Know Today. Shape Tomorrow

– Over 40 hydrogen projects have been announced in Australia with a potential capacity of 7.0 MT H2/year by 2030, representing a third of total announced capacity.

– Australia has plans to build two of the largest green hydrogen projects in the world

– Japan aims to become a ‘hydrogen society by 2050, Australia well positioned to supply growing hydrogen demand

The interest in hydrogen as a future clean energy feedstock and carrier is snowballing as governments around the world are planning their deep decarbonization goals and strategies. As a result, the global demand for hydrogen is rising. The future growth in demand can be even more promising considering the downstream applications in power, industrial, and transport (including marine) sectors.

Australia has established itself as a top exporter of key commodities such as coal, iron ore, and natural gas to the major economies of the region – China, Japan, South Korea, and India. It is also among the few countries that are uniquely placed to produce hydrogen at scale. In addition, Australia’s sizeable brown coal (lignite) reserves with carbon content as high as 60-70% could provide low-cost clean Hydrogen from coal gasification with carbon capture and sequestration (CCS) which can help kick-start the hydrogen export industry. Platts Australia Hydrogen price assessments for Victoria for lignite gasification with CCS were in the range of A$ 0.77-3.48/Kg for both with/without CAPEX considerations on Aug. 16. Although there are concerns around how clean such hydrogen can really be, given incremental energy needs/emission and upstream supply releases.  Large-scale investments in clean technologies producing green hydrogen may follow as they mature and become economical over time.Platts Hydrogen Production Asset Database has seen around 7.0 MT H2/year of announced hydrogen capacity from renewables by 2030 (refer to Fig. 1), catering to the demand primarily from power, industrial, chemicals, and mobility sectors¹ (refer to Fig. 2).

In addition to domestic consumption, there appears to be a significant potential demand for hydrogen as a fuel source from Japan which Australian hydrogen producers can target. Japan intends to cut its GHG emissions by 46% from 2013 levels and aims to achieve carbon neutrality by becoming a ‘hydrogen society’ by 2050, an upgrade from its initial targets in the Basic Hydrogen Strategy by the Ministry of Economy, Trade and Industry (METI), Japan. Over the next decade, the Government of Japan has committed a US$19.2bn (¥2 trillion) fund to develop green technologies, including hydrogen, storage batteries, and carbon recycling². Currently, Japan has more than 4400 FCEVs on the road, and the plan is to increase the number to more than 811,000 by 2030ⁱ. Japan is planning hydrogen power generation using international hydrogen supply chains, leading to annual hydrogen procurement of around 300,000 tons (amounting to 1 GW in power generation capacity). METI in long-term plans to generate 15-30 GW of power through hydrogen with the annual procurement of 5-10 million tons of H2. Given Japan’s limited domestic H2 production capacity, Australia can target this huge H2 demand. It has a clear advantage over other H2 producers around the world in terms of the availability of low-cost clean hydrogen combined with its proximity to Japan.

 ¹ Hydrogen Market Monitor – A Global Status Update of the Hydrogen Market (June 29, 2021)

² Asia-Pacific Hydrogen Policy Review (July 06, 2021)

Fig. 1 – Announced renewable H2 projects in Australia.

Fig. 2 – H2 end-use sectors in Australia

In past years, Australia has positioned itself as a developing hydrogen industry in the region through clean energy investments, research studies, and demonstration projects.
The Hydrogen Energy Supply Chain (HESC) project is one such pilot project that will demonstrate liquid hydrogen (LH2, H2 cooled to –253°C) transportation from Latrobe Valley in Victoria to Kobe City, Japan (planned for the year 2021). The LH2 will be transported using the world’s first LH2 carrier, Suiso Frontier, which will house a 1250 m3 vacuum-insulated double-shell-structure LH2 storage tank. The learning from this project in liquefaction, storage, and transportation will play a critical role in establishing an end-to-end supply chain between both countries.

In addition to LH2, the other viable technological options for H2 storage and transportation Include organic hydrides such as methylcyclohexane (MCH) and green liquid ammonia. Transporting liquid ammonia has an edge over the LH2 and MCH, it has higher energy density (11500 MJ/m3) than LH2 (8491 MJ/m3) on a volumetric basis combined with suitable temperature requirements, and it can carry around 17% of hydrogen by wt. compared to only 6% in case of MCH. Furthermore, ammonia has mature production technology, infrastructure, and shipping experience of many decades. For now, there are no large-scale renewable ammonia plants in Australia. Still, the country holds an edge as a likely hub of clean ammonia production, based on renewable energy potential and proximity to an end-user market in east-Asia.

Check out Platts Asia Energy Transition news

“For more than 20 years, the Global Energy Awards has recognized achievements by companies who have faced complex challenges and capitalized on unique opportunities.

The industry continues to be tested, and through these tribulations emerge authentic leaders.

We are most proud to stand by our communities and acknowledge the incredible success stories from unyielding leaders and dynamic companies.”

READ MORE

Jonty Rushforth, Senior Director of Markets & Energy Transition, and Paula VanLaningham, Platts Global Head of Carbon, talk about the devastating wildfires sweeping across the globe and the challenges facing nature-based carbon credits s the market reckons with offset permanence in the face of rising global temperatures.

Related analysis: Turkey’s forest fires kindle larger questions on offset permanence

From the raft of hydrogen projects unfolding in the Middle East and around the world, the importance of infrastructure readiness is becoming clear: setting the table for the hydrogen economy through development of ports, shipping lanes and storage will be critical in the months and years ahead.

The Middle East is rich in sunlight and has ample access to natural gas, which makes clean hydrogen and its derivatives such as ammonia potentially cost competitive compared with conventional fuels, in a decarbonization landscape. Opportunities exist to export either into Europe through the Suez Canal or into Asia.

Scaling up of both production and consumption of hydrogen is increasingly seen as a vital part of the achieving global decarbonization. Evidence of that scaling on the production side is seen in several key projects of Middle East origins, which are already looking at commercializing hydrogen, including the UAE’s recently announced $1 billion green ammonia facility in Khalifa Industrial Zone Abu Dhabi, or KIZAD. The project has access to Khalifa Port, the main export hub of Abu Dhabi, and will start production in the second quarter of 2024 with exports targeted mainly to Europe and the US.

A second $1 billion green ammonia project at KIZAD, a unit of state-owned Abu Dhabi Ports, would be powered by a 2 GW solar power plant. The plant would supply ships using ammonia as a bunker fuel and for export via gas carriers.

Partnerships, including offtake agreements, will power these developments, such as the cooperation agreement reached with German utility Uniper to secure green ammonia from Oman’s Hyport Duqm renewable hydrogen project. The project will be built in the Arabian seaport of Duqm in Oman, and will work well with the company’s global hydrogen strategy, Uniper said.

Other end-users, such as Japan’s largest refiner ENEOS, see the Middle East as a region with some of the world’s lowest levelized costs of electricity, which gives producers within the region an advantage and offers the operators of these new sites the potential to deliver cost-competitive hydrogen or its derivatives, such as green ammonia, to Europe and Asia.

As large projects are announced and developed, port developers will have to examine where they have the biggest bottlenecks to allow production of clean hydrogen from renewable sources or where they have the capacity to add carbon capture and storage.

Conversion of gas shipping lines for H2, ammonia

With production on the way, cooperation agreements are being drawn up with end-users. Companies such as Italy’s Eni aim to develop renewable and low-carbon hydrogen in Egypt using depleted gas fields to store CO2 produced from conventional hydrogen production. The agreement allows Eni to work with their suppliers to investigate potential local demand for hydrogen, as well as explore export opportunities.

Shipping from the Middle East to Europe and Asia takes advantage of existing supply lines for natural gas and LNG—via the Suez Canal into Europe and around to Asia.

From the customer’s perspective, deciding whether to buy domestic or imported hydrogen will largely depend on production and transportation costs, including terminal and other fees. Project developers must weigh the cost of producing decarbonized hydrogen or ammonia domestically against the cost of producing it with cheap electricity in the Middle East plus transportation costs.

In Japan, S&P Global Platts launched calculated cost of production assessments Feb. 3, 2020. The costs are based on fixed values such as capital costs and plant efficiency along with daily variable inputs, including gas and electricity.

The Platts cost of production prices show that the cost of producing hydrogen conventionally through a Steam Methane Reforming unit without carbon capture and sequestration averaged $2.61/kg since the assessments were launched.

In comparison, producing hydrogen through electrolysis averaged $7.24/kg. This difference between the two production routes is largely driven by a surge in electricity costs at times of peak consumption during winter, which drove up the cost of production via electrolysis.

On an MMBtu basis, hydrogen production costs are far more expensive than spot shipments of LNG delivered into the JKTC (Japan, Korea, Taiwan, China) region. Platts JKM LNG prices averaged $6.86/MMBtu since Feb. 3, 2020. Electrolytic hydrogen production costs minus transportation and storage averaged roughly eight times that amount over the same period and conventional hydrogen around three times higher than delivered LNG.

However, while shippers might be focused on costs, end-users could be focused on how many tons of CO2/kg H2 are saved. Pressure continues to mount on industry and governments to reduce carbon emissions amid rising challenges of climate change.

The World Energy Council’s Hydrogen on the Horizon: Ready, Almost Set, Go? report released July 27 also stresses the need to move beyond traditional supply-centric energy perspectives to focus more on the demand-side and the role of consumers, given their potential for disruptive innovation.

Better understanding of hydrogen demand has proved particularly challenging in the early stages of its development, the report said.

In the early stages of the development of the hydrogen market in the Middle East, this chicken-and-egg question around the costs of decarbonization will need to be resolved. It is likely that cooperation between industry and government will be an essential part of finding a solution to developing the necessary infrastructure. However, as investment decisions come under closer scrutiny, transparency around current and future hydrogen pricing will also become increasingly important.

A version of this article was first published on Zawya.com on Aug. 2, 2021

The EU has raised its 2030 greenhouse gas reduction target from a gross 40% to a net 55% on 1990 levels. An ambitious package of initiatives, Fit for 55, is to deliver the target.

Reform of the EU Emissions Trading System is at the heart of the package, but across the piece it is transport that emerges as the EC’s key target, as it has proved largely immune to decarbonization efforts thus far.

Click here to see the infographic in full size