Kate Vidgen • November 11, 2024

Australia: A Hydrogen Leader

Though the path ahead is littered with obstacles, Australia has an opportunity to alchemise hydrogen’s flexibility as an energy vector into cleaner living and export gold.

As the world tackles the challenge of decarbonisation, Australia is uniquely placed to become a global clean-energy leader. With an abundance of natural resources such as wind and sunshine, we already have a mature investment market for core forms of renewable energy. 


Then there are technologies, such as green hydrogen, which are, by international standards, emerging. With its heritage in mining, proximity to off-takers in South Korea and Japan, and aforementioned resource abundance, Australia is perhaps uniquely placed to support domestic and export hydrogen markets. The Australian Government has recognised this opportunity, with a national strategy that envisages becoming a top three exporter to Asian markets. 


Hydrogen’s flexibility as an energy vector is key. It can be a source of transport fuel, not only for point-to-point vehicles such as heavy haulage, rail and bus fleets but also, long-term, for hard-to-abate sectors such as aviation and shipping. Delivered through existing gas networks, it can also be used as a source of heat and a chemical feedstock. Crucially, hydrogen technologies, including electrolysers and stationary fuel cell applications, can also potentially contribute to grid stability by participating in demand response and ancillary services markets. 


The fact that hydrogen is the most abundant element on Earth, used in many different industrial processes, raises the question of why the green-hydrogen industry remains nascent. 


Green hydrogen is produced by splitting hydrogen from water using a renewable energy-powered electrolyser – a potentially zero-emissions process. Though electrolysers are scalable, there are a number of fundamental challenges impeding large-scale investment. 


The first of these is the lack of immediate demand. Australia’s National Hydrogen Strategy projects meaningful, exponential growth in demand for hydrogen from about 2035, challenging equity investors and financiers to adopt a “build it and they will come” approach. 


Just so, new markets generally require support to create momentum – in this case, government participation through offtake agreements. Given there are at least seven industrialised nations with hydrogen strategies, it is a competitive landscape. There is, however, a successful Australian precedent to reference: government support underpinned the development of Western Australia’s LNG market (notably the North West Shelf) via domestic demand, providing confidence in the formative stages of export market development. 


The nature of the offtakes is also a potential challenge. In new industries, infrastructure is generally underwritten by long-term offtakes to enable amortisation of infrastructure capital – initially 20 years, in the case of LNG, before a more mature market had formed. Hydrogen is different, and its usage has an impact. For example, vehicle fleets typically have a relatively short life of seven to 10 years, creating significant residual value risk. Governments may have a role to play in bridging different investment horizons between supply and demand. 


Finally, there are concerns about the safe usage of hydrogen. While hydrogen has been in usage for more than a century, its wide flammability range and low ignition temperature create the perception of risk. Some very positive work has been done on risk management and standards, but it will be important that training for newer applications is developed in line with specialist expertise. 


These challenges will require public and private sectors to work together to drive the maturation of this nascent industry. And while the challenges are fundamental, many countries are undeterred and investor confidence in the long-term opportunity is shaped by the global trend to decarbonisation, accelerated by the need for activity to drive a post-COVID-19 economic recovery. 


COVID-19 has also prompted many countries to review their approaches to sovereign capabilities, including energy security and independence. For Australia, domestically produced hydrogen can replace imported diesel in crucial industries such as mining, forestry and agriculture. This would have the added benefit of supply chain decarbonisation for our existing exports, something that buyers of Australian products will increasingly scrutinise. Hydrogen has the potential to generate significant carbon offsets, particularly as all sectors seek to reduce carbon intensity, ultimately bringing decarbonisation targets closer within reach. 


For Australia, green hydrogen hubs may be the key to leveraging existing strengths to realise leadership potential in the nearer term. Utilising domestic demand to create expertise and scale could be the foundation for future export capability. Australia’s heavy industries are already supported by extensive infrastructure that can be further developed to support green hydrogen production and use. 


An example is the Australian Renewable Energy Hub (AREH). Strategically located in Western Australia’s Pilbara region, the development is expected to have a total capacity of 26GW from onsite wind and solar to produce green hydrogen and green ammonia, as well as supply low-cost renewable energy to support Pilbara mining and mineral processing operations. The project has the potential to catalyse transformational development across the Pilbara by lowering energy costs and greening supply chains. While AREH is expected to become operational in 2027, it can provide a model for other hub projects that could come online sooner. 


Kate Vidgen is the Global Head of Industrial Transition and Clean Fuels for MAM Green Investments within Macquarie Asset Management.


More Transformations Articles

By Phil Ruthven AM - Founder, IBISWorld & Ruthven Institute November 27, 2024
Australia is a remarkably innovative nation. Prior to European settlement in 1788, Indigenous Australians pioneered ecological sustainability and developed an extensive knowledge of native flora and fauna, both of which remain outstanding achievements in the 21st century. Since then, Australians have continued to demonstrate ingenuity in many areas, including science, medicine and manufacturing. The nation’s achievements to date, include 15 Nobel Prize-winning innovations shared among 16 Australian recipients since the Prize was first awarded in 1901 (coincidentally, Australia’s year of Federation). It’s a proud past – but what can Australia expect of the future? What challenges will we face in 2020 and beyond? To answer this question, we need to consider several factors with regard to being innovative in an increasingly competitive world: • the changing world order; • our changing mix of industries; • the productivity challenge; • the elements of innovation (the who, what and how); and • the growing importance of intellectual property (IP) for business and economic success. The changing world-order The graph below suggests that the world – containing some 230 nations and protectorates – continues to amalgamate into larger cohorts. Over time, as a society and an economy, we have aggregated families (households) into tribes (local government), then into territories (states) and nations. These nations are now federating into eight regions, as highlighted below; and perhaps, as we move into the 22nd century, these regions will be presided over by an empowered world government or council of sorts. Regionalisation and globalisation are slow and painful processes, and there have been setbacks to both – take Brexit, for example. But, importantly, Australia is now part of the world’s largest region, the Asia Pacific, in terms of population and economic output. Indeed, the larger Asian megaregion (being the Asia Pacific and Indian subcontinent), accounts for two-thirds of Australia’s inbound tourism and immigration and 80% of our goods and services trade, respectively. A tectonic shift is underway in the global economy. The East, which already houses four-fifths of the world’s citizens, has also overtaken the West in GDP terms. Meanwhile, the economic and population pecking order of nations is changing fast, as we see in the following two graphs. 
By Arthur Sinodinos November 27, 2024
Science matters to every aspect of our lives. And yet it is under attack like never before in our lifetime. Climate change is just the latest battleground. The great American science communicator Neil deGrasse Tyson once said, “Once you have an innovation culture, even those who are not scientists or engineers – poets, actors, journalists – they, as communities, embrace the meaning of what it is to be scientifically literate. They embrace the concept of an innovation culture. They vote in ways that promote it. They don’t fight science and they don’t fight technology.” It was recently reported that climate change will be taught as part of the high-school syllabus. Climate sceptics immediately jumped in to suggest that both sides of the argument be presented to students. On the face of it, that sounds fair, except that climate matters are a matter of science rather than a matter of opinion. The antagonism towards science goes further than climate science. Green groups cherry-pick the science, too. They are antagonistic towards genetically modified foods, which do not fit their organic worldview. Anti-vaccination groups prefer half-baked theories and pseudo-medicine to rigorous, evidence-based medicine. Beyond science, expertise, more broadly, is questioned. Some prefer to put their faith in the "wisdom of crowds." This aversion to science is being fuelled by the spread of fake news and preferred facts. Confirmation bias is rife. We look for facts and opinions to back up our point of view or favourite conspiracy theory. These conspiracies often turn on the role of people or institutions we do not like allegedly subverting the popular will. Mistrust of experts is facilitated by the rise of powerful search engines. Access to Google has made us all pseudo-researchers. We can scour the web for information and opinions to back up our preconceptions. How many people self-diagnose using Dr Google? Scientists cannot afford to leave it to others to fight their battles, whether in the halls of power or the public square. This is a hard ask for many scientists, who have traditionally been reluctant to engage in an adversarial way in the public arena. In other words, scientists prefer to let their work do the talking. Accordingly, we do not celebrate scientists in the same way or to the same extent that we do athletes and entertainers. Few scientists are household names, even though the fruits of science are all around us and make life possible on Earth. Appropriately, scientists are also very careful to avoid the kind of emphatic statements and ’soundbites’ so beloved of the media. The scientific method relies on constant querying, testing and retesting of hypotheses to disprove a proposition. Beautiful theories are slain by ugly facts. Some climate scientists argue that it is better not to engage in debate and simply ignore sceptics. Others argue, from a more rigorous point of view, that understanding why someone may be a climate sceptic is the key to potentially talking them around. I sought to engage climate sceptic Malcolm Roberts of Pauline Hanson’s One Nation in dialogue when I was science minister. I brought his researchers together with senior scientists at the CSIRO for what I hoped would be a rigorous, evidence-based process. There were multiple sessions, but agreement was not possible. In retrospect, I’m not surprised. Another approach is to appeal to other views held by these sceptics – for example, those who support the use of nuclear energy in the interests of national sovereignty and self-sufficiency. We cannot wring our hands, ignore the doubters, and/or go to war. This is unduly defeatist. Information and transparency are the best disinfectant. We should build on existing science advocacy efforts. We do have Science Meets Parliament Week and other networking events. We have a Chief Scientist who speaks at public fora, engages in science education and appears before parliamentary committees, but no one person can carry the sector. Recently, the ABC’s Q+A program featured an all-scientist panel, but this is a comparative rarity. A few years ago, medical researchers organised to fight an attempt by the Gillard Government to cut funding for medical research. The fightback was novel and effective, but no one is encouraging scientists to take to the streets in a continual crusade for science. Scientists have to adopt the mindset of advocates. Used to being objective and evidence-based, they would be understandably uncomfortable with pure "spin". But today the facts need help and contextualisation. They otherwise risk being crowded out by assertion, self-interest and wilful ignorance. Evidence-based advocacy is not spin. It is essential to construct a narrative of what science is doing and who benefits. This must be practical and focused on people’s needs, expressed in clear, layman’s terms. Stakeholders who share the interests of scientists and are invested in the outcomes of science should be mobilised in support. They can be marshalled in a coalition of the willing to support the scientific case in public and with politicians, business and other influential members of society. Scientists reaching out to business can be beneficial on both economic and advocacy grounds. Effective collaboration between knowledge creators and industry is vital to maximising the prospects of successful commercialisation of domestic inventions and applications. Collaborating businesses develop a tangible stake in a healthy scientific scene in Australia. The government has taken measures to incentivise such collaboration, including changes to research block grant funding arrangements. The innovation ecosystem is growing, but it takes time to effect the necessary cultural change in the scientific and business communities. The American experience is a useful benchmark. Scientists should engage with politicians on all sides to establish constructive, long-term relationships. While the government of the day is always relevant, the opposition and independent members and senators should not be neglected. The opposition will one day be in power and crossbenchers can exert the balance of power in either chamber on occasion. Networking with new politicians is a useful investment that can pay off when these people are promoted into positions of power and influence. Arthur Sinodinos AO is an Australian diplomat and former Liberal Party politician who was an Ambassador to the United States from February 2020 until March 2023.
By The Hon Anthony Albanese, Prime Minister of Australia November 7, 2024
Following the mining investment boom, the sector is now undergoing a productivity boom, though its true value is yet to be fully captured downstream.