Exclusive: Finkel's hydrogen dream a step closer
Federal government plays catch up in clean hydrogen race
By Sophie Boot
The COAG Energy Council has agreed to fund the development of a national hydrogen strategy for consideration by the end of 2019, as the push for Australia to shift to a hydrogen economy grows ever stronger.
The decision was overshadowed by yesterday’s political clash which saw NSW Energy Minister Don Harwin push an emissions obligation in the national energy policy that was refused by the federal government. Later in the day the energy council agreed on a work program on grid security, approved the adoption of a reference bill by July 2019, agreed on regulatory reform for gas pipelines, and approved the bid - led by chief scientist Alan Finkel - for work on hydrogen.
Finkel will now work with state and federal public servants to develop the national strategy, with the Hydrogen Strategy Group likely to play a significant advisory role. Until that’s reviewed by the COAG Energy Council in a year’s time, Australia’s hydrogen progress will likely continue to be at a state level, piece by piece. On Wednesday, the Victorian government committed A$2 million to boost the development of hydrogen energy technology in the state.
The chief scientist told Australian Energy Daily it will take about a year to deliver the strategy, though the Energy Council will see drafts before December 2019.
Still, Finkel says he does have some ambitions and goals for the strategy, including developing export target prices for hydrogen, ensuring that hydrogen is integrated safely into the existing system, and making sure the benefits from hydrogen production flow through to the community.
Dr Attilio Pigneri, chief executive of Hydrogen Utility and a member of AEMO’s expert advisory panel, says it’s “fair to say the federal government is not really doing anything in this space at this stage,” though he hoped that would change following the COAG decision.
Why hydrogen?
Clean hydrogen - produced by using renewable energy-fuelled electrolysis to split water into hydrogen and oxygen, with no resulting carbon emissions - has historically been too expensive to gain traction. It’s now becoming increasingly viable due to the exponential growth of wind and solar power generation, the corresponding reduction in the price of renewable power, and the expectation that both those trends will continue.
A paper prepared by the Hydrogen Strategy Group - entitled Hydrogen for Australia’s future - was presented to the COAG Energy Council in August. It includes a 2018 estimate for clean hydrogen produced by alkaline electrolysis at A$40 to A$48.30 per gigajoule; hydrogen from PEM electrolysis was between A$50.80 and A$61.70 per gigajoule. In the best case model, this could drop to between A$20.80 and A$25.80 for alkaline, and between A$19.20 and A$23.30 for PEM, by 2025.
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Professor Michael Brear, director of the Melbourne Energy Institute at the University of Melbourne, says that at that price point, hydrogen becomes competitive with conventional liquid fuels. At a presentation at the Institute’s inaugural symposium last Wednesday, Brear said hydrogen prices can “very plausibly” get to between A$22 and A$23/GJ in the next five to ten years - “no subsidies, no nothing” - as long as the electricity price, which accounts for three-quarters of the levelised cost of hydrogen, stays low.
But for clean hydrogen to replace natural gas, industry needs a steer. Right now, hydrogen could be used in place of 10% of natural gas supplies for domestic cooking, heating and hot water; to supplant it completely, the network needs to be modified.
South Australia-based Hydrogen Utility is building the country’s first clean hydrogen electrolyser plant at Port Lincoln. The 15MW project will cost about A$117.5 million, and has received a A$4.7 million grant and a A$7.5 million loan from the state government’s Renewable Technology Fund.
Pigneri says grantees get to meet with the relevant government agencies regularly, and the state has created a supportive environment for industry.
“The vision was linked to the previous government but the new government has fully embraced it and supported it, which would be a great model to replicate at the federal level,” Pigneri says. “South Australia is miles ahead in their thinking.”
Nationally, he says, “the industry is ready, but the regulatory environment in which the industry will need to operate might not be ready yet”.
“What happened in the last two years is all of these hydrogen applications are becoming viable, or are about to become viable, all because of the cost of renewables coming down. The technology was already there, the industry is ready, it’s got standards in place, it’s got a number of players, it’s scaling up manufacturing.”
“In many ways it’s like the solar industry in the early 2000s. It has been around forever, but now there is this effort to invest in manufacturing electrolysers on a gigawatt scale, meaning we’re going to have several gigawatts of these electrolysers produced every year, which can be deployed at a very large scale.”
Trucks, trains and automobiles
There are some “low-hanging fruit projects” that Finkel is suggesting, and transport, he says, is an obvious overlapping issue with the hydrogen strategy. Fuelling station operators are waiting for demand to rise before they invest in hydrogen technology, but the lack of fuelling stations means vehicle manufacturers also aren’t investing to develop hydrogen-fuelled vehicles.
“There’s a role for state and national government to co-fund with industry, and that means a viable refuelling network to make it practical for vehicles to be hydrogen fuelled,” Finkel says. A mapping exercise for such a network should overlap with the strategy, he says.
Professor Brear says transport could be a great beneficiary from hydrogen, as emissions-free fuel can be produced from hydrogen.
“We consume on an energy basis more crude oil than we do electricity right now,” Brear said. “So that’s suggesting that instead of building 100 megawatts of solar and just selling it as electricity, we build 200MW of solar and sell 100MW as electricity and 100MW as hydrogen. We’re trying to match the commodity market and one of the several elephants in the room is the elephant called oil.”
Export potential
Both CSIRO’s and the Hydrogen Strategy Group’s reports stress that Australia has a huge opportunity to become a world leading hydrogen producer due to its land and renewable energy resources. Much of the hype behind hydrogen in Australia is the prospect of turning it into an export - with Japan and South Korea both taking steps to transition their economies to hydrogen - though Pigneri warns that a strong export market is some time in the future.
“A lot of people get really excited about export and then they get a reality check,” Pigneri says. “At the moment there is excess hydrogen supply in Korea, from black hydrogen, and there is sufficient hydrogen supply in Japan.”
Hydrogen Utility’s Port Lincoln project is the equal-largest in the world, but is still a “very small project in the context of export, yet you wouldn’t even be able to sell that amount of hydrogen or ammonia to an export customer today because that demand needs to be built,” Pigneri says.
“To build up the export market would be over time, and if we don’t build the capability to deliver against that - and the only way we can do it is by catering for the domestic market - we might miss the boat and other parties will move ahead faster.”
Sophie Boot is Australian Energy Daily’s Policy Reporter.