Climate | Environment | Emissions Reduction

Solving the hydrogen problem: chicken or egg?

One of the things keeping me up at night is the chicken and egg problem with hydrogen, Chief Scientist of Australia, Dr Alan Finkel AO told a CEDA audience in Melbourne.

“Until there's demand you can't build up the production, until you build up the production you don't get the cost down, and until you get the cost down you don't build up the demand,” Dr Finkel said. 

“So when I think about this big opportunity of making hydrogen and using it to decarbonise the Australian economy and to sell it to other countries so they can decarbonise their economy, there are three things that keep me up at night – scale, demand and diversity of supply.” 

Dr Finkel there are opportunities to build demand for hydrogen through bilateral trade agreements, industrial hubs, transport fleets and blending into the current gas networks. 

On diversity of supply Dr Finkel said sun and wind would be key to decarbonising the energy market but diversity of supply was important and that making hydrogen from water using clean electricity wasn’t the only option.

“It's a little bit scary thinking that we're going to go into a future where instead of being 10 different types of technologies that can substantially contribute to the energy that keeps our civilisations going, that we're going to go from a multiplicity down to two,” he said.

“Now the sun is always going to be there long term, the wind is always going to be there long term but we're go into an era of climate change where we don't know what sorts of things might disrupt supply. 

“There is an alternative pathway for making hydrogen, you can make it from fossil fuels and if you have hydrogen that is made from fossil fuels that gives you a third primary energy supply.

“No one will buy hydrogen made from a fossil fuel pathway unless it's clean. So this is the process we're talking about starting with coal, but it could be natural gas, you heat it in a special way called gasification in the presence of steam, and that then breaks the water and you get hydrogen but you also get carbon dioxide that you don't want, you have to get rid of that carbon dioxide ultimately by burying it – that’s called sequestration.”


Dr Finkel said hydrogen is a story that has been around for a long time, but there are multiple factors making it a more appealing option today.

“First of all, you've got countries that are saying they want to decarbonise and the only way they can do that is by using hydrogen and importing it,” he said.

“Japan wants to decarbonise, but they have very few resources including very little solar and very little wind, so currently they import 94 per cent of all the energy they use as oil, coal and gas. They see that they can replace ultimately all of that – oil, coal and gas – it might take 30, 40, 50 or 60 years but they can replace that with imported hydrogen.

“The second thing is if you look at the renewables, the plummeting cost of solar and wind and ultimately electrolysis units gives us confidence today that we didn't have 10 years ago, 20 years ago or 30 years ago that we can meet a price target.

“And the third thing is lower utilisation costs, a fuel cell is what goes into every vehicle that might use hydrogen whether it's a train, or a ship, or a truck, and converts the hydrogen back into electricity to drive the vehicle and they've come down in price, they've come down in volume, and they've come down in weight in an almost unpredictable way compared to where they were 10, 15 or 20 years ago.” 

Dr Finkel said hydrogen is an opportunity for Australia and the forthcoming National Hydrogen Strategy will aim to make it easy for industrial players and governments to develop their hydrogen industries. 

“We will take away all the barriers by identifying the standards and the regulations in the rules for interstate commerce, the bilateral agreements, we’ll work with the International Maritime Organisation to make sure that you can carry liquefied hydrogen on international waters because today you can't. 

“Just because something's hard that doesn't mean we should avoid it, in fact to the contrary if it's hard and it's big, that's where the industrial economic opportunity lies.”

“If we get it right, and the Australian Government and other governments around the world get it right, then I would put it to you that 100 years from now we'll have a world that is still magnificent.” 

Origin Energy General Manager, Strategy Execution, Felicity Underhill spoke as a panellist at the CEDA event and said Origin is currently investigating where hydrogen will sit within the future energy mix. 

“What is clear is it will sit somewhere and it's really a matter of that that orderly transition,” she said. 

“There are immediate options where it competes today with diesel, so it competes on a cost of energy basis today with diesel and it competes even more so on a lifecycle cost of energy and kilometre basis, so we could immediately see a place for hydrogen in the heavy vehicles.”

Ms Underhill said there’s been talk about whether hydrogen could be used as an energy storage medium. 
“The round cycle efficiency is not fantastic for that and so maybe we're looking at whether the flexible load of the electrolyser is actually something that will have more impact for Australia as a whole,” she said. 

“Say you have a hundred-megawatt electrolyser, that load can be turned on or off, and so in periods of peak demand you're going to be able to turn that down and redirect the load on the network to where it's really needed and so I think there's real benefit with that.

“But that comes with costs as well and for us to make this transition we're going to need everybody in the whole energy supply chain to come on board and be much more collaborative than in the past.”

Australian Gas Infrastructure Chief Executive Officer, Ben Wilson was also a panellist and said Australia has two alternatives to decarbonise the amount of energy that's delivered to homes through the gas networks.

“We can either reuse that infrastructure which has already been built, already been paid for and over time substitute the methane that we currently deliver with hydrogen or we can disconnect those gas networks and replace them with electricity,” he said.

“But because twice as much energy is delivered through the gas network you would need to at least double the electricity network, you’d need to build a whole new electricity network to replace that heat load whereas somewhat counter-intuitively the delivery mechanism for hydrogen already exists in the gas networks, so there's a massive opportunity actually to decarbonise the gas sector over time by moving from methane to hydrogen.

“We keep asking how do we get past this supply/demand, chicken and egg, and the gas networks can do that because the demand is there, you can produce hydrogen today, you can stick it into the gas network and sell it as methane so the market is already there.

“We could do 10 per cent hydrogen in the blend in many places around the network and that's a lot of hydrogen to kick-start that market and get us ready for scaling up to export.”