Australia: It’s full steam ahead for Australia as it embraces the hydrogen opportunity

He previously hailed it the hero fuel in Australia’s quest to reduce emissions and combat the effects of climate change, and in part one of this series Dr. Alan Finkel highlighted how hydrogen is in transition from being an exotic fuel to becoming a commodity like petrol.

In part two of this series, we heard from industry how Australia has “caught hydrogen fever”. Sean Blythe, CEO of ENGV, responsible for Australia’s first public hydrogen refuelling station, said, “Everyone is gripped. Not only do we have a well-considered national strategy and a clear roadmap, but each state is also vying to be the primary producer and exporter of renewable hydrogen, so they’re all funding major projects.”

And Blythe is right, Australia is embracing the hydrogen opportunity with both hands. The Australian Government has committed more than a billion dollars specifically for hydrogen, with the path to achieving ‘H2 under 2’ – the point where hydrogen becomes competitive with conventional fuels – set out in the 2019 National Hydrogen Strategy. Australia is one of the first countries to publish a strategy outlining the actions needed to support hydrogen industry growth.

Hydrogen is also one of five priority low emission technologies identified under the Australian Government’s Technology Investment Roadmap. And the Australian Government is working with state and territory governments to review the nation’s legal frameworks, to determine what reforms may be needed to support a safe and efficient clean hydrogen industry. This includes accelerating regulations for the blending of hydrogen into domestic gas networks, with trials already underway in parts of Australia.

Additionally, the government is progressing a domestic hydrogen Guarantee of Origin scheme, providing A$314m of funding to develop up to five clean hydrogen hubs and investing in building new hydrogen-ready gas generation facilities.

So what needs to happen next? For the third and final part of this series, H2 View spoke to the Australian Government’s Department of Industry, Science, Energy and Resources to find out more.

 Continued cost reductions, automated manufacturing of electrolysers and an increase in system size, as well as a decline in renewable electricity costs are factors expected to help Australia expand its green hydrogen market. What needs to happen next with regards to policy to support this growth and help Australia to meet its hydrogen goals?

Department of Industry, Science, Energy and Resources spokesperson: A key focus of the Australian Government is to build up domestic demand and export opportunities through the development of key regional hydrogen hubs. This will help the industry build scale, which is critical for bringing costs down and becoming a globally competitive supplier.

To achieve this goal the Australian Government is investing A$314m into the development of up to five hydrogen hubs in regional Australia.

By co-locating hydrogen producers and users, hydrogen hubs will provide focal points for demand, helping Australia’s hydrogen industry to scale up. Hubs will also help the industry to cut infrastructure costs, encourage innovation, and enhance skills and training efforts.

The government has identified the following locations as highly prospective, but these are only examples and the hubs programme will not be limited to these specific locations: Bell Bay, Tasmania; Pilbara, Western Australia; Gladstone, Queensland; La Trobe Valley, Victoria; Eyre Peninsula, Whyalla – South Australia; Hunter Valley, New South Wales; and Darwin, Northern Terriorty.

As well as increasing domestic demand, the Australian Government is building international market opportunities through international engagement. To establish Australia as a preferred supplier of hydrogen, we are developing hydrogen relationships around the globe. In particular we have agreed memorandums of understanding (MoUs) with the Republic of Korea, Japan, Singapore and Germany, all of which are expected to be net importers of hydrogen.

Most recently, the Australian Government announced an investment of A$565.8m through the 2021–22 Federal Budget to build on these relationships through forging new international partnerships on priority low emissions technologies, including hydrogen.

These agreements will help Australia to share industry knowledge, reduce technology costs and explore the development of international hydrogen supply chains.

As Special Adviser to the Australian Government on Low Emissions Technology, Dr. Alan Finkel is playing a key role in brokering these arrangements, with new partnerships announced under our MoUs with Germany, Singapore and Japan.

As you have already mentioned, a key goal for Australia is producing clean hydrogen under A$2 per kg. How is progress going in this field? And when do you think Australia could be producing hydrogen at A$2 per kg?

Department of Industry, Science, Energy and Resources spokesperson: Movements in markets and advances in technology will ultimately determine how quickly Australia reaches this goal. Industry analysis indicates that the costs of producing clean hydrogen are expected to fall significantly over the next decade, with estimates of producing hydrogen in Australia in 2025 ranging from A$2.30-5/kg of hydrogen_. The estimated cost in 2030 is A$2-4/kg of hydrogen. These are among some of the cheapest estimates in the world, suggesting that Australia’s approach to industry development under the National Hydrogen Strategy will achieve results.

As Australia’s Low Emissions Technology Statement also identifies, clean hydrogen from off-grid gas with carbon capture and storage (CCS) and coal gasification with CCS might be the lowest cost clean production methods in the short-term, although renewable production methods will come down in cost as clean hydrogen demand grows.

ARENA CEO Darren Miller forecasted electrolyser costs would need to fall to A$500k for Australia to achieve its A$2 per kg target. Is electrolyser cost the only/main factor to reach this target in your opinion?

Department of Industry, Science, Energy and Resources spokesperson: Bringing the cost of hydrogen production below A$2/kg will require significant development and deployment of clean energy supply and hydrogen technologies such as electrolysers. Globally, electrolysers and other hydrogen production technologies are in an early stage of scale-up and we have not yet realised many expected efficiencies from mass manufacturing and economies of scale. The demand from Australian-based projects for these technologies provides an opportunity to develop scale economies that will help to reduce costs. Scale efficiencies and reducing electricity and gas input costs will play a significant role in achieving this goal.

In the medium term, electricity and gas costs will be the most significant factor in Australia’s ability to achieve ‘H2 under 2’. It is expected that production will be both on and off-grid, with site selection dependent on proximity to end-use application and the ability to derive value from alternative revenue streams. For hydrogen produced off-grid, electricity costs will depend on the cost of renewable generation and any associated energy storage. For grid-connected hydrogen production, electricity costs will include the costs of grid connection.

On energy costs, the hydrogen industry will benefit from work being done by Australian Governments to provide reliability, security and affordability in energy for consumers and businesses, including through reforms currently underway that are set to drive the design of the post-2025 energy market.

Is it just green hydrogen the Australian Government is focused on?

Department of Industry, Science, Energy and Resources spokesperson: Consistent with the adaptive approach taken in the National Hydrogen Strategy, the Australian Government is neutral with regards to the type of technology used to produce hydrogen.

We recognise that both blue and green hydrogen may have roles to play in making the hydrogen industry a reality. And so we use the term ‘clean hydrogen’, which we define as either hydrogen produced using renewable energy or from fossil fuels with substantial carbon capture and storage (CCS). This gives the hydrogen industry flexibility to pursue the pathways that best meet customer preferences as global markets emerge.

In the future what would the utilisation of hydrogen look like in real-world applications? Where does the government see the most potential for integrating hydrogen? Where can you see it in daily life?

Department of Industry, Science, Energy and Resources spokesperson: Clean hydrogen is gaining increasing global attention as a clean fuel to decarbonise economies. It is a flexible, safe, transportable and storable fuel that produces no carbon emissions when used.

The most advanced areas of clean hydrogen demand in Australia currently are for ammonia production (where it can displace the existing use of high carbon hydrogen), blending into gas networks for residential, commercial and industrial applications, and early work to utilise hydrogen to co-fire gas generators.

Examples of this include:

• Work with Yara Pilbara Fertilisers on the feasibility of renewable hydrogen and ammonia for fertiliser production and A$1.71m investment with BP Australia to evaluate the feasibility of building a renewable hydrogen and ammonia production facility, both in Western Australia
• Funding two gas blending (up to A$60.8m) with 10MW electrolysers in Western Australia and Victoria
• A$24.9m to support new gas generators to be hydrogen-ready

Heavy transport, remote power generation and mining vehicles are likely to be the other early cost-competitive uses of clean hydrogen in Australia. The government has already invested A$4m for hydrogen transport-related demonstration projects, such as the A$3.1m investment into Toyota Australia Hydrogen Centre.

In Australia, hydrogen could also have a role to play in long duration storage for firming in the electricity grid, and in helping to decarbonise power supply in remote areas where hydrogen can be integrated into microgrids to provide long-term and seasonal energy storage that cannot be provided by batteries. The Australian Government has already invested A$50m in a programme to support feasibility studies into microgrids and another A$53.6m for deployment of pilot microgrid projects.

Clean hydrogen and ammonia have the potential to revolutionise efforts to decarbonise hard-to-abate heavy industry sectors. This includes global transport, shipping, fertiliser production, steel-making, industrial heating, and cement production. The use of hydrogen to make clean or low emissions steel in particular presents an important opportunity for Australia, thanks to our extensive iron ore resources and competitive advantage in producing hydrogen. Low carbon steel and aluminium are priority technologies under the Technology Investment Roadmap, due to the emissions reduction and economic benefits that these industries could bring.

Has hydrogen’s time come in Australia? What’s your honest assessment of the hydrogen market in the country and what needs to happen to unlock its potential?

Department of Industry, Science, Energy and Resources spokesperson: The progress in the development of a hydrogen industry since the launch of Australia’s National Hydrogen Strategy has been remarkable, with new projects being announced nearly every day.

While building demand and advancing technology are crucial elements for success, ultimately building a successful hydrogen industry for Australia can only be done through a genuine partnership between governments, industry, investors, researchers and our community.

Our National Hydrogen Strategy was developed and is being delivered in partnership by all Australian governments in collaboration with industry, communities and international partners, and it is this ongoing collaboration that will see us become a global player in hydrogen by 2030.

The government’s commitment is significant, with over A$1bn invested into the sector to date, and more investment to come.