Hydrogen in the Asia-Pacific: Full Steam A head
Hydrogen is being signalled as a “fuel for the future” as it demonstrates it meets many of the goals of decarbonised global energy supply. Decarbonisation opportunities for hydrogen include:
- a clean energy fuel alternative for industrial applications (iron and steel);
- an energy storage solution for transport (fuel cell vehicles, aviation and shipping); and
- a solution to seasonal variations in power demand, complimenting intermittency/unpredictability in renewables.
Clean hydrogen is produced through two emerging technologies in the clean technology space: renewable power generation or carbon capture. The two low carbon pathways for hydrogen production are:
- Green: produced from water electrolysis where electricity is sourced from zero carbon energies (renewables); and
- Blue: produced from thermochemical reactions from a fossil fuel feedstock (coal or natural gas) and water coupled with carbon capture of the CO2 emissions created as a by‑product.
Australia has the potential to export over 500 kt of hydrogen to East Asia by 2030, worth AUD$2.2Bn with future growth of AUD$5.7Bn predicted by 2040. Australia’s hydrogen trajectory in East Asia will depend on supportive policy frameworks which stimulate supply and demand eventually leading to cost parity in the longer term.
Stimulating Supply from Australia
Australia’s National Hydrogen Strategy argues that its position as a competitive producer of hydrogen is due to possession of the natural resources required to produce clean hydrogen, experience in building large-scale energy industries and an established reputation as a trusted energy supplier to Asia.
Key government policy initiatives to stimulate Australia’s export of hydrogen to East Asia at scale include:
- Government Investment: significant public investment is needed in scaling up pilot projects which in turn will build up market confidence and attract private investment. The Australian Government recently announced an additional commitment of AUD$300M in funding support for hydrogen projects. Other financial support initiatives to be considered include, tax incentives, government join venture participation in projects to share the risk with the private sector and reduced lease rates of crown land for hydrogen projects.
- Regulatory Certainty: policymakers should focus on the amendment of existing and development of new regulation, standards and certification to support the supply of hydrogen. A key opportunity for Australia is leading the development of a guarantee of origin scheme for adoption at an international level. Australia has potential to lead coordinated agreement on the standards adopted, carbon-free qualification and evidencing origination.
- Supply Infrastructure: safe and cost-efficient production, transport and storage will be an essential policy area to enabling large scale deployment of hydrogen. The world’s first liquified hydrogen carrier has been committed to a demonstration of shipping fuel from Australia to Japan. Australia should prioritise research and development in improving existing technologies for storage and transport including exploring higher-risk storage technologies involving complex materials (e.g. lightweight metal hybrids and carbon nanotubes).
Developing Demand in Asia
East Asian energy leaders have developed national hydrogen strategies and plans which signal significant future demand, for example:
- China: targeting 1M fuel cell vehicles (FCV) in operation by 2030 with at least 50% green hydrogen. State subsidies on FCVs are already introduced. Wuhan has announced plans to become the first hydrogen city in China by 2025;
- Japan: committing to deployment of 400 hydrogen fuel stations (HFS) domestically within 10 years and received support from 30 countries to set up 10 000 refuelling stations worldwide within 10 years; and
- South Korea: kickstarting investment with a US$1.8Bn fund up to 2022 and have expanded their commitments to supply 850K FCVs and 660 HFS by 2030 and building two hydrogen cities.
Australia is in a strong position to capitalise on demand from East Asian markets given its potential as a competitive producer, longstanding regional trade relations and geographical positioning.
Key government policy initiatives to enable Australia to engage demand from East Asia markets are as follows:
- Trade Cooperation: coordinating agreements on trade is key to facilitating demand from East Asia. Australia has entered into a cooperation agreement with Japan and a letter of intent with South Korea. Australia’s Free Trade Agreement with Japan (JAEPA); South Korea (KAFTA); and China (ChAFTA) could provide a competitive advantage over competing producers, for example the benefit of progressive elimination of tariffs on energy and mineral products. It is worth these agreements do not currently contemplate hydrogen within their provisions therefore an assessment should be carried out to understand whether such benefits will extend to hydrogen.
- Regional Relationships: Current diplomatic tensions with China are not conducive to establishing scaled trade of new energy source. An assessment of the federal Government’s position to not participate in China’s One Belt One Road initiative with respect to future trade of hydrogen should be carried out. China’s Western Australia consul-general Dong Zhi Hua described the initiative as an opportunity where “we can jointly build flagship projects featuring green energy such as LNG, lithium and hydrogen, which will contribute to energy security and sustainable development, create jobs and improve the livelihood of the local people.”
Leveraging the strong trade ties forged by existing energy trade and a common interest to advance to net zero, Australia and East Asia are well placed to jointly progress hydrogen as a fuel of the future.