- Hydrogen offers a solution to the global decarbonization challenge, as well as a significant new energy export opportunity.
- Governments and the private sector in Australia and New Zealand are showing renewed interest in the hydrogen industry.
- 2019 and 2020 will be key years in the development of the industry, with national strategies being developed and demonstration projects underway.
Why hydrogen's time has come
Hydrogen can be combusted for heat and motion (like natural gas) or oxidized by fuel cells for electricity to perform a variety of functions in power generation, transportation, heating and industrial processes. Importantly, hydrogen can be a low- or even zero-emission form of energy through the use of renewable energy technology or carbon capture and storage.
Hydrogen's potential as a form of energy has been known for a long time, but development of the hydrogen industry has stagnated. Experts point to three factors that have led to renewed interest in the hydrogen industry down under:
- Hydrogen has become cheaper to produce. With the new abundance in renewable energy, and the continued abundance of fossil fuel energy, it has never been more cost-effective to produce hydrogen from electrolysis (using an electric current to split water into hydrogen and oxygen), steam methane reforming (reacting natural gas with high-pressure steam) or coal gasification.
- It has become cheaper and easier to use in a variety of applications. Hydrogen technology has now been proven at commercial scale for mobility, energy storage, and as a clean fuel in gas networks. For example, hydrogen fuel cells have become smaller and cheaper, and therefore are more easily incorporated into vehicle manufacturing.
- Finally, hydrogen is in demand. In 2017, the Japanese Ministry of Economy, Trade and Industry outlined a vision for a hydrogen-based society to secure Japan's energy supply and assist in cutting its greenhouse gas emissions. The South Korean government has also shown increasing interest.
What's happening in Australia
The last year has been an exciting time for the hydrogen industry in Australia. A national hydrogen strategy is being developed by governments at the national level and is due to be finalized in late 2019 or early 2020. Hydrogen strategies are also being implemented at state level, including in the resource states of Queensland and Western Australia.
Research and development programs are occurring across multiple Australian universities and research organizations. In March this year, a program run by Queensland University of Technology, supported by Japanese petroleum conglomerate JXTG, conducted the first export of green hydrogen (hydrogen produced from electrolysis using renewable energy) from Australia to Japan.
The private sector is also forging ahead with new projects, often using government grants:
- Japan's Kawasaki Heavy Industries is coordinating a pilot project in the coalmining hub of the Latrobe Valley in Victoria to produce hydrogen through gasification of lignite combined with CCS for export to Japan.
- Renewables developers such as Neoen and Union Fenosa are planning co-located wind, solar, battery and hydrogen plants to produce green hydrogen.
- Gas utilities such as Jemena, ATCO and the Australian Gas Infrastructure Group are trialing the injection of green hydrogen into gas distribution networks.
- Australian LNG producer, Woodside, has invested in a consortium planning to build and operate hydrogen refueling stations across South Korea.
- Toyota is transforming a decommissioned car manufacturing plant near Melbourne into a hub to produce green hydrogen for transport.
And in New Zealand
The New Zealand government is also looking to support the development of a new green hydrogen industry after last year's announcement of a moratorium on continuing offshore oil and gas exploration.
In March 2019, the government launched a roadmap for the development of a new green hydrogen industry based in the Taranaki region – the hub of New Zealand's energy sector. The government has also signed a memorandum of cooperation on hydrogen with the Japanese government. In the private sector, the Tuaropaki Trust and Japan's Obayashi Corporation have broken ground on a plant to produce green hydrogen using geothermal energy in Taupō. Ports of Auckland has also announced plans to build a pilot hydrogen production and refueling facility at Waitematā port.
Opportunities for future growth
Projections show increasing global demand for hydrogen, particularly in Asia. Both Australia and New Zealand are well positioned to serve that demand, due to their existing infrastructure, expertise and resources, as well as proximity to key markets.
Continued growth of the hydrogen industry in both Australia and New Zealand will, however, also depend on reducing supply-side barriers to the industry's development, through the following:
- Stable government policy: major parties in both countries are supportive of the hydrogen industry, and development of the industry has not been politicized in contrast to much else in the energy space. National hydrogen strategies should be concluded and implemented in each country as a priority to capitalize on this support and provide a basis for stable future government policy on hydrogen.
- Supportive regulatory settings: the electricity and gas regulatory frameworks in Australia and New Zealand have strict requirements as to the gas mixture that can be transported in the gas pipeline network, which, if not amended, may preclude blending of large quantities of hydrogen into the network. Over time, regulations and standards specific to hydrogen and hydrogen technology will also need to be adopted to facilitate the industry. In Australia's federal system, it will also be important to ensure consistency of regulation across jurisdictions, for example, in relation to regulation of hydrogen vehicles.
- Vertically-integrated corporate structures: long-gone are the days of a single government-owned entity controlling an entire energy network. Today, different parts of the energy networks are owned by different entities, which sometimes have very different priorities. If the hydrogen industry is to continue to develop, it needs new and vertically-integrated corporate structures (including joint ventures) to enable the sharing of benefits, risks and costs, and to align priorities up and down the value chain. Government incentives or participation may be required to make this happen, as collaboration is not something that occurs easily in a market that is often very competitive (and regulated so as to encourage such competition).
- Infrastructure renewal and development: gas networks and facilities across Australia and New Zealand are in some cases not suited to hydrogen. Infrastructure is constantly renewed, but renewal programs will need to be more comprehensive to adapt infrastructure to materials suited to hydrogen. New infrastructure development will also be challenging: hydrogen projects are not modular to the same extent as wind and solar projects. In some cases large-scale investment will be required, which may require up-front government support and strategic management.
- Community acceptance: the threat posed to the energy industry by a lack of community acceptance is well known. Fossil fuel industries have been targeted for high greenhouse gas emissions, and renewables industries for land use and the impact on amenities. For the hydrogen industry, maintaining "social license to operate" should be a top priority. In this respect, the industry will need to consider how to address issues of emissions (relevant to non-green hydrogen), water use (relevant to green hydrogen) and safety.
Above all, development of the hydrogen industry will require ambition and focus from governments and the private sector. The next five to ten years will be a crucial period for the gas industry as it seeks to maintain and promote its relevance as an energy source in a world increasingly focused on emissions and decarbonization. A strong hydrogen industry would support decarbonization goals while also providing continuing revenues for government and the private sector.
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