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      March 25, 2024 | Sheraton Grand Sydney Hyde Park

      Australian Domestic Gas Outlook 2024

      June 11, 2024 | Melbourne Convention and Exhibition Centre

      Australian Energy Week 2024

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      Australian Hydrogen Forum
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      Hydrogen — 6 mins read

      Where should the Australian hydrogen industry concentrate its efforts in order to achieve economic viability?

      Before the recent Australian Hydrogen Forum, we sat down with some of the speakers to ask them about the practical steps that need to be taken for hydrogen to reach its full potential. We spoke to:

      • David Heard, Executive Director, Australia, Hiringa
      • Amy Philbrook, Future Fuels and Renewables, ATCO
      • Miranda Taylor, Chief Executive Officer, National Energy Resources Australia (NERA)

      What single issue do you identify as the most critical for hydrogen to achieve economic viability?

      David Heard believes successful early project delivery experiences for customers are critical in building confidence in the market. He says, “Only by working through the full technical, commercial and financial challenges of projects from concept to completion will proponents gain realistic knowledge about costs and opportunities for efficiency”.

      Vitally, once customers have confidence in hydrogen, they will be willing to wind back any premium they may apply for uncertainty, and start to lean in to support the scale-up and cost-out the industry can deliver over time.

      Amy Philbrook identifies advancements in technology development as key to economic viability. She says we need to look at the impact improvements in efficiency have made for solar PV, and notes that Australia has led the world in the development of PV research. She says, “Efficiency gains for electrolysers as well as carbon capture technologies can and will play a significant role in decreasing the cost of hydrogen production”.

      Miranda Taylor believes Australian project developers should focus on securing customers, saying, “We need to generate local demand to get the molecules flowing and activate the domestic market in the first instance.”

      Miranda predicts the cost of producing hydrogen with renewable energy will reduce as wind and solar power become cheaper. She feels hydrogen will be “the critical enabler” in a post-transition energy system, where hydrogen storage will provide the solution to intermittency.

      How does the industry progress from pilot case studies to a full ‘hydrogen economy’?

      Amy is quite pessimistic, noting that hydrogen is currently competing with natural gas in Australia. She says that until there is an incentive to use renewable fuels, industry will go with natural gas. She identifies safeguard mechanisms, a renewable gas target or carbon tax as incentives that could make difference.

      By contrast, Miranda disagrees, stating that for specific customers, hydrogen is a viable economic alternative right now. She notes that NERA already have access to proven electrolyser and renewable technologies to move beyond studies to actual FID (final investment decision) on hydrogen projects.

      NERA sees hydrogen as one of the tools in the ‘decarbonisation toolkit’. While they are not necessarily pushing for a full ‘hydrogen economy’ in the next decade they are aiming to identify the areas hydrogen can become the option of choice and deployment for high-potential applications now.

      David is also optimistic, saying a full hydrogen economy will emerge over time, “step by step, with customers.”

      He is much more patient with pilot studies, saying the entire industry needs to progressively develop capability and experience including the supply chain, the proponents, and the customers and markets.

      “In our view, there’s little point aiming immediately for megaprojects addressing currently non-existent sources of demand and starting with supply-focussed pilot projects – this approach is likely to flounder as it gets well ahead of any commercially-viable pathway to scale.”
      (David Heard, Executive Director, Australia, Hiringa)

      Like Miranda, David wants to target the sub-markets with the most imminent viability, but he disagrees with Amy that incentives are necessary. He believes hydrogen will find its commercial place due to the rising costs of premium liquid fuel or increasingly-expensive methane-derived feedstock. The relatively high costs of carbon abatement for traditional heat energy fuels, particularly in chemical manufacture, will make hydrogen cost competitive.

      When do you estimate that hydrogen could be a financially feasible mainstream fuel?

      David bullishly states that hydrogen could be a financially feasible mainstream fuel on the day in 2023 when Hiringa opens their New Zealand HRS (Hydrogen Refuelling Station) network! Whilst the initial investment required some modest government support, he is buoyed by interest from customers in the catchment area of the Hiringa refuelling stations.

      David says, “It seems to us that the price point for our hydrogen fuel is attractive enough to drive demand growth, particularly in a relatively high oil price environment.

      According to David, it is important to recognise the reality of the transition to net zero in defining ‘financially feasible’. Once the cost of carbon is recognised as part of the economics of a fuel choice, hydrogen can be competitive immediately, provided the net costs of electricity input and capital intensity of the infrastructure are optimised.

      Miranda is more cautious, saying that the financial feasibility of hydrogen will vary significantly across end-use applications. She believes the price of hydrogen will fall sharply by 2030, driven by lower costs of renewable electricity. Soaring oil and gas prices will make hydrogen a commercially attractive alternative to conventional energy sources for applications such as feedstock for industrial processes like ammonia and fertiliser production, heavier transportation and storage to support remote operations.

      Is there an important issue that you feel is being overlooked in the current discussions of hydrogen?

      For David, abatement value is in the price. He explains, “A lot of resistance to forecasts of a large green hydrogen sector focuses on the risk of a persistent gap in production costs of ‘grey versus green/blue’. We think this misses an important point: there simply is no long-term market for grey hydrogen or the various emission-intensive products targeted by the low-carbon hydrogen sector.”

      He is sceptical on whether low-carbon hydrogen can offer the lowest-cost abatement pathway in replacing the high-emissions alternative. He believes the cost of carbon abatement is going to be embedded in the price of the new commodities in the 2050 economy.

      Amy questions the Australian emphasis on solving Japan and Germany's energy supply issues - believing we should focus on Australia's energy issues. She thinks Australia needs to resolve whether our aim is to remain an energy exporter or to meet our internal emission targets.

      Amy says that stimulation of hydrogen demand domestically and internationally is required to allow demand and supply to equalise. Further international trade developments will define the time, size and nature of hydrogen as an energy carrier. These signals will support project development and deployment.

      Similarly, Miranda is concerned discussions about Australia's hydrogen opportunity often concentrates on export. She says it is unlikely the economics of export will stack up, due to transportation costs. She believes Australia should focus on developing its hydrogen supply chain capability to deliver advanced technology, equipment and services which are highly exportable. In her view, the real economic opportunities leverage hydrogen at-source to enable value-added local manufacturing.

      Whichever way the Australian hydrogen industry progresses, it seems clear commercially viable hydrogen is already within our grasp in specific sectors. The development of an economically feasible domestic market may be well-established by the time hydrogen export overcomes its hurdles.

      Kirstin Crothers, Editor, Energy Insights

      Energy Monthly

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      March 25, 2024 | Sheraton Grand Sydney Hyde Park

      Australian Domestic Gas Outlook 2024

      June 11, 2024 | Melbourne Convention and Exhibition Centre

      Australian Energy Week 2024

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