Opinion article

Why hydrogen?

The Federal Government announced a significant funding increase for hydrogen power generation earlier this month. ACIL Allen Director Science and Technology and Australian Academy of Technology and Engineering Energy Forum Chair, Dr John Söderbaum FTSE, considers the reasons for this investment, the role hydrogen could play in the post-coronavirus recovery, and the factors that continue to hold back the development of a green hydrogen industry.

The growing urgency to address climate change is drawing attention to technologies that can help Australia reduce its greenhouse emissions. Hydrogen is one such technology and it has seen a dramatic increase in the level of global interest over the last few years.
One reason is the scope for using hydrogen to reduce greenhouse gas emissions across many different sectors, including the energy, transport and industrial sectors.
In just the last couple of years, international discussions around a possible hydrogen industry have gone from being focused on technology research and development, to how best to capture the emerging investment opportunities in developing the hydrogen industry for use in domestic and export markets. The conversation has now clearly shifted to one around how best to drive the necessary market activation.
In Australia, a commercially viable hydrogen industry comprising both domestic and export value chains could be up and running by 2030. The export opportunity was probably the initial driver for Australia’s interest in hydrogen. Certainly, Australia is strongly positioned to drive the global shift to clean hydrogen energy, due to its extensive energy resources, expertise and infrastructure. Already countries like Japan and Korea are actively exploring the opportunities to import clean hydrogen from Australia. There is also interest from other countries around the world that do not have the ability to produce the amounts of hydrogen that they would need to meet their potential domestic needs.

Hydrogen could also play a role in Australia’s post-coronavirus economic recovery. We could use hydrogen in areas as diverse as supporting the electricity network; providing an alternative transport fuel; ‘greening’ the gas network; and developing industries with lower carbon footprints (such as steel and fertilisers).

So what is the problem?

While green hydrogen, produced using renewable energy, is the goal for many, it is currently relatively expensive. Other forms of hydrogen, such as that produced from natural gas or coal (with or without carbon capture and storage) will at least have an early role to play in helping establish the feasibility of hydrogen supply chains.

At the same time, it is critical that an emerging hydrogen industry does not significantly increase greenhouse gas emissions or compromise Australia’s and the world’s ability to meet the agreed Paris emissions reduction targets. Hence, regardless of the primary energy source, in the longer term, potential importers of Australian hydrogen will require that it comes with little or no associated emissions resulting from its production, and planning should focus on this goal. The key challenge will be determining how to best drive the costs of green hydrogen production and use down the cost curve through learning by doing.
The principles for achieving such cost reductions for any new or emerging technology are well established. It boils down to achieving significant uptake of the technology. Thus deployment and scaling up are the main challenges we face in developing an Australian hydrogen industry. New technology or significant increases in technology performance will no doubt come in time, but they aren’t needed to get started. Nonetheless, improving the efficiency of hydrogen production and finding lower cost production technologies will provide important contributions to maximising learning curve outcomes.

Driving uptake is not a small challenge. There is a need for a clear policy and regulatory environment as well as the coordinated development of supply lines and markets. There have been recent moves by jurisdictions to address potential policy and regulatory barriers to greater use of hydrogen. There is also a need for focussed and intensive hydrogen-related research, development and demonstration projects, such as those currently being supported by ARENA, to ensure Australia can leverage its competitive advantage and position its industry as a major player by 2030.

What do we need to do?

There is clearly a role for both the public and private sectors to play in developing a hydrogen industry into the future, both at the national and international level. While it will be private companies that will make the very significant investments needed to establish the industry, governments have a role too.

Collaborative partnerships with countries that are potential importers of Australian green hydrogen will also be important in helping to share the technological and financial risks associated with constructing a major new energy export industry. The collaborative agreement between Japan and Australia, to demonstrate the feasibility of establishing a hydrogen supply chain between Victoria and Japan, is an example of such collaboration. Australia’s collaboration with Japan during the emergence of our LNG export industry provides an excellent example of the importance of such collaboration.

The government, through organisations such as ARENA and CEFC is continuing to support R&D, innovation and the commercialisation of hydrogen‐associated technology through grants and other forms of support.
Establishing a domestic market for hydrogen will be important. Such a market will help Australia reduce its own national emissions, ensure that it can properly service an export industry and capture as much benefit from those exports as possible.

Investments in hydrogen demonstration projects, several of which are already in operation or being planned around Australia, are key to hydrogen value chain validation and technology deployment. They will provide industry with the confidence to invest in hydrogen. These demonstrations will also help to provide the enabling skills and infrastructure which will be needed to underpin the development of a large-scale hydrogen export industry in Australia.

Federal and State governments and national research institutes have important roles to play in driving the uptake of hydrogen technologies. The Australian National Hydrogen Strategy provides an excellent framework for the development of a hydrogen industry in Australia. The timely implementation of that strategy will be equally important.
In conclusion, Australia stands on the threshold of developing a major new domestic and export industry. The opportunities and potential economic, social and environmental benefits that could flow from the creation of that industry are considerable. However, that industry will not emerge, or will develop much more slowly, in the absence of a strong effort to implement the National Hydrogen Strategy.
About the authors

John Söderbaum

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Dr John Söderbaum FTSE is ACIL Allen’s Director Science and Technology and Chair of ATSE's Energy Forum. He has advised governments, the private sector and international organisations for over 40 years. Some of John’s hydrogen related projects include: The 2003 Australian National Hydrogen Study; a report on Australia’s hydrogen export opportunities for ARENA; the South Australian Government’s Green Hydrogen Study; an issues paper on the injection of hydrogen into natural gas networks (for the National Hydrogen Strategy Taskforce); and a report on how hydrogen can support electricity systems (for the National Hydrogen Strategy Taskforce). John has a first class honours degree from the University of Western Australia and a doctorate in nuclear physics from the ANU. In 2010 he was elected as a Fellow of the Australian Academy of Technology, Science and Engineering (ATSE).