There are now 35 green hydrogen electrolyser projects across Australia, with a collective potential capacity of 38 gigawatts if the cost of the technology falls significantly in the coming decade – according to new research by Rystad Energy.Most of those electrolysers are in the pilot phase, and the largest operational facility is the relatively minuscule 1.5 megawatt facility at the Hydrogen Park in South Australia – which is being used to mix a small amount of green hydrogen into the gas mains in certain Adelaide suburbs.
As Rystad’s map below shows, the 35 electrolysers are located all across coastal Australia, from northern Queensland to Tasmania to the Pilbara in WA.They are owned by a range of players including big miners BHP, Fortescue and Anglo American, gas company Woodside, financial firm Macquarie Capital, and electricity companies including Origin, Jemena, Stanwell and Pacific Hydro – as well as renewables and hydrogen specialists like Countrywide, Austrom and Hydrogen Renewables Australia.
Despite the vast pipeline of projects, Rystad renewables analyst David Dixon, who put the map together, said the viability of these and future hydrogen assets would depend upon massive cost reductions.Currently, he said it cost around $A5 to produce one kilogram of green hydrogen using renewably-powered electrolysers.He said the federal government’s target of producing green hydrogen at a cost of $A2 per kilogram would depend on costs falling 75 per cent, and that was unlikely to happen this decade without massive subsidies.
The $2 per kilogram figure is commonly regarded as the point at which green hydrogen becomes competitive with competing fuels. Today it costs around $5, Dixon said.Achieving those cost reductions would depend on three pillars. First, he said the cost of the electrolysers themselves would have to plummet. Second, the cost of solar and wind energy would also need to fall.And last and most difficult, he said green hydrogen producers would have to figure out a way to get maximum usage out of their electrolysers, including overnight and during peak energy demand between 5pm and 9pm.He said it was plausible to imagine the cost of hydrogen falling to $3 per kilogram, but the path to $2 per kilogram was unclear, making it “unlikely over the next decade”. He said NSW was the state with the most potential to produce cheap green hydrogen, followed closely by Victoria and South Australia.
Today most hydrogen is made by extracting it from fossil fuels – mostly gas – using “steam reforming”, a process that is cheaper than using renewably-powered electrolysis to split water into hydrogen and oxygen, but that emits CO2 in the process.Dixon said of the “three pillars” of cost in green hydrogen manufacture, the one with the most potential for reductions was electrolyser production.“For hydrogen electrolysers, because they’re built in such a small scale at the present time, if manufacturing was to shift, say, to East Asia, and you’d start to get these things built to gigawatt scale – similar to what happened in PV – there is a case where we could see these reduce 80 per cent over 10 years,” he said.But he said the outlook was not so hopeful for wind and solar.“For wind and PV, being such mature technologies, the amount of deployment improvements that need to occur for these technologies to come down 75 per cent – it’s unlikely over the next decade.”He said the price of electricity needed to be under $US20 ($A26) per megawatt hour, and “probably closer” to $US10 ($A13) – adding “Australia is just not there”.He added he expected solar prices to rise in the short-term as commodity prices tick up.
But the most difficult task in pushing down cost would be getting maximum use out of the electrolysers.“By far and away the the hardest of the three pillars of cheap green hydrogen will be a combination of the previous cheap electricity, but also increasing your utilization of the electrolyser to get the most out of it over its 30 year lifetime,” he said.“It’s really during the periods between 5pm and 8 or 9pm in the evening that are going to be a challenge. Being able to source electricity at sub $US20 per megawatt hour during these period is going to be a very, very big challenge.”
As the chart below shows, for green hydrogen to be competitive for use in ammonia production, it must be close to $A2 per kg, while to be used in steel production instead of coking coal, it must be well under $A2 per kg. <Chart>
Dixon’s predictions are more pessimistic than some. Last year, researchers at the University of New South Wales published a paper that claimed green hydrogen could become cheaper than fossil fuels in just a few years.Mining tycoon Andrew Forrest is also incredibly bullish about the potential to make cheap green hydrogen. He has plans to build as much as 1,000 gigawatts of renewable capacity around the world, and to use most of that to manufacture green hydrogen.In public comments, he appeals more to his own track record of finding reason-defying ways to cut costs in his iron ore business, than to the sort of facts and figures quoted by analysts and academics.In a study earlier this year, Bloomberg NEF predicted the cost of manufacturing green hydrogen would fall below $US2 by the end of the decade, and below $US1 by 2050.
Last year, Energy Minister Angus Taylor announced $70 million of funding, through ARENA, to pursue the government’s so-called “H2 under 2″ goal.“Despite the very significant benefits that can come from hydrogen, it is not yet economic for large scale deployment in our energy systems,” he said. “This $70 million funding round will help demonstrate the technical and commercial viability of hydrogen production at a large-scale using electrolysis.”
PRL Price at posting:
14.5¢ Sentiment: None Disclosure: Not Held
(20min delay)