Hydrogen is mostly extracted by using fossil fuels (and thus emitting carbon dioxide).
Almost 47 per cent of global hydrogen production comes from natural gas (grey hydrogen), 27 per cent from coal (black or brown hydrogen) and 22 per cent from oil, according to 2021 data from the International Renewable Energy Agency.
It can also be extracted from water (H20), by splitting hydrogen and oxygen through a process called electrolysis. This makes up just 4 per cent of the world’s hydrogen production.
This process of electrolysis can be done using any electricity source, for example burning gas or coal, nuclear power (which makes it pink hydrogen), or from renewable energy sources such as wind or solar (which makes it green hydrogen).
If the electrolysis process is powered by renewable energy, the hydrogen will be produced without emitting any greenhouse gases.
The good news is hydrogen can then also generate and store electricity without carbon emissions. To produce energy, hydrogen is burnt (at about 2200 degrees Celsius) and all it emits as a byproduct is water.
That’s why many people believe it has the potential to become the fuel of the future, replacing all fossil fuels needed for transportation, heavy machinery and power generation and the production of agrochemicals such as fertiliser.
What can (green) hydrogen be used for?
Green hydrogen has been touted as key to decarbonising industries that rely on coal, gas and oil as an energy source, such as steel, fertiliser and chemical production.
Former chief scientist Alan Finkel, a special adviser to the federal government on low-emissions technology, said he believed decarbonisation of steel making could be the highest value use of green hydrogen in future – a reference to hydrogen’s potential to be a substitute for coking coal in steel making.
In manufacturing, black or brown hydrogen is already used in chemical processes to refine petroleum, treat metals, produce fertiliser and process foods.
Hydrogen can also be used as a fuel, to power vehicles, such as cars, planes, ships and heavy machinery.
All vehicles (cars, planes, ships, heavy machinery) could, in theory, be powered by hydrogen fuel cells, which produce electricity and water. In fact, thousands of vehicles and machines around the world are already powered by hydrogen.
People see it as a viable replacement for fossil fuels, especially for industrial uses and long-haul transportation, because it lasts longer than other clean alternatives such as batteries.
What is the hold-up with green hydrogen then?
Green hydrogen currently costs anywhere from $US3 to $US8 per kilogram. This is compared to grey hydrogen, which costs less than $US2 per kilogram.
Frank Jotzo, Australian National University professor at the Crawford School of Public Policy, says low-emissions hydrogen must cost around $2 per kg to produce in order for consumers to be willing to use it instead of other fuel sources.
There are three major hurdles.
#1. Creating green hydrogen
Creating hydrogen is not difficult, but to do it with renewable energy at scale will be challenging. To split water into hydrogen and oxygen will require a massive expansion in Australia’s renewable energy generation capacity. For critics such as Mr Griffith, if Australia has developed such large amounts of renewable energy generation assets then the country would simply embrace electrification where possible.
A second cost constraint is the development of industrial electrolysers. While manufacturers are responding to increased demand for the units to split water into its core elements, supplies are limited. To further his own ambition, Dr Forrest, the executive chairman of Fortescue Metals Group, is building an electrolyser in Gladstone, which will cost $115 million.
The increase in electrolysers and soaring growth in renewable energy projects will inevitably bring down the cost of producing hydrogen, but experts say it is unlikely to be commercially viable before the end of the decade.
#2 and 3: Storing and transporting hydrogen
Once hydrogen is created, producers will face the difficult task of storing and transporting a substance that is light, flammable and unfortunately very explosive.
To overcome these problems, producers will keep hydrogen in one of three different states, a gas, a liquid, or as ammonia.
Finkel says the form in which it should be stored largely depends on what it will be used for. There are pros and cons to all.
If the demand was for hydrogen to be used in fuel cells to drive trucks or trains and cars, then it makes more sense for hydrogen to be kept in gas form when it is transported or stored, he says.
However, to move hydrogen gas around Australia would be problematic and dangerous. Australia is exploring the possibility of blending it with natural gas and transporting hydrogen through existing pipelines, but doing so in large quantities threatens further problems such as embrittlement.
Hydrogen embrittlement occurs when metals become brittle after the introduction and diffusion of hydrogen into the material.
If the hydrogen is to be used for power generation or chemical production (as countries such as Japan look to progressively replace coal in power generators) then storing it as ammonia, a derivative of hydrogen, has benefits.
Transforming hydrogen into ammonia before it is stored would lower transportation costs. Ammonia is 35 per cent higher energy density than hydrogen and has much higher liquefaction temperatures, at minus 33 degrees.
To transform hydrogen into ammonia would require a conversion facility at the source and a cracking facility at the destination.
By distributing hydrogen as a liquid in the form of ammonia, this could also enable the repurposing of some existing oil infrastructure to reduce costs, while natural gas pipelines could be repurposed to distribute hydrogen in gaseous form.
However, transporting ammonia has its own challenges. While it is more energy dense than compressed or liquid hydrogen and is easier to store than the latter, it is also highly toxic and flammable, with potential to cause plenty of damage if leaked at sea.
Still, a recent report by the International Renewable Energy Agency forecast that one quarter of the world’s hydrogen will be internationally traded in 2050, with 45 per cent of that shipped as ammonia.
The rest is likely to be shipped in liquid form. But to turn it into its liquid form, it must be chilled to negative 253 degrees, which is challenging but not that dissimilar to natural gas, which is liquified for easier storage and transportation at negative 162 degrees.
LNG is a major industry in Australia, and exports are worth more than $90 billion to the country’s economy. Critically for Australia’s hydrogen plans, it has experience in transporting goods at such low temperatures.
In fact, in 2022, Australia shipped the world’s first liquid hydrogen cargo as it sought to demonstrate the viability of the industry. The hydrogen created was so-called brown hydrogen.
Although it can be shipped in liquid form, it will not be cheap or quick. The transportation costs for liquid hydrogen would be more than three times those for LNG, according to a 2020 research paper, and putting in place the infrastructure for large-scale hydrogen use, such as pipelines or export and import terminals, will take many years.
For perspective, it takes up to 12 years to plan and build a natural gas pipeline and up to 10 years to build an LNG terminal. The time to build hydrogen infrastructure would be similar in length.
Are other countries investing in green hydrogen?
With fossil fuel generation on the wane globally, proponents of hydrogen insist it offers Australia a unique opportunity to be a world leader. LNG producers are investigating how to tap into enthusiasm for green hydrogen overseas.
Asia, most notably Japan, is pushing ahead aggressively with plans to place hydrogen at the heart of its energy transition plans. In April, Japan set a new ambitious target of boosting supplies of hydrogen to 12 million tonnes by 2040, from its previous goal of 2 million tonnes by 2030.
Europe, which has been hit hard by its move away from Russian gas, is also a lucrative market as it looks to decarbonise its hard-to-abate sectors in industry and transport, freeing up gas for households.
Demand for low-emissions hydrogen is also expected to soar by the end of this decade, set to increase up to 30-fold by 2030, according to the International Energy Agency’s closely watched World Energy Outlook.
Could Australia become a hydrogen superpower?
Australia is far from the only country excited by the prospect of green hydrogen, with the United States and the Middle East also looking to capitalise.
Australia, however, has notable advantages. With a vast land area and an abundance of sun and wind, Australia has the capacity to be a world leader in renewable energy generation.
But the scale of change required is staggering
The Australian Energy Market Operator has mapped out such a scenario, dubbed the so-called “hydrogen superpower”, and Australia would need to add the equivalent of all the renewable energy generation ever added to the National Electricity Market, every year, from now until 2050 to meet the hydrogen superpower scenario, according to Dylan McConnell – senior research associate at the University of New South Wales.
Other countries are also moving fast. In the US, legislation called the Inflation Reduction Act, which passed in August, will deploy $US500 billion in concessional loans to US business to effectively subsidise hydrogen fuel at about $US5 per kilogram – a far more generous subsidy than anything on offer in Australia.
The subsidy is expected to lever a tectonic shift in the US green hydrogen market and experts believe it will draw in increasing numbers of private sector investors.
German manufacturing plants have already started moving to the US, allowing Americans to gain investment to build electrolysis plants while eating Australia’s lunch at the same time.
It’s also unclear whether nations with demand for hydrogen will look to import from Australia. From Beijing’s latest hydrogen plan, it appears increasingly likely China will not need to import Australia’s green hydrogen – and will instead compete as a green hydrogen exporter as well.
Projects seeking to export hydrogen or hydrogen‐based fuels are also more numerous and more advanced than those for the corresponding import infrastructure. Of the 12 million tonnes of low-emissions hydrogen produced for export, only around 2 million tonnes of that has secured a customer or potential customer.
This is because there are currently only five ports around the world developing hydrogen import plans. These are for Amsterdam, Brünsbuttel, Rotterdam and Wilhelmshaven in Europe and Kobe in Japan.
Is there really a market?
While there is little disagreement about the potential for hydrogen as an export opportunity, there is widespread division about the scope of such a market.
For proponents like Forrest, hydrogen could replace LNG as a fuel source, positing Australia at the heart of that lucrative trade. But for critics, hydrogen is likely to replace gas only where electrification is not possible.
“To get $2-a-kilogram hydrogen – which is our stretch target – you have to start with 2¢ per kilowatt-hour electricity. If you have 2¢ a kilowatt-hour electricity, why would you waste a quarter of it in the electrolysis, waste another 15 per cent in the compression, another 50 per cent in the fuel cell or the combustion engine coming out?” Griffith asks.
“Making it four times at least, probably five or six if you include capex, more expensive than just doing the whole thing you were going to do with hydrogen electrically anyway.”
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