Wind and solar energy are excellent renewable sources. However, they also created challenges to existing energy systems due to intermittency caused by daily and seasonal fluctuations in sunlight and wind availability. Therefore, there has been a drive to source more reliable and stable sources of energy.
All Australian states have a net zero goal, and Australia, as a whole, aims to reach net zero by 2050. So far, despite the challenges, the country has been putting in the effort that is now delivering impressive results. This is where hydrogen comes in.
Federal and state governments have ambitious hydrogen strategies, investing millions into research, development, and project proposals.
The recent 2023 budget announcement paves the path for new gas field developments with the recognition of the importance of low-carbon hydrogen crucial to meet the nation’s goals.
$2 billion for low-carbon hydrogen in Australia
A $2 billion budget is allocated to speed up the development of low-carbon hydrogen, the Hydrogen Headstart programme. It will also help clean-energy industries against the backdrop of proposed changes to the Petroleum Resource Rent Tax (PRRT) that is expected to bring in an additional $2.4 billion to the Treasury over the next four years.
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The need to do more
According to Wood Mackenzie’s principal research analyst for hydrogen and emerging technologies, Flor De la Cruz, the budget will not be enough to stimulate the country’s hydrogen industry, and strong policy support should exist in the emerging and evolving hydrogen market.
She said, “In the last few years, we have seen governments respond to industry with additional policy support and it works. We are seeing developers flock to the US on the back of the IRA and company strategies focus on exporting to the EU on the back of RepowerEU. But Australia has fallen behind, allocating $2 billion won’t really move the needle.”
De la Cruz said that the budget would help several projects but will not be enough to stimulate a hydrogen industry and address domestic oversupply nationwide.
Their latest supply and demand outlook shows that Australia needs to export over 65 per cent of its low-carbon hydrogen supply by 2023.
To get projects off the ground, the country should focus on building a domestic low-carbon hydrogen market to get their projects off the ground.
Challenges in turning green hydrogen into a global fuel industry
There are major challenges in green hydrogen in Australia. One is that green hydrogen isn’t “there” yet; hence the costs are high. Producing green hydrogen is expensive due to the electrolyzers necessary to split water molecules and the electricity that powers them.
Another challenge to green hydrogen is that it is reactive and explosive. Hence, storing and transporting it in its raw form prove to be tricky. Proposed methods include turning it into liquid fuel, such as ammonia used in making fertilizers and explosives, which will also add more to the cost of each kilogram of delivered gas.
The transport costs also significantly impact the viability of any hydrogen export sector, which will make hydrogen exports a lot more challenging.
The role of Carbon Capture, Utilisation, and Storage (CCUS)
The 2023 budget also recognises the importance of CCUS. Still, there is a lack of commitment to a national CCUS roadmap in partnership with industry that is necessary for a clear policy direction to promote the country as a regional carbon storage leader.
Undoubtedly, the momentum for CCUS is building up. Australia should not miss the emissions reduction and economic opportunity of an emerging CCUS industry that will create new jobs and investments.
Will solar and wind be enough?
Some experts believe that green hydrogen does play a crucial role, but only in certain sectors. With this, they think that wind, solar, and storage will be sufficient.
The co-founder of Rewiring Australia, Saul Griffith, said, “The idea that hydrogen will play a large role in the energy future does not make economic or thermodynamic sense. It will play a small role, but attempting to carve out a large role represents a wasteful way to achieve clean energy goals.”
It is also noted that hydrogen production is extremely expensive because it takes three times as much electricity to produce.
Griffith wrote in his submission, “Over-investment in hydrogen is likely to leave Australian homes and Australian businesses with less economic savings and fewer emissions reduction.”
However, other experts argue that green hydrogen is necessary for decarbonisation in sectors such as heavy industry, shipping, and aviation, where electrification is not feasible. They believe a mix of renewable energy sources, storage, and green hydrogen will be required to achieve net-zero emissions by 2050.
Ultimately, the role of green hydrogen in the energy transition will depend on various factors, including the cost of renewable energy, technological advancements, and policy support. A mix of solutions will likely be required to reduce emissions, and green hydrogen may play a crucial role in certain sectors.
Energy Matters has over 17 years of experience in the solar industry and has helped over 40,000 Australian households in their journey to energy independence.
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