South Korea is aiming for 20 per cent of its energy mix in 2050 to be based on hydrogen (excluding hydrogen used as an industrial feedstock). South Korea has indicated a hydrogen economy is fundamental to achieving a 40 per cent reduction in carbon emissions by 2050 relative to 2015 emission levels. Korean estimates are for hydrogen demand to grow from 3 million tonnes per annum in 2020 to 17 million tonnes per annum by 2050 and demand to exceed the volume of product that can be produced domestically.
Like Japan, South Korea will rely on imported hydrogen to meet its targets. The Korean expectation appears to be that hydrogen landed from Australia will be cheaper in the long-term than hydrogen produced domestically via electrolysis and steam methane reforming with carbon capture and storage.
Apart from Japan and South Korea, China could also potentially become a major hydrogen export market for Australia. However, it is unclear as to whether China will emerge as a net importer or exporter of hydrogen due to China having the domestic capability to produce grey hydrogen from its considerable coal deposits and blue hydrogen using steam methane reforming (SMR).
Producing hydrogen from domestic coal and renewables is also attractive to China from an energy security perspective, given its current reliance on imported oil and gas for its energy needs. The hydrogen export opportunity in China will be assessed as the industry evolves over time.
However, the window of opportunity will not exist forever. Competing hydrogen producers across the globe are scaling up hydrogen production in their respective countries to supply the Japan, South Korea and China markets as soon as 2025. These competitors include Brunei, Qatar, United Arab Emirates and Norway and, in the longer‐term, market entrants such as the United States, Brazil, Chile and New Zealand.
Many of these countries enjoy the inherent strengths Australia has for hydrogen production, including abundant renewable resources, access to low‐cost gas for blue hydrogen production, depleted oil wells that can be utilised for carbon capture and storage, large areas of land for solar installations and proximity to key hydrogen export markets.
The Australian Government released a broad strategy plan last September that has hydrogen as one of its five priority low emissions technologies. Titled “Technology Investment Roadmap: First Low Emissions Technology Statement 2020”, the plan sets economic goals for each of the five priority technologies, including achieving under $A2/kg for clean hydrogen (at the site of production). Other goals include low emissions steel production at under $A900 per tonne and (in the case of carbon capture and storage) CO2 compression, hub transport and storage costs at under $A20 per tonne of CO2.
The framework sets out the Government’s investment priorities in emissions reduction technologies over the short (to 2022), medium (to 2030) and long-term (to 2050), the cornerstone of Australia’s long-term emissions reduction strategy. It is to be delivered ahead of the United Nations climate conference ‘COP26’ in 2021.
The roadmap is underpinned by an economy-wide survey of over 140 new and emerging technologies with the potential to improve productivity, lower costs, reduce emissions and support secure energy supply. These technologies include hydrogen, renewables, energy efficiency technologies, biofuels, battery electric vehicles, fuel cell vehicles and hybrids and carbon capture and storage (CCS) and other negative emissions technologies including biosequestration.
Significant hydrogen-specific funding program announcements by the Commonwealth or related entities include:
- April 2020 - ARENA opened its $A70 million Renewable Hydrogen Deployment Funding Round. This amount is in addition to the more than $A55 million of ARENA funding awarded to feasibility studies, pilot and demonstration projects and research and development activities since 2018. ARENA has shortlisted seven companies, with selection of preferred projects expected by mid-2021.
- May 2020 - Clean Energy Finance Corporation (CEFC) was able to make available $A300 million of debt and equity finance to invest in suitable hydrogen projects; an early priority for the Advancing Hydrogen Fund will be to invest in projects included in the ARENA $A70 million funding round, where they meet CEFC eligibility requirements.
- September 2020 – the Australian Government announced a $A1.9 billion package to invest in new energy technologies, including the allocation of approximately $A70 million towards establishing a hydrogen export hub, research collaborations and supply chain studies.
John Hirjee is Executive Director, Corporate Finance - Resources, Energy and Infrastructure at ANZ