Australia sees cost as key challenge for hydrogen

The Australian federal government sees three main barriers to the development of the country's hydrogen strategy, including building demand for the fuel and its derivatives, achieving low-cost production at scale and reducing delivery costs, according to Canberra's first progress report on its hydrogen strategy launched in 2019.

The federal government and all of the country's six state government each have outlined respective hydrogen plans as part of the energy transition from fossil fuels to lower greenhouse gas (GHG) intensive fuels such as hydrogen. Australia is the world's largest exporter of LNG and the second-largest thermal coal supplier.

"Like any nascent industry there will be challenges, and it is to be expected that demand-side indicators have slower progress than the supply side. It will take time to lower costs and to build export supply chains," Australian energy minister Angus Taylor said in the State of Hydrogen 2021 report.

Widespread global adoption of clean hydrogen will require sustained effort to offset the three biggest barriers facing industry globally, not just in Australia, including building demand, achieving low-cost hydrogen production at scale and reducing delivery costs.

Australian governments are next focusing on how to build up Australia's demand for hydrogen products, with the strategy laying out the pathway to achieve its vision.

The private sector has committed more than A$1.6bn ($1.14bn) of investment in hydrogen ventures in Australia, with public sector investment reaching $1.27bn in June 2021, the report said. Project announcements indicate scale could reach over 100MW by 2025.

The cost of producing clean hydrogen in Australia in 2025 is expected to be between A$2.30-5/kg, depending on the production method from around A$5/kg currently. In 2030 it will cost an estimated A$2-4/kg, the report said. The main cost drivers are capital costs and electricity costs. Renewable hydrogen production costs could fall below A$2/kg after 2030 if electrolysers and renewable energy become cheap enough, it said.

The average size of operating electrolysers around the world was approximately 1.1MW last year, the report said. But in early 2021 the 20MW Air Liquide Plant in Canada started operation with a four-module polymer electrolyte membrane electrolyser. Australia's largest operating electrolyser is the 1.25MW project at Hydrogen Park in South Australia. The Australian government has funded three electrolyser projects of 10MW each, which are expected to be operational in the near future.

Australian government future priorities include helping to drive down the cost of hydrogen production towards the A$2/kg goal and continuing to engage internationally to build export relationships, the report said.

By Kevin Morrison