€270 Million German Fund Opens for South African Green Hydrogen Projects

South Africa Invited to Tap into Germany’s Power-to-X Fund for Green Hydrogen Development

by Ikeoluwa Juliana Ogungbangbe
German Fund for SA Green Hydrogen Project

In a significant move towards accelerating the green hydrogen sector, Germany has opened its €270 million Power-to-X (PtX) Development Fund to South African developers. This non-refundable grant funding, established in 2023, aims to address the “bankability gaps” hindering large-scale projects in developing countries, including South Africa.

The German Ministry for Economic Cooperation and Development is financing the platform. The fund’s first call for expressions of interest (EoI) targets projects in Brazil, Egypt, Georgia, India, Kenya, Morocco, and South Africa. The German development bank KfW has appointed KGAL Investment Management to manage the fund, with a project submission deadline set for March 1 at noon.

Stefan Hediger from KfW informed Engineering News that the PtX Development Fund complements a suite of instruments for projects in developing countries. Beneficiaries are eligible for other concessional and grant funding schemes offered by Germany. This includes commitments supporting South Africa’s Just Energy Transition Partnership Investment Plan (JET-IP).

KfW has already agreed to a €23 million grant with the Industrial Development Corporation for early-stage green hydrogen projects in South Africa. Some developers are also eyeing concessional loans under the JET-IP and subsidized long-term purchase agreements under the H2Global framework.

Thomas Engelmann, head of the PtX Development Fund and energy transition at KGAL, explained that the fund focuses on advanced projects that need grant funding to reach financial closure. Up to €30 million could be allocated to individual projects meeting technical, environmental, and social eligibility criteria.

The fund primarily targets industrial-scale projects with an investment cost of over €100 million, particularly those supplying hard-to-avoid hydrogen usage sectors. Eligible projects could include those using green hydrogen to produce green ammonia, methanol, synthetic fuels, and hydrogen-based chemicals.

Engelmann emphasized that financing could cover any part of the PtX value chain, from renewable energy generation and electrolysis to hydrogen compression, storage, transportation, and distribution infrastructure.

The fund expects to disburse the entire €270 million over two to three bidding rounds, supporting eight to ten projects. Since the EoI’s launch in December, considerable interest has been shown by developers in various eligible countries.

Projects submitted to the PtX Development Fund undergo thorough evaluation against eligibility and exclusion criteria. The planned investment horizon spans from 2024 to 2027.

Hediger expressed confidence in the maturity of South African projects for the grant. Efforts are underway to promote this opportunity, including an upcoming webinar on February 13.

Kelly Slaffa from KfW highlighted Germany’s commitment to not only developing South Africa’s emerging green hydrogen industry but also promoting skills transfer, development, and job creation.

This funding initiative marks a critical step in fostering international collaboration in renewable energy and offers a significant opportunity for South Africa to advance in the green hydrogen arena.

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