Green hydrogen: Is this a make-or-break moment for Australia amid a $127 billion decline?

About 3,000 square kilometers of additional land is being acquired in the arid region for subsequent expansion and downstream industries, said James Leong, co-founder of Climate Impact Corporation, a Sydney-based company formed in 2022 that is implementing the project.

“Australia has a lot of flat land and we have the best infrastructure – railways and highways,” said the Hong Kong private equity veteran. “The beauty of hydrogen is that it can be converted into end products needed by various industries.”

Hydrogen, a highly flammable gas with a low energy density, is difficult and expensive to transport over long distances. This can be overcome by processing it into easily transportable products such as methanol AND ammonia piloted on ships and power plants.

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Alternatively, green hydrogen can be converted to methane in a complex process, as envisaged in the Green Springs project. The company proposes to transport the natural gas component using existing gas infrastructure.

Green Springs plans to deploy European and American equipment to remove moisture from the air to overcome water shortages in the region, as well as Chinese equipment to produce solar energy and hydrogen. It takes nine tons of water to produce one ton of hydrogen.

The heat produced by the process will power a separate set of devices that capture carbon dioxide from the atmosphere to chemically react with it green hydrogen for the production of water and methane. Burning this “renewable” methane is carbon neutral.

Climate Impact is in talks with a large Japanese utility that wants to source green methane to replace liquefied natural gas in its power plants, Leong said.

“Japanese and South Korean shipping, energy and steel companies are looking for low-emission fuels and chemicals,” he said. “Some want green ammonia, some want green methanol, some want green methane.”

Last month, Climate Impact entered into a non-binding agreement with US company GE Vernova – formerly owned by General Electric – to cooperate on the design of modules for the production of green hydrogen. They have set a goal of producing 500,000 tons of hydrogen per year at $2 per kg. According to the Hydrogen Council, an initiative launched at the World Economic Forum in 2017, the current cost of producing green hydrogen is estimated at around $4.50-$4.60 per kg.

The company is trying to convince Chinese and European electrolyzer manufacturers, including: Sungrow power system from China’s Anhui province – to set up shop in Australia, Leong said.

It is also in talks with Japanese, European and Asian banks for loans to cover 70 percent of Green Springs’ costs, with low-carbon, sovereign and pension funds taking the rest in the form of equity shares.

Climate Impact is not the only startup that has proposed a green hydrogen mega project.

In March, a global energy titan BP has increased its bid for the Australian Renewable Energy Hub, one of the world’s most ambitious green hydrogen projects, planned since 2014.

BP increased its stake in the project to 64 percent, acquiring the 15 percent stake held by Macquarie Capital and the Australian bank’s Green Investment Group for an undisclosed amount. BP has set itself the goal of capturing 10 percent of the global hydrogen market.

The $36 billion project, located on an area of 6,500 square kilometers in Western Australia, aims to build approximately 26 GW of solar and wind farms that will power 14 GW of electrolysers and produce 1.6 million tonnes of hydrogen per year.

Since 2019, when the Australian government unveiled its strategy to transform the country into a low-carbon superpower, more than 100 hydrogen production and related projects worth $127 billion have been announced.

At least 80 of the projects are green hydrogen projects, and 15 have made final investment decisions allowing work to begin.

In February, the federal and Western Australian governments agreed to invest A$140 million ($93.4 million) by mid-2028 in a training and research institute and port upgrades to handle large renewable energy facilities.

Meanwhile, last month’s federal government budget included A$8 billion in financial support – mostly tax incentives – over 10 years for renewable hydrogen production.

On the demand side, the Japanese government passed new regulations in February providing subsidies to green hydrogen producers and importers by financing the price differential between hydrogen and natural gas.

“Unlocking this type of financing is critical for green hydrogen to benefit from economies of scale and become price competitive with fossil fuels,” said Jen Carson, industry chief at the nonprofit Climate Group.

Despite such support, it is unclear when these mega projects will receive the support of customers and financiers to launch them.

Analysts say the feasibility of many projects is still being tested due to logistical challenges and uncertainty in the supply chain and export markets.

“The engineering, physics and money have to be right to create demand,” said Grant Hauber, strategic energy finance adviser for Asia at the Institute for Energy Economics and Financial Analysis. “It wouldn’t be possible right now without massive subsidies.”

While most countries have production incentives, plans need to be developed for transportation infrastructure and product markets, he added.

Xuan Feng, CTO of a hydrogen solutions provider based in Shanghai Hydroxiastated that due to the immaturity of the supply chain, many companies must provide their suppliers and customers with “help” to sell their products.

Liquid hydrogen transport was successfully demonstrated in 2022 by Suiso Frontier, the world’s first liquid hydrogen carrier.

The ship uses advanced insulation and structural technologies, but the risks associated with the new technology must be mitigated, said Alex Lua, Natural Resources Risk Consulting Engineer, WTW’s Asia risk advisor.

These include loss of tightness, flammability of hydrogen, extremely low storage temperatures, collisions or grounding, and metal embrittlement due to hydrogen absorption.

According to Lin Boqiang, dean of the China Institute of Energy Policy Studies, hydrogen will certainly play an important role in the global energy mix in the future, but it remains to be seen when it will be available in large quantities and cheaply.

“However, this does not mean that there is no need to develop green hydrogen,” he said. “Ongoing planning and government support is still very important as the supply chain needs to be built to be able to respond quickly enough when the tipping point for hydrogen use comes.”

For the world to achieve net zero emissions by mid-century and stop global warming at 1.5 degrees Celsius, according to the International Renewable Energy Agency (Irena), hydrogen and its derivatives – methanol and ammonia – must constitute 12% of energy consumption by 2050.

According to Irena’s 2022 projections, electrolyzer costs could drop by 80 percent to $130 per kilowatt in 2050 from $650 in 2020 if installed capacity reaches 5,000 GW in 2022. To meet global demand for green hydrogen, power electrolysers must increase to 350 GW by 2030 from 0.5 GW in 2021.

According to Irena, to achieve global climate ambitions, alkaline electrolyzer manufacturers need to achieve a cost target of 42 kilowatt-hours (kWh) per kg of hydrogen by 2050, up from 47-66 kWh in 2020.

Some startups have made technological breakthroughs that could accelerate the green hydrogen supply chain and market development if they can be successfully scaled up.

CM Xiagen hydrogen energy technologyelectrolyser maker backed by the Fujian government and state-owned conglomerate China Merchants Group, said laboratory data showed its pilot products were already outperforming the U.S. Department of Energy’s 2026 target that requires electrolyzers to operate at a voltage of 1.8 volts and a current density of 1 ampere. per square centimeter.

“Last year, we exhibited our technology at an international trade fair in France and it was well received by our international partners,” said Gao Xiaoping, president of CM Xiageng. “However, it will take several more years of hard work to achieve excellence in mass production of our products while ensuring good quality.”

HysataThe New South Wales-based electrolyser maker, co-founded in 2021 by Professor Gerry Swiegers from the University of Wollongong, says it has already exceeded Irena’s 2050 cost target, bringing it down to 41.5 kWh.

According to co-founder and CEO Paul Barrett, the company has developed an electrolyzer membrane that allows hydrogen ions to move much more efficiently, reducing electricity consumption by one-fifth compared to conventional electrolyzers.

Hysata will soon begin working with partners on commercial trials. Last month, the startup closed a $111 million Series B fundraising that included strategic investors such as BP, Danish wind turbine giant Vestas, South Korean steelmaker Posco and Malaysian energy company Petronas.

Hysata’s goal is to commercially deploy flexible capacity electrolyzers at industrial customer facilities in the second half of this decade, enabling them to produce green hydrogen on-site.

“We designed our system with 5-MW components that can be connected together like Lego bricks to create 100-MW branches that can then be deployed in dozens to reach gigawatt scale,” Barrett said.

Hydro X is another start-up looking to tackle the logistics challenge. The Israeli company won the silver award in this year’s Tera smart energy innovation competition, organized by Hong Kong gas supplier and China Gas (Towngas).

CEO Assaf Sayada said the company’s catalyst enables the safe storage and transportation of hydrogen using liquid media such as plastic or stainless steel tanks.

Hydro

Currently, hydrogen is typically compressed and liquefied by applying extreme temperatures and pressure, and then transported in specialized tankers or tube trailers.

“To produce green hydrogen, a lot of renewable energy is needed, and long-distance logistics costs are too high at $6 to $7 per kg,” Sayada said. “Our technology can keep the cost down to $1 and be a complete game changer.”