Western Australia is pushing ahead with its ambition to become a hydrogen powerhouse, but the government admits more needs to be done to stimulate demand in order to drive investment.
Speaking at an Energy Club of WA event in Perth this week, Western Australia’s Hydrogen Industry Minister, Alannah MacTiernan, told delegates there was a lot more work to be done in the downstream area to stimulate demand.
“All of the industry is telling us if we really want to get our skills up, really want to get into this space, that we need to get some more local demand to really get that moving,” she said.
Speaking at the same event, Woodside Petroleum’s vice president of technology, Jason Crusan, agreed that one of the largest challenges for an emerging industry such as hydrogen was actually getting customers to sign up and commit.
He added that companies such as Woodside could leverage their experience from the early days of building a market for liquefied natural gas in order to help build up the hydrogen market, while noting Woodside was working across the value chain to build demand.
“We don’t know how the entire market is going to evolve, we don’t know how the downstream is going to evolve completely, so we actually see ourselves playing across the value chain,” Crusan said.
“We are a bulk energy producer and that’s what we want to be for hydrogen as well, but you also see us working in downstream markets and helping get things moving.”
Woodside’s work on the downstream side includes its participation in HyNet, which is rolling out hydrogen refuelling stations in South Korea, while it is also a member of the Hyzon Zero Carbon Alliance, which is a consortium of companies working to accelerate hydrogen-powered mobility globally.
Market competitiveness
The Australian government is aiming to bring the cost of hydrogen production down to A$2 (US$1.43) per kilogram, however Crusan noted that there were already markets that could be targeted where hydrogen could be “very, very competitive” at today's prices.
“I think price is a bit of a misnomer, there are markets today that can tolerate it, especially in mobility, heavy haul trucks, those types of things, remote communities as well,” Crusan said.
Crusan also pointed out that large industrial customers would help drive early demand for hydrogen, rather than the general public.
“Your mom and pop, your home kind of build isn’t your first target market, it is your heavy transport and industrial markets, it is your large-scale power import customers potentially in Asia, where that price tolerance is acceptable at this time,” he said.
“Electrolysis and fuel cells now are reducing in cost by 20% per annum right now at the same time we are also increasing efficiency for how many kilograms per kilowatt are being produced, so you are seeing both an efficiency gain and a cost reduction in those units.
“I would say many of the manufacturing techniques that are used for solar and stuff are the same manufacturing techniques used for large scale fuel cells and electrolysis, so you are expecting to see the same kind of price reductions that will occur, but you wouldn’t target your average retail home as your first offtake customer in my opinion because of that price intolerance ... you’d target the heavy industry.”
Blue vs green
Western Australia currently has the ambitious target of building out 100 gigawatts of green hydrogen capacity by 2030 and for that figure to double again to 200GW by 2040.
While the government is focused largely on green hydrogen, Crusan believes blue hydrogen will play a key role in helping build and meet market demand now.
Blue hydrogen is produced from natural gas feedstocks, with the carbon dioxide by-product from hydrogen production captured and stored, however, the process is not emissions free.
“it will take some time to build that [200GW capacity], so how do we start building marketplaces using blue to help drive the conversation earlier versus waiting for 200GW to be built?,” he questioned.
“We can use the power that we have, the gas sources that we have to do that in a responsible and transparent way on a carbon intensity basis and do the right thing with either offsets or CCS (carbon capture and storage).”
Crusan also highlighted the significant energy demand required to reach a forecast from the International Energy Agency that about 75 million tonnes of blue and green hydrogen will be needed by 2040.
“That’s about 200 million tonnes of LNG in energy terms, so it’s a pretty monumental amount of energy production that’s needed for the future,” he said.
In comparison, Wood Mackenzie analyst Prakash Sharma recently told Upstream that 100GW of renewables powering electrolysers would have the capacity to produce just 5 million tonnes of green hydrogen per annum.
WA makes progress on blending
MacTiernan said the state government had been working on a series of projects in the transport area to help stimulate demand, while it is also working on blending natural gas into the state’s natural gas network to reduce emissions.
Just this week, the state government committed A$2 million (US$1.4 million) to ATCO Australia from its Renewable Hydrogen Fund.
ATCO owns and operates the majority of Western Australia’s gas distribution network and is now undertaking a project to blend green hydrogen from its Clean Energy Innovation Hub in Jandakot into the network.
The A$2.6 million project aims to blend up to 10% of hydrogen into isolated sections of the natural gas distribution network.
The state government claims ATCO's project will be the largest of its kind in Australia at around 2500 connections and will help lay the foundations to meet the government's target for WA’s gas pipelines and networks to contain up to 10% renewable hydrogen blend by 2030.
