National Hydrogen Strategy Issues Papers

Projects producing hydrogen by consuming energy from an electricity grid are problematic, even if this consumption is offset by building renewable generation. These generators may not really be "additional" to what would have been built anyway, since there may be no industry capacity to accelerate the current roll-out of wind and solar. There is a risk that hydrogen produced this way might be labelled as zero-emission, but in reality more CO2 is emitted than if the hydrogen project had not proceeded. Hydrogen involves much energy loss in its conversion processes, so the end result is that when offsetting hydrogen production, renewable generation delivers relatively poor CO2 reductions. If the hydrogen project was not built, the renewable energy would have directly displaced fossil fuel burnt to generate electricity, delivering higher CO2 reductions.

To avoid this pitfall, any hydrogen project should ensure that it "scales up" the renewable industry to build generation that's additional to what would be built in the absense of the hydrogen project. This will ensure that renewable generation devoted to hydrogen production is truly additional, and hence the hydrogen is truly clean. Also required is the transmission and other assets in the grid to enable this extra renewable generation to be connected. Governments can help via the COAG process. If hydrogen electrolysers will be connected into the NEM, AEMO should at least include a scenario factoring this extra demand into the 2019 Integrated System Plan.

In scaling up the hydrogen industry it seems logical to focus on the Pilbara region and its existing demand for energy. A key opportunity is the Pilbara's existing ammonia exports - these can be switched to renewable ammonia rather than fossil-based. Beyond this, hydrogen can be used to generate electricity for the Pilbara region.

Hydrogen certified as zero-emissions must be produced using renewable energy that's truly additional. Please see our response to issue 1 for more details.

If a hydrogen project uses fossil fuels with CCS, the CCS should capture 100% of the CO2, and the project should not be allowed to commence operations until its CCS function is operating fully.

The CSIRO's cost curve indicates that for domestic use, hydrogen will not be cost-competitive with natural gas in the forseeable future. Natural gas is already uncompetitive with efficient electric appliances for homes and small businesses, as found by our major study "Household fuel choice in the NEM 2018", funded by ECA. In addition, switching from natural gas to hydrogen would also require all gas appliances to be switched. If we want to eliminate emissions from gas appliances, it's clear that electrical appliances are a much more economic option than hydrogen ones.

If gas networks are used as a stepping-stone to hydrogen exports, consumers will be saddled with unnecessary expenses. This should not be allowed.

Another drawback to using hydrogen for this purpose is its inefficiency. Heating 1000 homes via burning hydrogen in the residence requires many more wind turbines or solar panels than heating 1000 homes with a reverse-cycle air conditioner (heat pump). Efficient electric appliances make much better use of our renewable energy generation capacity than hydrogen. The gas industry has suggested deploying heat pumps driven by hydrogen internal combustion engines, but these are impractical and are much less efficient than normal heat pumps driven by electric motors.

Electrolysers offer the potential to support the grid by modulating their power based on supply and demand in the grid. However this will result in a lower capacity factor and relatively expensive hydrogen, compared to running the electrolyser flat-out. Also the company may be bound by stringent export contracts that preclude them from significant demand management. Such issues should be considered when evaluating a project's impact on the grid.

Hydrogen suffers many energy losses in its conversions. In a recent analysis (see attached), we estimate that it would take nearly three times as many wind turbines or solar panels to propel a fleet of FCEVs than a fleet of outwardly-similar BEVs. This gives FCEVs a major fuel cost disadvantage as well as relatively poor environmental credentials. For most users, an FCEV's rapid fuelling is not a sufficient benefit to outweigh this downside. FCEVs may be useful for specific uses, but resources should not be devoted to developing a general-purpose hydrogen refuelling network.