Hydrogen can be produced in a variety of ways, including with renewable energy (renewable hydrogen), natural gas or coal. The Clean Energy Council advocates for renewable hydrogen as Australia’s primary hydrogen production method that can provide a clean, emissions-free alternative to natural gas and other fossil fuels.
Renewable hydrogen uses an electrolyser to run an electrical current through water to separate it into hydrogen (H2) and oxygen (O). While this is an energy-intensive process, if done with 100 per cent renewable energy, it can produce a flexible, zero emissions energy source.
In the electricity sector, there is the potential for hydrogen to be used to provide dispatchable power generation, energy storage to firm variable renewable energy or as a distributed energy resource (i.e. as part of an off-grid system or as back-up power).
Number of Australian hydrogen projects98
Value of Australian hydrogen projects$162.2b
The Australian Government has prioritised hydrogen as one of the central pillars of its Technology Investment Roadmap, with a target of producing hydrogen for under $2 per kilogram (excluding the cost of storage and transportation), which would make it competitive with fossil-fuel based hydrogen.
As part of this effort, the Australian Renewable Energy Agency (ARENA) established the $70 million Renewable Hydrogen Deployment Funding Round to support two or more large-scale (10 MW+) renewable hydrogen projects. These projects will help demonstrate the technology at scale and share the lessons learned to help the industry, reduce risk and costs, and increase efficiency. ARENA will select the successful projects in 2021.
The Australian Government also earmarked $300 million of Clean Energy Finance Corporation funding to offer lower-cost finance to support early movers in Australia’s nascent clean hydrogen sector.
Most state and territory governments have embraced the hydrogen opportunity as well, making substantial strategic investments to establish the infrastructure to create hydrogen export industries. These include South Australia’s Hydrogen Action Plan, Western Australia’s Renewable Hydrogen Strategy, Queensland’s Hydrogen Industry Strategy and Tasmania’s Renewable Hydrogen Action Plan.
The private sector has also begun to move into the hydrogen space, with the most notable projects including Australia’s largest installed electrolyser at the Hydrogen Park South Australia, which is due to commence production in late 2020. A number of other projects are in planning stages, including the Asian Renewable Energy Hub in the Pilbara region of Western Australia, which would be one of the world’s largest renewable energy projects producing renewable hydrogen and its derivative, ammonia.
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Australia’s substantial renewable energy resources mean that we have an enormous opportunity to take advantage of the growing demand for hydrogen as a clean alternative to coal and natural gas. Australia’s strong position has been recognised both domestically and internationally, with the International Energy Agency and the World Energy Council identifying Australia as a potential hydrogen production powerhouse.
As the global economy transitions to a low-carbon future, the global demand for hydrogen will grow strongly in areas such as transport, industrial use, electricity generation and as a replacement for natural gas.
Australia’s existing relationships with resource-constrained trading partners, such as Japan and South Korea, give us a considerable advantage in our efforts to capitalise on the growing hydrogen export market. The Australian Renewable Energy Agency has forecast that this could be worth as much as $10 billion a year by 2040, with Australia producing more than 3 million tonnes of renewable hydrogen annually. A 2019 study by Deloitte also found that if Australia were to secure the same global market share percentage as it has today for LNG, then the hydrogen sector could produce an increase to Australian GDP of up to $26 billion on a net present value basis and 16,900 jobs by 2050.
It is likely that in the early stages, the export of hydrogen could be in the form of ammonia (NH3), which is easier and cheaper to store and transport. Ammonia has many current uses, including in the production of fertiliser, pharmaceuticals and explosives, and has significant potential to be used as a future shipping fuel.
For example, one study of the maritime sector’s future energy outlook suggests that renewable ammonia (produced using renewable hydrogen) could represent between 30 and 55 per cent of the total energy used by the global shipping industry by 2050.
Domestically, hydrogen can be used as a fuel source for hydrogen fuel cell vehicles, as an alternative to natural gas in cooking, heating or industrial applications, or to generate electricity.