It’s clean, green and everywhere, so should Australian companies capitalise on hydrogen?

By Clayton Warner, General Manager Queensland and Tim Reynolds, Principal Consultant

 

In a nine-month period in 2020, more than US$150 billion worth of green hydrogen projects were announced globally. Goldman Sachs estimates the market will be worth $11.7 trillion by 2050, a statement echoed by many other investment banks.

Much of the world is racing to develop hydrogen capabilities in line with the Paris Agreement because, whether used in fuel cells or burned to generate heat, hydrogen’s only ‘exhaust’ is water.

In some regions, strict deadlines are expediting change. California law, for example, mandates 100 per cent zero-carbon energy by 2045. After the Biden administration re-entered the Paris Agreement, local interest in hydrogen surged; NextEra, a clean energy company, is now challenging ExxonMobil as the largest energy company in the United States.

On a global scale, though, America lags behind both China and Europe. In July 2020, the EU announced its desire to become the world leader in hydrogen, and it also plans to inject €470 billion into electrolyser infrastructure. It faces stiff competition from China, which has no set targets, but a distinct advantage in regard to scale and cost-efficiency. Europe, meanwhile, currently leads in technologies. According to Jorgo Chatzimarkakis, Hydrogen Europe’s Secretary General, China is only “two to three years behind.”

Many commentators believe that healthy competition between China and Europe over emission-free hydrogen technologies will accelerate the adoption of green hydrogen worldwide and drive down prices. One key argument is that China may do for H2 what it did for solar.

Japan is also making inroads. The nation released its Basic Hydrogen Strategy in 2017, making it the first to formalise what other nations were still considering. Heavily reliant on foreign fuel, Japan is one of Australia’s largest LNG importers and has a vested interest in Australia’s developing hydrogen industry.

Kawasaki, J-Power, Shell Japan and several international partners have formed a consortium with Australia’s AGL Energy to produce hydrogen from brown coal in Australia. The AU$500 million pilot project may result in the world’s first clean liquid hydrogen supply chain, complete with a vessel capable of transporting liquid hydrogen. Tokyo hopes the project will illustrate a viable path to decarbonisation, while for Australia, it could provide a hydrogen export trial run of sorts.

Existing natural gas infrastructure and trade agreements, a number of potential carbon sequestration sites, and its experience with large-scale energy projects mean Australia is well-placed to become a leading H2 exporter. According to an Australian Renewable Energy Agency (ARENA) report, these factors reinforce “Australia’s position as a favoured potential hydrogen trading partner.” Additionally, there is ample evidence of how global trade in new energy commodities can scale quickly; in 1970 the LNG market was worth very little yet by 2015, it represented nearly a third of all global gas trade, according to BP’s 2016 Statistical Review.

In February this year, CSIRO identified 56 Australian hydrogen projects. Four of these are currently operating, nine are being constructed and 43 are in the planning or feasibility stages. The Morrison government’s May budget allocated $275.5 million towards hydrogen production hubs and $263.7 million towards CCS development. A significant amount has also been apportioned to ARENA, which is supporting projects in hard-to-decarbonise industries; Rio Tinto, for example, received a $580,000 grant to replace natural gas with hydrogen in the calcination process at its Yarwun alumina refinery.

The low-emissions hydrogen chain is already equipped with mature technologies, while considerable research and development will finesse these technologies, the level of maturity indicates that technology is less of a roadblock than an unactivated market.

Light, abundant, and clean, H2 has long been touted as the fuel of the future. Several factors have stymied progress though: cost of production in comparison to burning fossil fuels, transportation difficulties, and its poorer performance against lithium-ion and vanadium cells. With regards to the latter, though, the mineral demand is high, and stores of lithium may fall short of demand. Plus, the extraction processes are carbon-heavy, a proposition that many companies are steering clear of in favour of adding value via greener options.

If the current level of hydrogen-related activity in Australia continues, which it is predicted to do, the Australian government may well hit its ‘H2 under $2’ goal sooner rather than later, making the widespread production and use of hydrogen a viable option, rather than a complement to fossil fuels. Already in Israel, H2PRO, a company backed by Bill Gates’ Fund, has redesigned the electrolysis process and believes it will be producing green hydrogen at $1 per kilogram within a decade.

There are significant opportunities for Australian companies to make inroads in the burgeoning hydrogen industry, and for Australia itself to take advantage of the new geopolitics of energy.

Watch this space. We certainly are, as well as ramping up our work in the new energies space.

If your company needs professional services including assistance with pipeline infrastructure, engineering, surveying and environmental and ecological assessments, Fyfe can help. Get in touch with us today to discuss your projects.

Related Links