Prieska Power Reserve

The green hydrogen
and ammonia market

Capacity additions are expected in Africa, Eastern Europe, and South Asia. However, ongoing plant closures will decrease capacity in East Asia.

Demand for ammonia is expected to increase in all regions with the largest increases expected in Africa and Eastern Europe.

In addition to its current main use in the fertilizer industry, green ammonia has the potential to play a role in other applications, especially if considered as part of a decarbonization strategy.

Similarly, global ammonia production is expected to continue growing. With ammonia already the second-most-widely produced commodity chemical globally, with a production volume of over 180 million tones in 2019, the projected global ammonia capacity increases of 4% per annum during the next 4 years are expected to result in global capacity reaching 210 million tones in 2023.

The global hydrogen market is valued at over $135.5 billion, with a forecast CAGR of 8 percent up to 2023 (Markets and Markets 2018).

Between 55 to 77 million tons of hydrogen are currently produced annually. About 4% of the global hydrogen market is attributable to green hydrogen. (IEA 2019b)

The future hydrogen energy market could amount grow to $2.5 trillion per annum by 2050 (McKinsey & Company in a report for the Hydrogen Council, 2018)

This equates to as much as 600-million tons of yearly global demand for green hydrogen, with as much as 320-million tons of this potentially being used to produce tradeable hydrogen-based products such as green ammonia, carbon-neutral kerosene and green steel.

Green hydrogen and ammonia in the South African context

The Council for Scientific and Industrial Research (CSIR), a South African Research Institution estimates that green hydrogen and ammonia could generate South Africa as much as €160 billion from yearly exports - a significant contribution to South Africa’s current gross domestic product of €300 billion.

This can be done through upscaling South Africa’s renewable electricity generation beyond what is envisaged in the country’s Integrated Resource Plan (IRP) for electricity.

Around 300 GW of wind and 300 GW of solar is required by 2050 to provide the energy required to meet South Africa’s electricity needs, as well as produce the potential 25- to 30-million tons per annum of green hydrogen for export, mostly in the form of tradable products such as ammonia, aviation fuel and steel.

Solar and wind would effectively becomea by-product of green hydrogen production .

The abundant solar and wind resources in South Africa, and its strategic positioning in relation to various key markets creates an opportunity for South Africa to capture between 5% and 10% of the global green hydrogen market share.

This Project, as one of the pioneer projects within South Africa’s green hydrogen sectors, has the ability to capture a large portion of the total South African market share as the amount of green hydrogen and ammonia increases through the years.

A number of countries are developing or have developed hydrogen policies and strategies

In 2020, the European Union launched the Hydrogen Strategy 2050. Under the strategy, the European Union plans on establishing 80GW of Electrolyser capacity by 2050.
40GW of this capacity is planned for Europe with the other 40GW abroad with cooperation agreements for offtake.
Individually, a number of other countries such as Japan, Belgium and Italy have officially announced plans to move towards hydrogen-based economies, making this an attractive industry to participate in.
With the adoption of hydrogen strategies in the European and other markets, incentives for green energy production and penalties related to greenhouse gas emissions, the market in Europe is prepared to pay a premium for “green” hydrogen to kick-start the hydrogen economy.
This is similar to prior programmes across Europe and other developed markets, where premiums were paid to kick start other renewable energy technologies like solar PV and wind.