Colour it green: Time to reset Australia’s national hydrogen strategy

When Australia’s National Hydrogen Strategy was launched in November 2019 the federal government, states and territories, jointly committed to making Australia a top exporter of “clean hydrogen.”

By the term “clean,” they meant not only green hydrogen – made by splitting water into hydrogen and oxygen using renewable electricity – but also “blue hydrogen” by capturing and storing the CO2 emitted when making hydrogen from gas (or even coal).

The central justification for supporting both forms of hydrogen sounded defensible: if what matters to the climate are the emissions, then it matters not what the method of production is.

And in keeping with this rationale, the Morrison government set about showering support on fossil-based hydrogen and carbon sequestration projects, to the tune of hundreds of millions of dollars.

Now, two-and-a-half years into the implementation of our national hydrogen strategy – which has treated “green” and “blue” hydrogen projects as equally meritorious – it is time to call time on government support for fossil-based hydrogen, and reset our national plan as a Green Hydrogen Strategy.

The reasons are many, but here I’ll name just three.

First, blue hydrogen is not in fact “clean.” Australia’s existing strategy stipulates carbon capture and storage rates of 90 per cent for projects to be deemed acceptable. But to our knowledge, such rates have never been achieved by a commercial project.

In the case of the massive Gorgon LNG project in Western Australia – as recently documented by IEEFA – Chevron and partners had originally targeted the geological storage of 80 per cent of the CO2 that would otherwise be vented into the atmosphere. After a three-and-a-half-year delay to the start of capture, and ongoing issues thereafter, the WA government revised down the target to around 66 per cent. Over the first five-year operating period (2016-2021), the project achieved around a 32 per cent capture rate.

Analysis by researchers at ANU (Longden et al) showed last year that if we were able to achieve a 90 per cent capture rate of emissions (including process and fugitive emissions), blue hydrogen projects could still emit over 4 kilograms of CO2 for each kilogram of hydrogen produced.

This compares with a recently launched “green hydrogen standard” which would set an upper emissions limit of 1 kilogram of CO2 per kilogram of renewable hydrogen.

Second, blue hydrogen may be cheaper, but it won’t be for long. BloombergNEF predicted in 2021 that green hydrogen would be cheaper than gas-based hydrogen with CCS by 2030.

With the sharp commodity price increases over the past few months, that forecast time is estimated to have halved. And what’s more, many proponents now say that cost is no longer the most important factor in offtake deals anyway, but rather energy security is.

Prospective buyers want certainty of volumes and costs, and they’re prepared to pay a premium to get it. This should narrow the window of the blue cost advantage even further, only underlining that any government money channelled into blue hydrogen projects risks funding white elephants.

Thirdly, buyers want green hydrogen. One of the most prospective international markets for our hydrogen is Europe, and they aren’t interested in talking to Australia about blue hydrogen.

The latest REPowerEU plan, released in May, aims to reduce the continent’s dependence on Russian fossil fuels by fast forwarding the clean energy transition. It has established a target of importing 10 million tonnes of renewable hydrogen by 2030.

Australia has a genuine shot at being a key supplier to Europe – a German delegation is currently visiting Australia to talk about the prospects of us establishing a renewable hydrogen supply chain to Germany. If we want to be part of that action, it has to be green.

With the folly of the gas-led recovery now behind us, and a number of states already committed to green hydrogen, it’s time for all Australian governments to draw a line under the blue hydrogen charade, and reset Australia’s sights exclusively on green hydrogen – and stop wasting our time and money on solutions that cannot get us to zero.

Anna Freeman is Clean Energy Council policy director – electrification and hydrogen