Following this announcement, a consortium of international energy companies has formed to investigate the potential for a fully renewable hydrogen supply chain in the Hunter Valley coal mining region in New South Wales. 

As noted above, the Hunter Valley is one of four hydrogen hubs in regional areas that may be eligible for A$275 million in funding over 5 years. The Hunter Valley is primarily a coal mining region that supplies thermal coal for export to Asian markets from the Port of Newcastle and to three coal power plants (which are all earmarked for closure) and is also home to thoroughbred horse breeding and wine growing industries.   

Global commodity traders Trafigura and Idemitsu, AGL Energy (an Australian utility provider) and APA Group (a gas infrastructure provider), RES (a clean energy company) and Walcha Energy have joined a partnership led by renewables developer and advisor EnergyEstate.  The A$2 billion (US$1.56 billion) Hunter Hydrogen Network (H2N) proposal would involve using renewable energy generated near the Hunter Valley to create “green” hydrogen, which would be transported via a dedicated pipeline to manufacturers based in the region and onto Port of Newcastle for export.  The partners will jointly work on a feasibility study for the proposal.

Stage 1 would involve the production of hydrogen at an electrolyser at the site of Idemitsu’s repurposed Muswellbrook coal mine and a 10km hydrogen pipeline to Liddell, near the site of a coal power plant due to close in 2023.  A much larger second stage would involve more electrolysers built around Liddell between 2022 and 2026, and a 100km extension of the pipeline to the Port of Newcastle that would allow hydrogen to be used by manufacturers there and exported to Japan and Korea. Larger volumes of renewable electricity would be generated from wind and solar farms planned for the Walcha plateau, west of the Hunter Valley.  A potential third stage would involve extending the hydrogen pipeline westwards to the proposed New England and Central West renewable energy zones being developed by the New South Wales government over the next five to 10 years. New electricity transmission infrastructure would be required to connect the renewable generation from Walcha and the two REZs to the proposed electrolysers at Liddell.

According to Energy Estate, the exact scope and size of the network of projects would be determined based on discussions with off-takers which would include manufacturers interested in using hydrogen or ammonia. These may include the Tomago Aluminium Smelter, chemicals manufacturers and proposed gas-fired power stations at Kurri Kurri and Newcastle which could convert to hydrogen-powered turbines.  Underwriting from an agency such as the CEFC for the hydrogen-related infrastructure is an option but the partners have stated that they would not seek financial assistance until the feasibility study determines the optimal scope and size of the various project components.  EnergyEstate said it would consult stakeholders in all three industries as well as local community groups on the potential to develop a hydrogen supply chain while the technical feasibility studies are underway.

In terms of recent developments:

• An A$100 billion renewable energy hub producing “green” hydrogen and ammonia has been proposed in WA, with the facility having the potential to be one of the world’s largest clean fuel projects should it proceed. 
  
  The Western Green Energy Hub would cover 15,000 sq km across the Goldfields-Esperance region in the state’s south-east and could produce up to 50 gigawatts of wind and solar power, nearly equal to the entire capacity of Australia’s national electricity market.  The project is estimated to cost close to A$100 billion.  The Western Green Energy Hub will be built in phases and will aim of ultimately producing up to 3.5m tonnes of “green” hydrogen or 20 million tonnes of “green” ammonia each year, with first production scheduled for around 2030.
  
  The project is sponsored by InterContinental Energy (“InterContinental”) and CWP Global (“CWP”). The Mirning Traditional Lands Aboriginal Corporation (a special purpose vehicle used by traditional owners) is also a partner with InterContinental and CWP in the consortium.  Hydrogen would be supplied both domestically and also for overseas customers.
  
  InterContinental and CWP had a A$48 billion wind and solar powered green hydrogen project proposed for WA’s Pilbara rejected by federal Environment Minister, Sussan Ley, earlier this year. The Asian Renewable Energy Hub project, which would have covered an area 10 times the size of Singapore, was rejected on concerns the facilities and brine from a desalination plant would pose a “catastrophic” risk to one of the world’s most important migratory bird habitats near Eight-mile Beach. The project was designed to include 1753 wind turbines and up to 10,800 megawatts of solar capacity, spread over a total area of more than 660,000 hectares.
• British energy major BP recently announced that it regards WA as “ideally positioned” for the large-scale production of “green” hydrogen and “green” ammonia, but that development will require significant investment in ports, energy and water networks and infrastructure.  This results from a A$4.42 million feasibility study by the company in relation to a renewable hydrogen and ammonia facility near Geraldton.  BP is one of several companies which see the opportunity to develop renewable energy-based hydrogen and ammonia projects in Australia, with the aim of targeting clean energy exports to Asia. 
  
  The prospects for scaled-up green hydrogen look “particularly promising” in WA’s mid-west, according to BP, as the region has existing infrastructure, access to land and “world class wind and solar resources with high diurnal complementarity (i.e. solar by day & wind by night)”.  The company’s study also confirmed strong demand from potential customers in the hard-to-abate industrial sectors which cannot be easily electrified, and for both local and export markets.
  
  The study, carried out by GHD Advisory, BP’s renewables venture Lightsource bp and with A$1.7 million of funding from ARENA, examined both the potential for a pilot-scale plant of 4,000 tonnes a year of hydrogen to make 20,000 tonnes a year of ammonia, and a much larger commercial scale plant of 200,000 tonnes of hydrogen to make up to 1 million tonnes of ammonia.  It considered three hydrogen production technologies, using a mix of power sources comprising solar and wind, with grid connection and some battery support.  The study examined potential economic returns but found that to be properly analysed and understood, the domestic and export markets for renewable hydrogen and ammonia needed to be further advanced. The study also found that significant scale will be required for general hydrogen fuel use to be commercially viable but that project economics become more favourable at large commercial scale.
  
  BP has stated that it will work with key stakeholders to develop plans for “green” hydrogen projects in WA and to define infrastructure needs, customer demand and appropriate business models, but its statement did not refer to any specific plan to move forward with a project.
  
  The feasibility study also found that the success of the hydrogen industry will rely on government support moving forward in the form of government decarbonisation incentives (such as a carbon price and/or clean fuel subsidies and requirements for gas blending into gas networks).  In WA, the State Government shares this view following a recent announcement that it is considering legislating their commitment to net zero by 2050, highlighting support of an energy transition to net zero where they have identified the hydrogen industry as being key to the success of the transition.  The Western Australian Renewable Hydrogen Strategy and the Western Australian Renewable Hydrogen Roadmap outline the WA government’s vision for WA to become a significant producer, exporter and user of renewable hydrogen and then how the government will support private enterprise in pursuit of this vision.
• Alongside large-scale hydrogen projects such as those already mentioned, the appeal of the WA hydrogen market has attracted players of all sizes.  Recently, Province Resources Limited (PRL) announced the progression of the scoping study of its central “green” hydrogen project, the HyEnergy Project.  Despite being a relatively small market cap ASX-listed corporation, PRL has managed to attract the attention of some of the largest players in energy because of the unique potential opportunity that the WA landscape provides.  Total Eren, a major French organisation in the renewable space, and PRL signed an MOU relating to this “green” hydrogen project that looks to capitalise on wind and solar resources in the Gascoyne region on WA’s coast.  PRL also has the backing of various government bodies, having received funding from the Western Australian Renewable Hydrogen Strategy, ARENA and the Australian Government Advancing Hydrogen Fund.
• In May, Horizon Power, the State government owned vertically integrated electricity provider to remote and regional WA, commenced construction on Australia’s first renewable hydrogen energy plant in a remote microgrid, in the Gascoyne town of Denham.  The community hydrogen project will feature a dedicated 704kW solar farm to power its innovative hydrogen plant and will feature a 348kW electrolyser, hydrogen compression and storage and a 100kW fuel cell allowing the production and storage of hydrogen.  The remote microgrid project will deliver electricity into the Denham hybrid power system and will generate 526 MWh of renewable electricity per year, which is equivalent to the energy required to power 100 residential households in Denham annually.  This project has received A$2.6 million funding from the ARENA, as part of ARENA’s Advancing Renewables Program. A further A$5.7 million has also been provided by the WA government.

In terms of other announced private sector initiatives in the “green” hydrogen sector:

• AGIG and Engie are aiming for a final investment decision by early 2022 for their A$44 million Murray Valley Hydrogen Park in Wodonga, Victoria, where hydrogen will be produced for blending into the local gas network, starting in mid-2023;
• ATCO and AGIG are targeting December 2021 as the date for a final investment decision on a separate project by them at the Warradarge wind farm in WA’s Mid-West which will produce up to 4 tonnes of hydrogen a day for the gas network; and
• a separate project by Engie and Yara Fertilisers at Karratha is part of a large project aiming at export-scale “green” ammonia expects within a decade.

Each of these three projects will use 10MW electrolysers to split water into hydrogen and oxygen.

In addition:

• FFI is aiming for a final investment decision this year for its 250MW “green” hydrogen plant at the Bell Bay industrial precinct in Tasmania.  The plant will have the capacity to produce 250,000 tonnes of “green” ammonia for domestic use and international export. Industry experts have estimated it will cost upwards of A$500 million to build the 250MW plant.

FFI has entered into arrangements for access to portside land required for the project and has signed an option agreement with Tasmanian Ports Corporation to exclusively negotiate all land and operating access requirements for the proposed plant.  In addition, it has been announced that FFI has entered into MOUs with Japanese corporations to investigate supply chains between Australia and Japan in relation to ammonia produced at this project.

FFI has also reportedly signed development agreements around major hydro power projects in Africa with a view to supplying “green” hydrogen to Europe and it has been announced that FFI has entered into a framework agreement with JSW Future Energy Limited, a wholly owned subsidiary of JSW Energy Limited, to explore opportunities to develop “green” hydrogen projects in India.

FMG is set to invest more than A$1 billion a year into FFI under a pledge by the company to allocate 10% of the annual profits generated by its core iron ore mining operations.  FFI’s “green” hydrogen project in Tasmania could be one of the world’s largest green hydrogen plants when commissioned, creating a significant export market for “green” hydrogen from Australia.  FFI has said it would soon call for expression of interest around the skills and jobs required for the project.

FMG has stated publicly that FFI has already produced “green” iron and “green” cement in trials that are part of the company’s plans to become a major player in “green” energy and to make its mining operations carbon neutral by 2030.  The company has also announced that it has met deadlines around trials using batteries, “green” ammonia and “green” hydrogen across its iron ore mining operations including in running locomotives and powering drill rigs, haul trucks and ships and that it had completed design and construction of a combustion testing device for ship engines and it had finalised design for a next generation ore carrier ship that would consume ammonia.

• Origin Energy, which already exports LNG, is conducting a A$3.2 million study into the feasibility of building a plant twice the size of the FFI plant at Bell Bay, Tasmania – the study is due to be completed by December this year.  In recent developments, Origin has announced a collaboration with shipping giant Mitsui OSK Lines to develop a supply chain for the export of “green” ammonia, including from its proposed plant in Bell Bay.  Origin Energy and Mitsui OSK will investigate the potential to transport “green” ammonia to key downstream markets starting in 2026.  Origin has singled out transport as one of the biggest opportunities globally to reduce emissions through the use of “green” fuels such as hydrogen and ammonia.  Origin Energy is also studying the potential for “green” hydrogen and ammonia opportunities at a plant which would be located in the port of Townsville.
• Both EnergyAustralia’s Tallawarra B gas power project in NSW, which was confirmed in May this year, and a power plant planned by Andrew Forrest’s Squadron Energy in Port Kembla will be designed to use a combination of gas and hydrogen.

A number of other commercial opportunities are under consideration despite the absence of an established market for “green” hydrogen in Australia.  Of note:

• Separate to ARENA’s announced plans to grant up to A$42.5 million (US$33.2 million) to a 10 MW electrolyser project being developed by Engie and Yara in Karratha, WA, Japan's JERA has agreed to a memorandum of understanding with Yara International to manufacture “blue” and “green ammonia” – “blue” ammonia is created with fossil fuel by-products whilst “green” ammonia is manufactured without any fossil fuel inputs.  

The companies plan to explore improvements to the Yara Pilbara Fertilizer plant in WA to allow it to create “blue” ammonia and also plan to work together on developing new “blue” and “green” ammonia projects, on optimizing ammonia shipping, and on exploring new sources of demand for ammonia in Japan (including in power generation).

While ammonia has been used mostly as a fertilizer so far, it is increasingly being seen as a potential “green” fuel because it is a compound of nitrogen and hydrogen, which burns without generating CO2, and is relatively easy to transport given it is a liquid. The aim of this initiative is to decarbonize JERA’s power production and provide Yara with a footprint in the strategically important Japanese hydrogen market.

• Ampol, a petrol and diesel supplier, has announced its involvement in a “green” hydrogen energy start-up that will target the A$1.5 billion a year remote diesel power generation market by offering the potential for reliable energy that is clean and affordable.  It is taking a 20% stake in CSIRO-backed Endua in a commercial partnership which is developing renewables-based hydrogen power units that can be used at mines, farms and residential communities that are not connected to the grid.  Envisaged somewhere between the size of a large cabinet and a small shipping container depending on its size and application, an Endua unit would act as a “power bank”, using renewable energy available on-site to power an electrolysis process to create “green” hydrogen, then store it until it was required for delivery as clean electricity.  There is about A$1.5 billion spent on diesel to generate power in Australia alone which emits 200,000 tonnes of carbon into the atmosphere.

Ampol’s 20% stake will be paid for in kind by it providing both expertise and customer access to the venture, as well as its Coopers Plains facility south of Brisbane which will be Endua’s base.  Ampol’s involvement is part of that company’s decarbonisation strategy which it unveiled earlier this year – Endua fits well with Ampol’s strategy of developing low-emission alternatives for customers as Ampol is already involved in remote power generation through its commercial diesel sales.  The company has stated that it expects to invest in the future as Endua develops its commercial product. 

Interestingly, Endua is a product of the “venture science” model of business creation pioneered by the CSIRO’s technology and science investment fund Main Sequence Ventures – the model starts with identifying a major challenge that offers a commercial opportunity to be solved, then assembling the science capability to tackle it from CSIRO, and introducing a pathway to market through a leading industry player which is involved from the start.

Hydrogen based on renewable energy is being fed into the gas distribution grid for the first time in South Australia.  AGIG has developed the $14.5 million Hydrogen Park South Australia (HyP SA) facility and views this initiative as part of building credibility in “green” hydrogen and a track record.

The landmark project in Adelaide will also result in “green” hydrogen replacing fossil fuel-based hydrogen at the Whyalla steel works.  This is a first for Australia in terms of clean fuel being used in heavy industrial applications. 

The project has reportedly attracted interest from Japan, Korea and the UK. Before Japanese and Korean customers will sign up for hydrogen imports, a domestic capability must exist as this demonstrates credibility – essentially, there must be a three-stage development of the hydrogen market, starting with domestic gas blending then using hydrogen in local industries and transport and finally exports.

Although a number of much larger “green” hydrogen projects have been proposed, the 1.25MW electrolyser at HyP SA is the largest operating in the country so far. The plant uses low-carbon power sourced from the grid during the day when renewables are plentiful to split water into oxygen and hydrogen gas. The hydrogen is mixed into the gas stream at a proportion of 5% and supplied to households in the Adelaide suburb of Mitchell Park – users are not expected to notice any difference in their gas supply. Regular audits of the power bought will determine its exact carbon intensity, with any residual CO2 to be offset through renewable generation certificates.  While so far only 700 households are involved, AGIG expects the number to grow to thousands by the end of 2022 and to increase the proportion of hydrogen in the distribution system to 10%. Any proportion beyond that would require modified or new appliances. 

The South Australian state government injected A$4.9 million into the project and is committed to supporting the growing industry.  This is seen as an important component of South Australia achieving its goals of reaching 100% net renewable energy and cutting emissions by more than 50% by 2030.  

The cost of hydrogen at HyP SA runs into the double figures per kilogram, well beyond the target of A$2 per kg in the Federal Government’s Low Emissions Technology Road Map. AGIG’s two projects that secured funding from ARENA will produce green hydrogen for A$5-A$6/kg with costs expected to fall further in later projects.  AGIG has stated that it is very confident it can get below A$2 per kilogram by 2030.

The Victorian state government has issued a consultation paper on a road map for the substitution of natural gas as part of its pledge to reach net zero emissions by 2050, and Infrastructure Victoria has a consultation ongoing on the future of gas infrastructure.

As noted above, another AGIG project planned for Albury-Wodonga, which has secured ARENA funding will supply a 10% “green” hydrogen gas blend to 40,000 customers, coming online in 2023-24.

AGIG is also building a hydrogen project in Gladstone that will involve 10% blending into the gas stream for the entire town, including industrial customers.