There’s plenty of hope for hydrogen, but the sector needs to avoid playing into hype.
- ‘Hydrogen, hype or hope’ was the topic of a well-attended event at Energy Club of Western Australia in mid-August.
Given the issue’s current prominence in the state’s energy conversation, perhaps ‘Hydrogen, a realistic pathway to iteratively tackle emissions reduction’ may have been a more comprehensive title.
Indeed, hope can be whipped into hype, and hype become the basis of hope.
In a conversation that includes all the colours of the rainbow to describe hydrogen production – blue, green, yellow, white, pink, grey have all been cited – and where we get fixated on the distinctions between clusters and hubs, those outside of the sector can become easily confused with where it’s all going and why it’s going there.
Let’s consider how we arrived here; first and foremost is the driver to decarbonise.
Hydrogen has advantages in areas where decarbonisation through electrification is not established, not plausible, more expensive, and/or where hydrogen offers advantages that electrification does not.
Most commonly, this will be applications such as heavy transport, remote power, and use in industrial feedstock.
Where the rainbow comes in is what the carbon footprint of the hydrogen is.
The two most referenced are green and blue.
Green hydrogen is produced by splitting water with electricity generated by renewable energy, while blue hydrogen is produced through a process called steam methane reforming while capturing the CO2.
Grey, splitting water with electricity from the grid, is also likely to have a short-term role, although this is far less referenced.
While positioning around hydrogen started in earnest around 2017, the emissions reduction driver has increased considerably since then.
Investors have gone from knowing next to nothing about hydrogen to agreeing partnerships with developers, while customers are increasingly referencing a willingness to pay a premium for a cleaner product.
The Australian discussion often centres on export, but where will hydrogen go?
This leads to the next reason for how we’ve arrived here: emerging national targets for hydrogen use and growing discussion about supply chain and technology development between jurisdictions.
Japan, a key market for Australia’s LNG and important trading partner, has placed a target of acquiring 300,000 tonnes of hydrogen a year by 2030.
South Korea has also invested heavily in hydrogen, with significant government support to grow its role in producing fuel cells, electrolysers, and fuel cell vehicles for export and domestic use.
More recently, Germany has committed to hydrogen goals and has entered into various agreements, including with Australia, to unpack how a green hydrogen supply chain would work between jurisdictions.
The final plank is falling renewables costs.
With the build-out of renewable energy becoming cheaper and power prices reducing as a result, the cost of green hydrogen production will likewise fall.
Indeed, electricity costs account for between 50 and 60 per cent of green hydrogen production costs.
The macrotrends provide a clear narrative of promise for hydrogen.
Yet in the big picture of hope, the sector needs to avoid playing into hype and offer an iterative and phased pathway forward.
There’s a balance at play.
On the one hand, industry and government need to act with urgency.
Strategic positioning is happening globally and, unlike minerals and petroleum where the geology gives rise to the resource base, there are several options globally that can underwrite hydrogen production at scale.
Yet this should not be done in a way that leads to suboptimal policy positions or taxpayer money being misdirected.
This is a future industry with the framework being put in now. Unintended consequences of decisions now would have far-reaching consequences.
Avoiding land banking is imperative.
There is no shortage of ideas.
Urgency can be directed to unveiling a competitive process in which proponents outline their plans and outline what’s needed from government to make this happen.
There will be big dollars involved, cutting across sizeable infrastructure, land, and potentially government-backed offtakes.
The government can’t support everyone, but if it’s done through a competitive and transparent process, support will be well directed.
And how about bringing manufacturing to the state for the kit needed.
It won’t happen overnight, and it won’t happen by putting to one side the structural factors that explain why we don’t do more manufacturing now.
Attracting such activity needs to be done with upstream proponents as these projects progress. Hydrogen is so hot right now.
Let’s make sure it’s not hot air.
- Joe Doleschal-Ridnell is director at JDR Advisers, where he works with clients in mining, energy and industry