Electrify or electrolyse? We can – and should – do both

Electrify Everything! says Saul Griffith. The Hydrogen Economy! says Andrew Forrest. What if we didn’t have to choose? What if the answer was, to borrow from the Energy Efficiency Council’s (EEC) CEO Luke Menzel, “everything, everywhere, all at once?”.

Transitions of all kinds breed a brand of divisiveness that delays progress. In many ways this is to be expected – humans are not geared to love change – and also, in some ways, it can be quite useful. It is not savvy to jump into a major development without careful consideration, a critical eye.

The energy transition in Australia, however, has been plagued with the kind of divisiveness that risks stymieing the rate of change we need.

Many messages are extremist, promoting their perspective at the expense of all others. There is no wiggle room. There is no room for collaboration. It seems impossible for Rewiring Australia’s electrification strategy to come together with Fortescue Futures Industries’ hydrogen strategy to make the best of both worlds.

The resulting threat is that we could take one step forward and two steps back.

We have been offered a promising policy environment where governments are actively advocating progress. Instead of asking us to justify why this is important, our members of parliament are now asking us how to do it. This is an incredible opportunity and would be devastating to squander.

We have one shot at this challenge of decarbonising our energy sector in this critical decade. Pollination Group – a specialist climate change investment and advisory firm – assumes that we will be “out of oil and gas by 2040”. The time for talk is over, and we need to get going on the doing.

We need to think of this race (and it is a race) as a decathlon. Decarbonisation must be tackled from all angles at the same time. While we might not need to win every event, we need to rank high enough across the board to win the whole thing.

So, what does an energy transition decathlon look like?

Professor John Fletcher who leads the UNSW Digital Grid Futures Institute is preparing for a huge increase in the scale of our electrical infrastructure to satisfy our 2050 ambitions.

We will need to triple, or even quadruple, the scale of our grid to accommodate increased demand. More importantly, that infrastructure will need to look and operate very differently to what we have today. We must throw away the handbook to flex our grid in a way we have never seen before to maintain grid stability.

This is going to cost billions of dollars. In fact, the Australian Energy Market Operator expects the transmission infrastructure alone to cost $12.7 billion to 2050 in its Optimal Development Program.

Professor Rose Amal, who leads the ARC Training Centre for the Global Hydrogen Economy, highlights the critical role of hydrogen alongside electrification as the fundamental building block for chemicals and fuels.

Approximately 94 million tons of hydrogen is produced annually worldwide, and it needs to be made green. Australia, by embracing renewable hydrogen, could catalyse its own clean manufacturing boom by exporting green commodities such as ammonia, methanol, iron, steel and aviation fuel. The production of many of these commodities cannot be electrified, they need molecules.

This will also cost billions of dollars in industrial development beyond the first $2 billion announced in the budget for our first demonstration plants. It will require consistent strategic investment in the parallel innovation needed to bring renewable hydrogen down the cost curve.

These futures are not incompatible. We electrify what we can, power it with solar and wind, and use the excess generation (which will be plenty if we oversize our solar and wind farms, as we must) to make hydrogen for our new agricultural and industrial champions.

The folks at the cutting edge of energy research understand this. They are already working together in the state government-funded NSW Decarbonisation Innovation Hub that houses three networks on electrification and energy systems, power fuels, and land and primary industries.

As the CEO of the Hub, Professor Deo Prasad, explains; “Not only will the Hub meet NSW’s key metrics in decarbonisation, but it will also facilitate enormous potential job creation and capacity building in the sector”.

We are chasing the gold medal.

But where are we going to get those billions of dollars?

We are on the cusp of a major windfall of decarbonisation investment. Government, private investors and entrepreneurs are all champing-at-the-bit to get a piece of the action. The most recent federal budget has provided the first $4 billion to get us started.

What investors need is strong options to consider. What they don’t need is in-fighting and divisiveness.

If we continue to fight amongst ourselves, we may easily find that investments in one field could negate progress in another. If governments change, they will likely choose the competing technology pathway and further feed the boom-bust cycle that has plagued the energy transition to date.

If we choose to work together, we can build enough momentum to ride-through the hurdles that our transition will continue to face. Again, it is a race.

It’s not an either-or, it’s a both-and.

One last note on the billions of dollars: There is no doubt that the transition will require significant investment, but how many billions is still up for discussion.

Efficiency first is an essential principle. The EEC recently released its flagship report, Clean Energy Clean Demand, which clearly outlines the role that we as energy consumers must play. Using less energy is of course cheaper. But in fact demand flexibility, using energy at better times and in better places, will have a huge impact on the bottom line.

Increasing Australia’s energy efficiency by one percentage point would increase real GDP over 15 years by $25 billion. RACE for 2030 – an energy co-operative research centre – suggests that flexing just our “last gigawatt” of demand could offer $455 million of system-wide value, including around $300 million of bill savings direct to customers.

Investing in people, to help them drive the transition, will have the fastest payback of all.

Dani Alexander is the Chief Executive Officer of the UNSW Energy Institute. Professors Rose Amal, John Fletcher and Deo Prasad are energy experts at UNSW whose research and technology supports the institute.