Australia would need a whopping total of 812GW of installed solar and wind capacity by 2050 to grab a share of the world’s green hydrogen market while also meeting its own net zero targets, a Bloomberg New Energy Finance report has found.
The report, BloombergNEF’s latest New Energy Outlook on Austraila, explores three decarbonisation pathways for Australia to 2050: A base case Economic Transition Scenario, a Net Zero Scenario, and a Hydrogen Export Scenario.
The Hydrogen Export Scenario (HES) is a new addition to the annual NEO for Australia, mapping out the twin goals of achieving net zero and emerging as a green hydrogen superpower by 2050.
It shows Australia could meet its own net-zero targets with renewable energy and green hydrogen while also supplying around 5.7%, or 28 million metric tons per year, of expected global hydrogen demand in 2050.
The catch is that this would boost Australia’s electricity demand by 169% more than what would be required to meet the nation’s net zero emissions targets alone – that’s the equivalent of 1,963 terawatt-hours by 2050, or seven times more than today.
“To supply this demand on a least-cost basis,” the report says, “wind and solar capacity across the country would need to grow to 812 gigawatts by 2050, 21 times more than today. Most of the electricity produced by these plants would be used to produce hydrogen via water electrolysis.”
Financially, BNEF says a renewable energy build-out of such massive proportions would require $592 billion in investment between 2022 and 2050, which is around 2.5 times more than the investment needed for net zero alone. Around $369 billion, or 62%, would flow into new wind capacity, with the remaining going to solar.
As for where all of this new capacity would go – BNEF says that while most of it would be onshore wind and solar, due to the least-cost imperative of the research – it would be focused on the more remote regions of the country, in the form of specialised project hubs.
BloombergNEF’s head of Australia, Leonard Quong, says that in those areas, land or grid constraints usually don’t exist yet and are probably unlikely to become a material challenge – although he stresses that questions about social licence are not tackled in an economic analysis.
“If the people of Australia decide that the use of land should be more heavily prioritised for agriculture, for other sustainability purposes, or even… for carbon offset markets, we would see a different mix of technology come to the fore,” Quong told RenewEconomy on Tuesday.
“That’s when offshore wind might have a more prominent role in the power system.”
So is it worth it – the enormous footprint and cost of all of the extra capacity – for Australia to export such a small percentage of the global green hydrogen supply?
“We are one of the few countries in the world with such an abundance of land such an abundance of high quality resources – and area in which to operate these sorts of industries that there is a real opportunity to become an investment hub for the supply of the green energy and the green materials the world could need,” says Quong.
“From where we are right now, [however] the risk is that we might not be able to scale … at the rate we would need to in terms of the infrastructure and of the capital as well.
“But all in all, it does represent an enormous opportunity for Australia to participate in the world low carbon energy systems in a way that we just have not in the past.”
That said, even without the hydrogen export component, BNEF’s Net Zero Scenario (NZS) finds that to reach the Paris aligned climate target by 2050 will still require a $1.9 trillion investment in the national energy system, representing an average of $68 billion per year.
Under the NZS, higher power demand from increased electrification as well as for domestic hydrogen production means Australia installs 300GW of wind and solar by 2050 around 102GW more than the base case Economic Transition Scenario – and 10 times what is installed today.
It also includes around 74GW of “dispatchable capacity” in the form of batteries, pumped hydro, hydrogen-fired gas plants, and gas plants paired with carbon capture and storage (CCS) – 9GW more than in the ETS – to fully decarbonise the power system.
“The increasing adoption of EVs and electrolysers for hydrogen production requires a commensurate expansion of Australia’s power grid,” the report says.
“Under the NZS, around $300 billion of investment flows toward the grid in Australia. (compared to $204 billion in the ETS), doubling the length of the network to over 1,600,000 kilometers from 2022 to 2050. The scale of this investment will likely necessitate a revision to the investment regimes currently in place.
“A new investment framework, in which private capital can accelerate grid investment without adversely impacting rate payers and landowners, could be a politically palatable way forward,” BNEF notes.
Notably, the Net Zero Scenario also requires Australia’s transport sector to pull its weight, via a wholesale switch to electric vehicles.
“In our modeling to get to net zero we found that, when it comes to EVs, 100% of all new cars sold on Australian roads would need to be electrified by 2033,” Quong tells RenewEconomy.
“This is a really high target compared to where we are today with less than 5% of all new passenger vehicles entering the road coming with a battery and a plug of some form.
“And of course, within that there are real questions around the ability of infrastructure, charging infrastructure, and the financial infrastructure insurance, road management around it to match the required rate of change.
“We’re paying very close attention to the federal government’s looming emission standard for vehicles which they’ll release later this year to see if we can get Australia back on track to where it needs to be in its transport sector,” Quong says.
“But … if Australia fails to …bring down emissions from transport, which is the second largest sector for emissions right now … our need for abatement doesn’t go away. It’s really just shifted to other sectors of the economy to do more heavy lifting, and it will likely be more expensive overall.”
