ARENA and CEFC to kick-start Australia’s ‘clean’ hydrogen industry

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ARENA and the CEFC will provide a combined $370M in funding support, as Morrison government looks to capitalise on hydrogen export potential.

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Photo: Sebastian Kahnert/dpa-Zentralbild
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Australia’s two premier public funding institutions for clean energy will commit a combined $370 million in funds to kick-start Australia’s clean hydrogen sector, as a new battle is set to heat up over the definition of what exactly is ‘clean hydrogen’.

The funding commitments were announced late Friday following approval for the National Hydrogen Strategy,, which found that there is an enormous economic opportunity for Australia to position itself as a global leader in ‘clean’ hydrogen exports, but which could include the  ‘clean’ hydrogen made from coal and gas, combined with carbon capture and storage.

The National Energy Strategy, prepared by chief scientist Dr Alan Finkel, was adopted by federal and state energy ministers at a meeting of the COAG Energy Council in Perth last week.

Upon the release of the strategy, the Morrison government announced that funding from the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA) would be directed to supporting the growth of Australia’s hydrogen industry.

“The National Hydrogen Strategy maps out the steps we can take to develop a sustainable and commercial hydrogen industry,” federal energy minister Angus Taylor said.

“The Government is backing that in through project investment to promote our outstanding potential as a hydrogen supplier to the world.”

The strategy found hydrogen could serve as a versatile energy source, that could support the decarbonisation of several sectors including the transport and manufacturing sectors, where it has so far proven more difficult to achieve emissions reductions compared to the progress achieved in the electricity sector.

If hydrogen production can achieve the same level of commercial competitiveness as that achieved by solar and wind generation in the electricity sector, it could create a substantial economic opportunity for Australia, boosting GDP and creating thousands of new jobs.

“A cautiously optimistic scenario could see an Australian hydrogen industry generate about 7,600 jobs and add about $11 billion a year in additional GDP by 2050. If global markets develop faster, it could mean another ten thousand jobs and at least $26 billion a year in GDP,” the National Hydrogen Strategy says.

range of hydrogen demand national hydrogen strategy
Source: National Hydrogen Strategy

Up to $300 million will be invested by the CEFC in emerging hydrogen technologies through a new Advancing Hydrogen Fund, and an additional $70 million would be provided by ARENA in grant funding to support the development and demonstration of electrolyser technologies.

“We are seeing increasing market interest in hydrogen, particularly as a low emissions fuel source for industry, transport and manufacturing,” CEFC CEO Ian Learmonth said.

“The CEFC is looking closely at how to harness Australia’s abundant renewable resources to provide green hydrogen for export markets around the world.”

Funding for both commitments would be drawn from existing funding allocations to the two agencies, and likely limited to hydrogen production using renewables, as both agencies precludes both agencies from investments in projects that include particular fossil fuel or carbon capture technologies.

“Significant levels of new investment will be needed to successfully commercialise and scale a global hydrogen industry. We believe Australia is well placed to help contribute to the growth of this emerging industry,” finance minister Mathias Cormann said.

“In establishing the Advancing Hydrogen Fund, we are creating the appropriate policy and regulatory settings to drive increased investment in hydrogen.”

ARENA CEO Darren Miller said the agency would target the agency’s $70 million commitment to hydrogen electrolysers to supporting larger-scale projects that would help drive down the costs of hydrogen production, particularly projects that are larger than 10MW in capacity.

“The hydrogen sector is still in its infancy, and while key technologies like electrolysers are available, there are few large scale systems deployed and they are still expensive,” Miller said.

“There is a need to develop local skills, supply chains and delivery capabilities of large scale renewable hydrogen projects. ARENA’s support can help to establish this new industry as well as progressing research and development to unlock greater cost reductions and efficiency improvements. Knowledge shared from the projects funded under this round will be vital for the industry.”

The $70 million commitment from ARENA represents a significant portion of the remaining funds available to the agency. With CEO Darren Miller telling a senate estimates hearing in October that the total remaining funds available were “around $200 million”.

ARENA will start a consultation process around potential priorities for grant funding and expects to invite the first applications for funding from March next year.

While hydrogen has the potential to create a new export opportunity for Australia, funding from ARENA and the CEFC will be relied upon to achieve necessary improvements in hydrogen technologies. Further research and development will be required to ensure it can be produced at a cost-competitive price, and to meet the scale of demand required to see hydrogen serve as a viable alternative transport fuel.

“Australia has the potential to become a major exporter of hydrogen, and in doing so help the global energy sector transition to a zero-carbon future,” convenor of the hydrogen ‘grand challenge initiative at the Australian National University Dr Fiona Beck said.

“But there is still a lot of R&D needed to understand the implications of different pathways for hydrogen production, transport, and use.”

Taylor also announced that a further $14.3 million has been committed to the ‘implementation’ of the National Hydrogen Strategy, including further reviews to potential regulatory barriers to a hydrogen industry, and to support international cooperation on trade partnerships and the development of relevant international standards, which may include a ‘guarantee of origin’ certification scheme for hydrogen.

The issue of certification was raised as Taylor, and resources minister Matt Canavan, enthusiastically welcomed the release of the “technology neutral” National Hydrogen Strategy, which suggested there could exist a strong opportunity for both coal and gas in the production of hydrogen fuels.

At the COAG energy council meeting, ministers agreed that Australia should lead the development of an international certification standard for hydrogen, which would provide transparency as to the origin of the hydrogen produced, as well as the emissions intensity of its production.

Such a ‘guarantee of origin’ was a recommendation of the National Hydrogen Strategy prepared by Dr Finkel, and was pushed by some state and territory ministers out of concerns that hydrogen production from coal and gas could fall under the same ‘clean hydrogen’ label as hydrogen produced using renewable energy sources.

The strategy recommended that a carbon emissions capture rate of 90 per cent would be required when producing “clean” hydrogen from coal or gas, to achieve an “acceptable” level of emissions avoidance.

Source: National Hydrogen Strategy

The strategy lays out a series of 57 recommendations, or ‘joint actions’, describing the next steps for governments to unlock the hydrogen sector, including identifying the necessary regulatory reforms needed to support an expanded industry, along with with the potential skill gaps that exist within Australia, and globally, that would need to be filled.

In particular, the strategy highlights the ongoing work required to support the blending of hydrogen into mains gas supplies, which would see hydrogen gas to displace natural gas used for heating and cooking.

Several gas network operators are undertaking small-scale trials of the blending of hydrogen in mains gas supplies, including Jemena in New South Wales, ATCO in Western Australia, and Australian Gas Networks at the Tonsley innovation hub in South Australia.

There, however, remain significant technical barriers to the complete replacement of mains gas with renewable hydrogen, due to the different burn characteristics of the two gases, and may require dedicated appliances to be developed that can reliability operate solely on hydrogen.

The prospect of large scale production of hydrogen has encouraged some enormous proposals for projects paired with renewables projects, including the Macquarie Group backed 15GW Asia Renewable Energy Hub in the Pilbara, and 5,000MW combined solar and wind proposal, with the involvement of Siemens, near Kalbarri.

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