Australia's large renewable hydrogen projects look to start small, build up in phases

Australia's large-scale renewable hydrogen projects are looking to start small but build up in phases to overcome challenges posed by rising costs, low demand and elusive investments, industry members said at the Asia Pacific Hydrogen 2024 Summit and Exhibition in Brisbane Sept. 12-13.

An early starter in renewable hydrogen, Australia has more than 100 renewable or low carbon hydrogen projects, several of which are designed to be large hubs catering to the export demand in Asia and Europe, where net zero targets are set around 2050.

"What we see as important is the ability to start small but build out in phases and have the ability to scale up to bring the cost down," said Lucy Nation, Country President Australia & VP Hydrogen, Australia and Asia Pacific at BP.

Nation said in the nascent industry, where electrolyzer technology, supporting infrastructure, customers' needs are constantly evolving, "the only way to do the project(s) is to break it up into smaller pieces."

At the 26-GW Australian Renewable Energy Hub in Pilbara, Western Australia, being developed by BP along with CWP Global and InterContinental Energy, phase one will be built for local renewable power sales, Nation said.

Phase two will be for renewable hydrogen, channelized into green steel, she added. While phase three could see renewable hydrogen/ammonia for domestic sales or exports.

"It's a pitch and catch analogy as in baseball -- you've got to have the end use well defined and anchored to the supply chain," said Jeffrey Goldmeer, Director of Energy Transition Technologies at GE Vernova.

The complexities of the large mega projects, which have never been built before with different components of the projects progressing at different timeframes, create challenges, Goldmeer explained.

The largest Australian renewable hydrogen project, the 50 GW Western Green Energy Hub, signed up with Korea Electric Power Corporation this month to conduct a feasibility study for phase one of the project situated in the remote southeast part of Western Australia.

Policy help

The Australian government has rolled out several climate policies, and specifically for hydrogen it launched a A$2 billion ($1.34 billion) incentive scheme Hydrogen Headstart in the 2023-24 budget and topped it up with a similar amount this year.

This year, it also launched a A$2/kg Hydrogen Production Tax Incentive to give a boost to the fledgling industry and counter the US' subsidy-heavy Inflation Reduction Act.

But the domestic industry is also urging for big build of infrastructure to support hydrogen and bigger demand-side stimulation to encourage buyers to offtake renewable hydrogen.

"Color choices really create a bias," Goldmeer said, referring to the different pathways by which renewable hydrogen is produced. "Why don't we talk numbers?"

Goldmeer insisted that a better way to trade renewable fuels is by categorizing it by its carbon intensity, which would create a range of different pricing for the buyer and seller and thus make it more viable.

The recent push in Australia to make value-added exports of commodities using renewable fuels, such as green iron and steel, could also be incentivized, which could lead to domestic demand of renewable hydrogen, the industry members said.

"There is no mechanism for people to see what the carbon footprint is for the different product choices and I think that is something the government can help us with," Nation said.

Particularly for products where consumers are very environmentally conscious -- such as those using EVs and tech devices, and for green steel, green lithium, green battery components -- showing carbon footprint may help the climate friendly fuel industry, according to Nation.

"It's coming but it's small. The quicker we speed that up the quicker energy transition will come along," she said.

Readjustments

Bunching of all the targets of the many global projects around the same time in 2030 may be detrimental, Yuichiro Fujiyama, Senior VP, CTO at ENEOS Holdings said.

"It is not possible to finish all the projects in 2030," Fujiyama said. "No one can reach Final Investment Decision with such a high cost... we have to relax the goal to maybe 2031 or 2032."

In addition to the cost, there are limited number of workers for all the projects to be operational around the same time, which may create shortages, according to Fujiyama.

Small modular build apart, mega renewable hydrogen developers are also making readjustments in their overall strategy in approaching renewable hydrogen.

Woodside Energy retracted its environment application for its Tasmania renewable hydrogen project owing to regulatory requirements and a lack of new renewable energy, the company said in August, while assuring it was committed to producing environment friendly fuels.

Fortescue's Executive Chairman Andrew Forrest said July 18 the company remains committed to producing renewable hydrogen and green metals after announcing a restructuring in July that will see about 700 jobs cut.

Platts, part of S&P Global Commodity Insights, assessed Western Australia hydrogen produced via alkaline electrolysis (including capex) at $3.63/kg Sept. 11, down 13.57% month on month.

Japan hydrogen produced via alkaline electrolysis (including capex) was assessed at $7.51/kg on Sept. 12, up 31.06% month on month.