Ammonia export a hope amidst Australia’s hydrogen hype: BNEF

Australia cannot compete exporting difficult to transport hydrogen but could use it locally to make low emissions products like ammonia for overseas markets.

Ammonia export a hope amidst Australia’s hydrogen hype: BNEF

Australia's hydrogen hopes lie with ammonia export and local use, but without strong Federal Government decarbonisation policies, the hype will be unfulfilled, according to Bloomberg NEF.

BNEF head of industry decarbonisation Kobad Bhavnagri said it was unclear what technologies apart from electrification will dominate the decarbonised economy, but hydrogen could meet up to 20 per cent of final energy demand.

"The hope really is that hydrogen can become this molecule that powers a clean economy," Bhavnagri told the Australian Hydrogen Conference in Sydney last week.

Bhavnagri said green hydrogen production costs could fall substantially. He expected by 2030 Western electrolyser manufacturers would match their Chinese competitors that currently undercut them on price by 80 per cent. Continued falling costs of renewable energy that power the electrolysers that split water into hydrogen and oxygen would add to hydrogen's competitiveness.

Australia's competitive advantage lies with the production of cheap renewable energy. BNEF predicts renewable power will cost less than $US20 a megawatt in almost all parts of the world by 2050, but Australian costs will be in the $US10-15/MW range.

The alternative to green hydrogen is blue hydrogen that uses the current technology of extracting hydrogen from natural gas and adds the capture and storage of the carbon dioxide produced.

BNEF analysis predicts green hydrogen will become cheaper than blue hydrogen everywhere, including the US, Saudi Arabia and Russia that have cheap gas.

"The business case for blue hydrogen looks fundamentally challenging," Bhavnagri said.

"It would be very hard to get financed when you have maybe a runway of 10 years of being a low-cost producer before you are undercut by a technology which is rapidly improving."

In many parts of the world, including Australia, green hydrogen will also eventually be competitive with natural gas as an energy source.

What is green hydrogen good for?

Bhavnagri said there is strong interest in the US to use hydrogen to generate clean peak and dispatchable power.

"We're also seeing that momentum on the equipment side with all of the major gas turbine manufacturers producing hydrogen capable units or units that are able to be retrofitted for the use of hydrogen."

Industrial uses for green hydrogen include hard to electrify sectors such as steel and cement, and replacing the hydrogen used in oil refining and methanol and ammonia plants.

However, BNEF sees hydrogen playing only a niche role in transport.

By 2030 BNEF predicts battery electric vehicles to have a lower total cost of ownership than both hydrogen vehicles and conventional internal combustion engines.

The exception is heavy-duty long-haul trucks, as batteries are likely to remain too heavy and costly to store the energy required despite expected technology improvements.

Australia's potential needs policy push

Australia will be able to make green hydrogen for less than half the price of Japan, according to BNEF. However, the product would not be competitive due to the high cost of converting hydrogen to ammonia for ease of transport and then converting it back to hydrogen in Japan.

"The economic rationality says any country should try and produce hydrogen onshore first," Bhavnagri said.

Japan and Korea have limited onshore renewable potential but could develop significant amounts of offshore wind power.

"Australia should really focus on exporting hydrogen derivatives, moving further up the value chain exporting things which are more energy-dense than hydrogen is as a cargo," Bhavnagri said.

Australia could export green hydrogen-based steel, synthetic fuels and methanol. Ammonia export markets include fertilisers, shipping and power generation.

"This is difficult because it involves us doing more than just dig and put on a boat, and makes us have to confront some of the challenges we have with the small scale of our market."

The hydrogen industry needs to grow to provide the scale required to drive down costs, but the initial growth to launch a viable industry needs policy support.

The list of global large scale hydrogen projects to provide the scale to drive costs down is growing, but Bhavnagri described most of them as speculative.

"They lack a viable business case; they lack an offtaker who is willing to pay the premium."

Bhavnagri said Australia could not "magically" develop a clean hydrogen industry with the Federal Government's mantra of "technology and not taxes."

"Scaling up hydrogen requires robust policy, which doesn't exist in Australia to the extent that is required."

BNEF identified a suite of policies required for the hydrogen industry to scale up, including legislated net-zero targets, tough heavy vehicle emission standards and mandates for lower emissions products.

"Many of those, unfortunately, are nonstarters at the Federal political level; there is not yet the appetite to do the hard things that we need to."

Main image: Graphic. Source: WA Renewable Hydrogen Strategy