Has hydrogen's time arrived?

A combination of societal, regulatory and shareholder expectations mean the energy majors, as well as green energy entrepreneurs, are exploring different avenues to achieve net zero. Central to these endeavours is the establishment of a viable hydrogen economy to determine whether this abundant chemical element could offer a solution.

A range of pilot projects are currently competing to offer up the most commercially viable and compelling technology and route to market.

At the same time, national governments are fast-tracking their strategy to capitalise on the unrealised potential of hydrogen. In practice, this has seen the likes of Europe, the United States, China, Japan and Australia formulate dedicated plans to fund research and development (R&D) that will evidence hydrogen’s cost-competitive credentials and application to store energy for logistics, industrial and domestic purposes.

But as with liquefied natural gas (LNG) and coal seam gas (CSG) before it, hydrogen first needs to prove its worth before it can unlock the levels of investment necessary to compete at scale.

Making hydrogen cleaner

Hydrogen has been used for many decades, most notably as an industrial feedstock to produce ammonia and in the hydrocracking and desulphurisation of fuels.

There are three different types of hydrogen:

  1. Grey hydrogen production is an advanced and mature process, whereby high temperature steam is used to produce hydrogen from a methane source, such as natural gas, oil and coal. The methane reacts with the steam to produce hydrogen, carbon monoxide and carbon dioxide.
  2. Blue hydrogen is made in the same way, but in applying carbon capture and storage (CCS) technologies, the CO2 can be safely stored deep underground or utilized in industrial processes, thus supporting decarbonisation initiatives.
  3. Green hydrogen is produced using electrolysis powered by renewable energy such as offshore wind or solar. Using electricity to split water into hydrogen and oxygen produces a green fuel, with zero emissions.

Hydrogen has a fundamental identity problem in that it must be made from a methane source, such as natural gas, oil and coal, and therefore cannot be considered a primary fuel.

At present, 95 percent of global hydrogen production is generated from fossil fuels rather than renewable resources."

However, when emissions reduction technology is applied in the form of proven carbon capture and storage (CCS) to pump carbon dioxide (CO2) into depleted oil and gas wells, the hydrogen produced as a bi-product is no longer considered grey, but blue.

It is in this blue hydrogen arena where much of the current investment is taking place. As potential market players seek to drive the cost of production down to enhance viability and contribute to meeting net zero targets, they are also jostling for position on the technology front in pursuit of pre-eminence in the market to come.

Creating green hydrogen at scale

Meanwhile, other tranches of investment are being pumped into ‘green hydrogen’, which is produced by the electrolysis of water using a renewable source, with R&D in this area marked by efforts to bring the cost of production and logistics substantially down.

But, while green hydrogen offers up the prospect of zero emissions and the opportunity to capture and store the world’s natural resources in large quantities of energy, it remains expensive versus other options for renewable energy production, making scalability the challenge.

The capacity to generate green hydrogen at scale however is enhanced in those jurisdictions with an abundant supply of renewable raw material i.e. sunlight and wind."

This is why regions including Australia are prioritising research around the development of a hydrogen economy and playing host to a number of pilot projects. Around such ambition, the Australian Government has just released its Technology Investment Roadmap that will guide AU$18 billion of Commonwealth investments towards five priority technologies of which hydrogen is one.

One such example is Santos’ proposed CCS project in South Australia. The CCS study, currently at Front End Engineering and Design (FEED) stage, seeks to capture the 1.7 million tonnes of carbon dioxide separated annually from natural gas at the Moomba gas processing plant.

The project not only provides the opportunity to safely and permanently sink CO2 into the geological formations of the Cooper Basin, but also offers up onward opportunity to develop blue hydrogen facilities. This has application for all manner of power stations and industrial facilities that are currently difficult to decarbonise through electrification since existing natural gas infrastructure could be utilised with minimal adaptation.

Expanding the value chain

The likes of BP, Shell, Engie, Woodside Energy and Origin Energy, are already developing stand-alone hydrogen strategies to explore the path to commercialisation, while others, including mining house Fortescue Metals Group, are also working to advance hydrogen technology.

While agreements to take the hydrogen produced on such pilot projects can assuredly be struck with local industry, the key to creating a supply chain at scale will ultimately come down to the successful negotiation of offtake agreements.

In this respect, hydrogen will be no different from Australia’s CSG and LNG sectors, whose fortunes soared once export agreements had been signed with Southeast Asian neighbours, notwithstanding the domestic capital expenditure assistance, subsidies, rebates and waivers that hydrogen could hope to benefit from too.

Hydrogen’s potential

It is in the industrial sector where hydrogen’s potential to lead to rapid and substantial cost reduction and immediate scale is most likely to be seen, and ammonia is at the heart of the action. This is because it provides the opportunity to safely store and transport hydrogen by transforming it into a liquid or salt through its combination with nitrogen.

The hydrogen is then drawn off at its destination for fuel burning purposes. A number of energy providers are showing a keen interest in this area, including Woodside, which has joined a consortium to study exporting hydrogen as ammonia from Australia to Japan.

Hydrogen also has the ready ability to out-compete lithium on the fuel cell front to power transport, since it behaves just like a battery and can charge a vehicle in a fraction of the time."

Again, many of the resources’ majors have pilot studies underway looking at early opportunities to use renewable hydrogen to power remote processing plants and mining vehicles. This includes Engie and Anglo American, who last year signed an agreement to develop and fuel the world’s largest hydrogen-powered mine haul truck; technology that could, over time, be moved into the passenger vehicle market.

The bigger picture

Right now, R&D on both blue and green hydrogen is focused on bringing the cost of production and logistics down below a threshold where developers and investors can be confident of cost-competitiveness. This will allow the scope to achieve scale and develop a marketplace.

Only once the economic case has been proven will hydrogen’s time as either a key part of the transition to or fundamental player in the true net zero mix arrive. Its unique set of credentials can then be leveraged and applied at scale across the industry, logistics and power generating arenas.

This point in time is getting ever closer. And, while the product may be different, power and resources’ skill sets are readily transferable. For the organisations with the requisite route to market knowledge, the future is redefining.

For further information contact:

Man wearing suit and tie

Brett Kalisch
Director, Natural Resources, Australia & New Zealand

t: +61 (0) 7 3020 4787