New analysis shows hydrogen production could add $50 billion to GDP by 2050 and create a jobs boom. Here’s how the quest to get there is shaping up.
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New analysis shows hydrogen production could add $50 billion to national GDP by 2050 and create a jobs boom. Here’s how the quest to get there is shaping up.
Hydrogen was a big winner in this year’s federal budget, with the government announcing a $2 billion Hydrogen Headstart program aimed at bridging “the commercial gap for early projects” and placing Australia on course to develop a gigawatt of electrolyser capacity by 2030 through two to three flagship projects.
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The Australian Renewable Energy Agency (ARENA) said the funding would provide revenue support for investment in renewable hydrogen production through competitive production contracts.
Basically, the funding will cover the commercial gap between the cost of hydrogen production from renewbles and its current market price.
As Stockhead’s Bevis Yeo points out, there are also calls for a subsidy of about $2 per kilogram of green hydrogen produced, half as much offered under the US Inflation Reduction Act.
Since US President Joe Biden promised $US370 billion in tax credits to the US renewable energy industry in August last year, more than 100,000 clean energy jobs have been created and almost $US90 billion invested in a matter of six short months – as Deloitte pointed out back in February with its report on Australia’s urgent case to support renewable hydrogen production.
Getting large-scale projects off the ground
ARENA CEO Darren Miller said the initiative would ensure large scale hydrogen projects already in development could get off the ground in Australia.
“Australia has an unparalleled opportunity to become a global green hydrogen leader, but we can’t afford to lose our momentum as other competing countries step up their ambitions and support,” he said.
“This fuding will reduce the cost of green hydrogen produced via renewable electricity and will scale up our hydrogen sector.
According to new analysis by global management consulting outfit McKinsey & Company and modelling by DCCEEW (Department of Climate Change, Energy, the Environment and Water), Australia’s hydrogen industry could generate $50 billion in additional GDP, and create more than 13,000 regional jobs and a further 13,000 jobs from construction of new renewable energy infrastructure by 2050.
Australian Association for Hydrogen Energy director and University of Sydney Professor François Aguey-Zinsou says hydrogen is still a relatively expensive exercise because the technology has never been deployed at scale, so there are many countries subsidising companies for projects to start and be viable.
“The Australian government says that $2 per kilo of hydrogen is a target we should reach to start to have some commercial viability,” he said.
“At the moment hydrogen from renewable eergy is about $6 per kilo.”
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And while Professor Aguey-Zinsou believes the goal of a gigawatt of capacity by 2030 is achievable, he says we’re a bit late to the party.
“Saudi Arabia already signed a contract with a large German electrolyser company to deploy five gigawatts of electrolyser and this will probably be done in the next two to three years,” he said. “So, if we do a gigawatt by 2030, we will be behind already.
“Typically, we are looking at deploying technology that has already deployed somewhere else, and I think we need to accelerate.”
We’re stoked to see the Australian Government launch an $2 billion ‘Hydrogen Headstart’ program to accelerate #GreenHydrogen projects. It’s a great first step! 🚀 pic.twitter.com/aX1zZoEZXn
— Fortescue Future Industries (@FortescueFuture) May 10, 2023
Hydrogen from fossil fuels need decarbonisaton
Beyond the obvious jobs and growth benefits, hydrogen also has the potential to cut annual global emissions by up to 20 per cent by 2050, McKinsey research says.
It can be combusted for industrial heat, used as a chemical input for green manufacturing, a fuel for heavy transport, or liquefied and compressed for export to key trading partners.
Sparc Technologies (ASX:SPN) GM renewable energy Nick O’Loughlin says hydrogen is already a massive 90 million tonne per year industry – it’s just that 99 per cent of that hydrogen is produced via fossil fuels.
“Regardless of what people may think about using hydrogen in your car, or in trucks, or whatever other application, there’s already a huge market out there which requires decarbonisation,” he said.
“There is already a big industry out there and there are offtakers out there, it’s all about just producing at a price that can match their existing production.”
And while $2 billion is a nice start, it’s not the much funding in the schee of things, O’Loughlin says.
“It will be able to support a handful of projects, but not many given the scale at which electrolysis projects need to be built to be competitive – they can be multibillion-dollar projects in and of themselves,” he said.
Unfortunately for Sparc, the funding isn’t directly beneficial to their hydrogen joint venture with the University of Adelaide to develop a photocatalytic green hydrogen technology prototype in July/August before scaling up to a pilot plant.
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Reducing production costs using existing infrastructure
One way to reduce production costs is to produce hydrogen in locations with cheap and plentiful renewable energy sources and where there’s existing gas pipelines and infrastructure – which is what Port Anthony Renewables (unlisted) is aiming for, with its hydrogen-hub plans in southeast Australia.
The Port is strategically and geographically situated to take advantage of the emerging energy arket, with the plan to build an intricate network of refuelling stations across Australia to expedite the conversion to carbon-free hydrogen-powered vehicles.
The idea is that if refuelling stations are built and costs reduced, hydrogen will produce reliable power for industries currently dependent on ageing diesel fuel systems – which is great for our net zero ambitions.
Notably, Port Anthony also has a joint venture with Infinite Green Energy (also unlisted) for Port Welshpool in Victoria, where the plan is to host liquefaction and storage at the port for ease of export in domestic Victoria and to Asia Pacific markets under development.
Infinite Green Energy also has the Arrowsmith project in WA where it is chasing a Final Investment Decision (FID) for 2024.
Replacing diesel for road transport
On the listed side, one company looking to decarbonise road transport is ReNu Energy (ASX:RNE), with renewable hydrogen projects in Tasmania heading towards a final investment decision ths year.
The company’s hydrogen investee company Countrywide Hydrogen (CH) is developing hydrogen projects in Hobart and Launceston (and a possible third at Burnie), strategically located to deliver a hydrogen refuelling network across the state for road transport.
A key success factor will be the delivered cost of hydrogen because it will be competing to replace the traditional fossil fuels like diesel and natural gas.
“CH is confident the announced federal government support to minimise the price of hydrogen will accelerate the uptake of hydrogen which means emissions reduction targets will be achieved faster, impacting positively on air quality and health,” Countrywide Hydrogen MD Geoffrey Drucker said.
Hydrogen stocks on the ASX
Another Aussie company set to benefit is Frontier Energy (ASX:FHE) which is poised to be one of the first low-cost green hydrogen producers in WA with its Bristol Springs Green Hydrogen Project.
The company recently completed a Pre-Feasibility Study tha outlined an initial capital cost of $242.5 million, inclusive of the 114-megawatt solar farm, as well as a 36MW alkaline electrolyser.
Plus, the proximity to nearby infrastructure including access to an existing water pipeline and connection to the Southwest Interconnected System (SWIS), will drive a targeted annual production of 4.6Mt of green hydrogen per year at a total of $2.77/kg.
First production is scheduled for 2025/early 2026. A timeline that could coincide nicely with the government’s hydrogen funding – however it’s dished out.
BW Equities, a Melbourne boutique corporate advisory, is certainly a fan, believing that supply-side equities would “act to catapult forward the adoption curve for Australian hydrogen – in turn shortening offtake discussions and raising the likelihood of additional stages of FHE’s Bristol Springs Project reaching FID.”
BW Equities on $2bn Hydrogen Headstart program announced in last night’s #budget and implications for $FHE: “We believe supply-ide subsidies would act to catapult forward the adoption curve for Australian #hydrogen – (continued) pic.twitter.com/wKoWAernHr
— Frontier Energy (@FrontierASX) May 10, 2023
Meanwhile GreenHy2 (ASX:H2G) is focused on stand alone power dystems, with the development of hydrogen storage systems in metal hydrides, which involves breaking up the hydrogen molecules and storing them on the ferrous titanium – a significant cost advantage because hydrogen stored in metal hydride tanks has no expiry date.
Earlier this month Barclay Pearce Capital (BCP) set a Speculative Buy rating on the company with a target price of 5c (versus current price of 2c).
BCP believes GH2 has several tailwinds, including a political landscape that’s conducive to the company’s growth, and said H2G’s tech is the only one capable of 100 per cent renewable fraction, and is completely green, using 100 per cent renewable generation.
Then there are companies developing hydrogen powered vehicles.
They include Pure ydrogen (ASX:PH2) which plans to launch the Taurus this week at the Brisbane Truck Show – a 220kW 6×4 prime mover with a hydrogen refuelling point able to handle B-double loads of up to 70 tonnes.
PH2 is also developing the Moreton Bay hydrogen project in Queensland which will be a site for hydrogen manufacturing and distribution with an initial targeted output of 1000 tonnes of clean hydrogen year.
Search is on
There are quite a few hydrogen stocks on the ASX focused on finding hydrogen, such as Gold Hydrogen (ASX:GHY) which has seven applications for exploration in South Australia.
Meanwhile, Provaris Energy (ASX:PV1) is progressing its green hydrogen export Tiwi H2 project in the Tiwi Islands, Northern Territory, with the plan to develop an integrated compressed hydrogen export supply chain for up to 100,000 tonnes per annum, “avoiding up to 1 million tonnes of CO2 emissions annually,” the company says.
Interestingly, Australia isn’t the only one investing in Australia, with Japn keen to secure Victorian lignite hydrogen resource as part of the international Hydrogen Energy Supply Chain (HESC) project. It announcing plans in March to commit $2.35 billion towards the project.
Environmental Clean Technologies (ASX:ECT) has projects in Victoria (Bacchus Marsh and Latrobe) and while not part of the HESC consortium, plans to prepare its COLDry demonstration facility for any vendor selection process for projects that require a lignite drying solution.
WA play Pilot Energy (ASX:PGY) which is working on a carbon capture and storage operation to convert the operating Cliff Head offshore oilfield to enable to production of blue and green hydrogen and ammonia at its Mid West Clean Energy project.
Province Resources (ASX:PRL) is developing the HyEnergy green hydrogen project in WA’s Gascoyne region, where it’s looking to undertake Pre-Feasibility studies (PFS).
This content first appeared on stockhead.com.au
At Stockhead we tell it like it is. While Frontier Energy,Sparc Technologies and Port Anthony Renewables are Stockhead advertisers, they did not sponsor this article
