Investor News

Hydrogen-fuelled election bid

A federal election is tipped for May, and the Labor party has released a hydrogen-fuelled jobs pitch for votes.

The below article by Ben Potter in the AFR highlights Labor’s policy.

The pitch involves the allocation of $1 billion of taxpayer funds toward the delivery of a plan aimed at supporting the development of the solutions needed to kick-start our hydrogen industry.

What’s most surprising in the policy is the support for both ‘green’ and ‘brown’ hydrogen.

This is a welcome surprise. It shows that Labor is aware of the underlying challenges facing scale-up of this new industry.

What is ‘green’ and ‘brown’ hydrogen?

Simply, 'green' hydrogen is produced using 'spare' wind or solar power to split water molecules via a process called electrolysis, which has no CO2 emissions.

Electrolysis uses a lot of electricity, making it very expensive at large scale, hence the ‘spare’ wind or solar electricity would bring that cost down because it's energy that would otherwise go to waste if not used.

'Brown' hydrogen is proposed to be produced from brown coal via a method similar to that of the currently dominant 'steam reforming' process which uses natural gas and water as its raw materials (accounting for >90% of the current hydrogen market). The idea is, that brown coal is a cheaper raw material than natural gas.

However, renewable advocates want us to think the choice is either 'green' or 'brown' hydrogen. They will criticise the allocation of $40 million of that $1 billion for developing technology to store CO2 from fossil-fuel powered hydrogen production.

But, is that criticism justified? Does it really come down to a fight between only two choices?

The key to answering this question is stated within the article:

Labor is touting the nascent hydrogen energy sector as the next big employer of blue-collar workers in Queensland as it unveils a $1 billion "national hydrogen plan" to tap a new $10 billion export opportunity.

The article then goes on to say:

This will "turbocharge" the fast-growing renewable energy sector by providing clean back-up power for when the wind isn't blowing and the sun isn't shining, Labor says.

The policy is promoting two distinct outcomes, which are very difficult to balance; export hydrogen and domestic hydrogen.

We only need to look at our own natural gas industry to see what happens when there's tension between export and domestic demand; high domestic gas prices.


The anticipated $10 billion hydrogen export opportunity for Australia is expected to materialise by 2028 and builds on the current global industrial market for hydrogen, which is already worth around USD129 billion a year (2017).

The main application for our exported hydrogen would be the transport sector.

For example, Japan is investing heavily in the development of hydrogen fuel cells, essentially aiming to displace internal combustion engines (and the oil they rely on) and competing with battery electric vehicles.

Domestic firming

Most people understand that wind is intermittent; low capacity and high fluctuations. On average we only manage to get 30% from our installed wind capacity. Solar also has a low average capacity of 25%, but fluctuates less dramatically.

That intermittency means we don’t always have enough electricity flowing from wind and solar at times of demand. This means we need a certain amount of dispatchable power on stand-by, ready to kick in at a moment’s notice. At present, natural gas-fired power and hydro power are the two main sources of back up.

Batteries are touted as a solution, but that’s expensive compared to say, pumped hydro.

Conversely, there are times when the wind is blowing, and no one needs the electricity. Usually at night. The idea of ‘green’ hydrogen is to use that unneeded electricity to split water molecules via electrolysis.

The hydrogen is then stored and, when electricity demand increases and there’s not enough wind output, the energy in the hydrogen is ‘sent’ to the grid via fuel cells.

But it only makes sense economically if you use ‘spare’ wind and solar output from existing capacity. This is the basis for ‘green’ hydrogen.

At the industrial scale, the 'steam reforming' process is cheaper than the electrolysis of water.

The problem with the steam reforming route is it produces a lot of CO2 which, in carbon-constrained markets, needs to be either offset or captured and stored. That adds cost.

To be commercial in the transport market, hydrogen needs to match or beat the price of alternatives; petrol, diesel and direct charging of battery electric vehicles.

To be commercial in the electricity storage market, hydrogen needs to be cheaper than alternatives; battery storage or pumped hydro.

At ECT, we agree that hydrogen presents an incredible opportunity. And the proposed investment in advancing production, storage and distribution solutions is essential if hydrogen is to become cheap enough to replace petrol in the transport sector or provide a cost-effective energy storage solution for our power grid.


We've been pursuing fundamental research on a potential new hydrogen generation process from brown coal, called COHgen; Catalytic Organic Hydrogen generation.

Data is still being collected and hypotheses tested, but if we're right, COHgen may just provide a cheaper hydrogen generation method than the current gasification-steam reforming route.

In addition to potential cost savings, the CO2 intensity of COHgen is expected to be much lower. How much? We’re still experimenting. But it appears that most of the carbon in our process ends up in solid form as a fine carbon powder. This carbon 'by-product' in itself may have potential value in the iron and steel making markets.

Crunching some numbers

If renewable advocates demand we abandon ‘brown’ hydrogen, it begs the question: Is there enough 'spare' wind (or solar) capacity to supply domestic backup needs and fulfil off-take agreements worth $10 billion a year?

Let’s start by figuring out how much hydrogen we need to make to be able to export $10 billion worth.

Based on this ACIL Allan report, which projects the landed price of Australian hydrogen in Japan to be A$4.61kg (2025), that's around 2.17 billion kilograms.

How much electricity would it take to make that much hydrogen?

A back-of-envelope calculation:

  • It takes around 50kWh of electricity to make 1kg of hydrogen via electrolysis. Advances in efficiency are targeting 43kWh per kg in the next few years.
  • Assuming the 43kWh/kg target is achieved, ~93.3TWh of electricity is required to make 2.17 billion kg of hydrogen.
  • The NEM generated 260TWh in 2017. Wind accounted for 12.7TWh.
  • That 93.3TWh would require ~35,500MW of new wind capacity to be added to the current ~5600MW and any other wind capacity envisaged specifically for electricity generation.
  • At 3MW each, we'd need 11,835 wind turbines added to our existing network at a cost of over $25 billion (assuming the cost per MW installed is ~$A2.25 million).

The numbers for taking a solar approach are much worse.

This creates a systemic problem that renewables advocates seem to be ignoring.

The more wind and solar we deploy for domestic electricity generation, the more firming backup power we need. And the more hydrogen we need to firm up unreliable wind and solar, the less we can export.

And the moment you depart from using 'spare' renewable capacity and build dedicated wind and solar capacity the cost of 'green' hydrogen skyrockets.

On the other hand, 'brown' hydrogen can be scaled to provide dedicated, cost-effective hydrogen production on a reliable, scheduled basis to meet export contracts, without threatening domestic backup supplies.

The bottom line

There's no doubt that hydrogen produced from fossil fuels will have a CO2 footprint that will either need to be offset or captured and stored, at a cost.

There is no doubt that the amount of 'green' hydrogen produced from 'excess' wind and solar will be unpredictable and insufficient, making it difficult to enter contracts for off-take, while threatening domestic needs.

If our COHgen technology proves to be scalable and economic, it could provide an alternative to the current CO2-intensive 'steam-reforming' process. Lower CO2 means less to offset or capture and store, resulting in lower-cost ‘brown’ hydrogen production.

At the very least, if COHgen isn't commercialised, brown coal still needs to be dried before it's gasified. And our Coldry solution is the ideal front-end enabler for a lower cost traditional 'steam-reforming' hydrogen plant.

If we are to deliver on the dual outcomes of the Labor policy; hydrogen exports and domestic hydrogen-based firming, then we need both 'green' and 'brown' hydrogen in our arsenal.


Hydrogen the 'next big employer': Labor announces $1b plan

22 January 2019 | The Australian Financial Review | Ben Potter

Labor is touting the nascent hydrogen energy sector as the next big employer of blue-collar workers in Queensland as it unveils a $1 billion "national hydrogen plan" to tap a new $10 billion export opportunity.

The plans include a "national hydrogen innovation hub" to make Gladstone – about 500 kilometres north of Brisbane on Queensland's coast – Australia's hydrogen capital and kick-start commercialisation of the long-anticipated but elusive energy storage technology.

This will "turbocharge" the fast-growing renewable energy sector by providing clean backup power for when the wind isn't blowing and the sun isn't shining, Labor says.

Source: Hydrogen the 'next big employer': Labor announces $1b plan