Hydrogen has gone to the top of the list for anyone talking about climate change and the renewable energy industry in Australia.
With serious money being thrown at feasibility studies and regional hydrogen projects as Australia commits to decarbonise ahead of 2050, it is being held up by many as a white knight for the issue.
The federal government alone has committed $1.2 billion to growing the hydrogen industry while the states and territories are also out to ramp up localised production.
Hydrogen is a colourless, odourless, flammable gas that could replace natural gas (methane) as a more environmentally friendly alternative. The only byproduct when burnt is water.
For commercial purposes, hydrogen is produced with an electrolyser. The focus in Australia is to develop green hydrogen, produced using renewable energy sources such as wind and solar power, rather than fossil fuels.
If Australia can develop, at scale, an industry producing hydrogen for under $2 a kilogram, it will then become an economically viable alternative energy for widespread use.
Already there is work being done on using hydrogen to power vehicles, and to develop a “hydrogen highway” in Western Australia as supportive infrastructure for the long-haul freight business.
Methane can also be used to generate electricity and produce heat, with applications across industrial manufacturing and the development of green steel for construction, and plans for new hydrogen-fuelled residential estates.
There is a broad consensus that there is a role for hydrogen to play in decarbonising our built environment, but the scale and scope is all up for debate.
Pinsent Masons partner George Varma heads up the niche global hydrogen practice and advises governments on the adoption and procurement of hydrogen infrastructure and technology.
He says there is “absolutely” a future for hydrogen within the property industry.
“Australia is at the forefront of hydrogen as a renewable energy,” Varma said.
“The hydrogen market is evolving at such a rapid rate.
“There is a company in Japan working on developing small-scale electrolysis for in the home, which we think could rival Tesla’s power wall.”
The federal government has put $464 million towards seven hydrogen hubs in regional areas across Australia—Belly Bay in Tasmania, the Pilbara in Western Australia, Gladstone in Queensland, Eyre Peninsula in South Australia, Hunter Valley in New South Wales, and Darwin in the Northern Territory.
But the barriers to entry loom large, according to Varma, who says until the production costs get down to under $2 per kilo, it is unlikely that hydrogen will be a commonly used renewable energy.
Varma says the cost of production and lack of scale need to be addressed to make it a more viable industry.
But this burgeoning industry has some big backers with deep pockets.
A year ago, at the Fortescue Metals Group annual general meeting, Andrew “Twiggy” Forrest shocked shareholders when he announced the iron ore miner would be switching gears to become a renewable energy powerhouse.
The billionaire has put his money on the table to investigate renewable energy investment opportunities all over the world and in Australia, to test the hypothesis that the renewable energy industry could replace fossil fuel industries.
Last month Fortescue Future Industries (FFI), the renewable energy arm of Fortescue, announced it would back the construction of the biggest electrolyser in the world, the Gladstone hydrogen project, which was approved this month.
The $114-million first stage of FFI’s six-stage project will build a multi-gigawatt-scale electrolyser factory, with an initial energy capacity of 2 gigawatts per annum. Electrolysers will roll off the factory line in 2023, and the industry could be worth up to $1 billion.
FFI chairman and founder Andrew Forrest said Fortescue was “ahead of the curve” in pioneering a global green energy manufacturing centre in Gladstone.
“This initiative is a critical step in Fortescue’s transition from a highly successful pure play iron ore producer to an even more successful green renewables and resources powerhouse,” Forrest said.
Forrest believes the green hydrogen industry will be worth $12 trillion by 2050, and could replace up to three-quarters of our greenhouse gas emissions.
Fortescue is leading the charge to manufacture homegrown “green steel”, with an aim to using green hydrogen energy to produce it.
If Australia were to adopt green steel it would make huge in-roads into decarbonising buildings, according to Green Building Council of Australia chief executive Davina Rooney.
The construction, operation and maintenance of buildings accounts for almost a quarter of greenhouse gas emissions in Australia.
But Rooney says hydrogen was not the silver bullet when it came to decarbonising one of the country’s dirtiest industries.
“Materials emissions are about 15 per cent of emissions now, and they balloon to 85 per cent if you do nothing,” she says.
“Green hydrogen will be used for grid stability, but electrification is the priority in buildings and homes.
“If we want to hit net zero by 2050 we need to get to net zero operation by 2030 … that means wholly efficient buildings that are powered by fossil fuel free renewable energy.
“There will be some role for hydrogen, but 99 per cent of buildings can be electrified now … we need to invest in the critical pathways to electrification as a priority ... we need action now.
“The area where we are extremely excited about hydrogen is manufacturing and green steel, this could greatly help to reduce the embodied carbon in buildings.”
The Australian Hydrogen Centre, established by the Australian Gas Infrastructure Group in 2019, is running two-year feasibility studies across South Australia and Victoria aimed at blending 10 per cent renewable (hydrogen) gas with natural gas.
It is the maximum amount that can be blended without requiring wholesale infrastructure replacement and changing the specifications for household appliances.
AGIG aims to deliver 10 per cent renewable gas to its network by 2030, and 100 per cent renewable gas to new residential estates by 2025. It also plans to decarbonise its distribution networks by 2040.
Green hydrogen will fuel future developments but it will require substantial investment in scale and infrastructure to get it off the ground.