Investing in the H2 economy

Australia’s abundant wind and solar energy resources, significant land mass and proximity to key markets in Asia Pacific all give the country a significant advantage over rivals when it comes to developing a hydrogen export market, according to a panel of experts.

“For reasons of science and in any event to be part of the future global economy, we must decarbonise our economy,” Dr Alan Finkel, Special Adviser to the Australian government on low-emissions technology, told an ANZ customer event in February.

“We are in the early years of a decade that is full of opportunities for the companies and investors who have the vision, the financial capacity and the project management experience.”

The event – which also featured Dr Fiona Simon, CEO of the Australian Hydrogen Council, John Hirjee, Executive Director – REI and Paul Richards, Head of REI at ANZ Institutional – was held after the release of the ANZ’s The ANZ Hydrogen Handbook – AH2, which explores the hydrogen opportunity in Australia amid the push towards net-zero carbon.

“Zero-emission electricity and clean hydrogen will make the biggest contributions of all to saving our planet, and they both represent enormous investment opportunities,” Dr Finkel told the event.

Potential

The economic potential of hydrogen is significant, according to Australia’s National Hydrogen Strategy, adding up to $A26 billion a year to GDP by 2050 and close to 17,000 new jobs.

“Made locally, [hydrogen] makes it the perfect complement for variable renewable electricity and batteries to decarbonise the economy,” Dr Simon told the event. “And to do so in a way that promotes and maintains electricity reliability and fuel security and fabulously for Australia, a thriving future export market.”

ANZ’s Hydrogen Handbook – AH2 highlights the sheer versatility of hydrogen across wide sectors of the economy, particularly in transportation and manufacturing including heavy haulage trucking, hydrogen-fuel cell-powered vehicles and steel manufacturing. 

The Australian government recently announced the establishment of seven hydrogen hubs in regional Australia to house domestic hydrogen producers and exporters including manufacturing sites to build the electrolysers used to produce green hydrogen from solar and wind energy. These hubs - to be co-funded by state governments and the private sector – will provide significant investments opportunities.

The momentum in the fledgling industry is strong, with around 81 projects in Australia in various stages of development, though most of these are small scale or in a pilot phase.

The environment in Australia is a “source of constant announcements”, according to Dr Simon.

“Many projects are looking at multiple uses in order to get maximum value from assets and to bring down the cost overall,” she said.

Companies such as Fortescue Future Industries have announced plans to construct a large electrolyser and renewable equipment manufacturing plant in Gladstone in Northern Queensland.

Barriers

The cost of manufacturing, storing and transporting green hydrogen is currently prohibitive compared to other alternative fuel sources. Electrolysis - the main method of renewable hydrogen production at scale – is costly.

While solar electricity is continuing to fall in price, which will reduce the marginal production cost of hydrogen, how cost effective the hydrogen is depends on the end use, Dr Finkel told the event.

Hydrogen selling at retail for transport at around $A12 a kilogram will let a consumer drive competitively compared to a tank full of petrol.

“We will get to that retail tipping point for transport within a couple of years,” Dr Finkel said, but noted the time horizon for hydrogen to be price competitive with natural gas for bulk use is likely to be next decade. 

The scale of capital expenditure needed to produce hydrogen at scale is staggering – in the realm of hundreds of billions. According to Dr Finkel’s calculations, Australia would need about 600 GW of solar and wind electricity to produce as much hydrogen in terms of energy equivalence for export as compared to the export of liquefied natural gas.

Competition  

The race to commercialise hydrogen for export is intensifying as countries such as Chile, Russia and Saudi Arabia charge ahead with plans.

Australia’s proximity to potential key markets in Asia such as Japan, Singapore and South Korea puts it in good stead.

Japan and South Korea have public targets to carbon neutrality by 2050 while China announced its ambition to reach net-zero carbon by 2060, by reducing their reliance on fossil fuels with renewable energy sources and low-emission alternate fuels such as green hydrogen. Singapore’s Green Plan includes the development of a sustainable hydrogen supply chain from Australia to the island nation.

“We can definitely boost our export markets, [but] it definitely takes time and will require collaboration and coordination,” Dr Simon said.

Sharon Klyne is Associate Director – Communications, ANZ Institutional

This story is an edited version of remarks made at an ANZ Institutional customer event