Part 2
Hy-Politics – political considerations shaping the evolution of clean hydrogen policy
Summary of the use case in Australia
In Australia, hydrogen is viewed as having a use case for transportation, heat and industry, as well as for export. While hydrogen has, in Australia, historically served mainly as an input into various industrial processes, both federal and state governments have committed to expand the use of hydrogen to transportation and heat (among several other applications).
In 2018, the CSIRO published the National Hydrogen Roadmap (the "Roadmap"), which analyses the economic opportunities associated with hydrogen and assesses how these opportunities can be realised in Australia. The Roadmap identifies hydrogen as having applicability and value in the areas of transport, remote area power systems, industrial feedstocks, for export, electricity generation, producing heat and synthetic fuels.
In respect of the three specific use cases identified for discussion in the Outline, the justification for each in Australia is as follows:
- Transportation: As of 2019, transport accounted for approximately 18% of Australia's total greenhouse gas emissions. Further, the transport fuel supply chain is reliant on overseas partners (as Australia imports approximately 90% of its liquid fuel). Consequently, the development and use of hydrogen as a transport fuel in Australia could reduce greenhouse gas emissions and secure a reliable domestic fuel supply. Notably, hydrogen is forecast to account for 50% of all domestic transport fuels and the use of hydrogen as a transport fuel is forecast to constitute approximately 20% of total future demand for Australian hydrogen production. However, the success of hydrogen as a transport fuel rests largely on the development of further infrastructure both at a global manufacturing level (i.e. upscaling production facilities) and at a local operational level (i.e. hydrogen refuelling stations).
- Heat: The Australian east coast gas market is expected to experience a gas shortage in the next decade fuelled by declining reserves in the vicinity of major gas consumption areas, restrictions on onshore development and the significant cost required to build import facilities or pipelines from other parts of Australia where gas reserves are abundant. Hydrogen is seen as an economic, low emission and, if the industry is successful upscaled, readily available replacement for natural gas as a source of heat. Hydrogen also has the potential to supplement the existing natural gas industry, through the process of blending hydrogen into existing natural gas pipelines so as to reduce the overall emissions intensity of gas combustion and relieving the impact of possible shortages. There are a number of projects in Australia which are studying the feasibility of blending hydrogen into local gas distribution networks. Nonetheless, using hydrogen to deliver heat is expected to be challenging in the short term.
- Industry: Clean hydrogen is seen as a viable option to displace grey hydrogen as industrial feedstock. As hydrogen produced through steam methane reforming relies on a continuous input of natural gas, the cost and supply concerns noted above for "Heat" apply equally to Industry. A subset of the industry use case, is the potential for the creation of an export-focused manufacturing sector, for example the potential of a "green steel" export industry.
While we note that export is not a use case as such, it is worth noting that Australia does consider the potential for hydrogen to become a major export as a significant motivator in developing its hydrogen capabilities. To this end, Australia has developed ties with Japan, Singapore, South Korea, the Netherlands and Germany to investigate.
While Australia can leverage off of its experience as a major LNG exporter, the success of any large-scale export industry is largely dependent on the availability of technologies (such as storage and long-haul transport) and achieving a competitive production price.
Green vs. blue
The Australian Government has indicated that it is technology neutral when it comes to hydrogen production. Australia's Chief Scientist Dr Alan Finkel (who chaired the working group which developed Australia's National Hydrogen Strategy) has argued that it would be irresponsible not to investigate alternate fuel sources for hydrogen, as multiple sources would provide valuable diversification and opportunities for scale. There is significant support for blue hydrogen amongst certain key industry players, as it allows existing producers in Australia's well-developed oil and gas industry to leverage off their existing natural gas reserves. For example, Woodside and Santos are both focused on blue hydrogen developments. Further, there are a number of existing coal projects which are looking for opportunities to use their resources in a different way. The Australian Government's key aim has been to achieve "H2 under $2" (per kg) – this is the price where hydrogen is expected to become competitive with alternatives in large-scale deployment across Australian energy systems.
