This Tuesday, Gilbert + Tobin together with leading international law firm Shearman & Sterling hosted a webinar exploring how green hydrogen is set to be the new commodity of the 21st century in Australia.
So why is green hydrogen so exciting? As Gilbert + Tobin’s Chris Marchesi said:
“as a means to decarbonise the hardest to abate sectors, green hydrogen promises to make the energy transition an energy and decarbonisation revolution”.
Gilbert + Tobin and Shearman & Sterling, together with Cameron Kelly from the Australian Renewable Energy Agency (ARENA), Rupert Maloney from the Clean Energy Finance Corporation (CEFC), PingYang Li from ENGIE Hydrogen, and Mike McKensey from Macquarie Capital, explored:
- Australia’s potential to position itself as a major global player in the green hydrogen industry; and
- the current barriers to capitalising on Australia’s potential.
The future: all eyes on Australia
With an increased demand for climate change action and companies feeling the pressure to set ambitious emission reduction targets, the energy sector is undergoing a rapid transformation.
Gilbert + Tobin’s Peter Doyle, reflecting on the Australian Government’s policy settings, noted that:
“The Australian Government’s policy settings are clear. “Green” hydrogen is a priority low emissions technology of long-term strategic importance to the Australian Government and securing a position as a global player in this developing sector is critical to the future economic prosperity of the nation.
Although we have the basic ingredients to succeed, the challenge for the government at all levels and the private sector is to stay the course over the long term and work together to achieve a commercially viable, resilient and sustainable industry and an optimal outcome for the nation as a whole.”
While the hydrogen market is nascent, key leaders in the industry believe that the development of the hydrogen industry in Australia has the potential to mirror the success of the LNG boom. Australia has a history of being a reliable supplier and a key component of this is its ability to establish and operate a world class supply chain.
Australia must act now to capitalise on its abundance of renewable energy resources and its potential to produce hydrogen at a competitive price for global export to where the demand exists, including to Asian and European markets.
Challenges of transitioning to green hydrogen
While the importance of green hydrogen in Australia’s decarbonised future is widely accepted, challenges remain.
Technical and commercial challenges relating to supply and demand
To play a significant role in the hydrogen market, Australia needs to meet a number of technical and commercial challenges both on the supply and demand side of the industry. ARENA considers the key to developing the Australian hydrogen industry is to increase the supply of hydrogen at a significantly lower delivered cost, while also building a viable demand, by proving and scaling use cases.
A key issue facing Australian companies relating to supply is the high cost of electrolysis, the process of using electricity to split water into oxygen and hydrogen gas. With respect to demand challenges, building enabling infrastructure for transport and export as well as regulation are key (discussed below). Further, the complex nature of hydrogen projects also brings its own suite of challenges – while the technology is known, substantial optimisation is required.
Investment in enabling infrastructure
A key barrier to the development of hydrogen production projects in Australia is the lack of enabling infrastructure. Australia must invest in building new infrastructure, including special purpose-built vessels, and retooling existing infrastructure, including ports, to ensure they are equipped to export hydrogen in liquefied form. Before committing to investment in the development of green hydrogen production plants, investors will want to see more money put into the necessary infrastructure.
Addressing regulatory uncertainty is key
Regulatory uncertainty in the hydrogen space will hinder the development of a commodity market. At an international level, the absence of consensus on the definition of what constitutes “green” hydrogen has created a chilling effect on the development of the market.
The development of Australia’s clean hydrogen certification scheme, the Hydrogen Guarantee of Original Scheme for Australia (H2GO), has the potential to provide certainty. However, the urgency of the scheme to be introduced needs to be balanced against the priority for the scheme to appropriately align with international standards that also remain under development. For more information on the H2GO, see G+T’s article Hy Hopes: Why the proposed H2GO certification scheme must embrace green hydrogen.
It is clear that there is a gap between where the nascent Australian hydrogen industry is now and where it needs to be in 2030 – 2050 to be truly and globally competitive with other key players. However, if both the public and private sectors act now to meet the present challenges with open arms, Australia will secure its position as a global hydrogen superpower.
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