Labor chases the dream of the hydrogen economy – but can it be caught?

The Labor Party has committed to spending $1.1 billion on developing hydrogen fuel networks and an export hub in Gladstone in Queensland if elected. What would this mean for the hydrogen economy?

The funding pledge includes $90 million for the Australian Renewable Energy Agency to research and develop hydrogen technologies and $1 billion for the Clean Energy Finance Corporation, to offer to private sector capital to co-invest on early stage technology projects.

The ACIL Allen Consulting hydrogen study projects that hydrogen exports could add $3.6 billion to Australia’s economy and provide nearly 6000 jobs by 2030.

Some are already comparing hydrogen with Australia’s enormously successful LNG industry, which began with a single project the North West Shelf in 1979 and 40 years later is now the world’s largest exporter, sending 74m tonnes offshore, mainly to China, Japan and Korea.

But some experts say a mature hydrogen industry may emerge many years sooner, with the costs of the technology predicted to fall even faster than those of solar panels, which even five years ago were prohibitively expensive with government subsidies.

But will it? It’s all a matter of scale.

How does hydrogen work?

To start with it is less energy dense than methane. Just over three (3.23) times as much volume of uncompressed hydrogen is needed to obtain the same amount of energy. Therefore the gas needs to be delivered in a gas grid at a higher pressure to compensate and it takes up a lot of space in vehicles so has to be compressed to a liquid in a tank. 

Over 90 per cent of today’s hydrogen is mainly produced by steam reforming. This process uses fossil fuels – natural gas, oil or coal – as a source of the hydrogen and the hydrogen produced is two to three times the cost of the original fuel. 

The claimed energy efficiency for natural gas reforming is 75 per cent – in other words a quarter of the energy is lost in conversion. What’s more the carbon footprint of this process, even if carbon capture and storage were to happen, has been evaluated as 336.26 grams of carbon/kWh. 

Renewable gas – a pipe dream? 

But what if the gas is produced from renewable electricity generators and stored for whenever it might be required? Then it would be almost zero carbon. 

The method of doing this is by proton exchange membrane electrolysis. However, right now, this method is around eight times more costly than producing it from fossil fuels

And predictions of the cost coming down have been around for over three decades.

Yet the need is becoming more urgent. As the amount of solar and wind energy increases on the grid more and more, because of its intermittency it will be produced at times when not all of it can be consumed, and so storage is needed to avoid it being wasted.

Right now the only close solution to this is batteries. But one day it could be stored by converting it into hydrogen and using it either to power vehicles or in the gas grid.

“Costs will come down as production increases,” ACIL Allen science and technology director John Söderbaum says. “It’s pretty much the learning by doing formula. You can see it in the costs of solar panel production which are really plummeting and I think you’re going to see the same thing with batteries. And hydrogen will be the same.” 

But he cautions that Australia will not begin producing hydrogen at any realistic scale unless it also builds the infrastructure needed to ship, store and export it. This is a chicken and egg conundrum because it will not make sense to build infrastructure until enough hydrogen is being produced.

“If the export industry gets off the ground and shows it can actually produce hydrogen, it may not be all that attractive to start with but it will come down in price, so that people are prepared to invest in it. Then it is just a question of time,” Soderbaum says.

Pumping up the grid

To do the latter would require changes in pressure to the grid delivery network and polyethylene pipes, since the molecule is smaller than methane and can escape through gaps. But it would offer a familiar service level to customers.

If it’s added to existing gas in a proportion above 10 per cent, then consumers’ existing gas appliances will have to be modified, says the Australian Gas Infrastructure Group’s lead advisor on low carbon transformation, Vikram Singh.

Owners of existing gas networks including AGIG and Jemena, are trialling hydrogen injections in small contained sections of their grids.

AGIG is injecting 5 per cent of hydrogen into a section of its gas network in South Australia, for up to 1000 households. It’s also investing in storage for hydrogen in salt caverns and repurposed gas transmission pipelines, and owns the Tubridgi gas storage facility in Western Australia.

Jemena is injecting up to 2 per cent hydrogen in a small micro-network in Western Sydney in a $15 million that is powered by bought-in renewable electricity, but project manager Gabrielle Sycamore says she wants to build a solar farm to supply the project instead once it is scaled up.

“You would co-locate hydrogen injections where the wind and solar farms are. It’s a natural point of entry into the network, making sure all the network infrastructure in that area is sound,” she says.

Developer H2U and Thyssenkrupp were awarded grants and loans to build an electrolyser in South Australia. They are now seeking debt for the AU$117.5m demonstration project, which is anticipated to begin producing hydrogen by 2021.

Hydrogen vehicles anyone?

In the UK, high purity hydrogen is available at refuelling stations for fuel cell cars at $18.7kg of hydrogen. Each kg contains 39.4kWh of energy, so that’s about $0.33/kWh. 

The ambition is to decrease the $/kWh value as more stations are manufactured and more fuel cell cars are in circulation. 

Industry groups think this could happen in Australia, and that the ALP’s hydrogen plan might kickstart the rollout of hydrogen transport and refuelling networks across the country.

Chief executive of Hydrogen Mobility Australia, Claire Johnson, says government agencies will need to fund research and development into fuelling stations. 

“The business case isn’t quite firm enough yet for private sector investors to invest in isolation. Both sides of government are looking at the funding required to build a network of refuelling stations and the regulatory changes required to enable this infrastructure to be deployed.” 

Johnson points to California, which is co-funding a network of refuelling stations across the state.

But it would still need auto manufacturers to make sufficient vehicles at the right price.

Existing hydrogen fuelled freight and bus vehicles can certainly travel much further without needing to refuel than if they were powered by today’s batteries, which would provide them with a competitive advantage over long distances, but not for personal transport in an urban context.

So there are niche markets. To take another example hydrogen forklifts are already in widespread use in the US, at warehousing facilities run by IKEA, Walmart and Amazon. “Hydrogen forklifts are more expensive upfront but they are cheaper to refuel than battery electric forklifts,” Johnson says.

Selling hydrogen gas to the world

But Australia is still many years away from producing hydrogen in quantities that would make sense to export, or building a pipeline network to transport it across the country.

South Australia is considered a likely epicentre for the country’s domestic hydrogen industry but it would make sense to build hydrogen for export in locations further north, such as Gladstone in north Queensland where LNG is shipped to China, Japan and Korea.

The Labor party’s hydrogen policy incorporates plans for a national hydrogen innovation hub that will examine whether LNG infrastructure can also be used to export hydrogen.

Most hydrogen projects say they are at least five to 10 years away from attracting investment – as they’ve been saying for years. Chief scientist Finkel says the industry is caught in a “chicken and egg” quagmire. 

“The problem is that commercial buyers, and many who are expressing an interest, are not yet ready to sign any offtake agreements because the price of hydrogen is too high and on the demand side they can’t get any agreements until they scale up their volume, they can’t take the price per kilogram of hydrogen down.”

In this situation, it up the government to provide a stimulus for ships. “It is clear that government will have a role in establishing appropriate safety regulations and standards, and in negotiating and finalising with the maritime organisation about safely shipping hydrogen,” Finkel says.

So it is here where, if it happens, the Labor party’s policy would make the most difference.

David Thorpe is the author of Passive Solar Architecture Pocket Reference, Solar Technology and Sustainable Home Refurbishment

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  1. Hydrogen is fantasy, it’s very nature as an element renders it near impossible to use as a mass market fuel. It is non-storable, non-pipeable, it’s able to leak through a metal container and piping which makes it extremely dangerous to use.
    It’s very expensive to manufacture, the manufacture processes in themselves are not energy efficient.
    There is no known technology that will ever make hydrogen viable as a mass usage fuel, it’s always going to be ten years away. Throwing money at it is just plain stupid, like nuclear fusion and fission.