Australia’s federal and state authorities have thrown their weight behind clean hydrogen policies and associated pilot projects, with the goal of driving down green and blue hydrogen production costs over the next decade, and industry has responded positively.

The latest company to join the fray is Australian junior Strike Energy, which recently announced plans for a $1.8bn ammonia and urea manufacturing facility in Western Australia that will include both blue and green hydrogen supply streams.

Canberra adopted its National Hydrogen Strategy in August 2019, noting that it wanted to “position the [hydrogen] industry as a major player by 2030”. A key element of this strategy has been to encourage the development of hydrogen hubs that will drive large-scale industrial demand.

The vast majority of global hydrogen production is of the grey and brown varieties and, among low-carbon varieties, the commercial viability of green production lags that of blue. But Australia’s ongoing renewable energy boom is set to help to bridge some of that divide.

Pricing concerns

The IEA has calculated that the cost of blue hydrogen production in the most promising regions is around $1.4-1.5/kg, while the cost of hydrogen generated from renewable electricity is around $2.5-6/kg.

The Australian government, however, wants to slash clean hydrogen’s production costs to less than A$2/kg (US$1.55/kg). In its first Technology Investment Roadmap, released last year, the government described the fuel as “transformative” with both industrial, power generation and transport applications.

“While blue hydrogen is currently the only way to economically produce clean ammonia at scale, we want to be ready for any shift in project economics” Nicholls, Strike

The Australian National University (ANU) has found that Australia could lower green hydrogen production costs to below A$3/kg within the next few years, with sub-A$2/kg an increasingly viable prospect over the next decade.

Thomas Longden, a Fellow at the ANU’s Crawford School of Public Policy and member of Zero-Carbon Energy for the Asia-Pacific Grand Challenge, tells Hydrogen Economist that not only could green hydrogen production costs approach A$2/kg but government scientific agency CSIRO’s own power generation cost projections also suggest that lower prices might be feasible.

“Combining the CSIRO GenCost electricity cost projections for 2030 with electrolyser estimates from the IEA results in hydrogen production cost estimates of between A$1.89/kg [for solar] and A$3.71/kg [for wind],” he says.

Australia is in the middle of a green energy boom, with the Clean Energy Regulator reporting that renewables’ share of the National Electricity Market topped 30pc in 2020, the first time it has done so. As renewable capacity expands, the commercial case for green hydrogen inevitably grows stronger.

The country has seen a string of projects green lit in recent years: from Western Australia’s A$51bn Asian Renewable Energy Hub—which will use 23,000MW of solar and wind power to produce green hydrogen and ammonia—to a A$240mn, 40,000t/yr green ammonia plant backed by the South Australian state government.

While the iron’s hot

The possibilities of green hydrogen have not been lost on the country’s oil and gas sector either.

Developers Woodside and Santos have grabbed headlines in recent months for their growing interest in green hydrogen. And the fuel has also caught the eye of the industry’s smaller players.

The Strike Energy ammonia and urea manufacturing facility will include both blue and green hydrogen supply streams, the company announced in January.

$1.55/kg – Australian government’s target price for zero-emission hydrogen

It has said that while its Greater Erregulla onshore gas development will provide the bulk of feedstock to the 1.4mn t/yr urea plant—dubbed Project Haber—the Western Australia facility will also include a 10MW hydrogen electrolyser.

Strike CEO Stuart Nicholls tells Hydrogen Economist that the company’s decision to include green hydrogen capacity was a “bet both ways” on the future of hydrogen.

“Green hydrogen production and use at scale in an industrial setting is yet to be proved. While blue hydrogen is currently the only way to economically produce clean ammonia at scale, we want to be ready for any shift in project economics.”

Strike wants to build the plant in an industrial area of the city of Geraldton, which has access to an abundance of wind power that exceeds local demand. “With wind prices falling close to zero in the evening, as a result of industrial demand in the area falling off, it creates arbitrage opportunities for the development,” adds Nicholls.

While Strike is eager to demonstrate the viability of green hydrogen in ammonia production for environmental reasons, the company remains focused first and foremost on project economics. Moreover, if Strike is able to displace gas with green hydrogen it frees up new marketing opportunities for gas from Greater Erregulla.

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Author: Andrew Kemp