This is a lightly edited transcript of the recent Energy Insiders podcast: Green hydrogen in mines. What are the prospects for green hydrogen in Australia’s mining industry? BHP, Rio, CEFC, and Enel Green Power share their views.
Giles Parkinson 00:29
Hello everyone, and welcome to this latest session. The title of this session is “Why green hydrogen for mines?” And this actually doubles as an Energy Insiders podcast for Renew Economy. My name is Giles Parkinson, and I’m the editor of Renew Economy, Australia’s leading source of information, analysis and commentary on renewables and the transition by things electricity and transport.
And we also publish The Driven, electric vehicle focused, and One Step Off the Grid, which may sound a bit similar to many of you, although it seems that because you are mines and remote, you’ve actually got two feet off the grid already, and wondering how to actually improve what it is that you’re dealing with. We’ve got a great panel today who I’ll introduce very, very shortly. We’ll be finishing with some questions from the audience.
So if you do have any questions, do please put them down in the appropriate form at the bottom of the page, and we’ll see if we get to them at the end of the discussion. So joining me today I’m delighted to introduce Kathryn Horlin, the program manager from BHP. Thanks for joining us, Kathryn.
Kathryn Horlin 01:43
Thanks, Giles. It’s great to be here.
Giles Parkinson 01:45
And we also have all the way from Rome, Italy, Lorenzo Ducci, a hydrogen senior Commercial Officer with Enel Green Power. Welcome, Lorenzo.
Lorenzo Ducci 01:56
Thanks. And look forward for this interesting discussion.
Giles Parkinson 02:01
Well, thank you very much. My phone’s already gone off, which is really embarrassing. I’m going to switch it off straightaway. Also joining us is Rupert Maloney from the head of the hydrogen investment of the Clean Energy Finance Corporation. Rupert, how are you?
Rupert Maloney 02:14
Hi Giles, Thanks. Good to be here.
Giles Parkinson 02:17
And also joining us and doubling up from the previous session is Thomas Mach of the Manager of Technology of Energy and Carbon Abatement at Rio Tinto. Thomas it has been a very busy day for you. That announcements and all sorts of things.
Thomas Mach 02:29
Absolutely. It has. And Giles, I’m looking forward to the discussion today.
Giles Parkinson 02:34
Yeah, should be great. We’ll get rolling. It’s amazing. A couple of years ago, we wouldn’t even have thought about green hydrogen and let alone for mines. It was barely a discussion on the radar. But now everyone’s getting quite serious about it. Kathryn let’s start with you. I mean, how are mines currently evaluating and investing in green hydrogen, given it is probably early days?
Kathryn Horlin 02:59
Thanks, Giles. So, as you’re probably aware, and most of the listeners are, that BHP has clear goals in place to reduce its operational greenhouse gas emissions in line with the Paris Agreement. So we’ve got two key targets, our public targets are our net zero operational emissions by 2050. And also the 30% reduction by FY30 off our FY20 baseline. And how we look at operations decarbonisation is that there’s lots of different pathways. And we do have a technology agnostic view.
For us, for BHP, green hydrogen we see has some potential to address some of the more challenging areas of emissions reduction. And so for them, those key ones are industrial processing. So where we use hydrogen for its chemical properties, and also for process heat, where we need high heat in our smelters and refinery areas, and also some applications in material movement. With material movement, our current view is in general electrification will be an application, but there’s some areas where it’s going to be harder, especially with our ancillary equipment, and where we see a role for green hydrogen.
Giles Parkinson 04:02
Thomas, can I throw the same question to you?
Thomas Mach 04:06
Yeah, thank you, Giles. So we have a number of projects under review at the moment to explore hydrogen adoption, primarily with our refineries. Elsewhere, we’re looking at electrification. But as you’ve heard today, you know, Rio Tinto is partnered with the Australian Renewable Energy Agency to study whether hydrogen can replace natural gas. That obviously has with it significant engineering, significant R&D. And so that’s what we’re using engineering studies and R&D studies. In order for us to really assess can we retrofit hydrogen into our existing operations. More broadly across Rio Tinto, and similarly to some of Kathryns’ reflection as well, we see hydrogen as a specialized product where we can’t have to electrification.
So again, quite similarly, we see it in terms of process heat, where we need direct combustion for certain processes in terms of steam raising or calcination. We see it as a replacement for metallurgical carbon. So for direct reduction of metal oxides to metals. We see it again in a specialized way for mobility for both above ground and underground. And, again, direct electrification areas is the preferred pathway. But for hydrogen where we can’t get there. And then finally, as a blending agent into into our gas streams. Of course cost is extremely important in that portion. But, but that’s that’s where we believe that we can use hydrogen and we’ve got active investigations for that.
Giles Parkinson 05:57
You’ve actually just announced a project today with funding from ARENA. So to all extents is that like a bit of a test case for what you might bring, applications that you might bring from a refinery situation to a mine situation afterwards?
Thomas Mach 06:12
Yeah. So look, we see there have been quite a few synergies, right. The learnings that we’re going to get from our refining study, in terms of safety, hydrogen storage, hydrogen transportation, the combustion of hydrogen, we see all of those learnings from this ARENA study, is then being potentially applicable into our mining applications as well. You know, the question mark around hydrogen, particularly at the scales that we’re talking about, is that we really don’t see it anywhere else in the world being used at that scale. And so that’s what we’re really focused on, on how we can bridge some of those technical questions.
Giles Parkinson 06:54
Oh Australian just loves to be a front runner. Lorenzo, let’s bring you in now. Tell us about some of the business models that people are thinking about, and sort of structuring these ideas and putting these things into place, given that these are early days so business models might be hard to come by.
Lorenzo Ducci 07:13
Yes, thanks, Giles. So since the beginning of the new hydrogen business unit in Enel Green Power, we have been working on two different business models, which we call the colocated, or hydrogen valley, and the standalone. The colocated business model envisages an electrolyzer built close to our renewable plant in a behind the meter configuration. This means that there is a direct connection between the renewable plant and the electrolyzer that is going to constitute a unique system. And as far as this direct connection, there is this direct connection between those two plants. The closer you are with your staker, the better it is in terms of competitiveness, the green hydrogen. The standalone business model instead envisages the construction of the electrolyzer at the premises of the off taker, connected to the grid and connecting only visually to the renewable plant through a power purchase agreement. This means that the electrolyzer will pay on top of the energy price the grid charges. But of course, the big advantage here is that as far as the electrolyzer can wash through energy from the grid, it can increase the number of operating power.
So basically, the discrimination factor between these two business model is essentially the trade off between the transport costs you have in the colocated business model, because you need to transfer your hydrogen from that system, the renewable plant and electrolyzer to the off taker, compared with the grid charges you have to pay in standalone. However, I will say that the context where we developed and we are developing those kinds of business model is quite different from the mining one. Instead, most of our projects under development are in Europe, where you have off taker mostly on grid with no availability of land. We know that in Australia, most of the mines are off grid with a lot of land availability.
Therefore, we believe that the best business model could be the one that envisages the construction of both the renewable plant and the electrolyzer at the mines. Of course, this is, I mean, we can say that these are sort of colocated because you have this direct connection between the renewable plant and the electrolyzer, but this model is subject to some conditions. First of all, the water availability as I already said, the land availability and the quantity of the resource.
So if all these three conditions are satisfied, this business model is definitely the one, the best one we can say for the mine, even because it provides the shorter time to market, is fully integrated with the renewable development strategy, and I would say that perfectly ties in with the overall decarbonisation strategy of the mines because you will build a renewable plant that will feed the electrolyzer to produce hydrogen but will also have green energy that you can use for other applications to decarbonize those. To conclude, so the big limitation of this model is, as I said, the scalability that is related to the condition I mentioned before, land availability and resources.
Giles Parkinson 10:33
We’ll get to the barriers very shortly, but Rupert, I’m just wondering about CEFCs point of view, what are you seeing as the main applications for green hydrogen in the mining community?
Rupert Maloney 10:45
Thanks, Giles. We are looking at both projects, but we’ve also recently completed a piece of research with Envision where we looked at the economic gap for hydrogen versus the alternative technologies across 25 different end use applications. And some of those are really relevant in the mining, on a mining site. So some of the key ones where that research showed, and it’s backed up by some of the projects that we’re starting to see coming through, is essentially displacement of diesel. So trucking is a key one. Certainly long, ultra long haul, ultra heavy trucking into a site, there’s opportunity there. That’s very difficult to have battery electric, due to the nature of how heavy those trucks are and the distances they travel and the high utilization of those trucks.
There’s an opportunity there to convert those to hydrogen fuel cell trucks. And then obviously, the big one on a mining site, or on some mining sites are the the dump trucks, the large mining dump trucks. Again, it’s going to be very dependent on the mine itself and the use of those mining trucks. But the research showed that there is a pathway over around about the next 10 years to have those large mining dump trucks to be competitive against diesel. And when I say competitive, that’s on a total cost of ownership basis.
So we broke down not just the hydrogen and diesel, but the the total cost of ownership of those trucks over their lifetimes. The key challenge across those end users really is the availability of trucks or sector. I know a number of mining companies are trying to take that on themselves and develop their own technology here. But it’s a real question for the OEMs. I see it in mining trucks. I see it in heavy trucks. What if we look back at the EV world about five to 10 years ago, where the OEMs are dragging their feet and the customers had to bring to market and I see that playing out as well.
Giles Parkinson 12:47
Kathryn and Tom, I wonder if we can get back to you guys and talk about some of the barriers that are facing the widespread adoption? I guess one of the things would be costs, and another one of the things would be what Thomas mentioned at the start, which is being sort of the first of the early adopters, which must always be a terrifying thing for a company of any size, I guess. Kathryn, maybe you can start first with some of the barriers that concern you as you’re approaching this technology.
Kathryn Horlin 13:16
Yes, certainly. So I would probably say for most applications for us green hydrogen is not yet commercially competitive with other fuels such as diesel, because of the costs associated. And as we’ve sort of talked through in a couple of the discussion points here, it’s that element of the producing, transporting, storing and using it and all of those add together for the cost stack. BHP recently released a prospects blog on green hydrogen, which can be accessed off BHP external website, which actually kind of breaks down what we see is the cost stack. So that cost stack is really challenging.
So we say it’s really important to collaborate with others, to help, you know, promote technology development, and also cost development. The other elements are probably things like such as safety. Understanding how you can safely produce, store, use hydrogen on a mine site. And also just the management of change component associated with changing it out. But I think that management of change component probably relates to whatever transition you have, whereas the safety and the cost is probably more of a critical issue for us. What about from your side Thomas?
Thomas Mach 14:29
Yeah Kathryn, all very good points. And I’ve got to say, aligned with with some of our thinking as well. Maybe I can just use an example around the costs. You know, if we were to achieve a $1 a kilogram hydrogen price, we’d need renewable power to come in at less than $20 per megawatt hour. So one of the key barriers that we see is really along this renewable power source, you know, 70%, give or take, of hydrogens total cost is the elecgricity price. So we really see that as one of the real central barriers in terms of widescale commercial adoption of hydrogen.
Catherine, likewise, I think a lot of the scalability that I’ve talked to already, the safety aspects of hydrogen, it being a gas that has very different properties from natural gas, and therefore needs different standards, some of which haven’t been developed, different engineering solutions, different materials of construction. So all of these are new. And I don’t think that they’re insurmountable, the barriers, but they still require technology development. So yeah, I think I think there’s some of the additional examples to Kathryns’ excellent answer.
Giles Parkinson 15:50
Thomas I’m fascinated by your target of $1 a kilo. That’s below, that’s half of what the Australian Government’s target is. It’s $2 a kilo by 2030. I think it is $1 a kilo the magic equation to make hydrogen reasonable? was just yeah.
Thomas Mach 16:04
Yeah Giles, so I think that’s very much on a case by case basis. We simply use that as an example. Nothing more than that. But I just thought in terms of you know, when you have a look at its comparative costs and requirements, that’s kind of the scale of some of the issues that we’ve seen.
Giles Parkinson 16:24
Lorenzo, perhaps you can help out here and give us a bit of a pathway to these reduction in costs. Because it’s not going to be just in the cost of the electricity supply that Thomas has mentioned, but also the cost of the electrolyzer. We’ve actually been putting a map together, we’ve put a whole series of large scale maps of wind and solar and batteries, and pumped hydro and now doing one with a green hydrogen. And there’s nearly as many projects in the pipeline, of course, on green hydrogen in Australia, as there are wind farms here. And that’s the sort of the scale of the ambition. But of course, a lot of those projects are probably, many of them are about a decade away. But tell us about the way you see prices falling to make this technology competitive.
Lorenzo Ducci 17:08
Yes, thanks again. So I mean, you already touched on some of the main points of this answer. So as my colleagues already mentioned, the main elements that contribute to build the the hydrogen cost are capex constituted by the electrolyzer, the BOP, the compressor, the storage and the energy cost. And even if all projects are different, and the price is influenced by the geography, we can see that energy costs and capex cover the 90% of the total hydrogen cost. Looking at the energy price, reduction on the LCOE is foreseen by 2030. For example, BloombergNEF forecasted a reduction of $10 to $15 per megawatt on PV in Australia.
However, the impact of this reduction will not be so relevant on the hydrogen cost as far as for each $20 per megawatt to have a decrease of $1 on the hydrogen price. So what is really neat, and Catherine already mentioned, is the reduction on capex. Today, we can say that for the turnkey green hydrogen project, we can add a capex of 2 million Australian dollars per megawatt, which means, if I’m not mistaken, US$ 1.3 / US$ 1.2 per megawatt. And to target this famous $2 per kilo as a target price for hydrogen we will need the decrease of around six times in capex.
The interesting things here deal is that if you confronted the evolution of the mainstream technologies like solar and battery, you realize that this reduction is not, I would say, out of reach, because in the last 10 years, both battery and PV decrease of 10 times , something like that. Of course, we need to invest, we need to make projects. You already mentioned that. There are more than 228 I think, green hydrogen projects. Electrolyzer manufactory have set up a roadmap to scale up the technology and to reach that price. So I think tha,t and this is also what the infoprovider say, that there are all the elements that will help us to bring these costs down. That is, I think, really key for letting the green hydrogen be competitive in the future.
Giles Parkinson 19:53
Rupert, we’ve kind of agreed that it’s not quite competitive yet, the technology, so that brings in a role for agencies like the Clean Energy Finance Corporation. Maybe you can give us an idea about the various funding options and how you might be lending some of the bagfuls of cash which are sitting on the edge of your desk.
Rupert Maloney 20:10
I wish it was that easy. Yes, I’ll start with us, I have to give a plug to the CEFC. So we have a $300 million advancing hydrogen fund. And what we’re doing with that is we’re looking to, it’s within the broader CEFC mandate so you should note that. Any deployment of capital within the CEFC needs to fall within the mandate. So it needs to be commercial, we’re not a grant giving organization. We can provide low cost funding, or very flexible financing. We can provide debt or equity. We will look and it’s within our eligibility to fund anywhere along that hydrogen supply chain. So obviously, renewable energy is very much within our core. The electrolyzer technologies within eligibility supply chain, so moving hydrogen around and even end use applications of green hydrogen.
So that could be, for example, trucks, fuel cell electric trucks could be within our mandate. So we’ll look to use that financing, that very flexible financing, to help some of these projects. So that’s what we’re doing. We’re out there talking to a number of different projects at the moment, getting closer to deploying capital. But there’s no doubt that the commercials, as everyone’s has said today, the commercials are challenging. We’ll work with our sister agency being ARENA, who’s there to provide the grants. All State governments as well have a role there. And each of the State governments have their own strategies, and are looking to provide funding support at the project level.
So we’re working with those State governments and ARENA to essentially get projects over the line. Since these early projects, these moving beyond pilot scale, that’s what’s important here, getting to 10/20/ 30/50 megawatt projects. Prove up those economics, work through safety considerations and operational considerations, share those learnings, before we move on to that next stage, and that’s a key role for CEFC. So yeah, CEFC, ARENA, State Governments, currently all looking at this.
Giles Parkinson 22:29
I’m just fascinated actually how long has the Office of Hydrogen Investment actually been created in the CEFC?
Rupert Maloney 22:35
Yeah, we were passed down an investment mandate in May last year, I believe it was May. Around about that timing, from the Federal Energy minister. And that essentially, the way it works is that set up the advancing hydrogen fund. I’ve been on board about that time leading up the platform. And we’ve been pretty active in a number of projects that are sort of public has moment, but they haven’t finalized their financing. I can put it that way.
Giles Parkinson 23:01
And you’re getting lots of applications?
Rupert Maloney 23:04
Plenty of interest. But we’re in an interesting spot, because the projects need to come together, they need to come together, there needs to be sufficient return there for equity and sponsors. There needs to be sufficient return for CEFC , although we’re highly flexible. And then the gap there may in the in the near term need to be filled by ARENA or other government support.
Giles Parkinson 23:29
Catherine and Thomas again, I was wondering if you can tell us a little bit about the way you’re sort of cooperating with other people in the development of these strategies. Are you looking to work together to beat global miners? What sort of other sort of partnerships are you creating to get these technologies over the line?
Kathryn Horlin 23:52
Sure. So for BHPs’ perspective, we’ve established a green hydrogen heavy industry consortium, and we’re collaborating with Fortescue, Anglo American and Hatch on that consortium. And the purpose of that consortium is to share learnings and insights around how hydrogen can be used in operations globally. And I would say that’s open for others to join, needs to be through Hatches, the project management and governance facilitator. But that’s been a wonderful opportunity to learn from others, how they’re actually applying hydrogen and working together. What about yourself, Thomas?
Thomas Mach 24:28
Yeah great. So look, we see collaboration to be really essential in terms of developing a hydrogen supply chain from end to end. You know, and it’s certainly part of us realizing some of our climate targets and ambitions. Obviously, the partnership with ARENA has been announced today. We also have other partnerships with other industries and engineering firms as well. And so look, it’s essential in terms of developing an end to end chain.
Once again, I think if we step right through it, you know, you need renewables and energy, the storage system, you need an electrolyzer, producer, manufacturer, and really to be creating a supply side. And then again, we’re looking very much at a demand side. How can we underpin that supply by the safe and effective use of hydrogen in our facilities, and that requires partnerships. And when they then intersect, at some point in the future, you know, we then can have a viable supply chain.
Giles Parkinson 25:41
So how close are you guys getting to actually maybe announcing a project at a mine site? I mean, you talked about a refinery today. Thomas, can I put to you or Kathryn about.. Is there a mining opportunity somewhere that’s been looked at?
Kathryn Horlin 26:01
I’m happy to go. So for us, we’re probably still at us at a study phase. Most people be aware that we were shortlisted for ARENA funding for our site at nickel West Kwinana refinery, we weren’t successful with that funding round. So we’re looking at other options for that. And similarly with our mines we’re still let the study phase. As I mentioned before, there is a lot of decarbonisation options. So we’ve got to weigh up the different options, and then which one’s more economically viable. We progress with those first, but don’t have anything to announce yet, unfortunately, on the mining side. What about you, Thomas?
Thomas Mach 26:39
Yeah, I think quite similarly, we’re really looking at hydrogen fuel cells across our mobile fleet, both above ground, underground for trains. But a lot of that is at a study phase at the moment for us as well. So, yes.
Giles Parkinson 26:58
Tell us about what the opportunity opens up for large scale renewables in mines with green hydrogen, because, obviously, I mean, as you alluded to at the start, if we want this to be decarbonisation technology, then it will need renewables. I mean, do the near term projects lend themselves to places which already have a certain amount of renewables at their mine site? I mean, we’ve already come across, we’ve heard over the last day and a half of some that already do, or will it be like a Greenfields project? And just what sort of scale can we be talking about for these projects?
Lorenzo Ducci 27:44
I think that what is sure Giles is that we will need a lot amount of green energy. So if you consider, for example, that the mining truck can consume around 200/ 250 tons of hydrogen per year. So for example, with the mines with 15 to 20 trucks, you will have an overall consumption per year of 5000 tons of hydrogen. This means that you would need 300 gigawatt hour of energy per year. So it’s already a huge amount of green energy that of course will need to develop a large scale renewable project. But this is only if you look, I would say, at standard business models.
So if we are going to broaden our perspective, maybe as Kathryn and Thomas already said, so looking at different business models, that could be for example, starting to look at producing green steel, green aluminum, using hydrogen in refineries, because this is what hydrogen allows us to do, as far as it has different applications. I would like to remark that in no grid power, we believe that hydrogen is a complement with electrification.
So electrification is the cheapest and simplest route to decarbonize, and hydrogen could be the perfect complement. But at the same time it has very different applications. So if we broaden our perspective, then the opportunity for large scale renewable are even more than the than the demanding processes said. And to give you an example of our project in Sheila, in that case, we will need to produce the A fuels a huge amount of green of green energy. And that green energy can be used not only as I said, for producing green hydrogen, but also to decarbonize other processes within the within the mines.
Giles Parkinson 29:39
It’s quite a stunning number that you actually produce. To have 20 big trucks and the amount that they will need and consume and 300 gigawatt hours, which I guess equates to something like about sort of 50 or 60 megawatts, and I might have that completely wrong because I just can’t do the calculation on top of my head, but that’s a significant amount of renewable capacity. So you’re either talking about really, really large mines, but I guess you’re also talking about mines, which are going to have a long life as well, because that’s a lot of investment in infrastructure that needs to deliver a return.
Lorenzo Ducci 30:14
Yeah, yeah. thats right. I think it’s another point. So you need huge investment. That’s right. But I mean, green hydrogen as I said will become competitive. It’s not a matter of if but it’s a matter of when, because, I mean, the expectation on the reduction on capex is there. So I really believe that. I mean, we need to be first mover on that. But I mean, it’s a pleasure today to listen from Kathryn and Thomas that miners are already thinking on that seriously.
Giles Parkinson 30:51
So Kathryn and Thomas, I’m throwing back to you, and you just heard about the scale. So when you’re thinking about these mine applications for these various technologies, I mean, is it then, you’re not just talking about a couple of turbines, a couple of megawatts of solar panels, you presumably thinking in terms of vast arrays of quite significant scale?
Kathryn Horlin 31:11
Yeah, it is huge, particularly when we look at our hubs, where we have several mines close to each other, such as in the Pilbara, or over in Queensland. The scale of renewables that you will need, if you’re doing direct electrification, or if you’re doing hydrogen is huge. I totally agree. But I think it’s fantastic. It’s a really exciting time for us to be having this conversation. And it’s a reality that most of the main mining companies have public targets that they’re working towards quite aggressively to decarbonize, which is great.
Giles Parkinson 31:53
Thomas on that line, I mean, big arrays of wind and solar, might these be shared resources? Or do you think there’s going to be proprietary stuff, like you might see in some of the transmission lines and the other infrastructure that already exists?
Thomas Mach 32:05
I think I think we’ve been talking about energy supply chains, right. And so they can come in all shapes and sizes, I think it very much depends on on the application. So look, we’re certainly looking at what it would mean for us. What solar and wind needs, similar to what Kathryn said, the sheer scale is that, you know, you know, some of the world’s largest kind of solar and wind requirements. So certainly that, I think, is a challenge. And, again, to the partnerships piece that we talked about, we can’t do it alone, we need it with to develop partnerships. And you know, that’s that’s kind of the the path forward there for us as well.
Giles Parkinson 32:47
Yeah. I’m inviting any listeners if you do have any questions, please do it on the chat page. We’d love to hear any questions that you’ve got for the panel. So we’d like to get to them as and when we can. And Rupert, just tell us a little bit about some of what you’re thinking about increasing scale. How that sort of gets to the point where we’re actually exporting hydrogen. We hear a lot about hydrogen exports and various forms, ammonia and things like that. Presumably, when you’re talking about big scale, you’re talking about a lot of redundant capacity.
Therefore, you’re talking about scale of markets that may open up. So I kind of imagine that you’re going to be building these large scale arrays, then they’re going to be multi purpose, and not just for a mine site, not just for a bunch of trucks, they’re going to be doing all sorts of different sectors of the market, including exports.
Rupert Maloney 33:40
I think you’ll get a bit of that, but it depends on what we’re talking about here. But I think this is a staged approach. We’re talking about large scale, captive use on a mine site, for example. We are talking very large numbers, there’s no doubt about that. They will be built for those purposes, and they need to… the point as well as is it’s not just solar. Because running an electrolyzer for the next 10 or 20 years with capital costs of electrolyzer at 28 or 30% of the time when the sun is shining, is a very high cost solution. It needs to have a higher load factor. You need to be getting up, we think about the current capital costs up closer to about 75% or 80% of the time. So yeah, in order to do that, you need a real mix of solar and wind.
So I think a lot of it’s going, where it’s possible, it’s going to be grid connected. We’re going to be using the transmission grid, where it’s possible. I understand it’s not possible in a lot of mining sites. But to get those load factors high is important. And then you move on to the export scale. And they’re planning a lot of the export projects under planning phase and moving to feed stage at the moment.
They’re planning their own new build renewable energy and then they’re very much factoring that into where they locate those export facilities. Because it’s a play on where’s the best renewable energy resources? The lowest levelized cost of energy for renewable energy? How far away is it from that demand setup? Being a port in that case? And so are you moving the molecules? Are you moving the electrons through the transmission lines? And then, so to get to that lowest cost? And then you get into the world of is it ammonia? Or is it liquid hydrogen, or another carrier form? And certainly liquid hydrogen has another energy dimension when you’re liquefying. So there’s a number of big projects, looking looking at those questions at the moment.
Giles Parkinson 35:47
A couple of questions have come through from the audience. This one’s for you, Rubert. Does the CEFC have public information on TCO for dump trucks? Major mining companies appear to be going the battery route, aware of one development in South Africa of a hydrogen truck? What can you tell us about that?
Rupert Maloney 36:09
Yeah, so the research I mentioned before, you can find it on CEFCs website. There is some information on TCO. It is worth putting a caveat on that. It is at a project level. It’s at a research level, the level above. But it’s taken a whole lot of inputs, level information to come up with those TCOs. So there’s some graphs in that report. And it’s comparing it not only to ICE, so diesel, but it’s also comparing it to trolley assist and battery electric. So we looked at the alternatives. I know Kathryn and Thomas have done a lot more detail than that at a project level. But it is a data source to look at that. So that’s that’s in the research that you can find on the CEFCs website.
Giles Parkinson 36:57
Kathryn, batteries or hydrogen?
Kathryn Horlin 36:58
And so for us, as I mentioned before, for most material movement applications, it’s more likely to be electrification. But there might be some applications for fuel cells. In terms of that question around public information, that prospects blog that I mentioned that BHP published recently, does have our view on some of the cost breakdown elements, which it doesn’t give you exactly the magic number that we use, but what we think it’s dump trucks, but it gives a pretty good indication. It’s the most public information that we’ve kind of shared around our cost views before.
Giles Parkinson 37:35
Here’s another question. Hydrogen means big investments in big business. Are big mining companies looking for global alliances with big clean energy supplies, such as Enel Green Power? Well, maybe I’m going to reverse the question and ask Lorenzo is Enel Green Power being approached by big mining companies to find out how much you can produce? And at what price?
Lorenzo Ducci 37:56
I mean, absolutely, yes. And we are looking for partners in, in developing green hydrogen project, because we strongly believe that we are at the beginning of the big challenge. So we need to work together to lower the cost. Because today, we know that we know that green hydrogen is not competitive. But what we can bring is definitely our capabilities in developing renewable, big renewable projects. And we understood today that we need a lot of green energy.
So I think it’s very important to be together today, for this project, look at looking at the partnership that will help us to study the solution. And of course, with the direction of reducing costs. So we are not already in a stage of looking for a buyer for the green hydrogen we are going to produce because we know that mines are not ready to take that because there is a technology gap that we need to fill together.
Giles Parkinson 39:01
Thomas, from your point of view, is that the case and presumably you’re sort of canvassing all the different options and different potential suppliers, but not yet ready to talk about the actual supply at this moment.
Thomas Mach 39:13
Yeah, absolutely. And in a lot of our studies, we’re certainly looking at partnership opportunities, supply options as well. So and yes, not ready quite yet. But certainly were in the mix there.
Giles Parkinson 39:28
Yeah. There’s another question here about metal supplies. In light of the current market comments about metal supplies and the surging costs of copper, etc. how do you see this feeding into the issue of reducing the capex of green h2 production? Thomas, do you want to have a crack at that one?
Thomas Mach 39:46
Look, that’s a really interesting question. And one where if you have a look at overall production costs, you know, will factor in. Certainly the supply chain costs are going to then make an impact. on renewables, it’s going to make an impact on all of the costs in a total end to end value chain. So yes, as more and more renewables are built, as there is greater requirements for metals, we’re going to see some prices go up. And equally though, as the scale of production, we might see the capex come down. So, really, it’s a question about the the future outlook. You know, we’re hoping that renewables come down overall, but it’s yet to be proven.
Giles Parkinson 40:35
Just a follow up from that one. And maybe for Kathryn, or maybe for Lorenzo. We’ve heard that electrification is preferable to hydrogen wherever possible, and cheap hydrogen demands very cheap electricity? Would not cheap electricity, minimize the opportunity for hydrogen at the scale necessary to reduce costs along the lines of wind and PV cost reductions? Ie, is this a self limiting process? It’s an interesting question, isn’t it?
Kathryn Horlin 41:01
Yeah, I’m happy to take that one. And I would probably say that’s been one of our conclusions. When we’ve done detailed studies, we’ve developed dynamic cost models of hydrogen looking at different learning curves and how we could see what are the different elements of the cost stack and what needs to happen? And I would agree with that conclusion to a certain extent. Yeah, you need it to be really the renewables to be really, really cheap. And then you go, well, then why don’t you just use the renewables, but then that goes to the point that Lorenzo was making before about hydrogen is a complement to electrification.
So we need hydrogen for its chemical properties, such as in refining, or smelting some elements. If you need really high process heat, hydrogen is a good application, and where you can’t use electrification. So in the material movement case, in many instances, haul trucks are going the same route all the time. So it’s most likely you can do electrification. If you have some equipment which doesn’t have a standard route, or has, you know, longer routes, then that might be an application for hydrogen. But I do generally agree with the conclusion of the audience member. Does Lorenzo have anything to add to that?
Lorenzo Ducci 42:10
Kathryn, thanks. I think you perfectly explained my thoughts as well. Maybe the only thing is that, yes, of course, hydrogen as a feedstock is an application that cannot be done by electrification. But sometimes also some electrification applications are far from being natural on the technology point of view, while the hydrogen one would be more ready. And on top of that, I will add that some hydrogen application have less investment needs to be applied. So maybe also in this case, we can consider hydrogen as a possible solution.
Giles Parkinson 42:51
I guess Lorenzo it comes down to the cost of electrolyzers to a large degree, and in Australia, I think, electrolyzer so far is just one megawatt, and of course we need to get to a scale. I’m just thinking back, you know, you compared it at the start of this discussion to solar and battery storage. How certain are we that electrolyzers will follow that same cost path?
Lorenzo Ducci 43:13
Not an easy question Giles. So, no, I mean, as I said before, we met different electrolyzer manufacturing, and all of that. So most of them has clearly expressed the intention of reducing the cost through a road map that will scale up their production and the production processes. Another thing that we can say here is that the 50% of the capex is the electrolyzer stock.
So it’s up to the manufacturer to reduce that cost, but the other 50% is the BOP. In that case, I think that there is space to lower that, thanks to the economy of scale. So most of these two have huge potential in terms of production. So not only the technology itself, but also all the components that are related to the technology and to run the plant.
Giles Parkinson 44:14
Rupert can I just throw one final question to you, and that needs to be a short answer I think. CEFC is not really looking to support wind and solar projects, per se, but will actually do that in the context of the hydrogen economy, given that the further reduction in wind and solar and I guess that’s the upfront capital costs need to be reduced quite significantly for hydrogen to be viable.
Rupert Maloney 44:37
Yeah, no, we definitely look at there’s a whole lot of enablers for a hydrogen economy. Certainly renewable energy is a key enabler and their costs, and so we’ll look to support the right projects, in that sense. Also, innovation as well. With the hydrogen supply chain we need more innovation, we need to bring down those costs through innovation. We also have an innovation fund that’s actively looking at opportunities, some really exciting innovation coming out of Australian R&D in Australian universities. So we’ll have more to say on that shortly. So yeah, we’re looking across all the enablers.
Giles Parkinson 45:15
Good stuff. Well, I think we’ve just about to come to the end of allocated 45 minutes. So I would just like to thank all our guests. Kathryn Horlin from BHP. Thanks for joining us. Rupert Maloney from Clean Energy Finance Corporation. Lorenzo Ducci from Enel Green Power and Thomas Mach, doubling up on two different sessions from Rio Tinto. Thank you very much. And thanks for the opportunity.
Thanks for listening into this session, which doubles up as an episode of Energy Insiders. You can find us on the Renew Economy website. And I look forward to more discussion and more announcements about the green hydrogen economy as we go forward. So thank you very much everyone.
