If Australia can maximise its opportunities to produce clean hydrogen and deliver it to the world, a potential $10 billion industry awaits, writes Ruchira Singh, editor, energy transition, at S&P Global Commodity Insights.
Australia hit a notable century in recent months, with the nation now home to more than 100 hydrogen projects, with a substantial number of them aimed at a future export market. In February 2022, Victoria’s Hydrogen Energy Supply Chain (HESC) created a minor sensation with the first trial cargo of liquid hydrogen to Japan.
Australia is anxious to get a foothold in the nascent hydrogen market to counter its established climate-compromised position as a major exporter of coal, liquefied natural gas and crude oil. It’s an opportunity worth pursuing as demand for Australian hydrogen could exceed three million mt/year by 2040, and potentially be worth $10 billion a year, according to the Australian Renewable Energy Agency.
Hydrogen projects started emerging in Australia around a decade ago, and HESC was announced in 2018. On 25 February, 2022, the Suiso Frontier (pictured above) carried liquid hydrogen from Port of Hastings in Victoria to Kobe, Japan, demonstrating the possibility of transporting the fuel long distances at minus 253 degrees Celsius.
However, the cargo received negative remarks from hydrogen cynics for carrying just 2.6 mt of liquid hydrogen in a vessel with a capacity of 75 mt. The fact the hydrogen onboard was produced via coal gasification also drew criticism.
However, HESC remains confident it can reduce costs via economies of scale so that by 2030, when the project is due to reach commercial status, production of 225,000 mt/year will be competitively priced and low-carbon thanks to carbon capture and storage.
There are other projects that exemplify Australia’s ambition as well as its penchant for technology. For example, the Tiwi H2 project on the Tiwi Islands, off the Northern Territory mainland, plans to export compressed hydrogen in purpose-built carriers from 2026. The project plans to produce 100,000 mt/year of renewable hydrogen as it seeks to benefit from a shorter route to market from Australia’s northern tip.
SunHQ Hydrogen Hub in Queensland also aims to produce renewable hydrogen by the end of 2022 for fuel cell powered trucks. In subsequent phases, project participant Ark Energy plans to export the energy carrier to help decarbonise its parent company, Korea Zinc.
The hydrogen sector is driving some interesting innovations. One notable project – Desert Bloom in Northern Territory – is extracting water from the atmosphere for electrolysis in arid locations while preserving precious local water sources.
However, Australian hydrogen projects are mostly sited along the eastern and western coastlines, with Queensland, Western Australia, NSW and Victoria dominant development locations, and respective state premiers making the running in the race to be the nation’s clean hydrogen vanguard.
Mega projects
S&P Global Commodity Insights’ Hydrogen Production Assets database shows current and planned renewable and low-carbon hydrogen capacities in Australia sum to around eight million mt/year, assuming normalised capacity factors.
Seven hydrogen hubs are in the concept and initial work stage, as are mega projects such as those being developed by InterContinental Energy, including the 50GW Western Green Energy Hub, which sprawls across 15,000 square kilometres in Western Australia and aims to produce 3.5 million mt of renewable hydrogen, or 20 million mt of renewable ammonia, by 2030.
Australia’s National Hydrogen Strategy states: “Australia is well placed to make hydrogen its next big export. We have all the natural resources needed to produce it, a track record in building large-scale energy industries, and a reputation as a proven partner to Asia’s biggest energy importers.”
Building bridges
With its plans for hydrogen-fired power generation, fuel cell vehicles and fuel cell ships, Japan is a key export market for Australia. Companies such as Mitsui & Co, Osaka Gas, Japan Oil, Gas and Metals National Corporation, Marubeni, IHI Corporation, Itochu and Sumitomo are all participants in Australian hydrogen projects.
Other relationships are being nurtured, too. In June 2021, a declaration of intent with Germany saw the joint funding of the Hydrogen Innovation and Technology Incubator (HyGATE). In March 2022, E.ON Group, a huge European network operator, and Australia’s Fortescue Future Industries agreed to supply five million mt/year of renewable hydrogen to Europe from Australia by 2030.
Meanwhile, in 2021, Australia and Singapore announced a partnership to accelerate deployment of low-emissions fuels and clean hydrogen in maritime and port operations. Also, in November 2021, the Port of Rotterdam, in the Netherlands, and Western Australia signed a memorandum of understanding to develop a renewable hydrogen export supply chain.
Taking flight
The next big step will be when the first hydrogen purchase agreements are signed. Port Anthony Renewables in Victoria invited expressions of interest in February 2022 for offtake of renewable hydrogen to be produced at the port and shipped overseas or sold domestically from 2025. HESC and InterContinental Energy say they are actively in talks with potential offtakers.
Australia targets a $1.43/kg price for renewable and low-carbon hydrogen under the Federal Government’s Technology Investment Roadmap. Current prices are higher, as seen on key S&P Global Commodity Insights price assessments (above). For example, Queensland hydrogen produced via alkaline electrolysis, including CAPEX, was assessed at $9.98/kg on 13 April, 2022, up 86 per cent from the month prior.
Technological advancements resulting in economies of scale and a gradual pick up of demand have the ability to drop prices and kickstart the market. There is enough optimism in the trade that it will get there.
Specifically, the falling cost of electrolyser plants and a plethora of renewable power could help renewable hydrogen meet everybody’s energy transition hopes.
Australia’s Fortescue Metals Group and European aviation company Airbus have signed a memorandum of understanding to cooperate on developing hydrogen as aviation fuel, striving for a first zero-emission commercial aircraft service by 2035.
For the Australian hydrogen trade, that would be a huge win.