The Outlook for Hydrogen in Australia

Australia is a country of vast distances and incredible amounts of natural resources. For decades we exported many of these resources, particularly iron, coal, and gas, to the rest of the world. In fact, in the last financial year we exported around 90% of the black coal and 75% of the natural gas we produced. However, our biggest export partners across Asia are likely to reduce these imports as they look to reduce their own greenhouse gas emissions. Yet, while significant decreases in fossil fuel exports are predicted, Australia has ambitions to remain an energy export superpower.

In 2019, the Australian Government established the country’s National Hydrogen Strategy with the goal to become a renewable energy superpower and contribute to regional and global decarbonisation. Pilot projects were funded, and last year Australia achieved a world first by exporting liquified hydrogen to Japan. However, while it was clean hydrogen, it was not green—it was produced from lignite and biomass in the Gippsland region of the Australian state of Victoria, with the carbon captured and stored. While the initial amount of hydrogen being produced is reasonably small at around 40,000 tons, it signals an initial step in an international hydrogen export market. It gives credibility to the Economic Research Institute for ASEAN and East Asia’s forecast that Australia is poised to become the East Asian region’s largest hydrogen exporter.

A Rapidly Growing Industry

Australia’s National Hydrogen Strategy aims to initially concentrate clean hydrogen use in niche hubs that will foster domestic demand. This is in accordance with the Federal and State Government’s belief that a strong domestic hydrogen sector will underpin Australia’s exporting capabilities, allowing us to become a leading global hydrogen player. From small beginnings Australia has big ambitions, and the announcement of a review of the Australian Hydrogen Strategy in February of this year signals further investment in this long-term energy strategy. There are currently seven low-carbon projects in operation, 15 in the active planning phase having passed final investment decisions, and over 80 more projects announced. Collectively, this represents around AUD$127 billion of announced hydrogen investments, indicating substantial interest in growing the industry at scale and rapidly.

The Australian Energy Market Operator’s (AEMO’s) 2022 Integrated System Plan (ISP), a 20-year electricity transmission development strategy, also included a hydrogen superpower scenario in its probabilistic expansion plan, which suggested that by 2050 the at-scale development of hydrogen production could quadruple the electricity demand on the country’s east coast compared to 2030 levels. Most of the hydrogen produced would be intended for the export market, including green steel. Concurrently, AEMO envisaged that domestic consumption would gradually transition to hydrogen-natural gas blends before domestic appliances would allow a 100% hydrogen use. However, In the latest input and assumptions report of the ISP, AEMO has now downgraded the hydrogen export outlook in its “1.5ºC Green Energy Export” scenario, indicating that uptake may be slower than initially expected. However, even with a more moderate forecast, AEMO predicts in the Green Energy Export Scenario that domestic and export hydrogen consumption could reach 3.4 megatonnes and 7.8 megatonnes, respectively, by 2050 (Figure 1).

 

Figure 1: Australia’s hydrogen consumption and export under a Green Export Scenario of the ISP

Source: Australian Energy Market Operator, Draft 2023 Inputs, Assumptions and Scenarios Report; reproduced with permission.

Outlook for the Future

That hydrogen has massive potential is not in question. But in Australia, and other countries, one question that does still need to be answered is one of electrons versus molecules: Is it better to produce hydrogen locally for export or produce green hydrogen near renewable energy hubs and pipe the hydrogen to an export site? Or will it be a mixture of both? Plenty of research and engineering assessments are underway to reach a conclusion.

To produce hydrogen at scale will necessitate large, centralized facilities. Potential Australian hydrogen hubs that were identified in the Arup report to the Council of Australian Governments are predominantly export ports such as the Port Kembla, Port Bonython, and Gladstone hydrogen hubs. These existing facilities already have much of the necessary infrastructure to support the export of liquified hydrogen or ammonia, and funding is being allocated to explore the feasibility of establishing such hubs.

What makes Australia so attractive for hydrogen production and exporting is the vast and high-quality renewable resource development potential. We are a sunburnt country with excellent solar irradiance. Wind also has great potential sites, particularly in the southern states. Falling costs for solar PV and electrolysers can only facilitate green hydrogen production uptake in Australia.

Of course, it takes more than sun, wind, ports, and pipelines to grow hydrogen exports. But with the Federal Government actively developing this country’s National Hydrogen Strategy in concert with the State Governments’ support of hydrogen pilot projects and energy hub developments, the opportunities for replacing Australia’s fossil fuel energy exports with clean and renewable hydrogen are very promising.

Christian Schaefer
Executive Advisor
GHD