Hydrogen - the fuel of the future?

Australia’s chief scientist, Dr Alan Finkel, believes hydrogen should be a key element of Australia’s – and the world’s – energy future. Burned as a fuel, it produces only water, not carbon emissions.

Click image to zoom Tap image to zoom

Pic: The Suiso Frontier will play a key role in the Shell-backed HySTRA demonstration project

But Finkel has argued the production of hydrogen is not an alternative to the fossil fuel industry. Rather Australia should use its coal and gas resources in the production of hydrogen as the most direct way to establish a hydrogen industry.

"Australia has an opportunity to be a significant player in [the hydrogen] market given it has one of the world’s largest recoverable brown coal reserves in Victoria.”

In a speech to the Australian Press Club earlier this year, Finkel said focusing on production from fossil fuels, combined with carbon capture and storage technologies, made more sense than basing production on wind and solar.

It is an approach already being piloted by Japanese company Kawasaki Heavy Industries (KHI) with a major project slated for the brown coal fields of Victoria’s Latrobe Valley.

“We can use coal and natural gas to split the water, and capture and permanently bury the carbon dioxide emitted along the way,” Finkel argued.

“I know some may be sceptical because carbon capture and permanent storage has not been commercially viable in the electricity generation industry. But the process for hydrogen production is significantly more cost-effective for two crucial reasons.

“First, since carbon dioxide is left behind as a residual part of the hydrogen production process, there is no additional step, and little added cost, for its extraction. And second, because the process operates at much higher pressure, the extraction of the carbon dioxide is more energy efficient and it is easier to store.”

Australia formally adopted a National Hydrogen Strategy at the Council of Australian Governments Energy Council in Perth in August 2019.

According to the government, the strategy sets a vision for a clean, innovative, safe and competitive hydrogen industry that benefits all Australians. It aims to position the industry as a major player by 2030.

“The strategy outlines an adaptive approach that equips Australia to scale up quickly as the hydrogen market grows. It includes a set of nationally coordinated actions involving governments, industry and the community,” the government says.

This is the environment in which the Hydrogen Energy Supply Chain (HESC) project in the Latrobe Valley and the Port of Hastings is taking place.

HESC is a world first trial to demonstrate hydrogen production from brown coal and safe and efficient transport of liquefied hydrogen to Japan. Building on more than half a century of resource industry collaboration between Japan and Australia, it could lay the foundations for a new industry built around hydrogen exports, mobility and hydrogen power generation.

According to HESC, Australia has an opportunity to be a significant player in this market given it has one of the world’s largest recoverable brown coal reserves in Victoria. As Finkel argued, producing hydrogen from brown coal is currently the most cost effective way of doing so.

Japan is committed to a clean energy future and is investing in the technology and global supply chain partnerships to become a ‘hydrogen society’ by 2050.

In 2015, Japan became the first country in the world to introduce stationary hydrogen fuel cells into households. Today more than 300,000 Japanese homes have a fuel cell installed. Hydrogen demand in transport is booming, with more than 3,000 fuel cell vehicles on the roads as of March 2019.

Key targets of the Japanese Government’s hydrogen energy roadmap, approved by the Japanese Cabinet in December 2017, include:

  • 2030 – Development of CO2-free international hydrogen supply chains, including HESC
  • 2030 – Large-scale hydrogen power generation will be operating, three million homes will have a hydrogen fuel cell and around 800,000 Fuel Cell Vehicles on Japanese roads
  • 2050 – Replace traditional residential energy systems and Fuel Cell Vehicles to be able to replace conventional gasoline mobility.

Capturing carbon

Capturing and storing carbon will be essential for hydrogen production to be scaled up to commercial levels. This will ensure carbon emissions are minimal and make hydrogen production virtually CO2 free.

The Australian and Victorian Governments’ CarbonNet Carbon Capture and Storage (CCS) Project presents a potential solution for CO2 mitigation in the commercial phase.

During the pilot phase, carbon emissions from brown coals will be very low – about the same as emissions from 28 cars.

The Kawasaki Hydrogen Road story

ANZ has been working on the CCS project from the beginning with Kawasaki Heavy Industries, a valued client of ANZ Japan for decades.

bluenotes spoke with Yasushi Yoshino, Deputy Senior Manager, Project Development Department, Hydrogen Project Development Centre, Corporate Technology Division at KHI and Haruki Sugiyama, Finance Manager at Hydrogen Engineering Australia Pty Ltd about the project.

They provided a deeper understanding of the hydrogen opportunity. Mr Yoshino is concurrently the CEO of HEA and Mr Sugiyama has been delegated from KHI head office. We thank them for their time. Below are their insights, edited for brevity and clarity.

Over the past several decades, global warming has emerged as one of the largest challenges facing humanity. In 2015, the Paris Agreement on climate change brought together many countries to strengthen the global response to the threat, vowing to keep the average global temperature rise this century below 1.5 degrees Celsius above pre-industrial levels.

This brought hydrogen energy - which does not emit greenhouse gas - to global attention. Both Japan and Australia have recognised the opportunity. Japan’s Ministry of Economy, Trade and Industry released a Strategic Road Map for Hydrogen and Fuel Cells in March 2019 and the Australian government published its National Hydrogen Strategy in November 2019.

Meanwhile, a joint Statement of Cooperation on Hydrogen and Fuel Cells was signed and released on 10 January 2020 at the Australia-Japan Ministerial Economic Dialogue in Melbourne, emphasising hydrogen as a key contributor to emissions reductions “especially when produced from renewable energy or fossil fuels combined with Carbon Capture Utilisation and Storage (CCUS)”. The statement acknowledged “the steady progress of the HESC Project towards establishing an international hydrogen supply chain”.

The hydrogen business has been in constant focus not only in Japan and Australia but all over the world. Demands for hydrogen energy have been increasing recently, especially in China and Korea as well as Japan, with implications for Australia, one country with the potential to provide a huge amount of hydrogen.

Australia, however, is not unique. Norway can produce and export hydrogen using renewable hydroelectric power and wind power thanks to its natural geography of fjords. Natural gas is also abundant in Norway which helps its hydrogen business.

Elsewhere, Canada, Russia and some countries in the Middle East region are able to produce hydrogen from natural gas and/or renewable energies. These countries might be Australian rivals when it comes to supplying hydrogen.

Australia is the world’s biggest exporter of LNG, a gas having similar characteristics to hydrogen in terms of clean energy and extremely low liquid temperature. Australia’s long experience in the LNG business gives it a competitive advantage in the emerging hydrogen energy supply chain. Hydrogen resources such as renewable energy and fossil fuels abundant in Australia also contribute to its greater competitiveness in terms of hydrogen supply.

Furthermore, Australia is close huge Asian markets for hydrogen and enjoys good relationships with most countries. From the buyer perspective, Australia is one of the most stable countries in terms of economics, public security and politics. These factors together mean Australia has a high potential to be a leading country in the field of hydrogen business, in both supply and demand.

The scale of the global hydrogen energy business is expected to grow dramatically through the 2020s and beyond. By 2050, it is expected hydrogen energy could supply 18 per cent of the electricity required in the world while contributing up to 6 Gt in annual CO2 abatement – despite the world’s population increasing by 2 billion. As such, hydrogen plays an important role as one of the cleanest energies in countering global warming. The industry forecasts to deliver significant economic growth, generating $US2.5 trillion sales per year and create 30 million employment opportunities.  

Given this global environment, in 2007 KHI established the Kawasaki Group mission statement as “a global technology leader with diverse integrated strengths. We create new value for a better environment and a brighter future for generations to come”.

From 2009, KHI has recognised hydrogen as a clean energy, contributing to a healthier future global environment. KHI backed the building of a hydrogen energy supply chain using its history and expertise of the technology in the fields of extremely low temperatures, LNG ships, plant engineering and gas turbines.

In particular, KHI is focused on progressing the Hydrogen Energy Supply Chain (HESC) pilot project in Japan and Australia with several project partners as a high priority. This HESC pilot project is recognised in the Australian National Hydrogen Strategy and is already attracting global attention.

In the HESC pilot project, hydrogen gas is produced from the extensive brown coal resources in Victoria’s Latrobe Valley. The gas is cooled to -253 degrees celsius for liquefaction at the Port of Hastings, the process reducing its volume to 1/800th its initial state. That liquid is loaded onto the liquefied hydrogen ship to be carried to Kobe in Japan.

Click image to zoom Tap image to zoom

By doing this, KHI aims to build the world first supply chain, linking the natural resources of brown coal with the production and liquefaction of hydrogen and its transport and storage. The HESC pilot project is operated in partnership with other firms with KHI in charge of construction of the facilities for hydrogen liquefaction and loading at the Port of Hastings, building the world’s first liquefied hydrogen ship and construction of a liquefied hydrogen unloading terminal in Kobe.

In the Australian National Hydrogen Strategy, Australia sets out to be in a leading position in supplying hydrogen coupled with renewable energies like solar power and wind power, both abundant in Australia and suitable as primary resources in hydrogen production.

Challenges remain. Renewable energy use in the production of hydrogen remains relatively high cost due to the unstable nature. The industry requires further maturity in the technology together with the establishment of the necessary infrastructure for hydrogen to play a significant role in society. Because of this, using fossil fuels to produce hydrogen will be important in the transitional phase.

Click image to zoom Tap image to zoom

Under that scenario, Victoria’s Latrobe Valley is ideally placed to a stable supply of hydrogen in bulk, at a low price. The brown coal in the Latrobe Valley is the equivalent of 240 years’ worth of total electric power generation for Japan. The concentrated and accessible nature of the coal resources with open cut mining can guarantee a stable supply.

However, brown coals are relatively young geologically and carry high concentrations of moisture lowering the efficiency of transportation and power generation. Spontaneous fires are also a risk in dried conditions. Historically then the use of brown coal has been limited to the adjoining thermal power plant. That makes the brown coals are available at a low price.

While CO2 is emitted during the production of hydrogen gas from brown coals in the commercial phase, most of those emissions will be injected under the ground in Gippsland through the CarbonNet project which promotes carbon capture and storage, handled by Australian and Victorian governments.

The building of a hydrogen energy supply chain using brown coal combined with CCS significantly contributes not only to providing long term hydrogen energy for Japan and Australia but also to utilising the huge brown coal resource in a clean and sustainable ways. It also brings about economic developments with employment opportunities in the Latrobe Valley and supports a new hydrogen export industry.

Click image to zoom Tap image to zoom

The HESC Pilot project started in December 2017 and is progressing well. The construction of facilities in sites in the Latrobe Valley and the Port of Hastings have been progressing and are scheduled to be completed in the middle of 2020, followed by pre-commissioning and commissioning activities. Early in 2021, the first loading of liquefied hydrogen onto the liquefied hydrogen ship will commence. By June 2021, the HESC Pilot project designed to demonstrate the technical elements of a hydrogen energy supply chain will be completed.

With the expertise gained through this project, KHI aims to expand its scale while reducing costs with plans to have achieved a large scale commercial project in the 2030s. KHI also has a target to build more than one hydrogen energy supply chain in the Latrobe Valley so as to achieve a true “hydrogen society” in the 2050s where significant amount of hydrogen will be supplied and consumed as energy and various transportation systems such as automobiles, buses and trucks will be powered by hydrogen energy.

To move to commercialisation, achieving scale expansion and cost competitiveness will be necessary. Commercialisation will also require:

  • Growth of hydrogen demand;
  • the existence of an off-taker;
  • legislation of necessary laws;
  • a “social license”;
  • development of infrastructure such as the CarbonNet project, the building of a jetty and electricity procurement to satisfy the project scope;
  • financial support from the government; and
  • risk sharing with project partners, governments and lenders etc.

The hydrogen supplied by these hydrogen energy supply chains will be of course available in Australia and must contribute not only to the achievement of a hydrogen hub in the Latrobe Valley but must also achieve the targets of the Australian National Hydrogen Strategy. For this, not only are technical developments required but also awareness and education about the benefits (and challenges) of hydrogen with local communities and Australia more broadly.

In order to achieve a hydrogen society, we hope ANZ shares our faith in the world’s first commercial hydrogen energy project and will be a partner to move forward together with us, assisting more deeply in the project rather than just focussing on being one of the transaction banks.

  • KHI Yasushi Yoshino, Deputy Senior Manager, Project Development Department, Hydrogen Project Development Centre, Corporate Technology Division and Haruki Sugiyama, Finance Manager at Hydrogen Engineering Australia

Satoshi Okazaki is Head of Corporate Banking – ANZ Japan and Andrew Cornell is Managing Editor of bluenotes


The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

editor's picks

04 Oct 2019

Betting big on future climates

Larry Marshall | Chief Executive, CSIRO

Australia must act now on climate change to retain our quality of life and economy, says CSIRO chief.

20 Jan 2020

Renewable transition: easier said…

Tsen Wong | Head of Energy Transition, Resource Energy and Infrastructure, ANZ Institutional

As the climate changes, the shift to renewable energy sources becomes more critical – but no simpler. Japan has a role.