National Hydrogen Strategy Issues Papers

An export hydrogen industry driven by solar power would require a vast land area for setting solar arrays. Dr Alan Finkel, Australia’s Chief Scientist and a Fellow of the Academy, commented that: “If we continue to imagine that all that future electricity to make hydrogen comes from solar, then in terms of land area, using current technology, that’s a solar farm the size of Wyoming”. Such an initiative in Australia would be feasible in the Pilbara region and would require careful planning and considering factors such as access to water and respect for native title rights.
One of the key factors in determining the economic viability of green hydrogen production will be the utilisation rate of the electrolyser.
The Academy has identified several National Electricity Market (NEM) related issues associated with green hydrogen production using renewable electricity. These issues are influenced by how the hydrogen produced will be used. For example:
• Injecting the hydrogen into the gas network: This might require electrolyser systems to be built adjacent to gas distribution infrastructure since injection may be easier at this point in the gas stream. The electricity generation, transmission and distribution system may need to be reinforced to meet the localised electricity demand from the electrolysers.
• Hydrogen exports: as discussed above, this would require large amounts of renewable electricity generation capacity to be built.
• Using the hydrogen for transport fuel: This could require localised hydrogen production facilities. Initially, these might be dedicated facilities that produce hydrogen to meet the demand from the freight or public transport sector. Depending on the level of demand, this may require the grid to those locations to be reinforced.

Producing and using hydrogen is another way that renewable energy producers could earn revenue from their plant. For instance, hydrogen could substitute for natural gas as a fast-start fuel. Hydrogen energy storage could improve the economics of renewables that would otherwise be spilt or constrained off owing to a lack of demand. Polymer electrolyte membrane (PEM) electrolyser plants could also be used to provide ancillary services.
It may be necessary to reform electricity (and gas) market rules to ensure that the value that can potentially delivered by hydrogen is allowed and appropriately recognised. The Academy agrees with the view that such reforms are necessary regardless of their impact on the emergence of a hydrogen industry.

The Academy recognises the challenge in coupling the electricity, gas and transport sectors as they are regulated, taxed and incentivised in quite different ways. Possible approaches could include:
• adopting an economy-wide approach that provides a market signal that encourages lower carbon emissions
• removing subsidies that support particular forms of energy generation and use
• ensuring that the Australian Energy Market Operator (AEMO) is able integrate its planning of different energy networks
The Academy is aware of studies in the EU that have examined the regulatory reforms necessary to allow hydrogen to participate in the energy market (e.g. regulating access to natural gas (or hydrogen) gas pipelines or hydrogen storage facilities.

It is clear from an examination of overseas hydrogen projects, that the majority involve collaborations between industry sectors, governments and (often) the research community.
Consultation with the owners of the existing retail and commercial fuel networks is vital for making strategic decisions regarding hydrogen in the transport industry. Each of these major stakeholders has over 1000 sites and service stations across Australia, and they are well placed to support the building of a network of hydrogen refuelling stations.
Collaborating with groups such as fuel cell electric vehicle (FCEV) manufacturers and manufacturers of hydrogen production and storage equipment will also be crucial, particularly on the construction of pilot projects to assess the opportunities and challenges of hydrogen as a transport fuel.
Commercial fuel sales also need to be considered alongside retail fuel sales. Commercial fuel sales is a different business from retail, organised differently, often with a distinct supply chain and infrastructure, and involving much larger volumes than retail fuel sales. This industry serves the aviation, logistics and transport, mining, marine, railway, defence, construction and agriculture sectors among others. Such projects could involve the end user of the hydrogen as part of the collaboration.

The transport sectors listed as priorities in the issues paper such as buses, taxis and light vehicles. were earlier considered as targets for LPG or CNG usage. It would be beneficial to examine the lessons from policies and programs to encourage CNG or LPG and use these to inform support measures designed to encourage the use of hydrogen in the transport sector.