Australia’s National Hydrogen Strategy adopted, funds for new projects allocated

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At the Friday meeting in Perth, the COAG Energy Council agreed to the National Hydrogen Strategy, which is expected to pave the way for a hydrogen economy that would enhance Australia’s energy security, create jobs and build an export industry valued in billions. The federal government used the meeting to announce $370 million would be directed to a new fund aimed at developing Australia’s hydrogen industry.

The money to bankroll green hydrogen projects will come from existing allocations to the Clean Energy Finance Corporation (CEFC) and Australian Renewable Energy Agency (ARENA), with the former tipping in $300 million and the latter $70 million. According to Energy Minister Angus Taylor, the funding will help Australia to realise its potential as a leading hydrogen supplier to key export markets, particularly in Asia.

Despite positive aspects, the National Hydrogen Strategy remains “technology-neutral”, with both hydrogen produced using renewable energy and the one via fossil fuels with “substantial” carbon capture and storage (CCS) in the game. Throughout the consultation process, Australia’s Chief Scientist Alan Finkel continued to push Australia toward hydrogen produced by solar and wind, but also remained attached to the fossil fuel-CSS idea. The stance was reflected in the Strategy itself.

Notwithstanding the efforts by ACT Energy Minister Shane Rattenbury on Friday to change the strategy so it only supported green hydrogen, federal resources minister Matt Canavan said after the meeting the government would be encouraging all forms of hydrogen creation, including production using brown coal.

“We have a really challenging task to bring down the costs of supplying hydrogen to the world,” he said. “Getting all of those costs down means trying different things at the moment and it’s not the time to foreclose different ways of producing hydrogen which would limit our ability to reduce those costs in the supply chain.”

However, the good news is that the Strategy also envisaged the development of a hydrogen certification scheme that will show the emissions intensity of hydrogen produced in Australia. With such transparency, prospective importers will be aware of the environmental impacts of the hydrogen they use. And Australia expects to have many trading partners, particularly in Asia, including China, South Korea, Japan and Singapore, which are already looking to develop hydrogen economies.

As established in previous studies, capitalising on the growing demand for hydrogen could result in an export industry worth $1.7 billion by 2030, and could provide 2,800 jobs, most likely regional ones. On top of this, two international reports have confirmed Australia’s potential as a future major hydrogen supplier. The World Energy Council identified Australia as a ‘giant with potential to become a world key player’, while the International Energy Agency projected that Australia could easily produce 100 million tonnes of oil equivalent of hydrogen, which could replace 3% of global gas consumption today.

Overhigh expectations?

However, a report by The Australia Institute (TAI) released in the run-up to the COAG meeting found the projected demand for hydrogen had been overstated. The think-tank argued the hydrogen export projections from consulting firm ACIL Allen, which the government is referring to, were 11 times higher than Japan’s official target, noting that even the low demand projection is two and half times the official target. The projections for South Korea are similarly high by comparison with government plans.

“Prematurely establishing a hydrogen export industry based on highly inflated demand figures may lock out the cleanest form of hydrogen, using renewable energy and electrolysis, because the technology isn’t cost competitive at this stage,” said Richie Merzian, Climate & Energy Program Director at TAI.“If hydrogen development is rushed in Australia it could see fossil fuels locked in as a global energy source for decades to come. The emissions will make it impossible to comply with Australia’s obligations under the Paris Agreement.”

According to a recent analysis from Wood Mackenzie, green hydrogen, produced primarily by solar electrolysis, will reach cost parity in Australia by 2030 based on US$30/MWh renewable electricity and 50% utilisation hours for electrolysers. But, the Hydrogen Strategy sets a vision for Australia to already become a major global player by that point. Meanwhile, CCS continues to be a costly option in Australia and across the world and often just an excuse to avoid taxing carbon and pull support from renewable energy technologies.

“A decade ago the fossil fuel industry promoted clean coal using CCS and now it is promoting hydrogen using the same unsuccessful technology. CCS projects have repeatedly failed to live up to promises, both domestically and globally, and missed their targets by a very large margin time and time again,” Merzanin said. “The only way to make hydrogen truly sustainable is to produce it using water and powered by renewable energy sources. Australia has time to establish and lead a global renewable hydrogen industry and should focus research and development efforts in that area exclusively.”