The hydrogen economy is not dead, just ask the shipping and aviation industries

Recent moves in the hydrogen industry have led some to forecast its death before it even really got started. But looking beyond the headlines, this is actually a sign of a maturing market.

Capital, expertise and customer demand are narrowing in on use cases that are viable now, with Australia well positioned to catalyse a hydrogen economy by leveraging the shipping and aviation markets as anchor customers for low carbon liquid fuels.

Pure play hydrogen remains expensive to make and fiendishly difficult to store safely or use directly as fuel. However, derivatives such as methanol and SAF, which require little to no upgrades to existing infrastructure can help decarbonise hard-to-abate industries.

Customers are already clearly signalling this emerging role for hydrogen, with the shipping and aviation industries increasingly turning to hydrogen derivatives as future fuel sources.

Last year, 138 methanol powered ships were ordered, and 269 methanol powered ocean going vessels are expected to be operational by 2028, according to data from maritime experts DNV. 

It is all part of the maritime industry’s effort to achieve net zero emissions targets – and the shipping lines are betting on green methanol, produced using renewable energy, to get there.

These efforts to build up a methanol ready fleet are complemented by commitments from mainline shipping operators like ANL (Part of the CMA CGM group), who have committed USD 1.5 billion to unlock the upstream decarbonisation value chain.

Further, these efforts by the private sector come against the backdrop of the Australian Government’s Maritime Emissions Reductions National Action Plan (MERNAP), which views the creation of Green Shipping Corridors as a key lever to decarbonise the broader maritime ecosystem.

Meanwhile, Sustainable Aviation Fuel (SAF) has typically been produced with used cooking oils and waste biomass. Producing SAF from these biogenic feedstocks is a critical first step that must be strongly incentivised and encouraged, but there simply isn’t enough high-integrity feedstock to meet demand.

Against this backdrop, airlines are turning to eSAF, a fuel made with hydrogen and produced using renewable energy. In addition to becoming potential customers, airlines like Qantas have committed investment to unlock a domestic low-carbon liquid fuels manufacturing industry, providing real momentum to help the industry take off. 

These moves by the shipping and aviation industries demonstrate the rapidly growing demand for hydrogen derived fuels, and show the Australian Government is on the right track with its support for low carbon liquid fuels production.

Australia has almost unrivaled potential for green fuel production thanks to its favourable climate – all that clean electricity can be used to power hydrogen production, which in turn can be used to produce low-cost green fuels like methanol.

The government’s Future Made in Australia program will play a key role in realising this potential, with support for hydrogen projects which target the aviation and shipping industries as anchor customers. The onus is now on industry to step up and create a long-term pipeline of low carbon liquid fuels.

Vast is on track to play a role in this emerging industry, starting with Solar Methanol 1 (SM1), our project in Port Augusta, which we are developing with German energy company Mabanaft. According to a recent study by engineering group Fichtner, Vast’s technology, which can generate power and heat 24/7, can reduce the cost of green fuel production by as much as 40% compared to other renewable methods. 

The Australian and German governments have recognised this potential and are supporting Vast’s first-of-its-kind project SM1. The project has funding agreements for up to AUD $19.48 million from the Australian Renewable Energy Agency (ARENA) and up to EUR 12.4 million from Projektträger Jülich (PtJ) on behalf of the German government. Critically, there is a rapidly growing market for the end product, with shipping companies and airlines thirsty for low-cost green fuels.

If you look through the hydrogen hype, the shipping and aviation industries are well positioned to act as anchor customers of hydrogen derivative eFuels and unlock the outcomes envisioned by the Australian Government’s early investments. 

• Craig Wood is CEO of Vast 

This statement includes “forward-looking statements” within the meaning of U.S. federal securities law, including statements regarding the future development and operations of SM1. Vast cautions you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Vast. Disclosure concerning certain of those risks can be found in Vast’s filings with the SEC and are publicly available on the SEC’s website at www.sec.gov. Except as otherwise required by applicable law, Vast disclaims any duty to update any forward-looking statements.