch“renewablespull”(Samadi,Lechtenbömer,Viebahn,&Fischer,2021)–forexample,carmakerssourcinglow-carbonaluminiumfromSaudiArabiaandNorway,whereproductionisbasedonsolarandhydropower,respectively.Aspressureincreasestodecarbonisematerialconsumption,carbonpricesriseandrenewableenergyandgreenhydrogencapacityrampup,suchrelocationsofenergy-intensiveprocessesareexpectedtoincreasesignificantly,therebyprovidinganadditionalopportunityforvaluecreation.4.3Fromfactor-costadvantagestohuman-madecompetitiveadvantagesAlltheseoptionsarenotmutuallyexclusiveandmaybeexploitedinparallel.Yet,theyarguablydifferconsiderablywithregardtotheirdevelopmentimpact.Large-scaleexportprojects,forexample,mayimprovethebalanceofpayment,yettheyarelesslikelytospurdomesticindustrialcapabilitiescomparedtoindustrydecarbonisationprojectsthathelpindustriestoadapttolow-carbonstandardsinexportmarketsorR&Dinvestmentsinnewgreenhydrogentechnologies.Assessingthedevelopmenteffectsisthereforeessential.Inthisrespect,differentiatingbetweenfactor-costadvantagesandhuman-madecompetitiveadvantagesishelpful.Factor-costadvantageshereincludeespeciallynaturalenergyendowmentsandotherlocationalfactorsthataregivenregardlessofsocietaleffort.•Naturalenergyendowmentsincludemainlythenaturalpreconditionsforrenewableenergygeneration(solarirradiation,windspeed).Thesearethemaindeterminantsoflow-costhydrogenproduction.Naturalenergyendowmentswithfossilenergysources,incontrast,maydeterthegreenhydrogentransitionduetoeconomicandpoliticallock-ins(Unruh,2000).However,thelattermayalsoopennewpathways.Firstly,oil-andgas-exportingcountriesoftenhaveindustrialcapabilitiesinproducingandoperatingrefineriesandotherchemicalplantsaswellaspipelinesandstoragefacilities,whichareeasilytransferrabletogreenhydrogeninvestments.Moreover,traditionalexportersofnaturalgasmayproducebluehydrogen,whichwilllikelybeindemandasabridgingtechnologytogreenhydrogen.•Otherlocationalfactorsaffectinghydrogenopportunitiesincludetherelativedistancetoimportmarkets.Countriesinpipelinedistancetomajormarketsareinanadvantageouspositioncomparedtocountriesthatneedtoshiphydrogenandderivativesoverlargedistances.Theavailabilityoffreshwaterresourcesreducesthecostscomparedtocountriesthatneedtodesalinateseawater.Also,othernaturalresourcesthatfeedintothehydrogenIDOSDiscussionPaper9/202318economy(e.g.platinummetalsforfuelcellsandorganicresourcesforsynfuels)mayfavourcertainindustrialpathways.Somegeostrategicassets,suchastheSuezandPanamacanals,mayofferopportunitiesfordevelopingspecifichydrogenandderivativesstorageandotherservices,whilealsopotentiallyco-locatingdownstreamindustries.Theexistenceofundergroundstorageopportunitiesforcarbonsequestrationisamajoradvantageifbluehydrogenisproduced(VandeGraaf,Overland,Scholten,&Westphal,2020).Human-madeadvantagesincludeeconomicdiversificationandtechnologicalcapabilitiesaswellasthequalityofpoliticalinstitutions.•Regardingeconomicdiversificationandtechnologicalcapabilities,themorediverseandcomplexeconomiesare,themoretheycanrecombinecapabilitiestodevelopnewcompetitiveadvantages(Hidalgo&Hausmann,2009).Countrieswithadiversifiedeconomycan,ontheonehand,buildonlocalcapabilitiestocreatebackwardlinkagesfromthehydrogencoreactivitiesand,ontheotherhand,feedgreenhydrogenintoexistingdownstreamindustries,therebypreparingthemfortheemerginglow-carbonworldeconomy.Moreover,diversifiedeconomiestendtohaveexistinginfrastructure(ports,rails,pipelines,etc.)andadvancedtechnologicalcapabilitiesembeddedinfirmsandresearchinstitutions.Asanexample,theexistenceofestablishedairtraffichubs(suchasinQatar,Dubai,AbuDhabiandAddisAbaba)offersopportunitiestoco-locatetheproductionofsyntheticaviationfuels.•Thequalityofpoliticalinstitutionscomprisesarangeofgovernanceaspects.Politicalstabilityisapre-conditionforsteeringdirectinvestmentfundsintothedevelopmentandexpansionofcleanenergytechnologies.Institutionalcapabilitiesareimportanttoensurecoordinationandcooperationwithinandbetweenvariousministries,agenciesandtheprivatesector;todesignsupportiveindustrialpoliciesincooperationwiththeprivatesectorbutwithoutbeingcapturedbylobbygroups(“embeddedautonomy”)(Evans,1995);andtodevelopandenforceproperstandards,amongotherreasons.Last,butnotleast,politicalinstitutionsaredecisiveforensuringtransparency,accountabilityandthealignmentofindustrialpolicieswithsocietalobjectives.Economiesbasedonnaturalresourcerentsoftenhaveestablished,sociallyexclusivepoliticalsettlements,wherebyrentsarecapturedbysmallelites.Suchlegacyimpliesariskofestablishinghydrogenenclaveswithverylimitedbenefitsforthesocietiesatlarge.Thehistoryofindustrialdevelopmentsuggeststhatcountriesusuallyfarebetteriftheymovebeyondexistingfactor-costadvantagesandinvestinadvanced,human-madecapabilities(Neary,2003).Thisisbecausegreaterdiversificationandeconomiccomplexityincreasethenumberofneweconomicopportunitiesviatherecombinationofexistingassetsandcapabilities,therebyacceleratingdynamicknowledgespillovers(Hidalgo&Hausmann,2009;Hidalgoetal.,2018).Forcountrieswithfactor-costadvantagesingreenhydrogen,itisthusessentialtoavoidtheformationofenclavesandtoinsteadinvestindomesticlinkages,technologicallearningandsupportinginstitutions.5UncertaintiesregardingthevisionofaglobalhydrogeneconomyWhatishistoricallyuniqueabouttheglobaltransitiontoagreenhydrogenscenarioisthatitstartsatnearly“zero”(hardlyanygreenhydrogeniscurrentlyproduced,transportedandconsumed)butprojectsaverysteepexpansioncurve.Inordertoassesstheviabilityoftheseambitioustargets,threequestionsareofhighrelevanceandbrieflyexplainedbelow.IDOSDiscussionPaper9/2023195.1Cantheprojectedfastandsteepscaling-upofrenewableenergygenerationbeachievedincountrieswithverygoodnaturalconditions?Inordertosafeguardtheenergytransitionintheproducingcountriesandnotdivertrenewablepowerfromotherpurposes,theGermanhydrogenstrategyprovidesforastrictadditionalitycriterion,thatis,dedicatedrenewableenergygenerationforgreenhydrogen.Scalinguptheexpansionofrenewableenergyplantsoftenfacesconsiderablelegalandregulatorybarriers.Moreover,propertyownersandlocalcommunitiesmightopposeprojectsforvariousreasons.Thisaddstransactioncostsforprojectdevelopersintermsofthetimeandmoneyneededtoobtainagreements,getapprovalsandacquirefinancing,etc.GettingpermissionforanewwindfarmprojectcurrentlytakesaboutsixtonineyearsinEurope.Inaddition,developingcountriessometimeslackacentralbodythatcoordinatesalltheactivitiesoftheenergysector.Lastbutnotleast,thelocalmanufacturingofrenewableenergycomponents,suchasPVpanelsandwindturbines,isquiteconstrained.China’srapidexpansionintherenewableenergysector–from328GWin2014to895GWin2020,dwarfingthecapacitiesoftheEU,theUnitedStatesandAustraliacombined–wouldnothavebeenpossiblewithoutrigidplanningandcentrallymanagedexecutionofprojects,letalonetheircompetitiveadvantageinmanufacturingrenewableenergysystems.Incomparison,Africahadabout56GWofrenewableenergycapacityinstalledin2021(vs.28GWin2011),largelyhydropower.Thefollowingquantitiesofelectricitygenerationareforecasted(KfW,GIZ,&IRENA,2020).Table1showsthestatusoftheenergymixtodayandtwodifferentscenariosabouttheexpansionofrenewableenergiesandtheremainingfossilfuelsfrom2019to2050.ThedifferencesarepartlyduetothefactthattheREmapdatafromtheInternationalRenewableEnergyAgency(IRENA)donotincludeNorthernAfricaand,thus,cannotdirectlybecomparedtotheInternationalEnergyAgency(IEA)scenario.Table1:RenewableenergyexpansioninAfrica:ScenariosTechnology2019Scenario20302040Wind5.7GWAfricaCaseIEA51GW94GWREmapIRENA133GW131GWSolarPV7.2GWAfricaCaseIEA124GW316GWREmapIRENA79GW255GWHydropower35.7GWAfricaCaseIEA77GW117GWREmapIRENA55GW95GWElectricitydemand/generation2804TWhAfricaCaseIEA1,662TWh/year2,740TWh/yearREmapIRENA687TWh/year1,815TWh/yearRemainingfossil3180.8GWAfricaCaseIEA272GW328GWREmapIRENA45GW51GWNotes:1DatadonotincludeNorthernAfrica;2DataincludeNorthernAfrica;3IncludingnuclearenergySources:For2019:IRENA(2021)andEnergyInformationAdministration(2020);for2030and2040:KfW,GIZandIRENA(2020)IDOSDiscussionPaper9/202320Thesedifferencesalsotranslateintodifferentscenariosregardingoverallcapacitiesforthegenerationofrenewableelectricity.TheOuarzazatesolarcomplexinMoroccoiscurrentlytheworld’slargestrenewableenergypowerplantandislocatedinoneoftheworld’sbestlocationsforsolarenergy.With570MWofinstalledcapacity,itgeneratesbetween1.3and1.5TWhofelectricityannually,accordingtounconfirmeddata.Thiscouldgenerate(assuming25percentenergylossinelectrolysis)about1TWhofgreenhydrogen.AccordingtotheGermanNationalHydrogenStrategy,76TWhofgreenhydrogenwouldhavetobeimportedtoGermanyasearlyas2030inthemediumscenario.Ifevenonly25percentofthisistocomefromAfrica,20Ouarzazate-typeplantswouldhavetobebuiltexclusivelyforthe(partial)greenhydrogensupplyofGermany,andhalfofthetotalenergyquantitiesforecastforwindwouldhavetobeusedforthis.Itmustalsobefactoredinthatthevastmajorityoftherenewableenergycapacityaddedshould/willbeusedforpurposesotherthanhydrogengeneration,suchassupplyingelectricityto770millionpeopleworldwidenotyetconnectedtothegrid(IEA,2022d),directelectrificationofmobilityandmanufacturingprocesses,heatpumpsforspaceheating,etc.5.2Cantheglobalelectrolysingcapacitiesbescaledupasfastasthecurrenthydrogenstrategiesassume?Onefurtherbottleneckintheramp-upofthehydrogeneconomyistheexpansionofelectrolysiscapacity.Thetargetsannouncedinthenationalstrategiessofarwouldimplygoingfrom0.2GWtodaytowellover100GWin2030.Tomeetthetargetof5TWofinstalledcapacityin2050,addedmanufacturingcapacitywouldevenneedtobe10to60GWperyearby2030and70to360GWperyearby2040(IRENA,2020).Theseambitionscontrastsharplywithreality:Globalelectrolysermanufacturingcapacityin2018wasabout135MWperyearandtheWorldBankestimatesthattoday2.1GWisaddedannually(WorldBank,2020).Thereislittleexperiencewithbuildingthetypeoflarge-dimensionelectrolysersnecessaryforsucha“quantumleap”.China,whichcurrentlyprovidesone-thirdoftheglobalelectrolysermanufacturingcapacity,hasambitiousgoalsregardingadomestichydrogeneconomyandgivespreferencetonationaldecarbonisationtargets(Li,Steinlein,Kuneman,&Eckardt,2022).Thus,itwilllikelyonlysupplyalimitednumberofelectrolyserstothirdcountriesforthetimebeing.This,inturn,couldmeanthattheglobalgreenhydrogeneconomywillunfoldwithlessdynamismthanhasbeenprojected.Ontheotherhand,thiscouldaffordarelativelylargespaceforotheradvanceddevelopingcountriestomanufacturetheirownelectrolysersand/ordelivercomponentsandsystemstoclientsintheirrespectiveregions.Furthermore,electrolysersrequireavarietyofmineralresourcesfortheirproduction.Themaininputstoalkalineelectrolysersareratheruncriticalsubstances,intermsofbothavailabilityandcosts.However,PEMelectrolysersdependverymuchontwocriticalresources:platinumandiridium.Iridiumisanespeciallyraremineral,andcurrentlyonly7tonsareproducedeachyear–thebulkofthisisproducedasaby-productofplatinumextractioninonesinglecountry(SouthAfrica).SouthAfricacurrentlyproduces92percentofallplatinumand70percentofalliridiumontheplanet(Minke,Suermann,Bensmann,&Hanke-Rauschenbach,2021,p.23582).Globaliridiumproductionwouldsupportthemanufactureof30-75GWofPEMelectrolysercapacityoverthenextdecade(IRENA,2020,p.68)–probablynotenoughfortheimplementationofcountries’ambitioustargets.ItwillbeimportanttoreducetheiridiumloadingofPEMelectrolysersthroughinnovationorbyrecyclingthemetaltoavoidbottlenecks.IDOSDiscussionPaper9/2023215.3Cantherequiredhugeamountsofhydrogenandderivativesbetransportedinaneconomical,safeandcleanway,giventhelongdistancesbetweenpotentialexportingandimportingcountries?Greenhydrogenoffersprospectsforanewglobalenergygeography.ItisclearthatEurope,JapanandKoreawillbelargegreenhydrogenimporters,asnationalproductioncapacitiesarerelativelylowinrelationtothequantitiesrequiredinindustryandmobility,whereastheUnitedStatesandChinaareexpectedtoservetheirdomesticeconomies.Asmentionedbefore,countriesintheGlobalSouthhavehugeexportpotential,astheirendowmentsofrenewableenergysourcesallowthemtoproducemoregreenhydrogenthantheyneedforthedecarbonisationoftheireconomies.However,itiscurrentlyunclearhowfastlarge-scaleexportsofgreenhydrogen(eitherliquefiedorintheformofammoniaorLOHC)cantakeoff.Resolvingthelargedistancesbetweenproductionsitesandend-usersatareasonablecostandunderstrongtechnicalandenvironmentalstandardsiskeytothesuccessofthegreeneconomy(RolandBerger,2021).Thefirst-bestoptionthatisbothtechnicallyandeconomicallyfeasibleisthetransportofhydrogenviaexistingpipelines,inthebestcaseretrofittednationalgaspipelines.Notallofthetechnicalitiesconcerningthepipelinetransportofhydrogenhavebeensolvedyet(e.g.howtoavoidembrittlementandhowtoincreasetheamountofhydrogentobeblendedwithnaturalgas).Buildingnewpipelines,especiallyforhydrogen,iseconomicallyfeasiblefordistancesofupto3,000km,buttheinvestmentcostsarehigh(EUR2.5and4millionperkm).Thetimeneededfortheplanningandconstructionofadedicatedhydrogenpipelinewoulddependonvariousfactors,notleastbureaucraticefficiencyandacceptancebytheaffectedpopulation.Formostdevelopingcountries,however,thepipelineoptionisoutofgeographicalreach,atleastfortheregionswiththegreatestdemand:Europe,JapanandKorea.SeavesselsaretheonlyrealisticoptionforgettinglargeamountsofhydrogenfromproductionsitesintheGlobalSouthtotheend-usersintheGlobalNorth.Therearemajortechnicalandeconomicchallengesthatmightimpedetheroll-outofatrulyglobalhydrogeneconomyuntilatleast2030.Fromatechnicalviewpoint,duetoitsverylow-energydensity,hydrogencannotbetransportedinagaseousstate(thiswouldtakeuptoomuchspace)andneedstobeliquefied(LH2).Apartfromtheenergy-intensityofthisprocess,thetransportofLH2hasnotyetreachedtechnologicalmaturity:Currentlyonesingleshipexistsworldwide(asaprototype)thatisabletotransportLH2,andithasaverysmallloadingcapacity.Themostfavouredsolutionfortransportinghydrogenisintheformofammonia,whichinthebestcasecansimultaneouslybeusedasasustainablemaritimefuel.AswithLH2,therequirednumberofshipsnecessarytocatertotheneedsofGermanyalonearenotavailabletoday,norwillbeinthenearfuture.Finally,hydrogencanalsobetransportedintheformofLOHCs,wherebyhydrogenischemicallyboundtoacarriermaterialandreleasedatthepointofdestination.However,thenumberoflandings–andthusships–wouldbehigherthaninthecaseofammonia.Forallthreeoptions,transportandthere-/conversionof/intohydrogenraisethelandedcostsofhydrogensignificantly,morethandoublingthecostofproduction(RolandBerger,2021).IDOSDiscussionPaper9/2023226GermandevelopmentcooperationtosupportgreenhydrogenDevelopmentcooperationisincreasinglyrecognisingthegreenhydrogenpotentialinpartnercountries.Germanyisoneofthetrendsettersinthisregard.Majoractivitieshavebeeninitiatedinthelastthreeyears.Mostimportantly,Germanyhassetupseverallargefundsforgreenhydrogen,partlytodeveloptheinternationalhydrogenmarketandsecureGermanimports,andpartlytosupportvalueaddedinpartnercountries:•H2Globalisanauction-basedmechanismfortheprocurementofgreenhydrogenoritsderivativesbasedontheContractsforDifferenceapproach:TheGermangovernmentprovidesgrantstocoverthedifferencebetweensupplypricesabroadanddemandpricesinEurope.Theaimistocreateenablingconditionsforhydrogenprojects;•thePtX(Power-to-X)GrowthFundintendstoacceleratetheglobalmarketramp-upandinfrastructureforgreenhydrogenthroughgrantsforhydrogenexportprojects;•thePtXDevelopmentFundprovidesgrantsfordevelopingandemergingeconomiestohelpbuildlocalvaluechainsaroundgreenhydrogen.Herewefocusonofficialdevelopmentassistance,thatis,theactivitiesunderBMZ.BMZdraftedaconceptpaperongreenhydrogenthatstrikesabalancebetweenlocaldecarbonisation,localvaluecreationandexploitingexportopportunities.Itsinglesoutfourmajorfieldsofactivity:1.supportingcomprehensivestrategiesandroadmaps,includingregulatoryframeworkreforms;2.enhancinglocalmarketcreationandvalueadded;3.fosteringthehydrogenexporteconomy;and4.promotingprivate(foreign)investmentthroughimprovingtheinvestmentclimate,matchmakingandinitialfunding.Moreover,itdefinescriteriatoensurethatonly“developmental”usesofhydrogenaresupported,thatis,thosethatcreateneitherincentivesforfossilfuelusage,norlanduseconflictsoraggravatewaterscarcityorenergypovertyatthehouseholdlevel.Infact,strategy-supportingtechnicalcooperationisunderwayinseveralpartnercountries.Germandevelopmentcooperationhasbuiltparticularqualityfeaturesovertheyears.Inmanypartnercountries,itisdeeplyembeddedinlocalinstitutions,oftenthroughlong-standingpartnerships.Multi-levelprogrammesareaspecificstrength,wherebyprogrammescombinepolicyadviceatthemacrolevelwithinstitutionalcapacity-buildingatthemesolevelandspecificinterventionsatthemicroleveltotestinnovativepractices,whichinturnhelpinformthehigherpolicylevels.Suchschemesareparticularlyappropriateforcomplexnewsystemicchallengessuchastheenergysystemtransformation.Giventheuncertaintiesinvolvedinthistransformation,especiallythoserelatedtogreenhydrogen,developmentcooperationmustbeconceptualisedasajointlearningprocesswithsufficientflexibilityintheprogrammedesign.Supportfornationalhydrogenstrategiesshouldbecontinuedandfurtherstrengthened,withafocusonthefollowingprinciples:•Domesticvaluecreation,industriallinkages,technologicallearningandpermanentemploy-ment.Thisismorelikelytobeachievedwhengreenhydrogenisproducedforlocaluses.Exportsofhydrogenandderivativesmayalsohavesubstantivespillovers,forexamplewheninputsaresourcedlocally,butsuchprojectsareoftenassociatedwithconditionsthatdonotIDOSDiscussionPaper9/202323encouragelocallinkages.TheBMZconceptpaperacknowledgesthesuggestedpriority,yetthisisnotalignedwithotherministries’interestinpromotinglarge-scaleprojects,withthemainaimofsecuringgreenhydrogensupplyforindustriesinGermany.Moreover,thereseemstobeamismatchbetweenBMZ’sstrategy(advocatinglocalvaluecreation)anddefactoresourceallocation(prioritisingGermanandEuropeaninvestmentsinlarge-scaleprojects).•Agradualandsequencedentryintothegreenhydrogeneconomy,prioritisingrenewableenergyroll-outandgridqualityoverambitiousdownstreamprojectsinelectrolysers,ammonia,pipelinesandthelike.Renewableenergyandgridinvestmentsare“no-regret”options,astheyarecrucialforlocalenergytransitionsandservelocalindustriesandhouseholdswhilealsoimprovingconditionsforhydrogen-relatedindustrialdevelopment.ThehydrogenstrategiesofCostaRica–andpartlyalsoChileandSouthAfrica,forexample–focusonthegradualimplementationofsmalltomedium-sizedprojectsofhydrogenproductionandlocalofftake.Thisenableslearning-by-doing,especiallywhenaccompaniedbyR&Dinvestmentsandinternationalknowledgetransfer.Othernationalstrategiesaretiltedinfavourofexports,FDIandlarge-scalehydrogenprojects(Namibia,Morocco;alsoe.g.theNorthernCaperegioninSouthAfrica).Whensupportingsuchlarge-scaleexportprojects,astrongemphasisneedstobeputonavoidingthecreationofenclaveswiththeirrespectivepoliticalandsocio-economicrisks.•Expectationmanagement:Thecurrentglobalhypeaboutgreenhydrogenshouldnotobfuscatethemanifoldrisksinvolved.Manyfactors(Section5)maydelaytheindustrialtransformation,whichtheninvolvessubstantiveinvestmentrisks.Failedprojects,evenwheninternationallyfinanced,maycomeatacostfortheproducingcountry,forexamplelanddedicatedtoutility-scalePVfacilitiescannotbeusedforalternativepurposes.Moreover,failedgreenhydrogenprojectsmightleadtopoliticalfrustrationandabacklashagainstotherdecarbonisationprojects.SucheffectswereobservedafterthefailureoftheDesertecproject,whichhadbeenpromotedsincearound2004andincludedfar-reachingplanstoproducerenewableenergyintheMENAregionandtocoverlargepartsoftheregion’selectricityneeds,aswellasEurope’s(15-25percent).Inthefollowing,wefocusonsixareasthatdeservespecialattentionwhenfurtherexpandingtheportfolioofGermanhydrogendevelopmentcooperation.Asthediscussiononeligiblepartnercountriesisongoing,wesuggestfocussingonthosecountriesthatare:stronglycommittedtogreenhydrogen,asmanifestedintheexistenceofambitiousroadmaps;transparentinthehandlingoflarge-scaleinvestmentprojects;committedtousinghydrogenfornationaldecarbonisation;andwillingtodosowithanexplicitfocusonsocialco-benefits.Morocco,Chile,Brazil,India,SouthAfricaandNamibiawouldbeamongthemostsuitablepartners.6.1Capacity-buildingforhydrogentechnologyforesightandindustrialpolicyAvarietyoftechnologicalandsocio-economicpathwaysareopeningupforcountriesendowedwithabundantsourcesofrenewableenergy(Section4.2).Someofthesemaysparkinclusiveformsofindustrialdevelopmentandtechnologicallearning.Thisisgoodnews,especiallyforcountriesinsub-SaharanAfrica,theMENAregionandLatinAmericathathavetypicallysufferedfrom“prematuredeindustrialization”(Rodrik2015),giventheincreasingdominanceofEastAsia,EuropeandNorthAmericainglobalvaluechains.Yet,hydrogeninvestmentsalsoentailmanifoldrisksforsustainabledevelopment.Theymaycreatecapital-intensivetechno-economicenclaveswithverylimitedpermanentemploymentandhardlyanylinkageandlearningeffectsonthelocaleconomy.Suchenclavesituationsmightencouragerent-seekingandtriggerpoliticalresistance.SomepathwaysmaylockinfossilfuelandespeciallynaturalgasproductionIDOSDiscussionPaper9/202324andconsumption(bluehydrogen).Moreover,therearelocalenvironmentalrisksrelated,forexample,towaterconsumptionanddesalination.Twosetsofcapabilitiesarethereforeessentialforcountrieswillingtoexploitthebenefitsoftheemerginghydrogeneconomywhilekeepingriskstoaminimum–andtheyshouldbesupportedbyinternationalcooperation.First,technologyforesightcapabilities(Stamm,2023)areimportanttogainadeepunderstandingoftheopportunitiesandrisksinvolvedinhydrogeninvestments.Thisiseasiersaidthandoneinanindustrythatisjuststartingtounfold,anditisthereforefraughtwithenormousuncertaintiesabouttechnologicalpathways,marketstructuresandprices.Institutionsareneededtoscan“thehorizonforemergingchanges,analysingmegatrendsanddevelopingmultiplescenarios,torevealanddiscussusefulideasaboutthefuture”(Cordonnier&Saygin,2022).Second,industrialpolicycapabilities(Altenburg&Lütkenhorst,2015)thatenablecountriestoselectpromisingtechnologiesandmarketopportunitiesassesshowtocombinetheattractionofFDIwithinvestmentsintoowncapabilities,anddevelopstrategiesfortechnologicallearningandlinkage-building.Again,thisisdemanding,giventheenormousinformationasymmetriesbetweengovernmentsandthecorporationsthatownthetechnology(Arrow,1962).Strategiesneedtobedevelopedinclosecollaborationwiththeprivatesector,whileatthesametimenegotiatingconditionsfortechnologytransferforlocalvalueadded.OfthecountrieswithsignificantgreenhydrogenpotentialintheGlobalSouth,onlyafewhavetherequiredadvancedanddifferentiatedinstitutions,andeventhosethatdo(e.g.Brazil,SouthAfrica)needtoscaleuptheirhydrogen-relatedexpertise.Developmentcooperationshouldthereforesupportbothcapabilities–technologyforesightandindustrialpolicydesign.Thiscanbedonewithanimmediateeffectbycommissioningspecialisedstudiesontechnologies,regulatoryframeworks,marketforecastsandthelike.Inthelongterm,however,partnercountriesshouldbeenabledtodevelopthisexpertiselocally.Thiscanbedoneviacapacity-buildingthroughtheGermanAgencyforInternationalCooperation(GIZ)and/orpolicy-basedlending(GermanCreditInstituteforReconstruction,KfW),aninstrumentprovidingconcessionalfundingtoenablesectorreforms.BMZmaywanttoconsidera“technologyforesightandindustrialpolicyadvisoryfacility”.6.2TechnicalandvocationaleducationandtrainingAlltheemergingtechnologicaloptionsrelatedtothehydrogeneconomyrequireskillsdevelopment.Germandevelopmentcooperationhaslongspecialisedintechnicalandvocationaleducationandtraining(TVET).Dependingonthesituationsinthepartnercountries,existingTVETinstitutionscanbeadaptedtotheneedsofanemerginggreenhydrogeneconomy,orthecreationofdedicatedtrainingcentrescanbesupported.Germandevelopmentcooperationshouldtrytoworkwithinternationalcompaniesintherenewableenergyandhydrogenfieldtodesignfuture-proofTVETprogrammes.Examplesareengineering,procurementandconstruction(EPC)companies–orprojectdevelopers,whichareofteninthedriver’sseatwhenrenewableenergyandhydrogenprojectsareimplemented.Makingtherightinvestmentsineducationandtrainingcriticallydependsonthequalityoftechnologyforesight(seeSection6.1).IDOSDiscussionPaper9/2023256.3Sharingthegainsofhydrogeninvestments:The“JustTransition”dimensionThecapital-andtechnology-intensivecharacterofhydrogeninvestments–fromenergyparkstoelectrolysers,ammoniaplants,portsandpipelines–makesitdifficulttocreatemassivedirectemploymentandcommunity-levelbenefits.Ittendstobedrivenbylargeforeign(andinsomecasesnational)companies,especiallyinexportprojects.ThisconflictswiththeexpressedpoliticalinterestinaJustTransitionthatisfairandequitable,leavingnoonebehind(FederalMinistryforEconomicCooperationandDevelopment,s.a.).Theunintendedsecondaryeffectsofcapital-intensive,large-scalehydrogenprojects–conflictsforland,waterandelectricity,Dutchdiseaseeffects,rent-seekingandcorruption,windfallgainsforrealestateinvestors,etc.–mayfurtherdeepenexistinginequalities.Employmentcreation(quitesubstantiveintheconstructionphase)andlocaleconomiclinkages(e.g.supplierdevelopmentprogrammes,localcontentrequirements)canspreadthegainsmorebroadly,butopportunitiesforlocallinkagesarelimitedduetothecapital-andtechnology-intensivenatureofthetechnologies(SystemIQ,2022).Developmentcooperationshouldthereforeexplore,testandgarnerpoliticalsupportforotherwaysofsharingthegainsofhydrogeninvestments.Figure4synthesisessomemodesofbenefit-sharing.Inadditiontotheforwardandbackwardlinkagesfromhydrogenindustriesthatareatthecentreofthisdiscussionpaper(highlightedinredinFigure4),thefollowingchannelsshouldbeconsideredtoensureaJustTransition:•Usingsomefiscalrevenuesfordirectpaymentstocitizens.InterestingmodelsincludetheAlaskaPermanentFundDividendScheme,whichpaysanannualdividendtoallAlaskanresidentsfromearningsofmineralroyalties;andMongolia’sresource-to-cashpaymentprogramme,whichdistributescoal-miningrevenuesascashtransfertoallcitizens;•Earmarkingsomefiscalrevenuesforbroad-basedorpro-poorspending(education,skills,supportingthestructuraltransformationofregions,especiallythosenegativelyaffectedbylow-carbontransitions,etc.);•Supportofcitizenparticipationschemesforenergyprojectssuchasenergycooperativesandotherformsof“distributedownership”aswellascommunitydevelopmentinvestments,possiblyasconditionalityforinvestors;•Conditionalityforinvestorstoproduceaccesscapacitythatisfedintolocalinfrastructure(e.g.electricityanddesalinatedseawatermadeavailabletolocalcommunities);•Savingrevenuesforfuturegenerationsand/orlong-termpublicinvestments(e.g.NorwegianOilFund);•Avoidingexcessivetaxexpenditures,repatriationofprofitsandpublicinfrastructureinvestmentsthatbenefittheinvestormorethanthegeneralpublic;•Ensuringthattherisksofmajorinfrastructureinvestments(whichmaybecomeobsoleteifaninvestmentfails)arefairlydistributedbetweenprivateandpublicinvestors.JustTransitionmeasuresareessentialnotonlyforconsiderationsofjustice–manyoftheemerginghydrogeneconomiesarecharacterisedbyextremeincomeinequality(SouthAfrica,Namibia,Brazil,Chile,Gulfregion)–butalsoforincreasingpublicacceptanceforhydrogeninvestmentsandavoidpoliticalconflicts.Developmentcooperationshouldthereforeplacemuchmoreemphasisonbenefit-sharing,especiallywhensupportingexport-oriented,enclave-typeinvestments.IDOSDiscussionPaper9/202326Figure4:OptionsforsharingthegainsofhydrogeninvestmentsSource:Authors6.4ScienceandtechnologycooperationManyknowledgegapsstillexistinhydrogen-relatedtechnologies;sometechnologiesthatareessentialforreapingthefullbenefitsofgreenhydrogenarenotyetcommerciallyviable,othersmayalreadyhavebeendeployedbutenormousefficiencygainsthroughimprovedtechnologiesareexpectedinthenearfuture.Thisincludes,amongothers,energystoragetechnologies;carboncapture,useandstorage;lessenergy-intensivedesalinationofseawaterforelectrolysis;morecost-efficientmodesoftransportforhydrogen;andappropriatetankervesselsforhydrogentrade,aswellasSAFs.Knowledgegapsalsoexistwithregardtoreducingenvironmentalimpacts,suchastransportwithoutcarbonleakageandthesustainabledisposalofbrine–theoutcomeofseawaterdesalination.Germanyhasadiversifiedsetoftechnologyinstitutes,suchasitsvarioustechnicaluniversitiesandthespecialisedFraunhoferandHelmholtzinstitutions,thatexploresuchsolutions.Dedicatedresearchandtechnologycooperationprogrammeswithhydrogenpartnercountries,especiallyundertheFederalMinistryofEducationandResearch(BMBF),wouldacceleratethesearchforeconomicallyviableandsustainabletechnologies.ThissuggeststheclosealignmentofBMZandBMBFfundingschemes.Consideringthestrategicroleofgreenhydrogenforarapidinternationaldecarbonisation,removingtheremainingtechnologicaluncertaintiescanbeconceptualisedasaglobalpublicgood,andsomeoftheR&Dcanthereforebeperformedatthemultilaterallevel.Aglobalresearchinstituteforgreenhydrogencouldbeestablishedasaninternationalcollaborativeeffortwiththemissionofovercomingthemajorhurdlestothelaunchingofagreenhydrogeneconomy.Itcouldbemodelledafterotherinternationalresearchmissionsdealingwithglobalchallenges,suchastheCGIARCentresforAgriculturalResearchortheGlobalCCSInstituteinAustralia.IDOSDiscussionPaper9/2023276.5Norms,standardsandregulationsTheuseofhydrogenrequiresmanifoldstandardsfortherequiredinfrastructure,suchaspipelines,hydrogenrefuellingsystemsandtankervessels,toensurethesafetyandinteroperabilityofsystems.Suchstandardsarebeingdevelopedinternationally,yetallcountriesneedtohaveproceduresinplacetotestandverifythefulfilmentofthesestandards.Moreover,thehydrogeneconomyrequirestheregulatoryreformofenergysystems.Thismayinclude:•newregulationsfortheenergysectoringeneral,suchasfortheunbundlingofelectricitygeneration,transmissionandretailingortheimprovementofwheelingframeworks;•overallenvironmentalfiscalreform,includingcarbonpricing,energytaxesandfossilfuelsubsidyreformstotiltthebalanceinfavouroflow-carbonalternatives;•specificrenewableenergyregulations,suchasfeed-intariffs,taxallowancesandtechnology-specificlocalcontentrequirements;•healthandsafetyregulationsforthesafeproduction,handlinganduseofgreenhydrogenanditsderivatives;•internationallycrediblecertificationofhydrogentomeettherequirementsofoff-takersusinginternationallyrecognisedmethodologies(Altmannetal.,2022;Schnurr,2023).Alloftheseenablingframeworksneedtobedevelopedandinvolvedifferentlineministries,regulatoryauthorities,standards,testingandcertificationbodies.Internationalcooperationcanhelpdeveloptheseframeworks.6.6MultilateralprogrammesandSouth-SouthcooperationMultilateralprogrammesshouldcomplementbilateralcooperation.Thereisadireneedforinternationalagreementsonhydrogenstandards.Thisimpliesagreedsafety,environmentalandpurelytechnicalstandards.Giventhedivergingviewsontheprosandconsofdifferenthydrogen“colours”(Section2),aconsensusisneededaboutlong-andmedium-term(bridgingtechnologies)decarbonisationrequirements,especiallywheninternationalorganisationsofferconcessionalfinance.InternationalorganisationssuchastheIEAandIRENAprovideplatformsforsuchcollaboration.Multilaterallyfundedresearchprogrammescouldacceleratethedevelopmentofcriticalbottlenecktechnologiesforthehydrogentransition.Likewise,South-Southcooperationcanbestimulatedamongcountriesinterestedinthehydrogeneconomy,eitherthroughdirectpartnershipsorthroughregionalinstitutionssuchastheAfricaGreenHydrogenAlliance.GIZcanfacilitatesuchcooperationbasedonitslong-standingpartnershipsinmanypotentialgreenhydrogenexportingcountriesaswellasinregionalinstitutions.IDOSDiscussionPaper9/202328PARTB:ThehydrogeneconomyinSouthAfrica7SouthAfrica’sdualchallenge:Energy-sectorcrisesplusdecarbonisationSouthAfricaisfacingadifficultdualchallenge.Ontheonehand,itiscurrentlygoingthroughitsworstenergycrisisinrecenthistory.Outdatedequipment,alackofmaintenanceandcorruptionwithinstate-ownedutilityEskomhasledtohighlevelsofelectricitysupplyinsecurity.For2022,thenon-availabilityofelectricitydueto“loadshedding”isexpectedtoaccumulateto3.5TWh.InFebruary2023,PresidentCyrilRamaphosadeclareda“stateofdisaster”overthenationalenergycrisis(VOA,2023).Evenwithrollingblackoutsandloadsheddingmostlybeingplannedandannounced,thelossesforthepopulationandthebusinesssectoraresevere,andgrowthratesareexpectedtoplummettoonly0.3percentin2023(VOA,2023).Ontheotherhand,thecountryurgentlyneedstodecarbonise.AswithmanyotherpartsoftheAfricancontinent,SouthAfricaissufferingfromtheeffectsofclimatechange.Since1990,thenationalaveragetemperaturehasincreasedatarateofmorethantwicethatofglobaltemperature,whichisresultinginmorefrequentdroughtsandextremeweatherevents.Althoughitisdifficulttoattributespecificeventstoglobalwarming,theincreaseinthefrequencyandseverityofadverseclimateevents,suchastheextendeddroughtsintheWesternCaperegion(secondhalfofthe2010s)andthefloodingintheEasternCape(January2022)andKwaZulu-Natal(April2022),havebroughttotheforethedeleteriousimpactsofclimatechange.Atthesametime,SouthAfricais,incontrasttomostothercountriesintheGlobalSouth,abigcarbonemitter.Witharound7.5tons,thepercapitaemissionsofthecountryarefarabovetheglobalaverage,exceedingeventheaverageoftheEU(6.4tons;IEA,2019b).ThemostimportantfactorcontributingtotherelativelyhighcarbonfootprintofSouthAfricaisthestructureofSouthAfrica’senergymatrix.SouthAfricahasthefifthlargestrecoverablecoalreservesintheworld.Investmentsintobeneficiatingcoalresourcesbeganduringtheapartheideraasthecountrywasfacinginternationaltradesanctions,whichtriggeredeffortstodevelopcoal-basedelectricityandcoal-basedpetrochemicalproduction.Coalisanabundantandrelativelycheaplocalenergycarrierandisusedforelectricitygenerationin15–mostlyold,technologicallyoutdatedandinefficient–powerstationsoperatedbyEskom.Today,72percentofSouthAfrica’snetenergydemandismetbyusingcoal.Inaddition,SouthAfricaexportshighamountsofcoal,mainlytoIndiaandPakistan,andincreasinglytoChina.Oilisthesecond-largestitemonSouthAfrica’senergymatrixandhasahighimportdependency.Solarpowerandwindcontributeonly1percenttotheenergymatrix(Figure5).Coalisnotonlyusedforelectricitygeneration.Thesecond-largestSouthAfricancompany,SouthAfricanSyntheticOilLimited(Sasol),usescoaltoproduceliquidfuelsandchemicalfeedstocksthatflowintonumerousdownstreamchemicalvaluechainsforfertiliser,explosivesandplastics.SasolisatechnologicalleaderinFischer-Tropschtechnologyandcoalliquefaction,andtodayitisamultinationalcompanywithbranchesandsubsidiariesin22countries(SASOL,s.a.).CoalliquefactionisahighlyCO2-intensiveindustrialprocess.Sasol’sSecundafacilityisthelargestsingle-facilityGHGemitterworldwide(Sguazzin,2020).Toresolvetheenergycrisis,SouthAfricawouldneedtoconnect5GWofrenewableenergytothegridannuallytoallowtheutilityEskomtodotheproperrepairandmaintenanceworkandsubstituteoutdatedpowerplantsforwhichrepairisnolongeranoption(Swilling,2022).Forcomparison:TheentireinstalledcapacityofallrenewablesinSouthAfricawas5.7GWin2021.Adding5GWistheequivalentof2,000modern2.5MWwindmillsputintooperationeveryyear.Thisisjustfornationaldemand,withoutconsideringtherenewableenergyinvestmentneededforexploitinggreenhydrogenopportunities.IDOSDiscussionPaper9/202329Figure5:SouthAfrica’senergymatrix(2019)Source:IEA(2019b);authorsInthelastfewyears,observershavenotedarealshiftintheSouthAfricangovernment’sattitudetowardsrenewableenergyandgreenhydrogen.InJuly2022,thepresidentannouncedaseriesofmeasurestodealwiththecrisis,includingaremovaloftheexemptioncapof10MWforrenewableenergyprojectsforwhichapprovalwasrequired.Hence,privatedeveloperscaninvestinrenewableenergyforself-generationatwhateverscaletheywishto.Likewise,ambitiousplanandpolicyreformswereannouncedtopromotegreenhydrogen.Still,thechallengeremainsnotonlytoleveragetheneededinvestments,butalsotodosoinawaythatissociallyjustandwidelysupportedbythegeneralpublic.8TheneedforaJustEnergyTransitionSouthAfricaratifiedtheParisAgreementin2016andisthuscommittedtotheglobalclimateprotectiongoals.In2021,inpreparationfortheConferenceoftheParties(COP)26,SouthAfricaupdateditsNDC,committingtoGHGreductiontargetsfortheyears2025and2030.Theseambitionsareframedwithintheconceptofa“JustTransition”,implyingthatdecarbonisingSouthAfrica’senergy(electricity)sectorhastobealignedwiththecountry’ssocialneeds.SouthAfrica’sbiggestchallengeintermsofsocialequityandjusticeisaveryhighunemploymentrate,especiallyamongtheyounggeneration.Inthefirstquarterof2022,63.9percentofpeoplebetweentheagesof15and24yearswereunemployed.Thefiguredroppedtoastillstaggering42.1percentforthoseagedbetween25and34years.Atthesametime,IDOSDiscussionPaper9/202330theofficialunemploymentratewas34.5percent(StatisticsSouthAfrica[statssa],2022).Whatmakesthesocialandpoliticalsituationparticularlyfragileisthefactthat,intermsofwealthdistribution,thecountryisthemostunequalintheworld,withaGiniIndexvalueof0.63andwithoutimprovementsoverthepastdecades.Thisgoeshandinhandwithacontinuingracialinequality:StatisticsSouthAfrica(statssa,2020)recognisesa“heavilyracialisedandgender-biased”labourmarket,withwhiteandmalepeoplehavingbetteraccesstojobsandearningsignificantlymorethanfemalesbelongingtotheblackAfricangroups,despitenearly20yearsofaffirmativeactionundertheBroad-BasedBlackEconomicEmpowermentprogramme.TheJustEnergyTransitionwillthereforeneedtostrikeadifficultbalancebetweendecarbonisationandensuringthatvulnerablestakeholdersareshieldedfromrisingcosts,unemploymentandothernegativeimpacts,andthattheyareleftbetteroffafterthetransition.Thereareadditionalpoliticaleconomyconsiderations–vulnerablestakeholderswithpoliticalcloutsuchasunionisedmineworkers,powerstationworkersandcoaltruckerswillactivelyblockthetransitionwithallmeans,includingprotestsandblockinghighways,inordertounderlinetheirclaims.TherearestrongpoliticalvoicesinSouthAfrica,notonlyamongcoalworkersbutalsointheAfricanNationalCongressandthegeneralpublic,thatseerenewableenergyandthemovetoindependentpowerproducersasapoliticalprojectfavouringforeigninvestorsandwhitelocalelitesattheexpenseofnationalenergysovereigntybasedoncoalandnuclearenergy.Supportforvulnerablestakeholders,arrangementstoguaranteejustrevenue-sharingoftheenergytransitionaswellasapoliticaldialoguethatsecuresbuy-inarethereforeessentialtoensureasmoothandwidelysupportedtransition.Thejusticedimensionoftheenergytransformationhastwomainfacets:tomitigatethenegativeeconomic–andespeciallyemployment–effectsofphasingoutofcoalminingandtherenewalofanindustrialcomplexthatisstronglydependentoncoal;andtoincreasethesocialcontributionsoftheemergingrenewableenergyandhydrogeneconomy.Phasingoutcoalminingisamajorchallenge,asitthreatensthejobsofnearly150,000workersinthecoalvaluechain,mostofwhichareemployedinmining,whereworkersarewell-organisedintradeunions.Organisedlabourinthecoallocalitiesareaversetoatransitionawayfromcoal,despitelabourunions(atthenationallevel)beingoneoftheearliestadvocatesofaJustTransitioninSouthAfricaandtheimportanceofrecognisingtheimpactoffossil-intensiveproductionontheenvironmentandcommunities(COSATU,2011).Moreover,thisphasingoutwillhaveeffectsonthetradebalance.Overthepast10years,exportincomesfromcoalwerearoundUSD5billionannually(ITC,2023a).Theseincomeswill,overthecomingdecades,diminishordisappear,directlydependentonthespeedwithwhichglobalcoaldemandisreduced.ThesecondelementoftheJustEnergyTransitionistoincreaseandbroadenthebenefitsoftheemergingcleanenergysectorforsocietyatlarge.Renewableenergyprojectsarelabour-intensiveduringtheconstructionphase,butmuchlesssoduringoperation(seee.g.Dell’Anna(2021),orSimasandPacca(2014)forthecaseofwindpower).Whetherandhowfastcleanenergiescan(over)compensateforthecontractionincoal-basedindustriesdependsonrippleeffectsintheeconomy,thatis,towhatextentSouthAfricawillbeabletodeveloptheenormouspotentialforforwardandbackwardlinkages,asdiscussedinPartA.Intheminingindustry,theneteffectsmaynotbenegative,asdeclinesincoalminingmaybeoffsetbyincreaseddemandinPGMmining.In2019,morethan500,000employeeswereregisteredintheminingsector,thereof39percentinPGMmining,21percentincoal,20percentingoldand5percentinironore.Theremaining15percentworkedinotherminerals,limeworksandstonequarrying(statssa,2021).Coalminingjobshavealreadyseenaconsiderabledecline,fromnearly140,000inthe1980s(Hantoetal.,2021,p.74).PGMminingmightoffsetasignificantnumberofjoblosses,asPGMshaverecentlyseenincreasingdemand(Figure6).Thistrendislikelytocontinue,astheenergytransitionrequireshugeinvestmentsinfuelcellsIDOSDiscussionPaper9/202331andelectrolysers,whichtodayrequirelargequantitiesofPGMs.Atthesametime,innovationsarereducingthequantityofPGMsusedintheseindustries,anddemandforcatalyticconverters–currentlyamajorPGMmarket–isexpectedtoshrinkascarmakersshifttoelectricvehicles.Thesedevelopmentsmakeitdifficulttoforecastlong-termPGMdemand.Figure6:ExportsofPGMmetalsfromSouthAfrica(2015-2021)Source:ITC(2023b);authorsMoreover,itisnotjustanissueofneteffects.Bothtypesofminingarecentredinpartlydifferentregions(mainlyNorthWestprovinceforPGMsandMpumalangaprovincemainlyforcoalandonlysomePGMmining)andrequiredifferentskills(undergroundPGMvs.opencastcoalmining).Structuralchangeandcompensationpoliciesarethereforedefinitelyneededtomakethetransitionjustandacceptable.9SouthAfrica’spotentialforrenewableenergyandgreenhydrogenSouthAfricaoffersexceptionalinitialconditionsforgreenhydrogen.Firstandforemost,SouthAfricahasverygoodclimaticconditions(year-round)forthegenerationofrenewableenergiesbasedonsolarirradiationaswellaswind.Thisenableslow-costhydrogenproduction.Also,SouthAfricahas1.2millionkm²oflandarea,ofwhichonly9percentisprotected,whichislowcomparedtootherpotentialgreenhydrogenproducingcountriessuchasNamibia(19percent),CostaRica(28percent)andMorocco(31percent).Thisreducesthepotentialtrade-offswithotherenvironmentalgoals(Thomannetal.,2022).Land,however,isacontentiousissueinthecountry,withpreviouslydisadvantagedgroupscallingforamoreequitabledistributionoflandresources.Establishingrenewableenergyprojectsoncommunitylandsinvolvescumbersomenegotiations,withtheeffectsthatrenewableenergyprojectsareoverwhelminglyplannedandinstalledonlandownedbyminingcompaniesor(oftenwhite)landowners,andtherespectiveIDOSDiscussionPaper9/202332landrentsarecapturedbytherich.Asacorollary,renewableenergyisperceivedbymanySouthAfricansasawhite-dominated,sociallyexclusivesector.Anotherimportantdownsideisthescarcityoffreshwaterresources.WatersecurityisabigissueinSouthAfrica.Althoughthedesalinationofseawaterisanoption,italsohasenvironmentalcostsintermsofenergyrequirementsandtheecosystemeffectsofthedisposalofbrineintothesea.Moreover,faileddesalinationprojectshavecostSouthAfricanmunicipalitiessubstantialamounts(Patel,2018).Politically,itishighlyproblematictoinstalldesalinationprojectsforgreenhydrogeninwater-stressedareasunlessthoseprojectmakepotablewateravailableforthesurroundingmunicipalities.Overall,renewableenergyandgreenhydrogenthusoffergreatopportunitiesforthecountry,butthesocial,economicandenvironmentaleffectsofthetransformationarehighlycontingentuponthepolicydesign.Thisassessment(andthepressureoftheenergycrisis)recentlyledSouthAfrica’sgovernmenttostepupitseffortsinsupportofrenewablesandgreenhydrogen,developaseriesofcomprehensivenewstrategies,fast-trackprojectregulatoryapprovalsandoffertaxincentives.10SouthAfrica’shydrogenambitionsSouthAfrica’sdecisivesupportforgreenhydrogenisreflectedinveryrecentanddetaileddevelopmentplansandregionalprojects.InFebruary2022,SouthAfrica’sDepartmentofScienceandInnovation(DSI)publishedadetailedHydrogenSocietyRoadmapforSouthAfrica2021(DepartmentofScienceandInnovation[DSI],2022).Thedocumentservesas“anationalcoordinatingframeworktofacilitatetheintegrationofhydrogen-relatedtechnologiesinvarioussectorsoftheSouthAfricaneconomy”.Inadditiontoinvestmentsinthegreenpowersector(renewablesandaspecialemphasisongridmodernisationandextension),thestrategyhighlightsthedecarbonisationofheavy-dutytransportandenergy-intensiveindustries(cement,steel,mining,refineries)asmajorobjectives.Hydrogenandhydrogenfuel-celltechnologiesarehighlightedasspecificindustriesinwhichSouthAfricamightbecomeaninternational“CentreofExcellence”inmanufacturing.Intermsofexportopportunities,thegoalisto“positionSouthAfricaasaglobalplayerinthegreenhydrogenandgreenammoniamarkets”.Thestrategyidentifiesfour“catalyticprojects”:•thePlatinumValleyInitiative(orSouthAfricanHydrogenValley)•theCoalCO2-XProject•BoegoebaaiSpecialEconomicZone(SEZ)•theSustainableAviationFuels(SAF)projectNotably,thestrategyincludestheuseofseveralhydrogen“colours”(grey,blue,turquoiseandgreen)as(supposedly)contributingtoanet-zeroeconomy.InDecember2022,thisfirststrategywascomplementedbytheGreenHydrogen(GH2)CommercialisationStrategydevelopedbytheDepartmentofTrade,IndustryandCompetition(dtic,2022).ItbuildsontheHydrogenSocietyRoadmap,yet“providesdetailandgranularitydifferentiatingbetweenshortandlongtermactionsbypublicandprivatesectors”.ThestrategyhighlightstwomainopportunitiesforSouthAfricaintermsofincreasedindustrialcompetitiveness:proprietaryFischer-Tropschtechnology(whichisessentialforPower-to-Liquidconversions)andtheresourcesofPGMs.Moreover,itidentifiesthemanufactureofequipmentandcomponents–forexamplefuelcellsandelectrolysers,heavy-dutyfuelcellvehicles,ammoniacrackingandtheindustrialisationoftherenewableenergymanufacturingsupplychainIDOSDiscussionPaper9/202333–asconcreteopportunitiesforindustrialdevelopment.Thedecarbonisationoflocalindustry(steel,petrochemicals,mining)isseenasanecessarysteptomaketheseindustriesfitforthefuture.Thestrategyoffersalonglistof“catalyticprojects”withinvestors,mostofwhicharecurrentlyconductingpre-feasibilityorfeasibilitystudies.Inadditiontothesestrategies,thereareseveralregionalinitiatives.Here,wepresentthetwomostadvancedregionalinitiatives:TheHydrogenValleyprojectandtheNorthernCapeGreenHydrogenStrategy.TheHydrogenValleyproject(EngieImpact,2021)seeks“todevelopamajorhydrogendevelopmentaxisconnectingthreeindustrialhubs”:•Durban/RichardsBayonthesoutherncoast,withdemandorlow-carbonfuelforportactivities,oilrefiningandsomeexportpotential;•theJohannesburg/Rustenberg/Pretoriaindustrialarea,wherechemicalindustries(ammonia,methanol,peroxide)aswellasironandsteel,aluminiumandcementindustriesneedtoshifttowardslow-carbonfeedstocks;and•theMogalakwena/Limpopominingregionwithanenormousdemandforhydrogentorunfuel-cell-drivenmega-trucksintheminesandheavy-dutyfuel-celltruckstotransportmineralsalongthecorridortoJohannesburgandDurban.TheHydrogenValleyprojecthasbeenco-designedwiththestrongengagementofleadingSouthAfricanandmultinationalfirms,anditspecifiesnineconcretepilotprojects,allatahighlyambitiousscale.TheNorthernCapeGreenHydrogenStrategy(NorthernCapeEconomicDevelopmentAgency[NCEDA],2022)isexport-focussed.TheNorthernCapeisasparselypopulatedregionwithexcellentsolarirradiationconditions,abundantlandandseveralminingprojects,yethardlyanyotherindustries.Thestrategy’scentrepieceisthe“Boegoebaaiportandrailproject,andadjacentgreenhydrogenSEZ,storageinfrastructure,transmissiongridsandpipelines”(NCEDA,2022).Itincludesconstructionofanewdeepwaterport.Theprovincialgovernmentsetthetargetof“5GWofelectrolysiscapacitysupportedby10GWofrenewableenergygenerationunderconstructionintheNorthernCapeby2025-2026”(NCEDA,2022).Theregionheavilybetsonforeigninvestment,including“toattractheavyindustrywishingtogogreentorelocatetoSouthAfrica”(NCEDA,2022).Furthermore,ithopestoattracttier-1solarPVpanelandwindturbinemanufacturerstoincreaselocaldevelopmentspilloversfromrenewableenergyparks.FeasibilitystudiesfortheBoegoebaaiprojectareongoing.Ifthoseindicateitseconomicviability,questionsstillremainregardingitspoliticalfeasibility.Large-scaleenergyinvestmentsthatuseadditionalenergyforexportsmaybedifficulttosupportintimesofextremedomesticpowershortages.Togarnerpoliticalsupport,suchprojectswouldhavetoplanconsiderableexcesscapacity(alsointermsofseawaterdesalination)tobesetasidefordomesticconsumption.Summarisingthestrategydocuments,robustpoliticalsupportandstrongprivate-sectorinterest–includingfromSouthAfrica’sleadingindustryplayerssuchasSasol,AngloAmerican,PetroSAandArcelorMittal–isevident.Hydrogenisseenasagamechangerforindustrialdevelopment.Yet,fromourperspective,twoaspectsstillremainfairlyvagueinallstrategies:1.TherelativeimportanceofFDI-drivenvs.domesticR&D-drivenefforts.Bothelementsarementioned,yettheamountsfornationalR&Dspendinghaveyettobedetermined,andthereisnomentionof,forexample,dedicatedsupplierdevelopmentprogrammes.ItwillbeinterestingtoobservetowhatextentSouthAfricacombinesFDIattractionwithindustrialIDOSDiscussionPaper9/202334andinnovationpoliciestoindigeniseanddiversifyhydrogenexpertisebeyondtheexpectedin-houseeffortsbySasol,AngloAmerican,ArcelorMittalandothers.2.AlthoughalldocumentsexplicitlyandprominentlyrefertotheobjectiveofaJustTransition,themechanismsforbenefit-sharingarenotspecified.Eventhoughallstudiesoffer(optimistic)estimatesforemploymenteffectsandtaxrevenues,thereisnomentionofearmarkingforsocialspendingorregionaladjustmentprojects,andnoconcretemeasuresareincludedtoencouragelocalenterprisedevelopmentorcommunityshareholding.Hence,thereseemstobeanimplicit,yetquestionable,assumptionabouttheautomatictrickle-downeffectsleadingtothejusticepartofthetransition.11OpportunitiesforvaluecreationOverall,thesestrategiesaimtoexploitallthepotentialsforvaluecreationmentionedinPartAofthisdiscussionpaper.11.1Ambitiousroll-outofrenewablesandelectrolysis,includingbackwardlinkagesRenewableenergyneedstobescaledupatamassiveleveltoovercomeSouthAfrica’scurrentenergyshortagesandtoproducetheadditionalelectricityrequiredforgreenhydrogenandderivativesproduction.Thisprovidesopportunitiesfortechnologicaldevelopmentandindustrialdevelopmentinrenewableenergytechnologies.Infact,SouthAfricahastriedtolocalisetheproductionofmanufacturedinputsthroughlocalcontentrequirementsandotherrequirementsinprojecttenders.Yet,theseattemptslargelyfailed.Producersofwindtowersandbladesweresetupbutthencloseddownagain,partlyduetoerraticpolicychanges(Bazilian,Cuming,&Kenyon,2020).“Foreign-ownedplayershavecompliedwithlocalcontentrulesbysettingupsubsidiariesinSouthAfricatoactasprojectdevelopers,operationandmaintenanceprovidersandEPCcontractors,orbyformingjointventuresorotherstrategicallianceswithlocalplayers.Inaddition,theyhavecontractedlocalcompaniesforservicessuchascateringandlogistics”(Bazilianetal.,2020).FortheSouthAfricanwindenergysector,Hansen,Nygaard,MorrisandRobbins(2022)confirmthatlinkage-buildinghasbeenmoresuccessfulinservicesthanmanufacturing,yetalsorelativelymodest.However,thismaychangewiththeenvisagedeconomiesofscaleinrenewableenergyprojectsandifthepolicyenvironmentbecomesmorepredictable.AdditionalbackwardlinkagesareexpectedinPGMs:Asmentioned,SouthAfricaistheworld’slargestproducerofPGMs(platinum,palladium,ruthenium,rhodium,iridiumandosmium),producingmorethan75percentofglobalPGMoutput.PGMsareimportantresourcesincrucialelementsofhydrogensystems,suchaselectrolysersandfuelcells.MostPGMsarebeneficiatedoutsideofSouthAfrica.ThisbegsthequestiontowhatextentSouthAfricamaybecomeaproviderofPGM-baseddevicesforthegreenhydrogeneconomy,specificallyPEMelectrolysersandfuelcellsforavarietyofapplications.TheSouthAfricanHydrogenSocietyRoadmap(DSI,2022,pp.23-24)listssomepotentialapplicationsthatSouthAfricashouldtarget:afuelcelllocomotiveforminesandforkliftsforfillingstations,hydrogen-poweredscootersandthree-wheelers,andhydrogensolutionsforthepowersupplyofoff-gridcommunities,schoolsandhospitals.Itshouldbenotedthatalreadyby2007SouthAfricahadlaunchedtheHydrogenSouthAfrica(HySA)programme,aimedatdevelopingtechnologicalcapabilitiesaroundthehydrogenandfuelcelleconomy.Thisledtotheestablishmentofsmall,yetcompetitivemembrane-producingcompanies.Similarly,firmssuchasIsondoPreciousMetalsandBambiliIDOSDiscussionPaper9/202335Energy–ablack-ownedandfemale-headedlocalenterprise–aimtomanufactureelectrolyserstacks,membranesandcatalystslocallywithsupportfromthestate.Todate,theseareonlypotentialsandpromisingopportunities.WhetherSouthAfricacangainafootholdinthegrowingglobalmarketforPEMelectrolysersandfuelcellsremainstobeseen.Mineralendowmentsinnowayguaranteesuccessincomplexdownstreamindustries,wherehighlyspecialisedandmostlyR&D-intensivecapabilitiesinchemistryandprocesstechnologiesareessential,whicharetypicallythedomainofspecialisedmultinationals.ArealisticstrategywouldprobablyofferincentivesforsuchmultinationalstoproduceinSouthAfrica,combinewithindustrialandinnovationpoliciestodevelopcertainspecialisedcapabilities(suchascustomer-specificmembranes)andproducelower-techproducts(suchassmallfuelcellsforoff-griduses).AttractingelectrolysermultinationalstoSouthAfricashouldbepossible,giventheaccesstoPGMs(andinthebestcasescaledlocalmembraneproduction),thepotentiallylargehydrogenmarket,arelativelylowindustrialwagelevelandaworkforcetrainedinengineeringindustries(especiallyautomotive).Withregardtospecialisedniches,AngloAmericanhasdevelopedaninterestinginnovation:aprototypeoftheworld’slargestfuelcellheavy-dutyminingtruck(Randall,2022).Evenhere,however,thesophisticatedtechnologieshavebeendevelopedbyforeignspecialistcompanies.11.2Chemicalconversionintoderivatives,includingforexportAccordingtothedevelopmentplans,twoopportunitiesstandoutinthefieldofhydrogenderivatives:ammoniaandsyntheticfuels,initiallymainlyforexportmarkets.Successherecriticallydependsonthelevelisedcostofgreenhydrogen,whichcouldbeamongthelowestworldwideduetoSouthAfrica’snaturalconditions.Greenammoniaisinhighdemandinternationally,especiallyfornitrogenfertiliserproduction,anditiscurrentlythemosttechnologicallymatureoptionforindirectlyexportinggreenhydrogenfromSouthAfrica.Severalmajorprojectsforgreenammoniaexportarecurrentlybeingprepared,mainlybySasol.TheBoegoebaaiproject,whichiscurrentlyafeasibilitystudy,aimsatproducingupto400kilotonsofhydrogenperyearusingnineGWofrenewableenergy.AnothermajorprojectbeingexploredbySasolisgreenammoniaproductioninSasolburg.NitrogenfertilisersmightalsobeproducedinSouthAfricaforregionalmarkets.SoaringgaspriceshaveincreasedfertiliserpricesandmadenitrogenfertiliserprohibitivelyexpensiveformanyfarmersacrossAfrica.BasedonSasol’schemicalprocesscapabilities,SouthAfricacouldbecomeaproducerofgreennitrogenfertiliserinarathershorttime,counteractingthefertiliser-foodcrisisthathasalreadysetin.Syntheticfuelsarealsoinhighdemand,especiallyaviationfuel,astheaircraftindustryiswillingtopayhighpremiumsforlow-carbonfuels.SouthAfricahasalreadyforsometimenowbuiltuptechnologicalcapabilitiesincoalliquefactionviatheFischer-Tropschprocess,whichincludesthehandlingandprocessingofhydrogenandtheconversionofPower-to-Liquid.Sasol,asaSouthAfrica-basedmultinationalcompany,isaworldleaderinFischer-Tropschtechnologyandcouldbecomeamajorproviderofgreensyntheticfuelsoncegreenhydrogenisavailable.Infact,SasolhasenteredintoaconsortiumwithEnertrag,Lindeandthe80percentblack-ownedlocalcompanyHydregenfortheexportofSAFatitsplantinSecundatobesoldattheH2Globalauctions(DSI,2022,p.77).Regardingthepublicsector,R&DiscarriedoutatCapeTownUniversityandtheCouncilforScientificandIndustrialResearch.AstudybyBole-Rentel,ChiresheandReeler(2022)identifiesSAFasaparticularlypromisingeconomicoptionforSouthAfricathatcould“replacetheuseofconventionaljet-fueldomesticallyuptoamaximumblendingthresholdof1.2billionlitresperannum,whilealsoproviding2–3.3billionlitresforexport”.SAFmaybeproducedfromthreesources:IDOSDiscussionPaper9/2023361.biomass(mostpromisinginSouthAfrica:sugarcaneA-molasses),oilseeds(suchasSolaris),agriculturalwasteoralienwoodyplantsthatareinvadingopengrasslandsandshouldanywayberemovedtoretaintraditionalecosystems;2.CO-richindustrialwastegases;or3.e-fuelsthatusegreenhydrogenaswellasacarbonsource.Inthemedium-termthiscanbeoilseedsorlignocellulose,henceitrequiresaharvestedinputandtherebycreatesagriculturalemployment;thealternativetobio-basedcarbonisdirectaircapture,butthisisfarfrombeingcommerciallyviable.SAFproductionwouldhencecreateemploymentatthefarmlevel,unlesscarboncomesfromindustrialoff-gasesordirectaircapture.Addingtothisthedirectandindirectemploymentinindustrialprocessingandtrucking,SAFmay“createover100,000directgreenjobsalongtheSAFsupplychain”(Bole-Rentel,Chireshe,&Reeler,p.5),makingitprobablythemostlabour-creatingactivitylinkedtogreenhydrogen(seealsoWWF,2019).11.3DecarbonisationofdomesticindustriesandtransportSouthAfricaiscommittedtoreducingGHGs.The2021updateofitsNDCsspecifytargetsfor2025and2030.Theseincludetargetsforhard-to-abatesectorsrequiringgreenhydrogen,inparticular:•fossilfuelactivities,includingcoalliquefaction,refineriesandpowerplant;•steelmanufacturing;•theminingindustry;and•heavy-dutyfuel-celltrucksandbuses.Withtheloomingthreatoftariffsonexportsofcarbon-intensivegoodstoindustrialisedcountrieswithmoreambitiouscarbon-pricingschemes,especiallyundertheEU’sCBAM,SouthAfricanfirmsandthegovernmentarefullyawareoftheexportproblemsiftheydonotdecarbonise.SomeofSouthAfrica’slargestfirmsarethusfacingchallenges,mostimportantlySasol(coalliquefaction),PetroSA(refineries),Eskom(coal-basedelectricity),ArcelorMittalSouthAfrica(steel)andAngloAmerican(mining).Atthesametime,theirinvolvementopensupmajoropportunitiesforcreatingdomesticindustrialcapabilitiesforthegreenhydrogeneconomy.Thesearespecifiedinthenationalstrategies,whichalreadymentionanumberofconcreteprojectsattheleveloffeasibilitystudies.Sasolhasannouncesseveralgreenhydrogenprojects,somepartneringwithArcelorMittalSouthAfricatoexploregreenhydrogenproductionforsteelmaking.ThiswouldincludecapturingofunavoidableCO2emissions.Thelargeminingsectorhasanenormousdemandforheavy-dutyfuel-cellvehicles,bothformovingoreswithinminesandtruckingmineralsoverlongdistancestoportsandlocalindustryclusters,forexamplefromtheMogalakwena/LimpopominingregiontoJohannesburgandDurban(EngieImpact,2021).Forsuchtraffic,fuelcellsaremoreefficientthanelectricvehicles.Industrialdevelopmentopportunitiescomprisethefuel-cellcharginginfrastructure,inputmanufacturing(suchasmembranes)andpotentiallythemanufactureoffuel-celltrucksandbusesandspecialisedequipmentsuchasAngloAmerican’shydrogen-poweredminingtruck(seeabove).IDOSDiscussionPaper9/20233711.4Attractionofforeigndirectinvestmentinenergy-intensiveindustriesIf,basedonitsexcellentsolarirradiationconditions,SouthAfricaachievesa)theroll-outofrenewableenergyprojectsfarbeyonditsdomesticenergyneedsandb)alevelisedcostofhydrogencomparabletothelowestcostproducersintheworld(dtic,2022),itmayattractinvestmentsinsomehighlyenergy-intensiveindustries,includingsmelters,steelmanufacturing,fertiliserproduction,certainautopartsaswellasdatacentres.Theseopportunitieswillgrow,asindustriesintheGlobalNortharefacedwithincreasinglyambitiousdecarbonisationtargets,encouragingthemtoseeklow-carbonsupplies.Thisopportunityisnot(yet)mentionedasaprimaryobjectiveinSouthAfrica’snationalstrategies–withoneexception:theNorthernCapestrategy(NCEDA,2022).12RecommendationsforGermany’sdevelopmentcooperationwithSouthAfricaintheareaofgreenhydrogenSouthAfrica’sJustEnergyTransitionneedsfinancialandtechnicalsupportfromtheinternationalcommunity.AtCOP27,PresidentRamaphosalaunchedthenewJustEnergyTransitionInvestmentPlancoveringthreeprioritiesforfinancialsupportthrougharangeofinstruments,includinggrantsandconcessionalfinance:energy,electricvehiclesandgreenhydrogen.TheInternationalPartnersGroup,ofwhichGermanyisamember,pledgedUSD8.5billionforthefirstphaseoftheprogrammeoverthenextthreetofiveyears(PresidencyofSouthAfrica,2022).ThiscomplementstheGerman–SouthAfricanEnergyPartnership,establishedin2013.Thecooperationandtopicsofthepartnershipinclude:•developingagreenenergyinfrastructure•promotinglowCO2powergenerationthroughrenewableenergy•increasingenergyefficiency•hydrogenandfuelcelltechnology,PtX(technologies,forexample,forproducingelectricity-basedliquidfuels)•structuralchangeincoalminingregions/JustTransition•researchcollaboration•supportingGermanenergytransitioncompaniesinSouthAfrica,business-to-governmentdialogueTheEnergyPartnershipcombinespoliticaldialoguewithpracticalprojectsupport.InvolvingtheGermanandSouthAfricanprivatesectorsisakeyelementintheapproach.Theseprogrammesprovideasolidbaseforfuturecollaboration.Inthefollowing,wesuggestanumberofaspectsthat,inourview,deservespecialemphasiswhennegotiatingfutureGermancontributions.Gradualentrystrategy.InlinewithSouthAfricanstrategies,wesuggestsupportingagradualstrategytowardsgreenhydrogen–gradualintwoways:First,assigningprioritytotheroll-outofrenewableenergyandimprovementstogridinfrastructureratherthanambitiousexportprojects.Renewableswillbeneededinanycase(“noregret”)toovercomethecurrentenergyIDOSDiscussionPaper9/202338crisiswithfrequentloadsheddingatanenormouscostfortheSouthAfricaneconomy,whileatthesametimelayingtheenergyfoundationsforfuturehydrogenprojects.A“RenewablesFirst”policywouldprioritiseenergysecurityandavoidforeseeablesocietalcontestationofhydrogenexportprojectsusingrenewableenergysourceswhileloadsheddingprevailsintherestofthesociety.Thesecondwayistobuilduphydrogencapabilitiesthroughsmalltomedium-sizedprojectsthatcombinehydrogengeneration,transportandoff-takeonthedomesticmarketaswellasthroughresearchprojectsandprivate-sectorexperimentsratherthanprimarilyenteringthehydrogenfieldvialarge-scaleFDI-drivenprojects.Thiswouldbuilduplocalcapabilitieswhiletheinternationalgreenhydrogeneconomyapproachestechnologicalmaturity.Today,manyissuesaroundtheinternationaltradeofgreenhydrogenarestillunresolved.Thisincludestechnologychoicesinproductionandtransportandthefuturecosteffectivenessofcompetingtechnologies.Moreover,demandisuncertainintermsofmarketstructure(relativedemandforLH2,ammoniaandliquid-organichydrogencarriers;geographicdistributionofoff-takers)andprices.TheearlierSouthAfricasupportsmajorinfrastructureinvestments,thehighertherisksofinvestinginthewrongtechnologyandendingupwithstrandedassets.Strongerfocusontechnologicallearningandvaluecreation.Large-scaleexportprojectsarepromisingforimprovingtradeandfiscalbalances,buttheytendtoevolveintotechnologicalenclaves.Thisisbecauseprojectstendtobedrivenbyinternationaltenders,structuredbyforeignprojectdevelopersandinvolvetechnologiesownedbyleadingforeigncorporationsthatarehighlycapital-intensive.Thepotentialforenteringintojointventures,involvinglocalsuppliersandhiringlocalexpertsisthereforelimited,unlessdomesticcapabilitiesintherespectivespecialisedtechnologiesaredeveloped.Enhancinglocalindustrialcapabilities–suchaslocalmanufacturingofequipmentandcomponentsforrenewableenergyprojects,fuelcellsandelectrolysersandammoniacrackers–isanexplicitfocusoftheproposedSouthAfricanGreenHydrogen(GH2)CommercialisationStrategy,yetthisobjectivehasnotyetbeentranslatedintoconcretepolicyroadmaps.Germancooperationcancontributeherethroughvariousmechanisms.Projectfinance,forexamplethroughKfWandH2Global,shouldencourageprojectsthatareaccessibleforlocalbidders,evenifthiscomesattheexpenseofprojectsizeandinvolveshighertransactioncosts.Technicalcooperationcouldsupporttheoperationalisationofahydrogenindustrialpolicyandfacilitateinternationalknowledge-sharingonthistopic.Thiscouldbecomplementedbyconcretetechnologytransferprojects,incubatorsandstart-upprogrammes.Germanyhasgatheredexpertisesincethe1990sinsupportinguniversityspin-offswithcomprehensiveservices(EXISTProgrammesofBMBF).GIZmayassistthetransferofexperiencesfromtheseprogrammestotheuniversitiesinvolvedintheHySAstrategy(CapeTown,WesternCapeandNorthWest)andpossiblybeyond.BMZ’sdeveloPPPprogrammecantargethydrogeninvestmentswithparticularlypromisingdevelopmenteffects.BMBFcantarget“2plus2”projectsforSouthAfricanhydrogen.Inthe2plus2format,projectsarefundedthatinvolveonepubliclyfundedpartnerandoneprivate-sectorpartnerfrombothcountries.GIZcanprovidepreparatoryandaccompanyingsupportherethroughinformationandnetworkingactivities.Physikalisch-TechnischeBundesanstaltshouldbeastrategicpartnerwhenitcomestosupportingtechnicalstandardsonthenationallevelandSouthAfrica’sparticipationintherelevantISOTechnicalCommitteesinternationally.Buildingtechnologyassessmentcapacity.Theglobalgreenhydrogeneconomyisunfoldinginahighlydynamicway.Thereisaraceforsecuringsuppliesaswellasallocatingandattractinginternationalinvestments.Atthesametime,asstatedearlier,manyuncertaintiesabouttechnologiesandmarketsremain.Thisistypicalofmajortechnologicaldisruptionswhencompetingtechnologiesaretestedbeforeoneortwoofthembecomethe“dominantdesign”thatmanagetoexploiteconomiesofscaleandsetthede-factoindustrystandards.Bettingearlyononetechnologythusbearshugeinvestmentrisks.SouthAfricamight,forexample,gainhugelyfromearlyinvestmentsinplatinumrefiningandbuildingupindustry-specificcapabilitiesforPEMelectrolysers,butitmayalsoloseenormouslyifalkalineelectrolysersbecometheIDOSDiscussionPaper9/202339dominantdesignorifplatinum-savingmembranetechnologiesaredeveloped.Similarly,portandshippinginfrastructureinvestmentsareverydifferentforLH2,LOHCandammoniaasderivativesforexport.Technologyassessmentisthereforeessentialtoassesstheopportunitiesandchallengesrelatedtotheemergingglobalgreeneconomyandfromthis,derivepracticalnextstepsforthecountryintermsofvalueaddition,technologicallearning,industriallinkagesandemploymentcreation.SouthAfricaisrelativelywell-positionedhere,withconsiderableexpertiseintheCouncilforScientificandIndustrialResearch,theDSI,theTradeandIndustrialPolicyStrategiesinstitutionandotherresearchcentres,yetitlacksthetypeofcriticalmassofspecialisedexpertsas,forexample,GermanyhasinitsdedicatedFraunhoferInstitutes.AlthoughGIZinSouthAfricaalreadyplaysanimportantroleinmobilisinginternationalexpertisefortechnicalstudiesonanad-hocbasis,theemphasisshouldshifttowardslong-terminstitution-buildingfortechnologyassessment.Since2020,SouthAfricaisoneofthreeAfricancountriesinvolvedinanUNCTAD(UnitedNationsConferenceonTradeandDevelopment)pilotprojecttobuilduptechnologyassessmentcapacitiesspecificallyinthefieldofagriculturalandenergytechnologies.ThisprojectisadvisedbyexpertsfromtheInstituteforTechnologyAssessmentandSystemsAnalysisatKarlsruheInstituteofTechnologyandtheGermanInstituteofDevelopmentandSustainability(IDOS).TheSouthAfricanpartnerisDSI,theLineMinistryoftheHydrogenSocietyRoadmap.Thismightbeusedasastartingpointforthelong-termsupportoftechnologyassessmentcapacitiesforgreenhydrogen–and,potentiallyotherareasofdisruptivechange.Supportinginnovativemechanismsforbenefit-sharing.Sofar,directdevelopmentspilloversfromrenewableenergyprojectsinSouthAfricaintermsofnewfirms,capabilitiesandpermanentemploymenthavebeenquitemodest.Forthereasonspointedoutearlier,addingelectrolysers,ammoniaplantsandseawaterdesalinationfacilitiesisunlikelytochangethis,unlessSouthAfricasucceedsindeepeningitsindustrialstructure.TomakethedevelopmentofSouthAfricanhydrogenjustandinclusiveandgarnerpoliticalsupport,thecountryneedstoinvestinasociallyinclusiveindustrialpolicy.This,however,willonlyyieldtangibleresultsinthemediumtolongterm.Short-terminvestmentsintoaJustEnergyTransitionarethereforeneeded,suchasearmarkingtaxincomesforregionaldevelopmentfunds,includingcommunitybenefitsashardcriteriaintendersorevendirectcashpaymentstocitizens(seePartA,Section6.3).Sofar,thereissurprisinglylittlediscussioninSouthAfricaaboutthesekindsofbenefit-sharing,despiteanticipatedconflictsoveraccesstoenergy,waterandland.Thehydrogencommercialisationstudy(dtic,2022)mentionsthedevelopmentofa“GH2Socio-economicplantoenhancelocalcontentinclusionofsmall,mediumandmicroenterprisesandentrepreneursandempowerpreviouslydisadvantagedgroups”asanecessarynextstep.Germancooperationmight,asacontributiontotheJustEnergyTransitionPartnership,prioritisesupportforthisupcomingtaskbycollectingevidencefrombenefit-sharingschemesaroundtheworldandhelpingtoorganisediscussionsaboutappropriatesolutionsfortheSouthAfricancontext.Similarly,Germancooperationmightsupportexchangeonpro-poordesignsofcarbon-pricingandfossil-fuelsubsidyreforms.SuchreformsareenvisagedinSouthAfricaasaprerequisiteforarenewableenergytransition,includingthereallocationofsubsidiestogreenhydrogendevelopment.Yetthismaycomewithadditionalburdensonpoorhouseholdsandthusneedstobecombinedwithsafeguardsandsocialassistance(Malerba,2023).Supportmaybeofferedeitherviatechnicalcooperationorpolicy-basedlending.Financialcooperationhelpsinsupportingtheenergytransformationinthecountryandtherequiredfastexpansionofrenewableenergygeneration.Thisseemstobeano-regretoption,astheneedfornewandcarbon-freeenergygenerationinSouthAfricaisinsatiable–beitwithorwithoutgreenhydrogengeneration–toensureajustandsafephasing-outofcoal-firedpowergeneration.KfWshouldalsooffergrantsandconcessionalprojectfinanceforhydrogenanditsderivativeswhenevertheymeetthedevelopmentcriteriaoutlinedintheBMZstrategy.Inaddition,dependingonSouthAfrica’spriorities,policy-basedlendingmaybescaledup(andcloselyalignedwithGIZ’sTechnicalCooperation)foravarietyofhydrogen-relatedreformagendas,rangingfromenergy-sectorreformandenvironmentalfiscalreformtoinnovativeformsIDOSDiscussionPaper9/202340ofbenefit-sharing,asoutlinedinPartA,Section6.3.Asalways,suchsupportneedstobealignedwithinternationalpartners,suchastheWorldBank’s“ScalingSolar”facility.South-Southknowledgeexchange.GIZinparticularhaslong-standingexpertiseinorganisinginternationalknowledgeexchangeondifferenttopics.GIZ’sPtXHub(InternationalPtXHub,s.a.)supportsthedevelopmentandimplementationofgreenhydrogenstrategiesinseveralcountries,someofthem(e.g.Chile,Argentina,Brazil,India)withcomparableopportunitiesandchallenges.Stakeholdersfromthesecountriescanbegiventheopportunitytosharetheirexperiencesindifferentpolicyfieldsrelatedtogreenhydrogen,suchasindustrialpolicy,FDIattraction,benefit-sharingandtechnicalstandards.Inadditiontohigh-levelexchanges,suchastheBerlinEnergyTransitionDialogues,thereisaneedformorein-depthexpertexchanges,forexamplebetweenMinistriesofIndustryandTradeandtheirthinktanksorbetweenstandardsauthorities.InthecaseofSouthAfrica,regionalcooperationwithNamibiamayalsobecomeapossibility.TheHyphenEnergyprojectinNamibiaandtheBoegoebaaiprojectinSouthAfrica,whichisatthefeasibilitystudystage,aregeographicallyveryclose.GIZmaywanttoactivateitsnetworksonbothsidesofthebordertoscaleupknowledgeexchangeandjointplanning.IDOSDiscussionPaper9/202341ReferencesAhmed,H.(2018).Newtrendsintheapplicationofcarbon-bearingmaterialsinblastfurnaceiron-making.Minerals,8(12),561.https://doi.org/10.3390/min8120561Altenburg,T.,Corrocher,N.,&Malerba,F.(2022).China’sleapfrogginginelectromobility:Astoryofgreentransformationdrivingcatch-upandcompetitiveadvantage.TechnologicalForecastingandSocialChange,(183),article121914.Altenburg,T.,&Lütkenhorst,W.(2015).Industrialpolicyindevelopingcountries–failingmarkets,weakstates.Northampton,MA,andCheltenham:EdwardElgarPublishing.Altenburg,T.,Wenck,N.,Fokeer,S.,&Albaladejo,M.(2022).Greenhydrogen:Opportunitiesforindustrialdevelopmentthroughforwardlinkagesfromrenewables.ResearchNetworkSustainableGlobalSupplyChains.Retrievedfromhttps://www.sustainablesupplychains.org/green-hydrogen-opportunities-for-industrial-development-through-forward-linkages-from-renewables/Altmann,M.,Cloete,L.,Diehl,L.,Rubbers,E.,Walwyn,D.,Wurster,R.,&Zeiss,J.(2022).Regulations,codesandstandardsintheframeofpromotingthedevelopmentofahydrogeneconomyforSouthAfrica.Finalreport.Dresden:LudwigBölkowSystemtechnik.Arrow,K.(1962).Theeconomicimplicationsoflearningbydoing.TheReviewofEconomicStudies,29(3),155-173.https://doi.org/10.2307/2295952Asimeng,T.,&Altenburg,T.(2022).HowdoesurbanraildevelopmentinChinaandIndiaenabletechnologicalupgrading?(IDOSDiscussionPaper14/2022).Bonn:GermanInstituteofDevelopmentandSustainability(IDOS).AuroraEnergyResearch.(2023,January24).RenewablehydrogenimportscouldcompetewithEUproductionby2030.Retrievedfromhttps://auroraer.com/media/renewable-hydrogen-imports-could-compete-with-eu-production-by-2030/Auty,R.(1993).Sustainingdevelopmentinmineraleconomies:Theresourcecursethesis.London:Routledge.Baffes,J.,&Koh,W.C.K.(2022).Fertilizerpricesexpectedtoremainhigherforlonger(WorldBankBlogs).Washington,DC:WorldBank.Retrievedfromhttps://blogs.worldbank.org/opendata/fertilizer-prices-expected-remain-higher-longerBazilian,M.,Cuming,V.,andT.Kenyon(2020).Local-contentrulesforrenewablesprojectsdon’talwayswork.EnergyStrategyReviews,32,100569.https://doi.org/10.1016/j.esr.2020.100569Bole-Rentel,T.,Chireshe,F.,&Reeler,J.(2022).Fuelforthefuture:AblueprintfortheproductionofsustainableaviationfuelinSouthAfrica.CapeTown:WWFSouthAfrica.Retrievedfromhttps://rsb.org/wp-content/uploads/2022/05/fuel_for_the_future-1.pdfBourne,J.K.(2022).Globalfoodcrisisloomsasfertilizersuppliesdwindle.NationalGeographic.Retrievedfromhttps://www.nationalgeographic.com/environment/article/global-food-crisis-looms-as-fertilizer-supplies-dwindleBrandon,N.P.,&Kurban,Z.(2017).Cleanenergyandthehydrogeneconomy.PhilosophicalTransactionsoftheRoyalSocietyA,375(20160400).http://doi.org/10.1098/rsta.2016.0400CertifHyConsortium.(2021).CertifHy.Retrievedfromhttps://www.certifhy.eu/wp-content/uploads/2021/10/CertifHy_folder__leaflets.pdfChatterjee,S.,Parsapur,R.K.,&Huang,K.-W.(2021).Limitationsofammoniaasahydrogenenergycarrierforthetransportationsector.ACSEnergyLetters,6(12),4390-4394.https://doi.org/10.1021/acsenergylett.1c02189ClimateWatch.(2023).NDCenhancementtracker.Retrievedfromhttps://www.climatewatchdata.org/2020-ndc-trackerCordonnier,J.,&Saygin,D.(2022),Greenhydrogenopportunitiesforemerginganddevelopingeconomies:Identifyingsuccessfactorsformarketdevelopmentandbuildingenablingconditions(OECDEnvironmentWorkingPapers205).Paris:OECDPublishing.https://doi.org/10.1787/53ad9f22-enIDOSDiscussionPaper9/202342COSATU.(2011).Ajusttransitiontoalow-carbonandclimate-resilienteconomy.Retrievedfromhttps://justtransitionforall.com/wp-content/uploads/2022/08/Naledi_A-just-transition-to-a-climate-resilient-economy.pdfDell’Anna,F.(2021).Greenjobsandenergyefficiencyasstrategiesforeconomicgrowthandthereductionofenvironmentalimpacts.EnergyPolicy,149,112021.https://doi.org/10.1016/j.enpol.2020.112031DSI(DepartmentofScienceandInnovation).(2022).HydrogensocietyroadmapforSouthAfrica2021.Retrievedfromhttps://www.dst.gov.za/images/South_African_Hydrogen_Society_RoadmapV1.pdfdtic(DepartmentofTradeIndustryandCompetition).(2022).ProposedSouthAfricangreenhydrogen(GH2)commercialisationstrategy.Retrievedfromhttp://www.thedtic.gov.za/wp-content/uploads/Powerpoint-Summary-Green-Hydrogen-Commercialisation-Strategy.pdfEl-Sayed,A.M.,Faheim,A.A.,Salman,A.A.,&Saleh,H.M.(2021).Introductorychapter:Cementindustry.InH.M.Saleh(Ed.),Cementindustry:Optimization,characterizationandsustainableapplication.London:IntechOpen.https://doi.org/10.5772/intechopen.95053EnergyEfficiency&RenewableEnergy.(s.a.).Hydrogenshot.HydrogenandFuelCellTechnologiesOffice.Retrievedfromhttps://www.energy.gov/eere/fuelcells/hydrogen-shotEnergyInformationAdministration.(2020).Off-gridelectricitydevelopment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