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State of Hydrogen 2021 | Australia

Charley Rattan's picture
World Hydrogen Leader Charley Rattan Associates

UK based offshore wind & hydrogen corporate advisor and trainer; Faculty member World Hydrogen Leaders. Delivering global hydrogen and offshore wind corporate investment advice, business...

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  • Dec 12, 2021
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Decorative

 

 

 

State of Hydrogen at a glance

 

Purpose of this report

To track Australia’s progress against global developments, Australian governments have committed to publishing an annual State of Hydrogen report. This report explains how we measure the progress of Australia’s hydrogen industry and provides a snapshot of industry’s progress.

Australia’s hydrogen opportunity

Clean hydrogen is gaining increasing attention as a clean fuel to decarbonise economies. It is a flexible, safe, transportable and storable fuel that produces no carbon emissions when used.

Hydrogen can be used:

  • to power vehicles
  • to generate heat and electricity
  • as an industrial chemical feedstock for products such as ammonia and steel
  • to globally trade clean energy.

Australia has all the ingredients needed to be a major hydrogen producer and exporter, including:

  • abundant and cheap renewable energy resources
  • geological storage resources
  • a proven track record as an energy exporter.

Australia’s National Hydrogen Strategy supports all production pathways and technologies that are capable of producing clean hydrogen. Clean hydrogen is hydrogen produced using renewable energy or using fossil fuels with substantial carbon capture and storage (CCS). This gives our emerging hydrogen industry flexibility to pursue the pathways that best meet customer preferences as global markets emerge.

Australian energy ministers share a vision for a clean, innovative, safe and competitive hydrogen industry that benefits all Australians and is a major global player by 2030.

Australia’s National Hydrogen Strategy provides a framework for governments and industry to work together to build Australia’s hydrogen industry. It starts with 57 nationally coordinated government actions.

The strategy takes an adaptive approach, ensuring Australia’s hydrogen industry can scale up quickly without over-committing in an industry that is still maturing. To do this, we will keep a close eye on the international hydrogen industry to ensure our actions keep pace with the rest of the world.

Since we released our strategy in 2019, the global hydrogen industry has developed in line with our most optimistic estimates for growth. Many countries have released hydrogen or low emissions strategies, with hydrogen a central part of plans to reach net zero and move to low-carbon fuels.

Australia’s small but rapidly growing hydrogen industry can take advantage of this global momentum. If our current pipeline of clean hydrogen projects is completed on time, Australia could be one of the world’s largest hydrogen suppliers by 2030.

Governments will continue to work with industry to overcome any barriers to development. This work focuses on 3 areas:

  • building demand
  • achieving low-cost hydrogen production at scale
  • reducing hydrogen delivery costs.

Following global momentum, the Australian hydrogen industry has seen substantial developments in 2020 and 2021. 

The Department of Industry, Science, Energy and Resources engaged KPMG to compare the Australian industry with global developments. KPMG assessed where Australia is likely to be in 2025 and 2030 against each of the 13 industry development signals outlined in Chapter 6 of the National Hydrogen Strategy (Table 1). For each signal, KPMG rated the industry’s development as either:

  • advancing quickly
  • advancing
  • advancing slowly.
Table 1: Overview of Australia’s progress across the industry development signals

Industry development signal

2025 pace

2030 pace

Current status

Investment

Advancing quickly

Advancing

  • Private sector investment is growing with committed investment exceeding A$1.6 billion.
  • Public sector investment reached $1.27 billion in June 2021. 

Project scale

Advancing quickly

Advancing quickly

  • Project announcements indicate scale could reach over 100 MW by 2025.
  • Gigawatt-scale projects have been announced and are expected to start operating in the second half of the decade. However, a final investment decision on these projects has not been made.

Cost-competitiveness

Advancing quickly

Advancing

  • Clean hydrogen costs are expected to decline to between A$2 and A$4 by 2030.[1]

Australia’s exports

Advancing

Advancing

  • Investment is being directed to hydrogen supply chains. Front end engineering and design studies are underway.
  • Supply chains still require development for Australia to be a major global supplier.
  • To support supply chain development, supply chain studies are underway with international partners like HySupply.
  • The government has supported hydrogen hubs to stimulate demand and produce clean hydrogen for domestic and export markets.

Chemical feedstock

Advancing quickly

Advancing quickly

  • Projects to use clean hydrogen in existing facilities have been announced.
  • Current announcements account for 20% of total electrolyser capacity.

Steel making

Advancing slowly

Advancing slowly

  • Limited activity in this area. However, several announcements from steel producers indicate an intent in this sector.
  • Clean steel is a priority technology under Australia’s Technology Investment Roadmap.

Electricity grid support

Advancing slowly

Advancing slowly

  • Limited trials are underway to test whether hydrogen can provide frequency control ancillary services (FCAS).

Mining and off-grid

Advancing

Advancing slowly

  • A few projects are exploring hydrogen for microgrid applications. However, there are no plans for either small-scale or wide-scale rollout at this stage. Fortescue and ATCO are exploring hydrogen mobility at a mine site. 
  • $103.6 million in government funding has supported microgrid pilots and deployment.

Power generation*

Advancing quickly

Advancing

  • Two new hydrogen-ready gas generators reached final investment decision in New South Wales: Snowy Hydro’s 660 MW Kurri Kurri gas generator and Energy Australia’s 316 MW Tallawarra B gas generator. Additional projects are also in the pipeline, specifically AIP’s Port Kembla gas generator.

Light transport

Advancing slowly

Advancing slowly

  • Limited deployments or infrastructure to support hydrogen use in light transport.
  • 4 refuelling stations and approximately 30 vehicles are in operation. Some additional projects are targeting operations in 2025.
  • The Australian Government has launched its Future Fuels Fund to take advantage of opportunities offered by electric, hydrogen and bio-fuelled vehicles. This includes support for electric vehicle refuelling infrastructure, including hydrogen fuel cell vehicles.

Heavy transport

Advancing slowly

Advancing slowly

  • Hyzon Motors and Fortescue Metals are collaborating on hydrogen-powered buses for mining applications.
  • The Australian Government’s Future Fuels Fund and Freight Productivity Program will support further heavy transport uptake.

Gas networks

Advancing

Advancing

  • Activity is underway to trial hydrogen blending. Nine projects are expected to be operational by 2025.
  • Gas networks are targeting 100% hydrogen in regions of the network by 2030.
  • Australian Governments have agreed to national gas regulatory framework amendments to bring hydrogen, bio-methane and other renewable gas blends within its scope. Reforms are expected to initially focus on gases and blends that can be used in existing natural gas appliances.

Industrial heat

Advancing

Advancing

  • Limited activity. However, Grange Resources (Tasmania) Pty Ltd is undertaking a feasibility study looking at hydrogen for industrial heat.

* Note: Power generation refers to global progress as the indicator explicitly relates to international electricity demand 

Source: Adapted from KPMG analysis, June 2021

This assessment shows that Australia is progressing well on:

  • activities that will support efficient scale-up of the industry by 2030
  • the supply-side factors that will let Australia meet increasing demand for hydrogen.

As is to be anticipated as a new industry develops, progress has been slower on demand-side indicators. This is expected given the early state of the industry and the higher cost of clean hydrogen compared to chemicals and fuels currently being used.

Many of hydrogen’s expected future uses (such as hydrogen blending in gas networks and fuels for vehicles) have only recently begun trials. Like any new industry, it will take some time to build export supply chains and deliver activities to help scale up the industry. For some uses of hydrogen, it will also take time for demand for hydrogen to build. Progress is expected to be slow at first, but will increase as costs decrease and markets increasingly adopt new technologies. This is a natural part of industry development globally, but will be accelerated through government support.

For example, use of hydrogen for transport applications is dependent on uptake of hydrogen vehicles by consumers. These vehicles are currently expensive, as the technology is new, but are expected to come down in cost over time as technologies continue to improve and production volumes increase. Use of hydrogen will increase in line with uptake of vehicles by consumers. Similarly, large industrial users of hydrogen, such as existing ammonia producers, may not switch to using clean hydrogen until their existing production plants reach their end of their asset lives.

The Australian Government is helping industry to accelerate these demand-side indicators through a variety of funding programs discussed later in this report. For example, through the Australian Renewable Energy Agency, the Australian Government is funding Yara Pilbara Fertilisers and ENGIE Renewables to develop a 10 MW electrolyser project to produce renewable hydrogen at Yara’s existing ammonia facility in Karratha, Western Australia. This project will see clean hydrogen used to make clean ammonia for global export. Projects like these, and the Australian Government’s $464 million Clean Hydrogen Industrial Hubs program, will help drive the costs of hydrogen down faster, which will increase demand and improve these indictors.

Government actions

All levels of government are delivering the strategy and taking early actions to overcome barriers facing the industry. So far, the Australian Government has:

  • built international relationships, including partnership agreements with Germany, Singapore, Japan, Republic of Korea and the United Kingdom to build hydrogen supply chains and advance technology research
  • developed a proposed approach for a domestic hydrogen Guarantee of Origin scheme and helped shape the design of an international methodology
  • announced hydrogen funding programs, including $464 million for the ‘Activating a Regional Hydrogen Industry: Clean Hydrogen Industrial Hubs’ program
  • invested over $300 million to support development of carbon capture and storage (CCS) and carbon capture, use and storage (CCUS) projects
  • awarded over $100 million to three 10 MW hydrogen electrolyser projects through the Australian Renewable Energy Agency (ARENA)
  • fostered industry innovation, collaboration and knowledge sharing
  • provided more than $300 million in funding for research, development and demonstration activities.

Direct Australian Government support for the hydrogen industry is now over $1.2 billion.

State and territory governments are helping develop the industry by implementing the National Hydrogen Strategy and their own hydrogen strategies. Together, the federal, state and territory governments have:

  • started a review of legal and regulatory frameworks
  • agree to amend the national gas regulatory framework
  • started the National Hydrogen Infrastructure Assessment
  • commenced work on industry development, including skills and training
  • supported analysis to understand community attitudes towards hydrogen.

State and territory governments are undertaking activities to support the hydrogen industry in their jurisdictions, including:

  • announcing funding for pilots, trials and demonstrations
  • engaging with communities
  • committing funding for hydrogen hubs
  • supporting industry development
  • participating in regional hydrogen technology clusters in partnership with National Energy Resources Australia (NERA)
  • supporting trials for hydrogen vehicles and blending hydrogen into gas networks.   

Australia is progressing well towards the vision in the strategy. But we will need to remain ambitious to keep pace with the global hydrogen industry’s rapid development.

Hydrogen hubs

To keep our position as an industry leader, Australia needs to quickly develop end-to-end hydrogen supply chains. We need to increase domestic demand for hydrogen to help our industry scale up and reach our potential as a major supplier.

Hydrogen hubs are regions where various producers, users and potential exporters of hydrogen across industrial, transport, export and energy markets are co-located.

Hydrogen hubs will create economies of scale to drive down costs of production, unlocking further demand for hydrogen as costs fall. Hubs will also create efficiencies by leveraging and supporting the existing industrial capabilities and workforces in relevant regions. Hubs will stimulate innovation and increase workforce skills development, as well as support other existing industrial sectors in these regions to lower both emissions and costs in doing business.

Demonstrating hydrogen hubs will develop domestic demand and provide the revenue certainty needed for large-scale supply. Hubs could take advantage of co-investment with:

  • state and territory governments
  • the private sector
  • international governments.

The Australian Government has opened the $464 million ‘Activating a Regional Hydrogen Industry: Clean Hydrogen Industrial Hubs’ program to fund up to 7 hydrogen hubs. State and territory governments have backed this approach by providing funding to develop hydrogen hubs in their jurisdictions.

Hubs will help us scale up the industry as we work towards the Technology Investment Roadmap’s goal of hydrogen production for under $2 per kilogram.

International partnerships

Strengthening our international relationships is equally important for building the industry. Australia’s federal, state and territory governments are building international partnerships with other governments and private companies.

The Australian Government has committed $565.8 million through the 2021–22 federal Budget to develop international partnerships on low emissions technology. The Special Adviser to the Australian Government on Low Emissions Technology, Dr Alan Finkel AO, is playing a key role in brokering these partnerships. 

These international partnerships will help develop Australia’s clean hydrogen industry by:

  • advancing the goals of the government’s Technology Investment Roadmap
  • driving investment in Australian-based projects and helping deploy low emissions technologies and energy
  • accelerating supply chain growth, including for clean hydrogen
  • fostering international collaboration on the development of practical low emissions technology pathways.

As a priority technology identified in the government’s first Low Emissions Technology Statement, these partnerships are expected to support development of the clean hydrogen industry.

In 2021 the Australian Government announced 5 new international partnerships:

  • Australia and Germany will work together under a new Hydrogen Accord. The accord includes several new initiatives to accelerate the development of a hydrogen industry. Australia will contribute $50 million and Germany €50 million.
  • Australia and Singapore will establish a $30 million partnership to accelerate deployment of low emissions fuels and technologies (like clean hydrogen) in maritime and port operations.
  • The Japan–Australia Partnership on Decarbonisation through Technology will increase our shared focus on priority low emissions technologies, including clean fuel ammonia and clean hydrogen. 
  • The Republic of Korea and Australia will work together to drive increased adoption of low and zero emissions technologies.
  • Australia and the United Kingdom have agreed to collaborate on research and development across technologies crucial to decarbonising the global economy, including clean hydrogen.

State and territory governments are also building international partnerships to support projects in their regions:

  • the South Australian Government signed a memorandum of understanding to investigate clean hydrogen exports with the Port of Rotterdam in the Netherlands
  • Tasmania is exploring ways to collaborate and cooperate with international partners.
  • the Victorian Government is a partnering with the Australian Government, the Japanese Government and Australian and Japanese industry to develop the $500 million Hydrogen Energy Supply Chain project in the Latrobe Valley.

Other activities

Governments will continue working on other activities to help the industry flourish. Priorities for the coming year include:

  • accelerating pilots, trials and demonstrations of hydrogen technologies
  • continuing to develop an international approach to hydrogen certification, moving from design to trialling hydrogen certification methodologies on real projects
  • ensuring a fit-for purpose regulatory environment by implementing findings from current reviews of legal and regulatory barriers for the industry
  • identifying the industry’s future infrastructure needs by considering findings from the infrastructure assessment
  • progressing the Victorian and Australian Governments' CarbonNet project to establish a multi-user CCS hub in Gippsland.

Success will rely on industry, governments, researchers and the community working together. If we get this right, we can realise our vision to establish a new clean hydrogen export industry in Australia. Clean hydrogen exports could directly support 16,000 jobs, plus an additional 13,000 from related construction work, by 2050. Australian hydrogen production for export and domestic use could generate more than $50 billion in additional GDP by 2050.

Footnote

  1. Analysis from CSIRO National Hydrogen Roadmap (2018), IEA cost data, SA hydrogen export study and ANU Green hydrogen cost report (2020) 

 

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