The team over at STOCKHEAD picked up on our announcement yesterday, as part of their coverage of the impact of the energy transition on Victoria's Latrobe Valley, home to the world's single largest lignite resource.

The Victorian government has just announced the go-ahead for the biggest battery in the southern hemisphere.

With a capacity of 300MW and the ability to supply 450MWh of electricity, it's twice as big as South Australia's big battery, which weighs in at 150MW & 194MWh.

Why do we need the battery?

Well, the answer varies, depending on who you ask. Which is concerning.

The Minister for Energy Lily D'Ambrosio tells us:

"We know in the time of climate change, our summers are getting far hotter and much longer, so that means there is increased strain on our thermal generators"

Whereas, AusNet Services (the folks who actually own and operate the Victorian electricity transmission network) executive general manager of regulation and external affairs, Alistair Parker, tells us:

"Its critical role though will be enabling extra interconnector capacity. If we have a fault in the network it can very quickly give us 250 megawatts and nobody will see the inconvenience in the network."

A quick fact check confirms that, as has been recognised by reviews such as the Finkel report, the successful integration of intermittent generation into the NEM requires energy storage so that the energy from that source can be used when it is most needed. This is especially true when intermittent power generation passes 10% of total generation, which occurred in Victoria in 2018.

Energy Policy Outcomes

Since taking the reins in 2013, the government has overseen the addition of ~2,770MW of wind and solar and the exit of ~1,600MW of brown coal power.

Paradoxically, despite the net increase in capacity of over 1,000MW the state is producing less overall power.

Moreover, the wholesale electricity price has gone from being the most affordable to the least affordable.

This is due to the difference between 'dispatchable' and 'variable' power.

That ~1,600MW coal plant averaged ~85% output, or ~1,360MW. Granted, it was old and would occasionally suffer partial unplanned outages, but that was usually confined to one of its eight ~200MW turbines. For context, wind output can and does fluctuate by ~1,600MW (or more) within a day.

Notice in the chart above that wind is almost non-existent during the evening peak, then reaches maximum output overnight, when demand is lowest.

Long term, wind and solar average 30% and 25%, respectively, making the ~2,770MW of new capacity worth around 550MW. Even then, it doesn't usually coincide with demand.

What is missing is 'firming' capacity.

Firming is the inclusion of backup generation or storage to enable wind and solar to provide energy to the grid when actually needed. The question of how much firming or storage is required is complex due to the interactions of the markets, location and type of generation capacity and seasonal variations which impact wind and solar output and demand.

For an in-depth look at the tradeoffs between backup capacity and storage at different levels of variable renewable energy penetration, you can take a look at the report by Marsden Jacob Associates that reviewed the techno-economic case for the Snowy 2.0 project.

But, in terms of back up generation, wind requires about 90% of its capacity to be able to deliver firm, reliable power. Solar requires 100%.

In terms of storage capacity, this varies with the amount of variable renewable energy in the mix. At 50%, 8 hours of storage is required. At 70%, around 16 hours is required and for 100%, a full days storage is needed.

This backup and storage is part of the true cost of wind and solar, but is always omitted or shifted by wind and solar advocates.

And as stated by AusNet Services, the biggest battery in the southern hemisphere isn't designed to firm our existing wind and solar capacity. It's just meant to enable more capacity to flow through to Victoria from NSW.

In other words, it's little more than a giant bandaid to help keep our lifeline to the NSW grid stable while we wait for more firm, dispatchable capacity and storage to come online.

Admitting the problem is the first step to solving it

You can't apply a solution to a problem that doesn't exist.

As such, Minister D'Ambrosio should be commended for acknowledging that energy policy outcomes have resulted in a power system that has become unreliable and unaffordable, noting the battery is...

"... part of our plan to deliver security, reliability and affordable power."

Unfortunately, despite the best evidence, wind and solar advocates believe that they can provide reliable, affordable power if they can simply build enough wind and solar capacity.

Unfortunately, nowhere in the world does high wind and solar penetration coincide with low electricity prices, and recent experience tells a different story.

While wind and sunshine are free, the infrastructure required to capture and convert them to reliable electricity, is not. And despite the very real declines in the cost of wind turbines and solar panels, increased variable renewable energy penetration has resulted in skyrocketing prices.

The paradox of decreasing wind and solar cost and increasing electricity prices

According to energy analyst Lazard, since 2013, the cost of wind and solar have come down by 40% and 60%, respectively.

So, why did wholesale electricity prices rise in Victoria with the addition of ~2,770MW of new, supposedly cheap, wind and solar?

Simply, the answer lies in the difference in capacity factor (the average output from a given power generator, mentioned above) and how one accounts for the cost of reliability.

In terms of accounting for the cost of wind and solar, the levelised cost of energy calculation only includes the directly incurred capital, operating, fuel and finance costs of a particular technology, in isolation.

It doesn't include the cost of reliability, which makes wind and solar look cheap, in isolation. But the cost of maintaining stability and reliability is shifted to thermal generators, or to network charges on retail power bills.

However, power generators, whether thermal power plants or wind and solar, rarely operate in isolation; they are part of a larger grid.

The effect of variable wind and solar on system costs often depends on the cost of the electricity that it displaces. Mandates require that wind and solar be 'used' ahead of coal and natural gas generation, when available. Solar generation during the day generally displaces brown coal power, while wind generation may be displacing natural gas, each with different cost profiles.

And to handle the unreliability of wind and solar, system operators need to activate ramping resources such as natural gas more frequently to meet demand. These usually have higher operating costs. As such, increased use during low wind periods, or during the morning and evening peak demand periods where solar is minimal, can raise total system costs even as renewable costs decline.

Crucially, these dispatchable power sources must be kept on idle to provide reliable backup, with the costs of maintaining this backup capacity passed on to consumers, but not included as a direct firming cost for wind and solar.

In short, the way the cost of wind and solar is calculated externalises or shifts the cost of reliability. As a result, we are now about to pay $200m to restore a small part of the lost stability and reliability.

Then there's the additional network cost. To cost-effectively deploy wind and solar, they must be located where they are most productive – in places with plenty of sun, wind and land. That is typically not close to the population centres, requiring more transmission infrastructure to connect supply with demand. Multiply that across many relatively small wind and solar farms, and the incremental network cost is substantial, adding about one-third to the actual project cost. But rather than being attributed to the fact that wind and solar are diffuse, this cost usually appears as part of the separate network charge on retail bills.

The biggest battery in the southern hemisphere has become an absolutely essential measure to help stabilise and secure our grid due to the increased penetration of unreliable wind and solar generation.

What's needed now is a clear policy framework that ensures future wind and solar projects can provide firm, stable, dispatchable power if they are displacing coal or natural gas.

Could hydrogen, made from coal or gas with the carbon captured and stored, be half the price of using renewable energy?

It appears so.

Yesterday's article ($) in the Financial Review by David Byers and Peter Cook exposes the cost challenge facing renewable hydrogen production.

Byers and Cook are commenting in response to the release of the Morrison government's Technology Investment Roadmap discussion paper, and $300 million pledge to set Australia on the path to becoming a hydrogen superpower, noting that an integral part of the approach is clean (no emissions) hydrogen produced from fossil fuels, with carbon emissions captured and geologically stored.

This technology-neutral approach isn't popular with renewable advocates who demand wind and solar power be used to make hydrogen, instead of natural gas or coal.

Are they right?

Let's start with a little background.

Hydrogen is the most abundant chemical element in the universe, but it doesn't occur naturally by itself here on earth. It's either combined with oxygen, to form water (H2O) or combined with carbon, to form hydrocarbons such as those found in natural gas (CH4) and other fossil fuels.

As such, we need to produce it. And there are two paths:

• Thermochemical - splitting hydrocarbons
• Electrochemical - splitting water

Currently, around 95% of the world’s hydrogen is derived from thermochemical processes based on steam methane reforming (SMR)that use natural gas, oil or coal as the feedstock.

The other 4% is produced by splitting water using an electrochemical process powered by electricity.

If that electricity comes from the grid, and the grid includes fossil fuel power generation, then that hydrogen will have a corresponding CO2 footprint.

Emissions data from Australia's Clean Energy Regulator shows our grid CO2 intensity is about 0.75t CO2 per MWh (2017-18).

It takes about 50kWh to make 1kg of hydrogen, giving it a footprint of 37kg per kg of H2.

This is important to understand because the National Hydrogen Roadmap includes a 'guarantee of origin' scheme to verify and reward clean hydrogen production. The European CertifHy project is given as an example to adopt.

CertifHy categorises 'green' and 'low carbon' hydrogen as follows:

• CertifHy 'Green' Hydrogen refers to hydrogen generated by renewable energy with carbon emissions 60% below the benchmark emissions intensity threshold.
• CertifHy 'Low Carbon' Hydrogen is hydrogen created by non-renewable energy with emissions below the same threshold.

What does this mean in practice?

As mentioned, around 95% of the world's hydrogen is currently made via the steam methane reforming process. A great recent article over at Forbes crunches the numbers, providing a figure of around 9.3kg of CO2 per kg of hydrogen. This is just for production.

As we can see, hydrogen produced using electricity generated by the current grid is around 4 times higher than from natural gas using the current dominant SMR method.

To use grid electricity to produce green hydrogen, under the CertifHy definition, the CO2 intensity of the grid would need to decrease from 0.75t CO2/MWh to 0.074t CO2/MWh. A drop of 90% from the current level.

Not impossible. But there are two more targets that must also be achieved if hydrogen is to meet the cost target of $2/kg:

1. The cost of electricity must drop from 6c/kWh to 3c/kWh or less
2. The capital cost of an electrolyser must drop to $135/kW, from a current best case estimate of $968/kW

Again, not impossible. But nowhere can we find a well-founded articulation of how this may be achieved. Unknown breakthroughs are required if these targets are to be achieved.

So, while 'green' hydrogen can be made using electricity from wind and solar to split water into hydrogen and oxygen, there's currently no approach that can achieve this affordably.

Conversely, hydrogen can be made cleanly from coal and gas when coupled with carbon capture and storage technology.

Byers and Cook are CCS experts.

David Byers is chief executive of CO2CRC, Australia's leading carbon, capture and storage (CCS) research body.

Professor Peter Cook is a senior adviser in the Peter Cook Centre for CCS Research at the University of Melbourne.

Renewable hydrogen advocates tend to try to gloss over the cost and scale challenge they face, but are quick to claim CCS is just experimental and unproven.

Byers and Cook disagree:

Carbon capture and storage is far from experimental – it is a well-understood technology.

Analyses by the IEA and the Intergovernmental Panel on Climate Change have concluded that the lowest cost pathway to limit global warming to below 2 degrees should include capturing and storing carbon.

This begs the question; why are some opposed to CCS hydrogen if its more affordable than dedicated renewable hydrogen?

If a key part of the global hydrogen strategy is to provide a viable alternative energy solution to the direct, emissions-intensive use of coal, natural gas and oil, then why would renewable hydrogen advocates insist on limiting our options and making it expensive?

Could it be that they are simply trying to remove the competition?

Maybe they are opposed to CCS hydrogen because it will still require the extraction of coal, oil and gas from the earth.

But this can't be the reason.

You see, the amount of wind and solar infrastructure required to generate the electricity required to split the water to make the hydrogen required to replace fossil fuels would result in a tremendous increase in mineral extraction to supply the raw materials that make the wind and solar infrastructure possible. That extractive activity, refining and disposal are already taking a toll on the environment.

To put this into perspective, IRENA forecast hydrogen demand in 2050 of between 133.8 million and 158.3 million tonnes a year, requiring at least 6,690TWh of dedicated electricity every year.

To deliver this amount of electricity would require the equivalent of :

• 1,775GW of offshore wind farms, or;
• 2,243GW of onshore wind, or;
• 4,240GW of solar PV, or;
• 957GW of nuclear power

For context, at the end of 2018, the world had installed 23.4GW of offshore wind, 540.4GW of onshore wind, 480.4GW of solar PV and 397GW of operating nuclear reactors, according to IRENA and the World Nuclear Association. And virtually all of this capacity is being used to generate electricity, not green hydrogen.

Renewable hydrogen production, at large scale, may eventually become affordable and able to meet the $2/kg target to compete with fossil fuels in many applications. Until then we need to bridge the gap by producing CCS hydrogen.

Here at ECT, we see two direct opportunities in the context of the emerging hydrogen industry:

1. Coldry, our low-temperature, lignite drying solution, which features zero-direct CO2 emissions, can be deployed as the front end feedstock preparation stage for standard coal gasification technology, which is the stage prior to the standard hydrogen production route known as steam reforming. It’s the gateway enabler for lignite-to-hydrogen production.
2. COHgen, which stands for ‘catalytic organic hydrogen generation’, is our novel, low temperature, low emissions hydrogen generation technology currently under development that may provide a low-cost alternative to the steam reforming route to produce hydrogen from brown coal.

There is still a lot of work ahead to develop our COHgen process and confirm techno-economic viability at large scale, but we are engaged with various parties involved with the Victorian HESC project, both directly and as a member of the FEnEx CRC – Future Energy Exports Cooperative Research Centre – https://www.fenex.org.au/.

We mentioned above that, even at $2/kg, hydrogen isn’t economically viable for certain applications. Iron and steel making is an example.

We have a solution for that too.

HydroMOR, which stands for ‘hydrogen metal oxide reduction’, is our lignite-based, hydrogen-driven, low-emission primary iron making process which enables the utilisation of alternative low grade and waste resources, improving the economic and environmental outcomes of primary iron production. HydroMOR utilises the Coldry process as its front-end drying and material agglomeration stage.

Importantly for steelmaking, HydroMOR is a way to directly harness hydrogen from lignite, without the need for a separate hydrogen plant, delivering lower-cost iron and steel compared to traditional coal-based routes.

The hydrogen is generated in-situ from the lignite, within the reactor, providing outstanding efficiencies and CO2 reductions of ~30% compared to blast furnace production.

Hydrogen is indeed a smart way to transition to lower emissions.

Byers and Cook state it well:

Australia has ready access to the latest carbon-capture and storage technologies and expertise. It has some of the world's best deep sedimentary basins in which to store carbon dioxide, and an internationally recognised resources industry.

Hydrogen has long been touted for its potential as a clean energy solution. But only a technology-neutral approach makes sense. Pursuing a renewables-only pathway risks condemning hydrogen to stay where it has been for the past 30 years – always the next big thing.

Read more...

Today's article by James Fernyhough in the Financial Review ($) confirms exactly what we said last week; 'green' hydrogen is demonstrably too expensive and the opportunities for meaningful cost reduction are limited.

Fernyhough highlights the federal government's recent call for the private sector to come up with ways to slash the cost of renewable hydrogen production by 75 percent, to get it under $2.00/kg.

According to the recent National Hydrogen Roadmap by the CSIRO, hydrogen made using electricity generated by wind and solar costs around $11 per kilogram.

The cost of electricity and the capacity factor of wind and solar generation seem to be the two biggest cost barriers.

Assuming the ambitious $2.00/kg cost target was achieved, Fernyhough makes a sobering observation regarding the viability of hydrogen as a substitute for fossil fuels in certain applications:

"...even with a low-carbon grid and major early-stage government investment, renewably produced hydrogen would only be able to compete with carbon-heavy alternatives if there was a price on carbon, a policy the Energy Minister Angus Taylor again ruled out on Thursday."

How much would that carbon tax need to be to make hydrogen competitive? It depends on the application:

• Steelmaking: Bloomberg New Energy Finance found even if 'green' hydrogen cost $1.50 per kilogram, there would still need to be a carbon tax of $76 per tonne of carbon dioxide for it to be a more economic alternative to coking coal in steel making by 2050
• Cement production: $91 per tonne of CO2
• Ammonia: $119 per tonne of CO2
• Fuel to power ships: $221 per tonne of CO2

The hydrogen wars are heating up

There's a battle for the hearts and minds of Australian's in the quest to position the nation to capitalise on the forecast demand for hydrogen as a clean energy alternative.

On one side, renewable advocates claim 'cheap' wind and solar should be used to make 'green' hydrogen. Yet this 'cheap' electricity doesn't automatically make 'green' hydrogen cheap due to the tyranny of low capacity, which we explain further below.

Meanwhile, CCS hydrogen, which produces hydrogen from coal or gas while capturing and storing ~95% of the CO2 emissions, is already in the 'ballpark', as indicated in the IEA chart below.

The chart also shows the current higher range of 3.00 - 7.50 USD/kg (A$4.61 - A$11.54) for the production of renewable hydrogen.

Source: https://www.iea.org/reports/the-future-of-hydrogen

As mentioned, the National Hydrogen Roadmap by the CSIRO shows a dedicated renewable hydrogen production cost of ~$11/kg (~USD7.15), placing it toward the top of the IEA's renewable hydrogen cost range above.

The electricity cost challenge

The biggest challenge is the capacity factor. This is determined by when the wind blows and when the sun shines. We get to that in a moment.

The second biggest challenge is reducing the electricity cost.

Other factors such as plant size and efficiency also play a role.

Electricity cost is a result of two things:

1. The price of electricity
2. How much electricity is required to make 1kg of hydrogen

In the case of dedicated renewable electricity generation, which sits outside the wholesale and retail market, the price is simply the cost of capital plus the cost of operating, maintaining and financing the equipment.

The amount of electricity is required is a function of the physics of hydrogen production via electrochemical separation of water which is well-understood.

Current electrolyser efficiencies are between 54-58kWh/kg depending on the technology... It is generally considered that efficiencies better than 45 kWh/kg are unlikely to be achieved.

National Hydrogen Roadmap - Pathways to an economically sustainable hydrogen industry in Australia

Let's assume that it takes 50/kWh of electricity to make 1kg of hydrogen.

At a cost of 6 cents per kWh in the above table, that's $3.00 of electricity to make 1kg of hydrogen.

Some long-run contracts for recent wind farm projects are as low as 5.3c per kWh. That's for supply to third parties, so it includes profit.

If we stick with dedicated renewable electricity generation solely to power the electrolyser, then we won't be adding a margin internally and can simply apply the 'levelised cost of energy' (LCOE) formula.

Lazard provides one of the most reliable LCOE references:

• Utility-scale solar PV cost - USD32-42 (AUD49-64)
• Onshore wind - USD28-54 (AUD43-83)

Let's assume 3c/kWh.

If the $11kg cost of dedicated renewable hydrogen mentioned above includes around $3.00 worth of electricity and a 50% reduction in electricity cost from 6c kWh to 3c kWh can deliver a saving of $1.50 per kg, we're down to $9.50 per kg.

So, where do the remaining cost savings need to come from?

To analyse this, the National Hydrogen Roadmap gives this handy breakdown of the current best estimate for the grid-connected scenario savings:

The electrolysis process and cost is almost identical for either grid-connected or dedicated scenarios. It's just that the cost start point is higher for the dedicated renewables scenario due to the lower capacity factor.

The above includes the following assumptions from page 70 of the National Hydrogen Roadmap:

• Electricity price drop from 6c to 4c per kWh
• Capacity factor increased from 85% to 95%
• Scale increased from 1MW to 100MW
• Capital intensity decreased from $3496kW to $968kW
• Opex decreased from $75/kW/y to $19/kW/y
• Efficiency improved from 54 kWh/kg to 45 kWh/kg
• Reduced finance and risk rates

The Capacity Factor Challenge

When the above cost-saving estimates are applied to the dedicated renewable hydrogen scenario, the challenge of getting under $2.00kg becomes all too clear.

The main barrier, as we've mentioned, is the low capacity factor of 35% for wind and solar, compared to 85% for the grid-connected scenario.

The capacity factor of wind and solar means the electrolyser is used less often, constraining the potential to derive revenue and pay back the capital investment. Conversely, in the grid-connected scenario, the same size electrolyser is producing 85% of the time.

Plant size may yet provide decreases, with some sources estimating a capital cost as low as $400/kW by 2030, but at present, the direct capital cost for the best-case scenario in the National Hydrogen Roadmap is projected to be around $968/kW, assumed in the above chart.

Some unforeseen breakthrough needs to occur to make 'green' hydrogen affordable. That may come in the form of a solar innovation or a new method or catalyst.

CCS hydrogen also needs to make some headway in reducing cost, but it's almost there already.

The National Hydrogen Roadmap provides the data that shows just how close:

So, there you have it.

'Green' hydrogen needs to find a way to reduce its cost by around $9 per kilogram.

CCS hydrogen needs to find savings of less than 75c per kilogram.

And while the path to deliver those 'green' hydrogen savings is yet to be discovered, we believe we can help deliver the savings needed to shave the few cents off the brown coal to hydrogen cost.

Here at ECT, we see two direct opportunities in the context of the emerging hydrogen industry:

1. Coldry, our low-temperature, lignite drying solution, which features zero-direct CO2 emissions, can be deployed as the front end feedstock preparation stage for standard coal gasification technology, which is the stage prior to the standard hydrogen production route known as steam reforming. It’s the gateway enabler for lignite-to-hydrogen production.
2. COHgen, which stands for ‘catalytic organic hydrogen generation’, is our novel, low temperature, low emissions hydrogen generation technology currently under development that may provide a low-cost alternative to the steam reforming route to produce hydrogen from brown coal.

There is still a lot of work ahead to develop our COHgen process and confirm techno-economic viability at large scale, but we are engaged with various parties involved with the Victorian HESC project, both directly and as a member of the FEnEx CRC – Future Energy Exports Cooperative Research Centre – https://www.fenex.org.au/.

We mentioned above that, even at $2/kg, hydrogen isn't economically viable for certain applications. Iron and steel making is an example.

We have a solution for that too.

HydroMOR, which stands for ‘hydrogen metal oxide reduction’, is our lignite-based, hydrogen-driven, low-emission primary iron making process which enables the utilisation of alternative low grade and waste resources, improving the economic and environmental outcomes of primary iron production. HydroMOR utilises the Coldry process as its front-end drying and material agglomeration stage.

Importantly for steelmaking, HydroMOR is a way to directly harness hydrogen from lignite, without the need for a separate hydrogen plant, delivering lower-cost iron and steel compared to traditional coal-based routes.

The hydrogen is generated in-situ from the lignite, within the reactor, providing outstanding efficiencies and CO2 reductions of ~30% compared to blast furnace production.

Hydrogen is indeed a smart way to transition to lower emissions.

Unfortunately, renewable hydrogen is so far back in the pack when it comes to cost, we need to ensure the right questions are asked and the correct assumptions are used as the nation decides how best to invest taxpayer funds to drive the innovation required to meet the cost target of $2.00 by 2030.

An article ($) by Aaron Patrick in today's Financial Review asks the question:

Should the government spend $500 million building a steel mill to promote technology so space-age it may never be deployed?

The article is in response to a recent report by The Grattan Institute titled 'Start with steel: A practical plan to support carbon workers and cut emissions.'

Patrick notes the admirable aim of the report to:

"...help solve one of the great economic, environmental and political challenges of our time: how to phase out Australian coal without turning some 50,000 working men and women, and their families, into climate change carrion."

The Grattan report proposes, among other things, that the taxpayer stump up $500 million to underwrite a $1.5 billion natural gas-fired steel mill that would switch to using 'green' hydrogen in 5 years or so.

All that's then needed is another $200 billion of private investment to build factories in NSW and QLD, and we'll have our very own 'green' steel industry employing many of the former coal workers, exporting 47.5 million tonnes of 'green' iron and 40 million tonnes of 'green' steel.

But Patrick is critical of the Grattan claim of 'credible economics', noting:

Even steelmakers, which would love more government support as they struggle to reduce carbon emissions, aren't convinced that millions of tonnes of Queensland steel will one day replace coal on ships for Shanghai.

Hydrogen-produced steel "could be decades away", making coal necessary for the foreseeable future, says Mark Cain, the chief executive of the Australian Steel Institute, the industry's lobby group.

"There needs to be a technological breakthrough."

Our own understanding of the economics of hydrogen production set off alarm bells.

A careful examination of the data in the Grattan report exposes several problematic assumptions:

• Buyers must be willing to pay 60% more for 'green' steel
• Renewable hydrogen must drop in price from US$7.70kg to US$3kg to limit the 'green' steel price premium to 60%
• The cost of producing electricity from wind and solar must drop to almost zero, in order to produce renewable hydrogen at US$3kg, in order to produce 'green' steel at 60% more cost

There's no indication how the cost of renewable hydrogen will be reduced from US$7.70kg to below the US$3kg needed to make 'green' steel economics remotely credible.

The sole goal here is to reduce CO₂ emissions from iron and steel making. But the report confirms that even at an ambitiously low renewable hydrogen price of US$2kg, 'green' steel costs 40% more, equating to an abatement cost of US$150 per tonne of CO₂ avoided.

Given carbon credits are available for around A$16.00, it appears sticking with coal and natural-gas based iron and steel making, and offsetting emissions through the planting of trees, is more cost-effective than the proposed 'green' steel plan.

Before we dive in to the details, it's important to understand a little about 'green' steel.

'Green' steel is made by using renewable hydrogen, rather than coal, to strip the oxygen out of iron ore. The byproduct is water rather than carbon dioxide.

In the Grattan proposal, the steel is 'green' because the hydrogen is made by electrolysing water (splitting H₂O into H₂ and O) using electricity generated by wind and solar. This is called 'green' or renewable hydrogen.

The cheapest and therefore dominant route for industrial-scale hydrogen production is a process called steam reforming which 'cracks' natural gas to produce hydrogen and CO2.

Electrolysis produces no CO2, but is more expensive.

So far, the technical differences are straight forward.

However, when you reach page 20 of the Grattan report, you start to find out just how uneconomic it is to make 'green' steel.

"Hydrogen prices of US$3 per kilogram, which is at the low-range of today’s cost of renewable hydrogen, give a green premium of about 60 per cent for steel..."

Start with steel: A practical plan to support carbon workers and cut emissions
Wood, T., Dundas, G., and Ha, J. (2020). Start with steel. Grattan Institute.

For context, the market price for hydrogen in 2030 is expected to be around $A2.00 to A$2.50kg (US$1.40 to US$1.75), meaning that regardless of how the hydrogen is made, 'green' steel is destined to cost around 40% to 50% more than steel made using coal.

Assuming better than the best

The Grattan report takes the best-case renewable hydrogen cost from the IEA and uses it as its worst-case scenario in a chart on page 21:

Here's a chart from the IEA, the source of the US$3kg reference:

Source: IEA (2019), The Future of Hydrogen, IEA, Paris https://www.iea.org/reports/the-future-of-hydrogen

On that same IEA webpage, you'll also note that hydrogen made from coal or natural gas, with carbon capture and storage, ranges between US$1.50kg and US$2.38kg.

Source: IEA (2019), The Future of Hydrogen, IEA, Paris https://www.iea.org/reports/the-future-of-hydrogen

And closer to home, here's the data from the CSIRO's recent National Hydrogen Roadmap, which shows the cost of 'green' hydrogen from dedicated renewables at around ~A$11kg (~US$7.70kg), which sits within the high end of the IEA range.

Source: Bruce S, Temminghoff M, Hayward J, Schmidt E, Munnings C, Palfreyman D, Hartley P (2018) National Hydrogen Roadmap. CSIRO, Australia.

The Grattan report does not cite a basis for the US$1kg and US$2kg price assumptions and does not say if, when or how renewable hydrogen may achieve these cost points. Unless we've missed something buried elsewhere in the report, they appear to be unfounded.

But, you may think that it's perfectly reasonable to assume that the cost of renewable hydrogen will come down, even if we don't know exactly how, right now. After all, that's what innovation is about. We agree, to an extent, but we need to at least get a ballpark idea of what that cost reduction needs to look like.

How do we work out what needs to happen to actually bring down the cost of electrolytic hydrogen to US$3kg or less?

Luckily, on page 19 of the National Hydrogen Roadmap, it shows us what's required to bring down the cost of hydrogen in the grid-connected scenario.

By examining the following projected cost reduction chart for grid-connected hydrogen, we can understand the tremendous challenge faced by 'green' steel advocates in bringing down the cost of the more expensive dedicated renewable hydrogen production.

The below chart takes the current best-case grid-connected hydrogen cost scenario and breaks down the required cost reduction across the range of influencing factors to arrive at a best-case scenario for the future.

Source: Bruce S, Temminghoff M, Hayward J, Schmidt E, Munnings C, Palfreyman D, Hartley P (2018) National Hydrogen Roadmap. CSIRO, Australia.

Let's assume that improvements in capacity factor, efficiency, plant size and other factors can be delivered as stated.

This leaves the largest single component, electricity cost, which must drop by A$1.17/kg to make grid-connected electrolytic hydrogen affordable and competitive with coal and natural-gas based methods.

Is this required electricity cost reduction feasible?

We need two pieces of information to find out:

1. Electricity required to make 1kg of hydrogen: 50kWh;
2. the grid-connected electricity price for the current best-case scenario on the left of the chart: A6c/kWh (taken from Table 3, further up this page)

Calculation: 50kWh x A6c = A$3 of electricity per kg of hydrogen as the starting point under the best-case grid-connected scenario.

To achieve the A$1.17 reduction from A$3.00 requires a 39% decrease in the cost of electricity, from A6c to A3.66c/kWh.

As shown in the chart below, the last time we had wholesale electricity prices that low was in 2015, before we started closing coal power stations and adding more wind and solar capacity.

What does this mean for likelihood of the cost of dedicated renewable hydrogen generation dropping from A$11kg (US$7.70kg) to less than A$4.29kg (US$3kg)?

Firstly, the assumption of the current electricity price of 6c is the same for dedicated renewable hydrogen as it is for grid-connected hydrogen (Table 3, above). The main difference is the capacity factor, which is unlikely to change much, given this is a function of how often the wind blows and the sun shines. On this basis, we can simply apply the same cost reduction requirement of A$4.21 per kg (US$2.95kg).

Calculation: $11kg - $4.21 = A$6.79 (US$4.75).

How did Grattan miss this simple cost barrier, given the data, is available from the IEA and CSIRO?

Even if electricity from wind and solar cost nothing, the projected improvements across the other factors would only bring the cost of renewable hydrogen down to A$4.96kg (US$3.47kg).

Now, there may be some breakthrough in the pipeline that changes all that. But failing such an unknown breakthrough in the near term, the cost of dedicated 'green' hydrogen is demonstrably too high.

The answer?

CCS hydrogen.

CCS hydrogen is simply hydrogen made from coal or natural gas, with around 95% of carbon dioxide emissions being captured and stored.

The National Hydrogen Roadmap highlights the real export opportunity for Australia to affordably and reliably serve export demand for clean hydrogen by 2030:

Hydrogen production via coal gasification in Victoria’s Latrobe Valley, therefore, represents the most likely thermochemical hydrogen production project.

A prospective plant would have the advantage of an extensive brown coal reserve sitting alongside a well-characterised CO2 storage reservoir in the Gippsland Basin. Pending the success of the proposed HESC demonstration plant in 2020/2021 and subsequent improvements in efficiencies, hydrogen could be produced in the region for approximately $2.14 -2.74/kg under a commercial-scale plant when it comes online in the 2030s.

Source: National Hydrogen Roadmap - Pathways to an economically sustainable hydrogen industry in Australia, page56

And remember, using the Grattan reports own figures, even at this lower price, hydrogen still isn't a cost-competitive way to make steel.

The Opportunity for ECT

Here at ECT, we see two direct opportunities in the context of the emerging hydrogen industry:

1. Coldry, our low-temperature, lignite drying solution, which features zero-direct CO2 emissions, can be deployed as the front end feedstock preparation stage for standard coal gasification technology, which is the stage prior to the standard hydrogen production route known as steam reforming. It's the gateway enabler for lignite-to-hydrogen production.
   
2. COHgen, which stands for ‘catalytic organic hydrogen generation’, is our novel, low temperature, low emissions hydrogen generation technology currently under development that may provide a low-cost alternative to the steam reforming route to produce hydrogen from brown coal.
   
   There is still a lot of work ahead to develop our COHgen process and confirm techno-economic viability at large scale, but we are engaged with various parties involved with the Victorian HESC project, both directly and as a member of the FEnEx CRC – Future Energy Exports Cooperative Research Centre - https://www.fenex.org.au/.

We mentioned above that, even at $2/kg, hydrogen isn’t economically viable for certain applications. Iron and steel making is an example.

We have a solution for that too.

HydroMOR, which stands for ‘hydrogen metal oxide reduction’, is our lignite-based, hydrogen-driven, low-emission primary iron making process which enables the utilisation of alternative low grade and waste resources, improving the economic and environmental outcomes of primary iron production. HydroMOR utilises the Coldry process as its front-end drying and material agglomeration stage.

Importantly, HydroMOR is a way to directly harness hydrogen from lignite for primary iron making, without the need for a separate hydrogen production plant. The hydrogen is generated in-situ from the lignite, within the reactor, providing outstanding efficiencies and CO2 reductions of ~30% compared to blast furnace production.

As mentioned, the Grattan report states 'green' steel will be 60% more expensive even if renewable hydrogen somehow does manage to come in at US$3kg.

Conversely, adopting HydroMOR is estimated to save more than 30% on capital cost and around 15% on operational costs compared to a blast furnace operation, reducing the cost of the finished product.

Let's conclude by paraphrasing Aaron Patrick's question:

"Should the government pour $500 million of our taxpayer dollars into a proposal that may, if currently unknown breakthroughs that reduce the cost of wind and solar electricity are discovered, eventually make hydrogen that makes steel that costs 60% more?"

You be the judge.

Well, yes, we can.

It's called HydroMOR and it replaces expensive metallurgical coal with abundant, affordable lignite (brown coal), delivering lower emissions and, most importantly lower cost.

And this combination of lower emissions and lower cost is the key to successful innovation as we attempt to shift away from the use of metallurgical coal, and indeed fossil fuels altogether.

At present, the ultimate solution is considered to be 'green' steel, made with renewable hydrogen. You see, carbon (in the form of carbon monoxide) is currently the dominant method of converting iron ore into iron. But hydrogen can also do the same job. Unfortunately, this route is more expensive. Green steel will eventually (probably) become economic, but the timeframe is decades from now.

This hasn't stopped some from taking the position that green alternatives for steelmaking are already available.

Over at 'The Conversation' an article by Dominique Hes, Senior Lecturer in Sustainable Architecture, University of Melbourne argues this very point:

Just as thermal coal can be replaced with clean energy from renewables, we can use low-emissions steel manufacturing to phase out metallurgical coal.

The article is in response to the leader of the opposition, Anthony Albanese confirming his belief that coking coal will still be required for steel making for decades, even if our thermal coal exports dwindle as coal-fired power is eventually phased out.

So, who is right?

The answer; depends on the cost.

Before one can claim a solution is at hand, one needs to understand its techno-economic profile for a given set of market conditions.

A techno-economic feasibility study is required to determine both the technical suitability and economic feasibility. Assuming it can do the job, is it cost-effective and competitive with alternatives, in the context of local market conditions?

Unfortunately, discussion of economic performance, when it comes to talking about 'green' steel, is usually omitted, as we previously mentioned here.

Just because something can (technically) be done, doesn't mean it's economic to do so. Some solutions may be economic in some circumstances and not in others, due to locally available raw materials. For example, it makes economic sense to use natural gas in the middle east, where natural gas is cheap and abundant, rather than import metallurgical coal.

In this respect, Hes is absolutely correct in the assertion that we can (technically) use low-emissions steelmaking methods to phase out metallurgical coal, but omits discussion of the most important factor required to make the shift; cost.

Think about it this way; solar-powered flight is now technically possible. They've even managed to circumnavigate the world in a solar-powered plane.

If we left the argument there we'd be 100% correct that we can (technically) travel by solar-powered plane.

However, when you consider the economics, it's not a practical, affordable solution. It took 505 days (technical challenges, poor flying conditions, and a delicate aircraft all contributed to the slow pace) at an average speed of 70km an hour and could only carry two people. It is not economically feasible for solar power to replace fossil-fuel-powered passenger jets. The energy density of sunshine and battery storage is just too low to make it practical and affordable.

Now, we've previously performed a techno-economic feasibility study on our HydroMOR process, comparing it against the cost of the two current dominant primary steelmaking methods (blast furnace and DRI kiln).

It's the only way to know if our HydroMOR process is on track to deliver a lower-cost steelmaking solution.

The outcome?

HydroMOR is cheaper than both the blast furnace and DRI kiln.

Note: The above summary is based on the techno-economic feasibility study for a 500,000 tonne per annum integrated steelmaking facility in India, utilising local iron ore fines and lignite

The important takeaway is that techno-economic feasibility studies provide a measure against which to make decisions.

A core skill for technology developers is learning to fail as quickly and cheaply as possible.

As a new idea advances from a prototype, through the scale-up pathway from pilot, to demonstration and eventual commercial deployment, techno-economic-feasibility needs to be revisited at each point on the way.

If our analysis indicated our HydroMOR technology was likely to be higher cost than the incumbent methods, then we'd have to reconsider further investment in development.

With this approach in mind, let's look at the several technologies flagged by Hes as 'ready' to replace coking coal:

• Tyres: replacing coking coal with tyres and plastic in electric arc steelmaking
• Direct reduction:
  • Midrex
  • Energiron
• Renewable hydrogen: Hybrit

Rubber and plastic

This first approach doesn't deliver low-emissions steel, so much as it displaces metallurgical coal with a source of carbon that may have ended up in a landfill.

Tyres can contain sulphur, zinc and other additives that need to be considered to ensure any negative impact on the composition of the final steel product is minimised.

While additional refining can add time and cost, impacting economic feasibility, there appears to be insufficient publicly available data on the cost of using tyres in steelmaking, so it's difficult to comment further on the economics.

There is also a practical limitation to displacing metallurgical coal with tyres. Despite the huge number of tyres in the world, there's not enough to completely replace metallurgical coal demand.

Globally 1.5 billion tyres are discarded each year. Based on the local experience with rubber injection at the Arrium steel plant, 1 million car tyres offset 15,000 tonnes of coke.

Extrapolated, this theoretically displaces 22.5 million tonnes of coke (equivalent to around 33.75 million tonnes of metallurgical coal, as it takes about 1.5t metallurgical coal to make 1 tonne of coke).

For context, Australia currently supplies around 200 million of the worlds 320 million tonnes of metallurgical coal.

Fully deployed, this tyre technology could shave up to 10% off metallurgical coal demand, which is great for reducing landfill, but can't phase out metallurgical coal completely.

Direct Reduction

Direct reduction is an interim step toward zero-emissions steel making.

The two processes mentioned, Midrex and Energiron, are both in commercial operation.

Midrex can be configured to use coal, natural gas or hydrogen. The pitch by Midrex is for end-users to establish a facility using natural gas then move to 100% hydrogen when it becomes available and affordable.

Energiron is designed to take natural gas and crack it via a nickel catalyst to produce hydrogen and carbon monoxide, which is used to reduce the iron ore to iron.

Both have lower CO₂ footprints than a blast furnace.

HydroMOR is lower.

Sources: V G Lisienko et al 2016 IOP Conf. Ser.: Mater. Sci. Eng. 150 012023 & MN Dastur modelling of HydroMOR

The key takeaway: technology selection depends on a careful assessment of the available raw materials and the cost of production, relative to alternative methods and materials.

In regions with abundant, low-cost natural gas, Midrex and Energiron should naturally be considered.

In regions with abundant, low-cost lignite, HydroMOR is a strong contender.

‘Direct reduction’ from renewable hydrogen

Direct reduction from renewable hydrogen is seen as the ultimate goal in the quest for zero-emissions steel making.

Hes makes two distinct points in the article:

"The key message is this: it is possible to create low-emissions steel, without metallurgical coal. And it is already happening."

and

"... there’s no reason these fossil fuels can’t be entirely replaced with renewable hydrogen in the near future."

On the first claim, we agree with Hes. The use of natural gas by Energiron and Midrex are two examples. The use of lignite by HydroMOR is another (more on HydroMOR further down).

On the second claim, there is one consideration preventing the entire replacement of fossil fuels in the near future with renewable hydrogen: cost.

Unfortunately, nowhere in the article is the cost of renewable hydrogen mentioned. And given cost is the single biggest factor that needs to be overcome when commercialising new technologies, especially in commodity markets like iron and steel, it should be front and centre in every discussion. Otherwise, how do we know what we're aiming for? How do we measure progress or success?

So let's briefly touch on the cost of renewable hydrogen:

• ‘Renewable hydrogen’ is made using electricity generated by wind turbines and solar panels
• According to BNEF, ‘green’ steel becomes economic when the renewable hydrogen cost drops below USD2.20kg (AUD3.25kg) and metallurgical coal rises above USD310 per tonne (AUD435t), which they believe is possible by 2030
• The CSIRO's figures disagree with BNEF's, estimating that renewable hydrogen generation in Australia will drop in cost from AUD 11.00kg today, to AUD 6.79kg by 2030 (chart, below), while CCS hydrogen made from brown coal is already in the desired price range

Source: Data from the National Hydrogen Roadmap - Pathways to an economically sustainable hydrogen industry in Australia, Bruce S, Temminghoff M, Hayward J, Schmidt E, Munnings C, Palfreyman D, Hartley P (2018) National Hydrogen Roadmap. CSIRO, Australia.

At the crux of the issue is energy density. Coal and natural gas are energy-dense and the infrastructure required to harness that energy and convert it to hydrogen is relatively cost-effective and compact, even with carbon capture and storage (CCS).

Conversely, while sunshine and wind are free, they are extremely diffuse and the infrastructure required to harness them to generate the electricity required to power the electrolysers to split water is relatively expensive and highly distributed.

Renewable hydrogen to supply green steel is absolutely technically possible but steelmaker Arcelor Mittal has acknowledged that industrial scale-up is likely to take 10-20 years and the cost of the steel is projected to be some 60 to 90 per cent higher than existing methods, calling into question not only the timeframes but fundamental economic feasibility.

Swedish steelmaker SSAB has embarked on a program to develop the ‘Hybrit’ process, as Hes mentions. SSAB's program aims to deliver a 1-2 tonne per hour pilot plant at a cost of AUD 210 million, then scale to commercial capacity by 2035 at an estimated cost of 20 to 30 per cent more per tonne of steel than existing methods.

To summarise, yes it is absolutely technically possible to make steel with hydrogen made using electricity generated by wind and solar.

But, with all due respect to Hes, the high cost presents a good argument as to why this won't happen in the near future and certainly isn't ready to replace metallurgical coal today.

HydroMOR

What is possible today is our HydroMOR process.

HydroMOR is an alternative, lower-cost, hydrogen-driven, lignite-based iron making process, currently under development that can help bridge the gap between today’s CO₂-intensive steelmaking methods and tomorrows zero-emissions solutions.

HydroMOR achieves this through the clever use of lower-cost, abundant, alternative raw materials and an innovative chemical and process pathway.

By combining lignite (brown coal) with iron ore fines we’re able to produce a composite pellet that enables the low temperature (<900C) reduction of iron ore, reducing capital and operating costs and CO₂ emissions.

The pelletisation process is performed by our Coldry technology, efficiently removing most of the moisture from the lignite on the way through.

The composite pellets are charged to a proprietary furnace and heated.

This is where the ‘magic’ happens.

Unlike coking coal, lignite is rich in volatile matter, consisting of organic hydrocarbons.

HydroMOR harnesses the natural chemistry of lignite, turning those hydrocarbons into gas, which is then 'cracked' to free the hydrogen, which in turn reacts to strip away the oxygen from the iron ore, leaving pure iron (Fe). And because all this happens in-situ from within the pellet, the process is relatively quick and very efficient.

Uniquely, HydroMO's ability to convert the iron ore to iron via an in-situ hydrogen reaction, eliminates the need for external hydrogen generation or storage, creating a direct reduced iron pellet, pictured below.

The resulting gases are used to heat the process, which is designed to be self-sustaining in most cases. Waste heat from the furnace is harnessed to provide drying energy for the Coldry stage.

Further, HydroMOR achieves reduction at a lower temperature than the blast furnace or rotary kiln routes and in significantly shorter timeframes.

HydroMOR can also process iron ore fines or mill scale, which are considered lower-value than premium lump iron ore and often considered waste.

So, steel can be made without metallurgical coal.

And green steel made from renewable-generated hydrogen may one day be affordable.

Until then, lower-cost innovations such as HydroMOR can help bridge the gap between today's use of metallurgical coal and tomorrows hydrogen future.

Hot on the heels of the Federal Labor party's renewed commitment to net zero-CO₂ emissions by 2050, the federal coalition government has recently announced a significant shift on climate policy; a shift they describe as 'more gas and more tech — not taxation — as the way to support cheaper and low emission climate solutions without damaging the economy'.

It's already proving divisive.

Today, the ABC reported:

Research programs into wind and solar could be dumped by the Federal Government in favour of emerging technologies in hydrogen, lithium and reducing or storing greenhouse emissions from major industries, the Energy Minister says.

Wind and solar advocates (the recipients of several decades of mandates and subsidies) are circling the wagons, clearly worried at the loss of 'guaranteed' returns, despite claims they're cheaper than coal and gas.

The rationale behind the shift?

According to the ABC article, the Commonwealth has invested $10.4 billion into more than 670 clean technology projects, but a change of direction was needed.

Why is the change in direction needed?

To date, there's been a heavy focus on tackling the largest source of CO₂ emissions; the electricity sector.

Mandates and subsidies for wind and solar have formed the centrepiece, helping establish wind and solar in the market, and achieving the scale necessary to bring their cost down.

The result has been a significant increase in wind and solar capacity.

Unfortunately, this has also coincided with an increase in electricity cost.

Wind and solar capacity deployment (along with the closure of Hazelwood brown coal power station in 2017) has undoubtedly helped reduce electricity sector CO₂ emissions.

But public support designed to develop and commercialise new technologies must eventually taper off and come to an end, either because they aren't performing as expected (failure), or because they've achieved commercialisation (success) and no longer need propping up.

In the apparent move away from wind and solar contemplated by this new policy, which is it; failure or success?

The following comment from Energy Minister, Angus Taylor suggests financial support for wind and solar has reached the point of diminishing returns.

"We must be comfortable changing horses mid-race if they don't perform as expected."

However, the CSIRO and AEMO claim new wind and solar are cheaper than new coal and gas projects, indicating success.

“Our data confirms that while existing fossil fuel power plants are competitive due to their sunk capital costs, solar and wind generation technologies are currently the lowest-cost ways to generate electricity for Australia, compared to any other new-build technology,"

CSIRO chief energy economist Paul Graham

The Climate Council, referring to a report by Bloomberg New Energy Finance (BNEF), takes it one step further, claiming new wind and solar are as cheap as existing coal and gas.

This is a critical inflection point. Due to the continued fall in the cost of wind and solar, as well as the higher international price for black coal, it is now the same cost or cheaper to build a new wind or solar plant in Australia than to continue operating old coal power stations in New South Wales and Queensland.

That is a highly qualified statement. If black coal export prices fall (as they often do across the commodity cycle), then the claim is invalid. And it doesn't hold true for brown coal generators, because brown coal prices aren't export-linked.

Having said that, if new wind and solar is cheaper than existing coal and gas or new coal and gas, then fantastic! It means the past several decades of mandates and subsidies have achieved their goal. Wind and solar are now commercially mature and able to stand on their own, right?

In which case the government's decision to switch the policy focus away from established or underperforming technologies and on to emerging technologies that can facilitate the development of solutions for new challenges such as hydrogen industry advancement, or tackling agricultural emissions, makes complete sense.

But judging by recent comments from some well-known renewable energy advocates, it appears they are critical of the new policy focus.

Yet given claims that wind and solar are as cheap as coal and gas, wind and solar advocates can't demand ongoing mandates and subsidies without calling these claims into question. They need a different angle of attack to keep mandates for wind and solar. The 2050 zero-emission target is just the ticket.

Simon Holmes à Court, senior advisor to the Climate and Energy College at Melbourne University and a member of the board of the Smart Energy Council penned a scathing attack on the policy shift late last week.

At the crux of his argument was that the government's new policy lacked targets and without a target of zero net CO₂ emissions by 2050, it means we're not serious about keeping global warming under 2C.

Let's examine if this is the case.

He paints a picture of global action to imply we're breaking stride with the rest of the world:

"So far, at least 77 countries have committed to the target..."

We look at why this statement is misleading, in a moment. Meanwhile, it's important to understand why Holmes à Court attacks Bjorn Lomborg:

The greatest proponent of the frame is Danish political scientist Bjorn Lomborg, one of a small cadre of almost respectable climate obfuscationists.

Lomborg is a leading critic of the effectiveness of the Paris agreement and a vocal proponent of the technology investment approach being adopted under the government's new policy.

Considering that both Holmes à Court and Lomborg agree on the cause of climate change, why does Holmes à Court resort to name-calling?

Simply, Lomborg diverges on what the most appropriate, cost-effective policy response may be. But rather than argue Lomborg's actual position, Holmes à Court takes aim at the man. Such attacks are a sign of a weak argument.

Holmes à Court does try to appear to argue Lomborg's position by referring to a 2009 proposal by Lomborg. But upon closer inspection, this is just a strawman in the context of discussing the government's current energy and emissions policy shift toward technology-led solutions, rather than tax-led solutions.

The point Holmes à Court should be arguing is presented in Lomborg's 2015 paper, Impact of Current Climate Proposals.

In that paper, Lomborg uses IPCC models to assess the Paris agreement targets, concluding that success results in a mere 0.17 degrees less warming and is, therefore, a highly costly treaty that will change little in terms of temperature by 2100.

He logically claims it’s more cost-effective to invest in R&D and adaptation.

Conversely, Holmes à Court is very selective in presenting information to support his opinion, omitting important elements that are crucial to context.

For example, when he mentions 77 countries have “committed to the [2C] target”, he fails to explain that the commitments are non-binding and, according to Climate Action Tracker, only Morocco is on track to meet a commitment that’s compatible with 1.5C and only Costa Rica, Kenya, Ethiopia, India, Bhutan and the Philippines have commitments deemed compatible with 2C.

Quoting the 77 number to lead the reader to believe there is overwhelming action in support of the Paris agreement target is meaningless when you consider only 7 are deemed to be taking action that’s compatible with the Paris agreement 2C target.

But even the notion of what constitutes ‘compatible action’ is often misunderstood.

Bear with us while we dive into some of the detail.

The Paris agreement seeks to limit warming to 2C, with efforts to achieve 1.5C. This entails stabilising CO₂ at 450ppm. We're currently at 414ppm.

A global budget of 1700Gt CO_2e between 2000 and 2050 is projected to give a 67% chance of keeping temperature rise below 2C.

Stabilisation at 450ppm in the context of a population expected to grow from 7.8 billion to 9.7 billion entails lowering CO₂ emissions per capita to 1.5t per year. For context, the global average CO₂ per capita is currently around 5t.

Australia’s fair share of the 1700Gt CO₂ budget was determined to be 10.1Gt (0.6%) over the 2000-2050 period. We currently account for 1.3% to 1.5%.

Australia’s Climate Change Authority identified a 'modified contraction and conversion' approach designed to achieve our share of the effort in delivering equal-per-person emissions of 1.5t globally by 2050. A meagre ration in the context of Australia's current ~12t CO₂ per capita.

Under the Paris agreement, the rest of the world is meant to take a similar approach to identify targets to achieve the same 1.5t CO₂ per capita outcome, with developing nations allowed to emit more in the short term, to catch up.

But, as Climate Action Tracker and Lomborg’s analysis suggest, while the targets may be able to deliver equal-per-person carbon emissions, they won't deliver the 2C limit objective of the Paris agreement.

Which brings us back to Holmes à Court's argument against the shift in policy and against Lomborg, for his ability to rationally articulate the case for the technology investment approach which the government seeks to adopt:

If you’re committed to the Paris agreement – to keep the increase in global average temperature to well below two degrees above pre-industrial levels, and pursue efforts to limit the increase to 1.5 degrees – then at a minimum, logically, scientifically, you’re committed to net-zero carbon emissions by 2050.

Simon Holmes à Court

To appreciate where Holmes à Court is coming from it helps to understand what drives the 2C threshold.

This is where you need a little awareness of climate modelling. Specifically, Representative Concentration Pathways, or RCP's and what they mean for temperature projections.

Scenario	2100 Mean (likely range)
RCP2.6	1.0 (0.3 to 1.7)
RCP4.5	1.8 (1.1 to 2.6)
RCP6.0	2.2 (1.4 to 3.1)
RCP8.5	3.7 (2.6 to 4.8)

Basically, if we keep CO₂ concentration at no more than 450ppm as shown below in RCP2.6 we keep temperature rise to 1C i.e. the way it is right now. Not likely, given the Paris agreement commitments entail absolute increases from India and China.

In terms of meeting the Paris agreement target of 2C, we have 1C of 'buffer' left, implying RCP4.5 is the limit.

So who is right, Holmes à Court or Lomborg? Can the Paris agreement deliver? Let's see what others may have to say.

The 'Breakthrough Institute' concludes:

The world is on a path to warm around 3C above pre-industrial levels by 2100 under policies and commitments currently in place. This is a far cry from the 1.5C and 2C targets enshrined in the Paris agreements, but is also well short of the 4C to 5C warming in many “business as usual” baseline scenarios that continue to be widely used.

They go on to note:

... the International Energy Agency (IEA) 2019 World Energy Outlook (WEO) and the UN Environment Program (UNEP) 2019 Emissions Gap Report — both reflect current trends in clean energy technology costs and deployment and make the case that global emissions will be relatively flat over the next few decades. These estimates are on the low end of those in the latest set of fully integrated baseline scenarios featured in the energy modeling literature that intend to depict a world without climate policy — the Shared Socioeconomic Pathways (SSPs), developed for the upcoming 2021 IPCC 6th Assessment Report (AR6).

In short, they find that IEA numbers imply that the most likely outcome of current policies is between 2.9-3.4C warming — which is reduced to around 2.7-3C warming if countries meet their current Paris Agreement commitments. This suggests a more optimistic reduction of 0.2C to 0.4C, compared to Lomborg's analysis of 0.17C.

There are uncertainties surrounding this projection, of course. For one, there are uncertainties in the sensitivity of the climate to rising CO₂ concentrations that mean emissions expected to produce warming of around 3C could result in warming as little as 1.9C or as much as 4.4C.

But the conclusion does align with Lomborg's analysis that the Paris agreement commitments if met by all countries, will cost a lot and fail to keep the temperature rise under 2C, while refuting Holmes à Courts insistence that sticking with the Paris agreement targets will keep temperature rise below 2C.

The key is to invest in innovation.

Hydrogen technology development is flagged as the next big energy sector that can lead to deep cuts in transport emissions, provide storage for unreliable wind and solar and potentially replace natural gas.

Investment in technologies that can enable affordable, reliable hydrogen production, distribution and use in a manner that's competitive with current energy mainstays like petrol and natural gas, makes great sense.

Here at ECT, we have four technologies in various stages of development that we believe can help bridge the gap through the cost-effective mitigation of CO₂ emissions across a range of energy and resource applications:

1. Coldry: our unique zero-emission lignite drying process is the cost-effective gateway enabler for CCS hydrogen
2. COHgen: our unique low-emission process for generating hydrogen from lignite
3. HydroMOR: our unique low-emission iron making technology that replaces expensive coking coal with abundant, affordable lignite
4. CDP-WTE: our recently acquired waste-to-energy process that converts low-value and waste hydrocarbons such as wood chips, end-of-life plastics and lignite, to diesel

Importantly, our technologies are designed to improve the economic benefits as well as the environmental outcomes of low-grade, low-value and waste resources as we transition to a low-emissions future.

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