Project plight highlights hydrogen’s challenge

THE decision by Canadian infrastructure group ATCO to abandon a $53 million green hydrogen project 250 kilometres north of Perth shows how challenging the transition from fossil fuels is likely to be.

On the face of it, a lot stacked up for the Clean Energy Innovation Park project south of Eneabba, especially as Australia heads towards the self-imposed 2030 deadline for vast cuts in CO2 emissions.

Hydrogen, while by no means a perfect replacement for natural gas, has some strong parallels in its transport and use.

ATCO operates the gas reticulation network in the South West, so it has a very good reason to invest in alternatives like hydrogen. It already runs a small pilot operation from Jandakot.

With wind being the intended energy source, this was genuine green hydrogen.

ATCO had also secured Australian Renewable Energy Agency approval for a $28.7 million grant for the project.

So, what could cause it to cancel this project?

ATCO said last week it remained committed to a hydrogen facility in Western Australia but believes it is more feasible to proceed closer to heavy industry, where demand will justify the investment.

But that is not the whole story.

While the proximity of production to customers may have been an issue that emerged from its deliberations, the fact that ATCO did not have an offtake agreement was ultimately the key reason for the project’s death knell.

It was a precondition for the ARENA funding.

Despite the federal government throwing money at this kind of caper through the likes of ARENA, due to the urgency of its own policies, the environment in WA has, it seems, been slow to keep up.

It is notable ATCO is still going ahead with projects in other jurisdictions.

In WA at least, ATCO thinks the economics for this kind of project’s success are lacking and has retired from the fray to lick its wounds while it waits for conditions to improve; presumably when an offtake agreement might be more likely.

That is disappointing.

Of course, it isn’t black and white.

WA has abundant natural gas which is cheap by national and global standards.

The state is highlighting that advantage, so it would be somewhat contradictory to add to costs by requiring hydrogen to be part of the mix.

Nevertheless, we need to keep an eye to the future, so it is surprising that industry sources say there is an absence of basic policy settings, such as feed-in tariffs like those which reward renewables producers or clear rules for blending with natural gas, that would stimulate this new market and get it moving.

And this was not a gigantic project.

By comparison, the Dampier to Bunbury Pipeline cost the state more than $1 billion to develop, with its energy utility building the pipeline and agreeing in the early 1980s to a take-or-pay contract for more gas than known demand at the time.

It initially had a capacity of 360 terajoules a day, upgraded to 450TJ/day in the early 1990s. We have long benefited from that strategic decision.

ATCO’s project was forecast to produce four tonnes a day, or the natural gas equivalent of about half a terajoule.

It could fuel up to 800 cars or 150 buses or trucks, by being added largely unnoticed into the natural gas system or serving the needs of an industrial user.

In most of these forms, a state-owned agency or utility might have stepped in, in some way.

Public transport, reticulated gas retailing or as a direct input to power production?

I am no fan of subsidising private interests or attempting to pick winners, but the state government has long talked of WA taking advantage of our resources strengths to be a leader in this new market.

Such was its keenness, it made Alannah MacTiernan the state’s first hydrogen industry minister in 2021.

In acting, the state doesn’t need to favour one producer or another, but it seems odd with all the talk of being a hydrogen superpower we don’t have even the basic settings in place to fuel a local market.

No-one is suggesting the level of ambition that existed in the 1980s is needed today but it does seem we may be dragging our heels.