Australia green hydrogen: Production costs to drop 37% by 2030

Europe shifts investment to Australia’s hydrogen energy

The Russia-Ukraine conflicts ignites energy crisis across Europe. Countries start diversifying supply to wean themselves off Russian fossil fuels and ramp up the development of renewable energies, including hydrogen. Having been planning various hydrogen projects in recent years, the bloc first targeted Australia, where there is a full-fledged hydrogen development. As a result, euros are poured into hydrogen projects in Australia, further accelerating the country’s hydrogen development. 
 

Strategic focus areas: Export and transport

Australia has long been involved in hydrogen development since 2019. The country’s approach is guided by the National Hydrogen Strategy published in November 2019, which contains actions for the country to become a major player in global hydrogen production and trade by 2030. Its visions are as followed: 

1. Become the third-largest hydrogen exporter in Asia
2. Establish comprehensive record of hydrogen safety check 
3. Create domestic job opportunity and economic benefits 
4. Set up world-recognized certification mechanism for hydrogen energy

To financially support R&D activities, the Australian government launched the Advancing Hydrogen Fund. Administered by the Clean Energy Finance Corporation (CEFC), the fund shells out AU$300 million investment explicitly for the hydrogen industry and prioritize projects that promote the objectives of the National Hydrogen Strategy.

In 2019, the Australian Renewable Energy Agency (ARENA) introduced the Renewable Hydrogen Deployment Funding Round, providing AU$ 70 million for projects using electrolyzers with 10 MW or bigger electrolyzing capacity. The grant program was later expanded to AU$ 100 million, for three projects were selected and will enter operation by 2023. 

Strategic targets set by states and territories of Australia: 



Each state and territory plays a distinctive role in promoting hydrogen. Echoing with the National Hydrogen Strategy, every government published a state hydrogen strategy, in which all states prepare great investments, drawing up various strategic targets based on their inherent features and where they are on developing hydrogen. Generally, the strategies surround exporting hydrogen and innovating transportation. 
 

Australia’s blueprint for global hydrogen supply 

Despite ample energy resources, Australia has low population density and moderate demand for electricity. In 2020, the country only consumed 190 TWh of electricity, with 346% of energy self-sufficiency, according to statistics from the IEA. As renewable energy goes to waste if not stored, Australia seeks to store or export energy, which is one reason why it is actively building a global hydrogen supply chain. Eyeing its neighboring markets that have lower energy self-sufficiency, such as Taiwan (11%), Japan (11%), and South Korea (19%), Australia aims to become the biggest hydrogen exporter in Asia. 

Home to copious natural gas, Australia has complete gas networks and port infrastructures that can send liquified natural gas all around the world. These infrastructures can be used to transport hydrogen.
 

Cost estimation of Australian green hydrogen 2022-2030

Australia aims to cut production cost of green hydrogen to AU$ 2/kg (US$1.38/kg). For now, the figure sits at AU$4-6/kg (US$2.76-4.14/kg), depending on which renewable energy and electrolyzer are used for electrolysis. Presently, the mainstream electrolysis technique is alkaline electrolysis and polymer electrolyte membrane electrolysis (PEM).

Costs of renewables and electrolysis make up the biggest chunk in green hydrogen production cost, with the former accounting for at least 50%. Currently, solar energy and onshore wind energy are the more affordable renewables in Australia. Costs of renewables decline every year, but solar and onshore wind energy are well-developed, thus see little price decline. By 2030, cost of green electricity will drop by around 19%.  



Besides renewable energy prices, energy conversion efficiency is with vital importance. Presently, it takes 50.2 kWh of power to produce 1 kg of hydrogen. With the capillary-fed electrolysis (CFE) technique, it is possible to produce 1 kg of hydrogen with 35 kWh of power, with 95% of energy conversion rate. The CFE technique stores electrolyte in an electrolyte reservoir at the bottom of the electrolyzer, so that the electrolytic solution is not directly exposed to both the anode and cathode side. A spontaneous capillary action of the porous, hydrophilic, inter-electrode separator makes electrolyte flows. Since only one side of both electrodes are exposed to electrolyte, such technique allows electrolysis to occur without forming bubbles.   

The CFE technique is expected to be tested in 2023 and commercialized by 2026. By then, energy conversion rate will see markedly improvement, reducing power consumption. As efficiency rises and costs drop, cost of 1-MW electrolyzers will decline by 40% by 2030, total capex by 32%, production cost of green hydrogen will come in at AU$2.4-2.8/kg (NT$ 50-58/kg). Yet, the level is still shy of the AU$2/kg strategic target, as InfoLink forecasts. 
 

Offshore wind likely to join hydrogen for energy production in 2030 

Hydrogen is mostly used by the refining and fertilizer manufacturing industries. Australia is expanding the application of hydrogen to aviation, steel, and shipping industries. Despite domestic demand, hydrogen adoption targets in Asian countries, such as Japan and South Korea, also drive up demand, boosting the development of green hydrogen. 

As solar and onshore wind energy head into full swing, Australia starts paving its way to develop offshore wind energy, aiming for 2 GW of installed capacity by 2032, 4 GW by 2035, and 9 GW by 2040. In the future, with the innovation of electrolyzer, residual wind sources of offshore wind energy can be used to produce hydrogen. For instance, an offshore wind farm project, Star of the South, may be involved in hydrogen production. With 2.2 GW of capacity, Star of the South is scheduled to be complete by 2032, potentially contributing to a clean energy hub in Gippsland, Victoria, to help produce green hydrogen.