“It really is a race:” NSW must get cracking on green hydrogen, experts warn

New South Wales has enormous potential to transition its coal-based economy to one focused on clean energy and green hydrogen, but experts warned the state was in a make-or-break race to be globally competitive as Europe and the US set a cracking pace.

A virtual summit hosted by the Smart Energy Council on Tuesday broadly applauded the NSW government’s  vision to make the state a clean energy superpower, but warned that action must be taken immediately – including signficant government spending – to stay in the global race.

The NSW Coalition government last year unveiled a $32 billion Electricity Infrastructure Roadmap, targeting 12 gigawatts of new renewable energy capacity spread across designated Renewable Energy Zones (or REZs) with an additional 2 gigawatts of storage capacity by 2030.

As NSW energy minister Matt Kean reiterated this week, the state also hopes to claim a slice of a global green hydrogen industry via its various hydrogen programs and support, including $70 million for hydrogen hubs in the Hunter Valley and Illawarra.

“The future possibilities of hydrogen as an energy source are incredible”, Kean told the summit. “It’s a fact that most of the hydrogen used in New South Wales is grey hydrogen, produced by using fossil fuels … replacing that with clean and green hydrogen could help drive a new energy boom”.

“Now is not the time to rest on our laurels, now is the time to push harder and faster”.

Kean said: “Delivering cheap, green energy into the supply chain of every business in our state” would help “immunise the economy from the looming threat of green protectionism in key markets in Europe”.

But other speakers at the summit warned that the state needed to move much more quickly and decisively on a number of key fronts to have any hope of keeping up with the global pace, particularly as two of Australia’s largest trading partners – the US and the EU – move to impose carbon taxes on emissions-intensive imports.

“If as it looks like the US is going to move towards the EU style policy, then it really is a race for countries like Australia who have the opportunity to really significantly benefit from this change, or significantly suffer,” said Clark Butler, the CEO of Sunshot Industries, a business dedicated to enabling globally competitive manufacturing in Australia, with a sustainable energy cost advantage.

“What will it take? It really takes starting now. You don’t have to read the IPCC report to be worried about …2030, much less 2040. Most of these projects are five to 10 years in the making. Our strategy for decarbonising Tamago [aluminium smelter], for example, will take until 2029, at least, but it can be done if we start immediately.

On the government’s discussion of the potential to turn the state’s coal centre, the Hunter Valley, into a REZ, Butler said he “really encourage(d) the government to stop calling it potential and make it actual.”

Vincent Dwyer, the CEO of Energy Estate, which has plans for gigawatts of renewable-backed green hydrogen production, including in NSW, said it would not only take 10 years to decarbonise an asset like Tomago, but around 3GW of dedicated renewables in a region that already had “significant grid issues.”

And Dwyer stressed that one of the main hurdles for green hydrogen in Australia was its inability to compete with gas.

“Underwriting is an important feature …hydrogen finds it very difficult to compete with gas on a direct supply replacement basis. And so an off-take incentive structure provided by governments is really going to be important to get the industry going,” Dwyer said.

“We think there are certain applications, such as iron making for example, where we’ll be able to make the economics work without significant incentive. But for applications such as blending into pipelines and for replacement of gas for industrial heat, hydrogen is going to be non-competitive for quite some time. So, a certificate scheme or an incentive arrangement will really drive the value there.”

Tim Stock, the government’s hydrogen and clean energy project director, said thousands of skilled workers in the Hunter Valley were “carbon exposed” and a hydrogen future represented “a real legitimate pathway for these workers and the economic growth within those regions”.

Stock said the government would launch a collaboration platform in coming days designed to connect hydrogen projects with potential customers or users. He said the government anticipated launching its hydrogen strategy in late October or early November this year.

“Now, while we are going to be the last state to release a [hydrogen] strategy, it’s going to be a very strong strategy and will help us build on the knowledge and the type of work that’s already being undertaken across Australia,” Stock said.