Hydrogen for transition to net-zero: Where are we now?

As this year’s delegates congregated for the Australian Energy Future Conference, the entire world was preparing for Glasgow’s COP26 summit. As such, it was a great time to hear from some of the industry’s real powerhouses as they discussed the future of energy—specifically the role hydrogen will need to play in Australia’s transition to net zero.

The Day 3 opening plenary session of the 4th Energy Future Conference featured Dr Alan Finkel, John O’Brien, and Prof. Peta Ashworth. From their presentations, the message was clear. For the first time in history, the world is looking to replace an existing energy source. If that’s to happen—and it must—it needs to be supported by policy, technologies, investment, and people. Beyond that, we must quickly find a way to balance the supply and demand of green hydrogen by embedding its capability into our electricity and gas networks and our transport and manufacturing industries, and seek out opportunities for export.

Here’s a summary of the three presentations:

Unlocking Australia's Hydrogen Economy

In the opening address, Dr Alan Finkel, Special Adviser to the Australian Government on Low Emissions Technology—DISER—laid out the challenges and opportunities that lie ahead.

The history of the modern energy supply is a tale of accretion. As new fuels have been discovered, we have simply added them to the energy mix. Until now, we have never looked to replace an existing energy source.

If we are to tackle greenhouse gas emissions that’s exactly what we need to do. We must build something new, something better. We call it The Electric Planet. It’s a model in which we use clean energy to target the areas that account for 80% of emissions. It requires us to take three simultaneous steps:

  1. We have to decarbonise our existing electricity supply with a combination of solar, wind and hydro.

  2. We need to transform the built environment so that it runs on clean electricity and its derivatives.

  3. We have to tackle transport, through electrifying heavy-duty vehicles like trains, trucks, ships and planes, which we will achieve by delivering electricity through high-density fuels like hydrogen and its derivatives.

In taking these three steps, we will also avoid the 10% of emissions that are attributed to fugitives—the emissions that escape during the extraction and export of coal and oil.

But such change isn’t going to happen organically. It needs to be supported by policy. Though new technologies like solar power and battery storage have already begun to make their mark, they needed help to do so. At the outset, they were hundreds of times more expensive than oil, gas and coal. Only with the help of government intervention—in the form of feed-in tariffs and reverse energy auctions, for example—have they been adopted by residential and commercial consumers.

The scale of what needs to be done is almost inconceivable, so too is the opportunity it presents to Australia. To give a sense of what is required, if we were to match 2019’s LNG exports with the equivalent hydrogen energy, we would need to use 8 times the amount of electricity we produced as a nation in 2019!

Of the challenges we will face, two in particular are worth noting:

  1. Rather than refer to hydrogen by colours, we need to measure the emissions during hydrogen production numerically. An internationally accepted certification scheme is being looked at by the IPHE, and the efforts are being led by Australia, France and the US. An equivalent domestic scheme is being finalised by the Clean Energy Regulator.

  2. We need to balance pent-up demand and pent-up supply. There are dozens of projects underway in Australia. To ensure there is sufficient demand, we will need to start using hydrogen for energy storage, electricity back-up and generation, heavy duty transport, steelmaking, ammonia and fertiliser production, blending into the gas network, and export.

The Role of Hydrogen in Achieving Net Zero at the Least Possible Cost for the Economy

John O’Brien, Senior Partner, Financial Advisory at Deloitte Australia, talked about the path to a competitive hydrogen economy.

As mentioned above, the opportunities are enormous. The market has taken notice and plenty of companies are now talking about supplying hydrogen. The question is: who is going to buy it?

At this point in time, green hydrogen is costly to produce. When you consider all the aspects of the production process and supply chain, preliminary analysis suggests the indicative cost in Australia at the moment is between $3 and $9 per kg. Over time, that price will fall and modelling by Deloitte suggest that hydrogen will reach $3.30 per kg between 2025-26. When this happens, hydrogen will become competitive with diesel. That represents a lucrative, near-term opportunity for Australia to decarbonise long-haul trucks, buses and coaches.

Assuming we are able to reach a price of $2, the cost of using green hydrogen and decarbonising will not lead to significantly higher prices for end users. Modelling shows that the impact on the price of most goods and services will be minimal. There is one exception, however: aviation. In the medium term, the opportunity lies in transitioning the aviation industry away from jet fuel post 2026. But even at $2 per kg, hydrogen will have a noticeable impact on the cost of a ticket.

Maximising the utilisation of electrolysers will be the key to ensuring hydrogen is competitive. As such, hydrogen hubs—where multiple users take hydrogen at different times and for different uses—will be critical. Developing these hubs is one of the priorities in Australia’s National Hydrogen Strategy.

If we are to take advantage of the opportunities hydrogen will present, we will also need to invest. At the moment, we are lagging behind our competitors. To date, we have invested $1.2 billion. In comparison, Germany has recently invested $12.7 billion, South Korea has invested $50 billion, and the UAE has invested an undisclosed portion of $164.7 billion. (see also IEA Global Hydrogen Review 2021, p 27)

The Public and Hydrogen: Results from Citizen's Panels.

Prof Peta Ashworth, Chair of Queensland Hydrogen Task Force, Chair of Sustainable Energy Future, University of Queensland talked about the social aspects of hydrogen.

To understand people’s attitudes to the current and future energy system, three citizens’ panels were created. They were designed to be deliberative; to take the members on a journey in which they were educated on certain topics by a series of experts so that they could form their own, informed opinions.

The panels were held in three locations: greater Melbourne, Illawarra Wollongong, and South Australia. Each was designed to match the local demographics as closely as possible, to gain insight into the opinions of the general public at an urban, rural and state level.

The panels were asked a series of questions, including what they valued most about the current energy system. They were also asked to consider the actions, challenges and opportunities Australia will face as it moves along the path to net zero. Their responses were documented and analysed.

The panel’s feedback showed that a one-size-fits-all approach wouldn’t deliver the right outcomes. Whereas some areas valued quality of service and the availability of solar power and battery storage, others were focused on affordability and reliability.

During the sessions, the panels were asked to develop a series of principles that they felt should underpin the transition to a low-carbon energy future. They were:

  1. Every person has the right to safe, reliable and affordable energy supplies that are supported by fair tariffs and rebates. Therefore all Australians should have reliable, guaranteed energy when they need it and at a price they can afford.

  2. The implementation of new low-carbon technologies should be based on scientific research and education, and supported by government and industry funding.

  3. The new energy technologies should be safe to produce, consume and dispose of in comparison to the current technology.

  4. Australia should participate in global efforts to reduce CO2 emissions. It should prioritise the development of renewable energy, introduce targets to approach zero-net carbon emissions and implement a code of conduct informing Australians about all energy choices.

  5. Energy is an essential service. Big companies and government should act in the public interest so that energy services are equitable. Energy providers should put human and environmental impacts alongside profit.

  6. Government and private support for education and research with a purpose to encourage innovative and progressive technology and an objective to produce financially viable renewable sources of safe, environmentally friendly and reliable energy.

  7. Governments’ decisions should be apolitical and instil fair incentives for moving towards renewables and penalties for non-compliance. They should allow free enterprise to develop alternative energies at a cost-effective rate for the consumer, through tax incentives.

  8. There should be an obligation to provide energy to the citizens of Australia first before exporting to other countries. The energy transition throughout the years needs to have system redundancies to ensure energy security.

Watch the recorded video of this session here:

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