Western Australian resources industry body the Chamber of Minerals & Energy (CME) says the state has unique advantages for blue and green hydrogen production, but also highlighted challenges to the nascent industry.
In a new position paper released on Wednesday, titled Towards Competitive Hydrogen, CME explores the opportunities and challenges associated with Western Australia’s goal to establish itself as a global player in this field.
The report set out that a technology-driven and “colour”-agnostic approach, with alignment and collaboration between industry and government plus the establishment of realistic export targets will all be key to Western Australia becoming an internationally competitive hydrogen producer.
The report was supported by a study from Australian Venture Consultants, which highlighted that Western Australia had a comparative advantage in blue hydrogen, given its existing gas export industry and customer network in Asia.
It also has substantial natural gas resources and geological formations suitable for carbon capture and storage.
However, the report also highlights that it is still unclear how Western Australia’s existing liquefied natural gas infrastructure can be leveraged for hydrogen production and export, while adding that several countries have similar infrastructure, and extensive infrastructure specific to hydrogen production.
It also notes that many other economies had far more experience with hydrogen production and sunk cost infrastructure, giving them a distinct advantage for leveraging and developing skills.
Pathway to green hydrogen
The CME also notes that while blue hydrogen production will never be fully emissions free, it offers “a transitional pathway” to zero-emissions green hydrogen.
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.
Green hydrogen is made using electrolysis powered by renewable energy to split water molecules into oxygen and hydrogen, creating an emissions-free fuel.
The report claims that as renewable-energy costs continue to decline and the cost of electrolyser technology falls, green hydrogen production will become more competitive as years progress.
“However, the speed at which technology costs reduce is not uniformly felt across industry and uncertainty of technology development poses several challenges to policy settings and investment decisions,” the report said.
“The blue hydrogen narrative is different, with blue hydrogen being more competitive today and arguably serving as a transition to the time when green hydrogen technology is more widely used.”
Opportunities and challenges
Covering nearly one-third of Australia, with a land mass of more than 2.5 million square kilometres, and with a low population and land-use intensity, Western Australia has the available space to build vast renewable energy projects that could help power green hydrogen production.
It also benefits from “high-intensity” renewable energy resources, with the CME noting WA’s solar is among the highest irradiance in the world, while the state also possesses excellent wind resources.
However, Western Australia could face competition from the Middle East, which the CME notes also has access to expansive areas of land and excellent renewable energy resources, as well as governance structures where investment can respond quickly to government decisions.
It also noted that Middle Eastern countries are well positioned to supply hydrogen to Europe, while they are also in similar proximity to Asian customers as WA exports would be.
“Hydrogen is a very busy space — one in which WA is now competing with other states in Australia and also countries around the world that are eyeing similar opportunities,” the CME’s director of policy and advocacy, Rob Carruthers, said.
“Middle Eastern countries such as Qatar, Oman and [United Arab Emirates] are likely to be significant competitors when it comes to hydrogen — as they currently are in the global LNG market — and it's crucial that WA keeps pace.”
The CME report makes a number of recommendations that government support could take, including accelerating the establishment of hydrogen hubs to facilitate technological development and shared learnings.
The paper also calls for alignment between the state and federal governments on certification for low-emission hydrogen.
Carruthers added that it was also important for Western Australia to remain technology agnostic and instead focus on the delivery of cost-competitive production, transportation and use cases that also provide certainty for decarbonisation pathways in line with national and state goals.
“There also needs to be a realisation that hydrogen isn’t like LNG or iron ore where WA is at a competitive advantage simply because of its resources and reserves. Hydrogen can be produced anywhere around the world,” Carruthers said.
“We do have many things that will help — including land that could be made available to build large-scale renewable energy generation plants, high solar irradiance and plentiful wind resources — but these don’t provide a clear absolute, competitive, or comparative advantage.”
The CME report also notes that the demand outlook for hydrogen still remains uncertain, with forecasts out to 2050 differing greatly among analysts, while it is widely expected demand will not grow significantly by 2030 above the current 75 million tonnes per annum currently utilised globally.
While Western Australia has plans to blend hydrogen into the existing natural gas network and utilise hydrogen for domestic ammonia production, the CME anticipates the state’s domestic demand will remain “comparatively small”.
However, other potential sources of domestic demand for hydrogen in WA could come from the mining and agricultural sectors, which are heavily reliant on diesel fuel.
Carruthers says the state should also look further afield for trade partners interested in sources of large-scale hydrogen.
“As our paper outlines, Japan is a natural fit for hydrogen exports due to its long-time interest in incorporating hydrogen in its fuel mix, including increasing the uptake of hydrogen fuel cell electric vehicles [HFCEVs], and the strong LNG relationship it holds with WA,” he said.
“Similarly, South Korea looms as a potentially attractive trade partner because of its targets around increasing the number of HFCEVs and refuelling stations to support local manufacturing.”
“Both Japan and South Korea are excellent examples of long- term, mutually beneficial trade partnerships for Western Australia, which have the further potential to expand into hydrogen export in the decades to come,” Carruthers added.