Water scarcity is the most pressing problem in developing a green hydrogen economy. (Delwyn Verasamy/M&G)
South Africa’s ambition to transition to a green hydrogen economy reflects both a strategic opportunity and a necessity in addressing the country’s intertwined energy, climate and socioeconomic challenges. With a heavy dependence on coal, South Africa faces mounting pressure to decarbonise while simultaneously tackling poverty, unemployment, inequality and energy insecurity.
Green hydrogen, produced through renewable-powered electrolysis, has emerged as a versatile energy carrier capable of decarbonising hard-to-abate sectors such as steelmaking, heavy transport, chemicals and power generation, while also serving as a long-duration energy storage solution. This positions green hydrogen as a key enabler for both the just energy transition (JET) and broader sustainable economic growth.
To harness this potential, the government has established comprehensive policy and institutional frameworks as a strong foundation. The Hydrogen Society Roadmap (HSRM), approved in 2021 and launched in 2022, provides a long-term vision to build an inclusive hydrogen economy and reach net-zero carbon growth by 2050. It emphasises decarbonising industries, greening the power sector, developing export markets for hydrogen and ammonia, and promoting local manufacturing across the hydrogen value chain.
The Hydrogen Valley feasibility report, launched in October 2021, identified three Green Hydrogen Valley Hubs (GHVH). These include Johannesburg, Durban/Richards Bay and Mogalakwena/Limpopo, which are expected to cater for hydrogen demand of up to 184,000 tonnes by 2030 against a national target of 500,000 tonnes a year.
Recent research by the Water Research Commission (WRC) suggests Mpumalanga as a third hub based on the potential for a new water economy post-closure of some coal mines and coal-powered power stations, and this can potentially offset the 316,000 tonnes a year balance by 2030. Furthermore, the government aims to deploy 10 gigawatts of electrolysis capacity in the Northern Cape region by 2030 and 15GW by 2040.
According to the report by the National Business Initiative, South Africa could produce green hydrogen for $1.60 a kilogramme by 2030, representing one of the lowest costs worldwide.
Building on this, the Green Hydrogen Commercialisation Strategy (GHCS), approved in 2023, provides regulatory clarity, investment incentives and an operationalisation framework. Estimates suggest green hydrogen could contribute up to 3.6% to South Africa’s GDP and create 370,000 jobs by 2050, underscoring its economic potential. The Just Energy Transition Investment Plan (JET IP) for 2023 – 2027 further commits R319 billion to hydrogen initiatives, backed by international financing, such as loans from the African Development Bank and Germany’s KfW Development Bank. Furthermore, in December 2024, the South African government introduced a tax incentive, providing a 150% tax reduction on investments in electric and hydrogen-powered vehicle production, and this is due to enter into force in 2026.
Despite the momentum, multiple problems could impede progress. The availability of renewable electricity is a critical constraint, as the current grid is dominated by coal and renewable capacity expansion remains slow. In this regard, the current renewable energy capacity of about 7500 megawatts (7.5GW), already connected to the grid by 96 independent power producers (IPPs) requires significant boosting to achieve the projected 40% renewable energy by 2030. Electrolyser technology, central to hydrogen production, is still costly, and scaling up remains uncertain. Infrastructure for transport, storage, and distribution of hydrogen is underdeveloped, while sector-level hydrogen demand strategies are not clearly defined. These barriers highlight the need for integrated planning, investment, and market development to unlock the full potential of hydrogen.
Perhaps the most pressing concern for transitioning to a green hydrogen economy in South Africa is water scarcity. Electrolysis requires large amounts of ultrapure water, with about nine litres for every kilogramme of hydrogen produced (with more water required if water for cooling is included), posing a significant challenge in a country ranked the 30th driest in the world and further challenged by emerging issues such as climate variability. South Africa already faces severe water stress, with 98% of resources allocated, widespread water quality issues, and projections of a 17% water supply deficit by 2030. Furthermore, many rivers and dams are degraded by pollution, agricultural runoff, and wastewater discharges, while non-revenue water losses from aging infrastructure exacerbate the crisis.
Large-scale hydrogen production could intensify competition for water resources unless alternative supply options, such as seawater desalination or advanced wastewater reuse, are adopted. Furthermore, little is understood about the water chemistry transformations during electrolysis or the effluent profiles generated, raising concerns about potential impacts on ecosystems and human health. To put the water scarcity into context, most of the identified green hydrogen valley hubs are vulnerable to a lack of water supply. In this regard, the proposed green hydrogen valley hubs are exposed to varying levels of water security vulnerabilities, ranging from moderate (for Johannesburg), high (for Durban/Richard Bay) and extreme (for Mogalakwena/Limpopo).
Addressing these issues requires a comprehensive and multi-pronged approach. Solutions include diversifying water sources through seawater desalination, wastewater reuse, expanding groundwater access, reducing non-revenue water losses caused by aging infrastructure and ensuring strict water quality management. Lifecycle assessments and environmental impact studies must guide project approvals to ensure that hydrogen production does not compromise water security or worsen existing ecological pressures. Policymakers therefore need to integrate water demand and quality assessments into hydrogen strategies, while developers must prioritise closed-loop water systems, effluent treatment, and sustainable sourcing. Without robust planning, hydrogen projects could inadvertently compromise ecosystems, biodiversity and community access to clean water. In this regard, collaboration across various stakeholders such as government, industry, and research institutions will be vital to designing resilient solutions.
If these problems are managed effectively, South Africa is well-positioned to emerge as a leader in the global green hydrogen economy. With its abundant renewable energy resources, strategic geographic positioning for export markets, and strong policy frameworks, the country could transform hydrogen into a driver of industrial competitiveness, foreign investment and climate resilience. By ensuring that hydrogen development is aligned with water stewardship, social equity and environmental safeguards, South Africa can pursue a truly successful just transition, where decarbonisation is achieved without sacrificing critical resources or deepening existing inequalities.
Dr John Ngoni Zvimba is a research manager at the Water Research Commission, and writes in his own capacity.