10 November 2021
#Renewable Energy, #Transport, Shipping & Logistics
With growing pressure on countries to reduce emissions and meet decarbonisation targets across the globe, interest in renewable energy sources has spiked in recent years. Hydrogen has received significant attention as an efficient green fuel and is touted as Australia’s next superhero export.
In September, Holding Redlich partners David Harley and Vanessa Maruna were joined by industry panellists Nicolas Fertin from North Queensland Bulk Ports, Alana Barlow from Sumitomo Corporation and Matt Walden from the Australian Renewable Energy Agency (ARENA) to discuss the rise of hydrogen as the fuel of the future. The conversation focused on the opportunities and challenges associated with decarbonising the hydrogen supply chain, as well as the important role of ports in developing Australia’s hydrogen industry.
Hydrogen energy is not a new concept and has been around for several decades. However, the opportunity to utilise hydrogen as a green, renewable energy source is only now being appreciated.
The panel identified both the environmental and economic opportunities of hydrogen adoption. The global market for hydrogen is forecast to become a trillion-dollar economy and, in Australia alone, it is estimated that hydrogen will contribute $11 billion annually to GDP by 2050. While the future of hydrogen in Australia presents a massive export opportunity, there is also an opportunity for hydrogen to play a significant role in decarbonising Australia’s domestic industries. The panel discussed the potential for hydrogen to become the fourth pillar of our economy, joining the likes of resources, tourism and farming.
Throughout the discussion, the panellists agreed that Australia has an opportunity to leverage its competitive advantages within the wider hydrogen market. Australia is well-positioned to scale up its hydrogen production given the availability of land, access to water, largely untapped renewable energy sources and great track record of reliable supply chains upon which many economies around the world depend. Furthermore, Australia has several major ports along coastlines exporting resource commodities, many with the existing infrastructure that can be used or adapted to export hydrogen.
To service international demand, Australia needs to first develop domestic hydrogen use cases. Establishing a viable domestic market will lay the foundation for improved production economies and attract private capital to support innovation, all of which can be supported by domestic government policies. The panel drew parallels with the establishment of the liquefied natural gas (LNG) industry. Domestic adoption was used by the LNG production industry in its infancy to secure economic efficiencies before launching into global export markets, and this approach should be considered for hydrogen.
The key stakeholders in creating Australia’s domestic market will be governments, financiers, developers and regional users of hydrogen. Ports will also play an important role because not only do they house critical export infrastructure, the ports themselves are large energy consumers and so they can help build the base case for hydrogen demand. Furthermore, the panel discussed the suitability of ports as hydrogen hubs, that is, a region where hydrogen users, producers and exporters are co-located.
Hydrogen hubs have the potential to make infrastructure more cost efficient and foster innovation and synergies in energy production and delivery in both domestic and export contexts. Port precincts are well-suited to fostering hydrogen hubs due to their significant footprint, water supply, power connectivity and export corridors.
The future is bright for Australia’s domestic hydrogen adoption. However, the panel acknowledged some key considerations and flagged potential challenges.
Australia is fortunate to possess the fundamentals required for hydrogen production, but there will be challenges along the way. Hydrogen hubs require large land areas, so setting aside space is a key consideration for ports during master planning processes.
From a regulatory perspective, Australia does not yet have planning regimes specific to hydrogen in place, and it will be a while before specific policies are developed, so some retrofitting will be required. However, ports tend to have their own planning schemes in place, which presents an opportunity for ports to proactively cater for hydrogen adoption in the near future.
The development of Australia’s LNG industry has presented a raft of lessons the hydrogen industry can learn from, notably the duplication of expensive infrastructure by competitors. There is an opportunity for greater collaboration and the development of common use infrastructure this time around.
The panel also noted the growing focus on the carbon footprint of the entire supply chain, including port operations. There is a risk that if ports do not start reviewing their operations and introducing carbon reduction strategies, users may increasingly be unwilling to put goods through the port.
The panel agreed that, now more than ever, those in the energy and resources sector need community support and a social licence to operate. Ports cannot disassociate themselves from the communities in which they operate because once a social licence is lost, it is extremely difficult to get back.
A lesson learned from the LNG uptake was that where communities were engaged and continually consulted throughout the project, operations ran more smoothly because of the community buy-in and support. The panel recognised that while people may generally be ambivalent towards hydrogen at present, they are not ambivalent about the impact of large industries coming to town. Consultation will be key as there is a real opportunity to showcase the benefits of hydrogen, particularly the environmental opportunities associated with it.
The panel agreed that the adoption of hydrogen would be a transitional journey. It will not happen overnight or tomorrow, but will take many years. While the potential for the hydrogen industry in Australia is tremendous, key factors for success will include regulation and policy, collaborative development of infrastructure and the speed of the consumer energy transition.
If you would like to listen to this discussion, please watch our on-demand webinar. You can also speak to us or contact us here if you have any questions about this article.
Authors: David Harley, Krystal Bentivoglio & Ally Frizelle
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