Transitioning SA's Petrochemical Value Chain

Sasol has suggested that a green hydrogen price of between $1/kg and $2/kg will be required for it to compete with coal as a feedstock, and thereby enable the production of cost-competitive products from Secunda and Sasolburg. Currently green hydrogen and its derivatives are significantly more expensive than their fossil-based (grey hydrogen) alternatives. Even if the carbon is captured from the fossil-based hydrogen production process via carbon capture technologies (making it ‘blue’ hydrogen), green hydrogen products are still likely to be more expensive in the near term. (Carbon capture technologies remain nascent and therefore very expensive).

Reductions in the cost of electrolysers and renewable energy technologies are expected to drive down cost of green hydrogen, with optimistic projections claiming that it is possible to achieve ~$1.6/kg by 2030. On the other hand, carbon pricing mechanisms are expected to increase the cost of grey hydrogen production (and to some degree blue hydrogen, as residual amounts of CO2 remain) over time. These factors will contribute to green hydrogen reaching price parity with fossil-based alternatives at some point in the transition. There is still a large amount of uncertainty as to when price-parity might be achieved, and many contextual, country and site-specific factors will come into play.

Current and projected cost of green, grey and blue hydrogen in South Africa (2021-$/kg, own compilation):