HYDROGEN FUEL TECHNOLOGY TO DRIVE ECONOMIC RECOVERY
CHEM Energy SA will be gearing up production at its Dube TradePort-based factory as it has a number of significant hydrogen fuel cell projects in the pipeline.
The factory, completed as the pandemic locked down the country, produced only what was needed to support its cellular network client. However, according to Hal Koyama, director of CHEM Energy, a subsidiary of the publicly traded Taiwanese heavy equipment manufacturer, CHEM Corporation, opportunities are opening up.
“Things seem to be settling down this year and telecommunications companies are assessing their capital budgets and requirements,” he said.
Most importantly, as a hydrogen infrastructure provider as well as a hydrogen fuel cell power generation provider, CHEM sees an enormous opportunity to start a hydrogen economy in South Africa, particularly as the country has a national green energy programme.
LATEST GENERATION FUEL CELL PRODUCTS
The company is focused on producing the latest generation of fuel cell products, the G5, for backup and continuous (off-grid) telecom power solutions.
Its core business is supplying cellular telecommunication stations with power especially in areas of weak power supply or no-grid. It has deployed over 3 000 systems and clocked up millions of operating hours to support telecommunications networks globally.
Koyama said that CHEM’s R170 million (US$10 million) factory at Dube TradePort will be the cornerstone of building up a green hydrogen ecosystem, bringing all parts of the hydrogen economy together to create a virtuous cycle of growth in technology and products.
“Once you have hydrogen power generation, it can be expanded to bring innovative technology companies into South Africa to support that growth. The opportunity is now for South Africa to start that growth cycle,” said Koyama.
The enormous potential for fuel cell technology to support power generation within South Africa and the continent was a key factor in CHEM’s decision to bring its technology to the country, set up production and establish a supply chain.
“Power is a challenge throughout the continent. We see opportunity in SA to support the network and other sectors, but we see a ten times greater opportunity outside SA,” said Koyama.
LOCALISING THE SUPPLY CHAIN
With their motto, for-local-by-local, localisation of as much of the supply chain as possible is a key consideration for the company.
A survey of potential African countries showed South Africa had the infrastructure and a workforce with a high level of skills that were completely applicable to their technology. The outcome is all employees are South African and drawn from the greater Durban area.
Dube TradePort was selected as the ideal location for the production facility. It has easy access to an international airport, the Durban harbour, a facility that met CHEM’s needs was available, the economic trade incentives of the SEZ were attractive and the Dube TradePort team’s receptiveness and responsiveness were among the deciding factors in choosing a site. Moreover, the support and engagement within various levels of government and industry to help sustain CHEM’s investment has also been another proof point for them.
While parts and subassemblies are imported CHEM Energy has started its localisation programme.
“We have worked with several suppliers of printed circuit board assemblies, pressurised tanks, wire harnesses and other smaller parts. The selection process has been rigorous. It has taken time; in instances as long as two years and a lot of investment to get the selected suppliers approved. To date, we have achieved 20% content localisation with our target being 80% at full capacity.
“Through the selection process, we have been able to develop these suppliers by changing the way in which they manufacture their product and helped get them certified to global standards. Some suppliers have made their own investments in machinery, processes, and skills to enable them to produce more cost effectively and at the required quality”, said Angelin Maharaj, President CHEM Energy.
The company has also leveraged the services supplied by the SEZ to support local, shorten their supply chain, reduce cost, and ensure that quality and reliability of supply are always intact.
These services include AirRoad logistics and shipping, Dube iConnect cloud-based infrastructure and other industries established within Dube TradePort.
“We are quite pleased with the quality and the cost of components that we are sourcing,” said Maharaj adding that once localisation starts, development and a multiplying effect starts to take place in the supply chain. For instance, the wire harnesses supply leverages the automotive industry, the sheet metal enclosures produced in Durban is sourced from an aluminium producer in Pietermaritzburg and the methanol in the fuel cell is produced by Sasol. Furthermore, various PGM components support the local mining industry and mining jobs.
GOVERNMENT’S ROLE IN HYDROGEN TECH
He urged government and forward-looking companies to become involved in this transition. The products exist and the opportunity is now. China is a prime example of this shift. It has invested tens of billions of dollars over the past three years building thousands of trucks and buses that will run on hydrogen fuel, thus driving the commercialization of hydrogen fuel cell technology.
Hydrogen is the technology of today. There is a large-scale movement globally towards hydrogen fuel cells and the time is right now for South Africa, said Koyama.
South Africa’s challenge is in adopting the technology and the government has an important role to play in supporting the hydrogen fuel cell ecosystem in SA and boosting foreign direct investment.
The regulatory environment in terms of codes, standards, safety and more have been laid out internationally by countries leading the technological charge and these can be adopted.
There is a gap between investments that have already been made in hydrogen technology in SA and the government’s role in driving further investment by supporting commercialization of the technology.
But the government could put in place incentives that make it attractive for companies to switch to hydrogen power generation locally. Instead of importing diesel generators as a stand-by for electricity outages hydrogen fuel cells could be used as a direct replacement.
Governments at national or regional level should establish a task force whose sole purpose is to find opportunities to get the commercialization of hydrogen technology started. Government is already working on the policies on hydrogen fuel cells as well as localization and commercialization which are key to kick-starting benefits and investment. It is localization and commercialization that drives new industry and sets the social and economic multiplying effects into motion.
INTERNATIONAL PARTNERSHIPS
SA companies wanting to be part of the hydrogen fuel cell revolution should partner with international companies already producing key components for fuel cells.
“Bring them into the country and then develop the technology on top of what exists,” recommends Koyama, who believes that once the technology starts taking off there will be massive product innovation.
An added advantage of partnering with global technology leaders and bringing the investment into South Africa is that it spurs more investments in support of that technology, developing existing industries and establishing new industries building an ecosystem that has a multiplying effect economically and socially.
Secondly, he recommends that companies and entrepreneurs focus on where future demand in hydrogen fuel cell technology is going to be; the underdeveloped areas in the technology such as the power electronics that are adapting the fuel cell.
While CHEM Energy manufactures a five-kilowatt/hour hydrogen fuel cell, products generating a hundred kilowatts/hour are also in the pipeline and at this power level they could start to help Eskom restore grid reliability. “There isn’t any silver bullet to fixing things that are going on there now, but hydrogen fuel cells should be part of the solution,” said Koyama.
CHEM Energy uses methanol (CH3OH) as the liquid carrier of the hydrogen in its fuel cells.
“There’s so much in the application space to be researched, developed, and given limited funds that is where I would put my money, not on the little components within the fuel cell. Billions of dollars have been spent globally on that.”
Biomass, reverse electrolysis and even carbon emissions can be used to produce methanol, and there are efforts underway in this field in anticipation of a hydrogen economy. A less obvious element in the hydrogen economy which is slowly becoming known is that SA has the capability to make its own hydrogen fuel. Sasol makes methanol as a by-product of its processes but in the future the country could have a completely renewable source of methanol and other power sources reducing its dependence on imported fuel and large volumes of coal.
