Lessons from a hydrogen leader: Australia

This is the second in a series exploring national hydrogen strategies from around the globe. For the first in the series, see our previous look at the takeaways from Japan.

Japan aspires to be one of the biggest consumers of hydrogen in the world. Today we visit a country representing the supply side of the ledger: Australia.

Australia’s approach to hydrogen:

Hydrogen as commodity

Australia was an early mover in developing a national hydrogen strategy, with an initial release in November 2019. The strategy identifies a significant opportunity for hydrogen to help decarbonize Australia’s economy, with an emphasis on the fuel’s potential for long-range transport and the industrial production of steel, as well as for generating electricity and heat.

But much like Japan, Australia sees hydrogen as more than just a climate-friendly fuel, and instead as a crucial element for protecting a national interest. In Australia, that interest is simple: economics.

Australia currently generates $70 billion AUD a year exporting coal and LNG to Asia. The inevitable decline of these businesses has long been a divisive political issue in Australia, with climate change advocates pitted against industry.

But in the wake of the 2020 bushfires, even the right-leaning Liberal government has begun to acknowledge the importance of climate action both at home and abroad. The decline of existing fossil fuel exports is no longer a question of if, but when, and this has left policymakers and industry looking for solutions to fill the gap in the economy.

With abundant potential for generating clean electricity, Australia is well-positioned to enter the hydrogen market. And with demand for its hydrogen projected at $9.5 billion AUD as soon as 2030, the fuel has the potential to be a new energy export for the country.

As Australia’s chief scientist has put it, “The most marvellous application of hydrogen of all is the ability for us to continue what we’ve been doing for hundreds of years—ship energy from a continent where it is plentiful to the continents where it is in short supply.”

Australia has already begun working to establish its hydrogen distribution networks. Official agreements are in place with countries including South Korea, Japan, Singapore, and Germany, developing joint action plans and collaborating on technology research.

Moving from brown to green

Hydrogen is already widely used around the world, including in Australia, for various chemical and industrial purposes. But most of this hydrogen is produced through steam methane reforming, which requires the burning of fossil fuels. In fact, current worldwide hydrogen production is responsible for CO2 emissions equivalent to that of the United Kingdom and Indonesia combined.

Australia is no different. The country already has significant capacity for hydrogen production. But most of this capacity is powered by so-called “brown coal”—the dirtiest of fossil fuels.

In order for Australia to develop a climate-friendly export market for hydrogen, it will need to drastically reduce the carbon intensity of its hydrogen. This can be done one of two ways:

• The first approach is to implement carbon capture and storage technologies that reduce or eliminate the emissions from steam methane reforming, creating so-called “blue hydrogen.” Australia may have some natural advantages, such as undersea basins, that present opportunities for economical carbon storage. But these technologies have yet to be proven at scale. And some environmentalists in Australia are resistant to dedicating climate change dollars on this when there are other options available.

• The second approach is to change the method of hydrogen production to electrolysis, using electricity generated without emissions. This is referred to as “green hydrogen.” This is currently an expensive option, at about twice the price of conventional hydrogen. But costs are falling rapidly, and Australian National University projected last year that the cost of green hydrogen could be competitive by the end of the decade.

Betting big with mega-projects

The Kawasaki project (credit: Financial Times)

Several hydrogen mega-projects are already underway in Australia with the support of both government and industry.

In Southeast Australia, a $500 million AUD pilot project is set to begin producing hydrogen this year for export.

The hydrogen will be generated using brown coal, liquefied, and then shipped by specialized tankers to Japan (we covered this project with Kawasaki Heavy Industries from the Japanese perspective in our post last week).

Critics of the project point out that hydrogen generated from coal is hardly a “clean” fuel source. But proponents say the initial goal is just to prove the viability of the supply chain, with a plan to reduce emissions through carbon sequestration at a later date.

Both the Australian and Japanese governments have partnered with industry to fund the project.

And in Northwest Australia, the government has fast-tracked approval on an even grander project: the Asian Renewable Energy Hub.

The Hub intends to build 15 GW of wind and solar generation this decade, making it the world’s largest power producing facility behind China’s Three Gorges Dam. The electricity would power electrolyzers to generate large quantities of hydrogen.

Much of this hydrogen would be converted to ammonia for export, while some could be used locally to decarbonize regional steel production. The project plans to begin exporting as soon as 2028, with an initial capital cost of $22 billion AUD. In the long term, plans exist to scale the facility up to 26 GW.

Transporting hydrogen as ammonia (credit: ABC.net)

Yet another project in South Australia aims to build the largest green ammonia plant in the world. Led by an Australian hydrogen company, H2U investments, the project has attracted investment from Mitsubishi Heavy Industries, and plans to commence commercial production by the end of 2022. The total cost of the project is estimated to be $240 million AUD.

These significant investments from both the public and private sector reflect the commitment in Australia to the country’s developing hydrogen economy.

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Keep an eye out for more of our investigations in the coming weeks, as we explore what Canada can learn from global leaders in the hydrogen economy.

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Written by David Campbell, former Director at the Nuclear Innovation Institute.