Environment & energy | Australia

28 October 2021

Green hydrogen will be central to Australia’s energy sector in coming years, but the country risks using it inefficiently and wasting its potential, Jenny Selway writes.

Green hydrogen is a major export opportunity for Australia as the world moves to net zero emissions, but ineffective investment in green hydrogen could result in the country being left behind.

Several new projects that will blend green hydrogen into gas distribution networks have recently been approved, but directing green hydrogen to other sectors, especially those that struggle to use renewables to bring down emissions, would maximise both commercial and emission reduction outcomes and facilitate industry competitiveness.

What is green hydrogen? In short, it is a zero-emission fuel produced through the electrolysis of water, using renewable energy. The cost of green hydrogen is influenced by electricity prices, capacity/load factor, plant size, capital cost, and efficiency.

The Australian National Hydrogen Strategy has set a target of two dollars per kilogram for Australian industry, with the goal of making prices competitive enough for export. Current prices, however, are closer to four dollars per kilogram. As such, green hydrogen, at least for now, needs to be considered a precious commodity, and directed towards applications that maximise its current and future value.

Australia’s hydrogen strategy advocates for state investment to realise economies of scale and ultimately achieve its price target. As it stands, $103.3 million has been funded for three ARENA (Australian Renewable Energy Agency) green hydrogen projects.

For now, two of these will bring small amounts of green hydrogen into existing gas distribution networks, although the concept of converting the existing gas network to using 100 per cent green hydrogen instead of natural gas is being investigated.

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The gas-blending concept is no longer experimental. Hydeploy, a hydrogen power project based in the United Kingdom, is currently injecting 15 per cent by volume hydrogen into residential networks in Leeds, and Hydrogen Park SA is injecting five per cent hydrogen into natural gas mains in Adelaide.

Yes, the technology is proven, but policymakers need to consider whether there are more worthwhile uses for this valuable product than blending it into the gas network. What could improve environmental and commercial outcomes?

First, there are some problems with the blending approach, and the reality of network conversion is much more complex than some may believe.

While blending hydrogen into the existing network to up to 20 per cent by volume is feasible without much trouble, concentrations above this threshold would require the changing of transmission pipelines, valves, and hardware due to hydrogen embrittlement concerns, incurring significant investment costs.

In addition to these conversion costs, hydrogen blending at low volumes also has limited emissions benefits.

Hydrogen has less energy per unit volume than the current norm of natural gas, and in a blend that contains 15 per cent green hydrogen, only five per cent of the gas’ energy comes from the hydrogen, limiting emission reduction benefits.

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It is important to remember that hydrogen requires electricity to produce, via the electrolysis of water. Assuming a very high-capacity rate of 90 per cent for an electrolyser firmed with deep storage, it would take 43 kilowatt-hours of electricity to produce one kilogram of green hydrogen.

As a result, studies show that where feasible, bypassing the gas network altogether via direct electrification is a better road to decarbonisation, as significant amounts of energy are lost when converting energy from one form into another.

Given the current grid’s emissions intensity, the renewable electricity required to produce a tonne of green hydrogen would today be better utilised directly in the grid, rather than being converted to green hydrogen to be used in the gas network – at least until the grid itself is largely powered by renewables.

Instead of gas blending, green hydrogen should be directed towards those sectors where direct electrification isn’t possible. These are the ‘hard to abate’ sectors, such as ammonia, heavy vehicle transportation, marine shipping, aviation, aluminium, methanol, and other high heat intensive industries that utilise gas.

For example, due to emissions intensity and relative cost differentials, replacing a tonne of grey hydrogen used in ammonia production with a tonne of green hydrogen would be almost three times less expensive per tonne of carbon dioxide equivalent avoided, compared to blending that tonne of green hydrogen into a gas network.

These examples demonstrate that a targeted and effective use of green hydrogen is essential. Those hard to abate sectors without a road to clear electrification are a more attractive target for Australia’s green hydrogen – in both economics and emissions reduction – than gas network blending.

Given this, Australia must develop a plan to ensure that green hydrogen projects maximise their impact in terms of emissions reduction. In turn, this would secure the Australian hydrogen industry a path to commercially viable uses for its green hydrogen and pave the way for its effective use into the future.

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