Bottling up Australia’s sunshine and wind as green hydrogen and exporting it to the world is starting to look less like a pipedream. But first we need to get the colours right, writes Poppy Johnston.

In late January 2022, the world’s first purpose-built hydrogen tanker, the Japanese-made Suiso Frontier (pictured above), started loading its first shipment of liquid hydrogen at Victoria’s Port of Hastings to transport to Japan.

Clean hydrogen, which is a flexible fuel that can be used for transport, manufacturing and electricity production, is central to Japan’s decarbonisation agenda. Which is why it may come as a surprise the hydrogen loaded onto the ship was made using dirty brown coal from Victoria’s Latrobe Valley.

Granted, carbon offsets will be used during this early pilot phase and the plan is to eventually build carbon capture and storage (CCS) capabilities to capture carbon dioxide released in the coal-to-hydrogen process. As part of the Japan-Australia venture designed to iron out wrinkles in the hydrogen supply chain, the controversial CCS technology landed another $20 million from the Australian Government.

It’s the latest development in a dream that has captured the imagination of many people in the space in just a few short years: Australia exporting hydrogen to the world. Clean hydrogen and ammonia could replace Australia’s lucrative fossil fuel exports in a decarbonised global economy; reduce the nation’s reliance on imported fuels; slash global emissions; and create thousands of jobs in the regions.

That’s the vision outlined in the Federal Government’s National Hydrogen Strategy, led by Australia’s chief scientist, Dr Alan Finkel. The goal of bringing down the cost of clean hydrogen to below $2 a kilogram has been backed up by millions in government funding for research and projects, including the development of several regional hydrogen hubs.

A lot has happened since the early days of the hydrogen export idea. While still considered an ambitious task steeped in vast logistical and technical challenges, the pathway is becoming clearer. Indeed, a “hydrogen superpower” scenario was added to the Australian Energy Market Operator’s 2022 draft Integrated System Plan, which also highlighted a faster-than-predicted clean energy transition taking place.

If nothing else, the clean hydrogen export opportunity has helped generate bipartisan momentum behind the low-carbon agenda. According to August 2021 research by the University of Queensland for the Future Fuels Cooperative Research Centre, the public is broadly in favour of hydrogen used locally as well as exported.

The research, led by clean energy expert Professor Peta Ashworth from the University of Queensland, shows that support cuts across party allegiances.

Globally, 2021 was a huge year for clean hydrogen announcements – including the release of 26 national hydrogen strategies – and BloombergNEF is predicting even more activity in 2022. The strategic research provider forecasts electrolyser sales to quadruple this year and at least four hydrogen companies to go public. It also expects to see net-zero commitments doing more to drive momentum than carbon prices.

However, many questions remain unanswered for Australia’s clean hydrogen export opportunity: What are the best regions for producing it? Will communities embrace it when the time comes to build the necessary infrastructure? What should we be using it for given clean electricity is cheaper and cleaner in many applications?

In fact, even the definition of “clean” hydrogen remains an open question.

All the colours

Perhaps most pressing is the confusing rainbow coding system used to describe the colourless hydrogen gas. Hydrogen is already inexpensively produced for industrial purposes using fossil fuels. This is often called “grey” hydrogen. The “green” variety is made by zapping water with renewably produced electricity in a process known as electrolysis. There’s also “blue” hydrogen in play, which is made using fossil fuels but can be considered low carbon because it uses CCS technologies.

However, not everyone is convinced by the low carbon credentials of blue hydrogen. Dr Fiona Beck from the Australian National University’s College of Engineering and Computer Science is part of a large research program investigating pathways to decarbonise Australia’s exports to the Asia Pacific region, including hydrogen fuels and its derivatives.

According to recently released research on blue and green hydrogen, blue hydrogen’s low carbon credentials are challenged by the fugitive methane emissions from extracting and processing natural gas. Fugitive methane emissions go largely unaccounted for despite a growing body of evidence demonstrating the prevalence of leakages.

“If you include the methane emissions in the emissions accounting for blue hydrogen, it starts to look a lot less clean,” Beck tells EcoGeneration.

While blue hydrogen is cheaper than green hydrogen, this is unlikely to be the case by the end of this decade. Beck says the trajectory to bring down the cost of green hydrogen is “really clear” due to the anticipated price drop in electrolysers when manufactured at scale, as well as expected advances in wind, solar and other clean energy technology.

The same can’t be said for CCS, which requires a bespoke solution for every plant and becomes more expensive when larger proportions of CO2 need to be captured. Beck notes that despite attracting a lot of investment during the years, CCS remains largely unproven as a carbon reduction tool.

The concern is that investing in fossil fuel based hydrogen with CCS could be risky as it locks in a new fossil fuel industry with significant emissions, and is likely to be out-competed by much cleaner technology in the future. A recent International Renewable Energy Agency report also voiced concerns about blue hydrogen projects becoming stranded assets.

Know your hydrogen

The origin story of hydrogen matters. While some methods of production are much more carbon intensive than others, the molecule leaves no clues about how it was made.

Without a trusted mechanism for labelling hydrogen production methods, there’s danger that countries will shift the burden of carbon reduction elsewhere.

As Beck points out, hydrogen is different from fossil fuels in that most of the emissions are released at the point of production rather than at the point of use. Due to carbon accounting and reporting practices in country, it’s possible the responsibility for cutting emissions will be shifted to each hydrogen-producing country.

One solution is trade agreements, such as the carbon border adjustment mechanism that the European Union plans to implement. Beck says this could enforce the transfer of low carbon products across borders.

The first step is agreeing on definitions for hydrogen production. In Australia, the Clean Energy Regulator is trialling a Hydrogen Guarantee of Origin (GO) scheme during the next 18 months that will identify how supplies of hydrogen are produced.

The Federal Government has committed to aligning with international efforts to classify hydrogen origin through the International Partnership for Hydrogen and Fuel Cells in the Economy.

How green is green hydrogen?

An uncomfortable thought to consider is that green hydrogen will be competing for renewable electricity at a time when it’s in great demand. There is a risk, as Beck points out, that clean energy could be siphoned off to make hydrogen at the expense of the emissions intensity of the domestic grid.

“There is some complexity in thinking about how clean even green hydrogen is,” she says.

Beck says energy systems are complex and it may, in some circumstances, make sense to start producing hydrogen before decarbonising the grid fully.

The best clean energy source for the job

The optimal applications for clean hydrogen are still the subject of discussion. For most applications, using renewable energy directly without turning it into hydrogen is the preferred option because going from electricity to hydrogen, then back to electricity, is going through a 30 per cent round-trip efficiency.

In transport, electric cars are likely to be cheaper than hydrogen fuel cell cars, but hydrogen fuelled trucks are likely to be better suited for long-distance freight. These sorts of equations are playing out in real time – in the southern French city of Montpellier, a transport agency recently cancelled an order of hydrogen fuel cell powered buses upon discovering electric buses are significantly cheaper, both in upfront and operating costs.

However, there are some safe bets for hydrogen. According to the 2020 BloombergNEF report, it’s most suitable for manufacturing processes that require the physical and chemical properties of molecule fuels in order to work, such as in steel and cement manufacturing, and replacing the grey hydrogen used in oil refining and methanol and ammonia plants.

The molecule’s low density also makes transporting it an expensive exercise that requires new infrastructure in bulk. One might start to wonder if there are that many situations where it makes sense to import green hydrogen.

Beck says from a pure energy efficiency perspective, nations should prioritise renewable energy generation in country rather than importing green hydrogen from far away. But the caveat is that real-world energy systems are extremely complex.

For example, in Germany modelling has been done to show the country could meet its energy needs by creating a big super grid with the rest of Europe, but Beck says that ignores the complexity of the existing system.

“The fact that people don’t want more transmission lines, and that most people in Europe use gas as their main heating supply, if you suddenly tried to electrify all of that, what would that mean for the electricity grid?” she says.

Given the reality of these energy systems, Beck says it could be the case that the best option is to actually import a product such as green hydrogen.

“But that’s a really open question,” she says. “There’s a lot of debate right now about how much green renewable fuels are actually going to play a role in the future.”

BloombergNEF head of industry decarbonisation Kobad Bhavnagri has previously suggested that given the economics of transporting hydrogen, Australia should focus on making and exporting green hydrogen derivatives such as green steel and synthetic fuels.

“Instead of exporting the hydrogen itself, you export the goods you would make using hydrogen,” he has stated.

The cheapest places to produce green hydrogen

Steven Percy is a senior research fellow with the Victorian Hydrogen Hub based at Swinburne University of Technology. He has done some modelling work to discover the most suitable Australian regions for producing green hydrogen.

His preliminary modelling identifies the low cost renewable energy zones for producing cheap green hydrogen. Based on these forecasts, the best places to produce green hydrogen are currently Far North Queensland and Tasmania, although this will change as more clean energy projects are built.

By 2030, the Far North Queensland coast could be the lowest cost spot for producing green hydrogen, and by 2040, inland areas across NSW, Queensland, Victoria and South Australia could be the least expensive hydrogen-producing regions.

The next stage of the research will overlay other factors that should be considered when selecting zones for hydrogen production, such as proximity to ports and areas of demand. Percy says that the cost of putting in pipelines is another factor to consider. In some circumstances, it could be feasible to put in a pipeline to transport hydrogen from a low-cost producing zone to areas of high demand and supply chain access.

Other variables to consider are environmental factors, such as available water resources. According to Percy, “surprisingly little” water is required to service the $50 billion green hydrogen industry envisioned by the Federal Government – around four per cent of the water used for agricultural purposes. He also notes that a lot of water will be freed up when coal-fired power stations retire.

Desalination is also an option. Percy estimates using cheap renewable energy for desalination could account for only about one per cent of the cost of producing hydrogen. However, desalination can harm marine life so this option would need to be weighed up on a project-by-project basis.

Australians are protective of farmland and water

Professor Ashworth is an expert in understanding the public perceptions of hydrogen and other energy resources. She led some research on hydrogen in 2021 for the Future Fuels CRC (a national survey and citizens’ panels). The survey was based on one she and her team undertook for ARENA in 2018. Comparing the two studies, a slight increase in support for hydrogen was recorded.

Ashworth says when it comes to surveying the public about these sorts of technologies, many opinions are still loosely formed and often based on information gleaned from family and friends, if at all. Generally, the public’s understanding of hydrogen is fairly shallow outside a small cohort of enthusiasts. For example, few people are cognisant of the different colour codes applied to hydrogen.

“And why would they … they are probably not even thinking about hydrogen,” says Ashworth. However, when they hear about the production processes, most people are more in favour of green hydrogen produced from renewable energy.

It’s when a project is proposed nearby that people typically start asking questions about the effects of that project, in particular on farmland or water resources because “that’s when the real social licence issues come to the fore”, says Ashworth.

In terms of the export opportunity, Ashworth says there are some legacy issues tied to the export of gas and the notion of prioritising an affordable local supply.

“It’s something that comes up a little in group discussions,” she says.

Safety is also the top concern – although most are confident this will be well managed through regulations – as is the need to ensure economic benefits flow through in the form of jobs and diversification of local economies.

People are also concerned about environmental impacts, such as water use and land use that might otherwise be used for agriculture. 

“I think the coexistence issues between land for food and land for energy production is going to be a critical social licence issue,” says Ashworth. “Particularly when you start to look at the scale of production required.”

She says that once people are informed about the benefits of hydrogen for domestic use and export, they tend to become more supportive rather than less. As such, Ashworth says the many pilot projects that are occurring around Australia will be very valuable for educating the community and building confidence in the industry.