Clean hydrogen industry's scale, investments advance globally: Sumitomo

The clean hydrogen industry has advanced in terms of scale, investments and policies not just in Australia, but other producing nations as well, which bodes well for the future of energy transition globally, Jeremy Hasnip, head of energy transition at Sumitomo Mitsui Banking Corporation said Oct. 27.

SMBC has been appointed financial partner to the Central Queensland Hydrogen Hub (CQ-H2), where Stanwell, Iwatani, Kansai Electric and Marubeni plan to produce ammonia and liquify hydrogen for domestic and export purpose, the companies said Oct. 26.

"We are starting to see the beginnings of an industry where capacity is coming in not just from the developers but in the supporting businesses (such as) market economists, engineering consultants," Hasnip said, speaking at the First Annual Asia-Pacific Hydrogen Summit organized by the Sustainable Energy Council Oct. 26-27 in Sydney.

"That's a great sign for a bank... we need to understand what sort of assets they are going to be building, what sort of products they are going to selling, and be part of the solution to bring the private capital to make that all happen."

Hasnip said while Australia and the US had been center stage for the emerging hydrogen industry, activity is now seen across many countries, with cost of production being the differentiating factor between them.

Countries like India are putting a lot of effort into the hydrogen sector for domestic refining and potentially for export, he said, noting the large population and industrial base were a ground for market development.

In Malaysia, activities were seen in the refining sector where clean hydrogen could play a role and in Singapore the government was driving a vision that kept it relevant as a clean transport hub for marine transport and aviation, he added.

"We will see countries like Singapore being very supportive over time for SAF, ammonia for bunkering fuels for substitution... so it is all starting to come together," he said.

That said, the price of renewable hydrogen remained a stumbling block for the industry.

Price gap

The price gap between hydrogen derived from various pathways was to be watched where renewable hydrogen was eventually seen closing the price gap with hydrogen derived from fossil fuel sources and therefore become commercially viable, according to Hasnip.

The price gap "obviously will change over time as we see improvements in technology (and) electrolyzes that has already started to happen as we see greater scale in the renewable energy sector," he said. "We are starting to get gigawatt scale in producing electricity and that will help drive some of these costs."

According to Hasnip, renewable hydrogen is expected to close the price gap with 'blue', or hydrogen derived from fossil fuel with CCS and that will also eventually get to the price level where 'gray', or fossil fuel-based hydrogen, is.

Australian states have been pushing large scale renewable energy zones in order to decarbonize their power supply as well as push energy prices down. In Queensland, a new 1.8 GW capacity from two wind farms are part of the latest additions to renewable energy, the state said recently.

In Victoria, the State Electricity Commission will support 2.6 GW of renewable generation and storage assets by 2028, the state said Oct. 26.

Platts, a part of S&P Global Commodity Insights, assessed New South Wales hydrogen produced via PEM electrolysis at $1/kg Oct. 25, down 47.64% month on month.

It assessed Victoria hydrogen produced via lignite gassification with CCS at 51 cents/kg Oct. 25, down 6% from a month ago.

Large FID

For the financing world a large final investment decision in the Middle East was a significant example for others to follow, Hasnip said.

The Neom Green Hydrogen project in Saudi Arabia was supported by 20 banks where a good number were international banks and some were local, he said. It also had some development funds involvement.

"So we are seeing a stacking of different financing sources to get to what is quite a big number -- $6.2 billion but it is a gold standard project in terms of its very long-term offtake," he said.

Neom Green Hydrogen reached financial close on a 2-GW renewable hydrogen production facility in Oxagon in Saudi Arabia, set to cost over $8 billion, the joint venture said in May.

Neom is significant as it is a fully wrapped up construction project with a very competitive construction cost and it is in a good place to build anything being in the Middle East.

"That is something to aspire to, to build at scale and do it competitively and pull whatever sources of capital you need to make that happen," he said. "Sitting here in Australia, we should emulate that."