Origin Energy joins green hydrogen revolution with Tasmania project

Origin Energy is working on a green hydrogen project in Tasmania’s Bell Bay, one of many Australian developments aiming to build a new export industry.

Origin’s Tracey Boyes at Bell Bay in Tasmania: ‘The question is: how soon can we make this happen?’ Picture: Peter Mathew

In Tasmania’s Bell Bay an energy revolution is under way. Some of the nation’s biggest players have piled into the industrial precinct, racing to develop green hydrogen and ammonia plants that could fuel a major export industry for Australia.

Alongside separate projects at Bell Bay from billionaire Andrew Forrest’s Fortescue Metals Group and gas giant Woodside Petroleum sits Origin Energy, which aims to make 420,000 ­tonnes a year of zero-emissions ammonia for overseas buyers.

It’s among dozens of projects looking to gain a foothold in a booming industry, seen as a cleaner alternative to gas and critical for cutting carbon emissions to meet pressing climate change goals.

“The reason why hydrogen is interesting for the energy industry is because of decarbonisation in many ways,” Tracey Boyes, Origin’s head of future fuels and growth, told The Australian from Bell Bay, near Launceston. “The journey started three years ago when people started talking about hydrogen again and we decided to lift the lid and see if there was an opportunity for us. Back then the question was: is this something that’s going to happen? Now the question is: how soon can we make this happen?”

Across Australia a dizzying array of projects are in the pipeline as companies and investors look to capitalise on ample renewable resources to develop an industry that’s become a key plank of the Morrison government’s technology-led solution to reach net-zero emissions. Australia is targeting becoming a global hydrogen player by 2030 and a top-three ­exporter of the fuel to Asian markets.

For Origin, Tasmania is an obvious place to start. It offers ample renewables and hydropower resources, access to sustainable water, power transmission and port access to ship ammonia to international customers. The power giant is close to completing a feasibility study on its Bell Bay hydrogen plan, and if it stacks up from a technological and commercial perspective, first production could start by 2025.

Multiple pieces of the hydrogen “jigsaw” still need to be finalised, with Origin in talks with existing renewable developers about supply deals. It’s also working on shared infrastructure to avoid a repeat of its experience in Queensland’s Gladstone, where three LNG plants including Origin’s APLNG were built alongside each other at huge cost.

“It’s actually like a 5D jigsaw puzzle,” Ms Boyes said. “You’ve got to think about all of the levers and pulling all of them as hard as you can at once and seeing if you can get there. If not, you need to see what you can tweak in and around that.”

With the industry in its infancy in Australia, getting projects off the ground will not come cheap. Origin’s plan for a 500 megawatt plant to produce the 420,000 tonnes of ammonia annually could cost up to $1bn, according to some estimates, a big bet given uncertainty over how quickly demand for the fuel will grow this decade.

The price of green hydrogen — which taps renewable energy sources to split hydrogen from water, and then transport it as ammonia — is currently much higher than hydrogen sourced from gas, while shipping is also high cost.

That would add up to lower returns compared with its gas business, Origin said, and partly reflects a lower-risk manufacturing model that will shape the hydrogen industry.

“These first few projects we won’t be making millions of dollars on,” Ms Boyes said. “For these early developments, it’s definitely about learning and not making a loss. Hydrogen is just manufacturing really.

“It’s actually a fairly simple process once you’ve got the plant set up and you’ve got your offtake. There’s not a level of risk in there and uncertainty that you might get with other projects, so we wouldn’t be expecting as high a return at any rate.”

Given the hype that hydrogen can help cut emissions for steelmakers, provide an alternative transport fuel and be used for electricity generation, Origin is among industry players casting its net wide.

It’s part of a green hydrogen demonstration plant with Jemena in western Sydney and has plans to build a hydrogen export plant in Townsville with Japan’s Kawasaki Heavy Industries. The 300MW electrolyser will produce 36,000 tonnes of liquid hydrogen a year for both export and domestic supply.

It’s also signed a deal with the world’s biggest LNG carrier, Mitsui O.S.K. Lines, to work on developing the supply chain for export-scale green ammonia from Australia by 2026. Pacts have been agreed with South Korean steelmaker Posco to supply green hydrogen to the nation and with Japanese refiner Eneos to investigate a supply chain between the two countries.

Origin wants to be able to capitalise on its position as a powerful player in Australia’s energy industry while keeping its options open, depending on how quickly projects and technologies develop. Hydrogen production at large scale may still be a decade away, according to some experts, and Ms Boyes said it was challenging to make a definitive call just yet on commercial timelines.

“It might be five to 10 years but it’s really hard to tell because there are lots of different ingredients that can play out in lots of different ways,” Ms Boyes said, noting the costs of renewables and electrolysers along with a potential carbon tax among factors to consider.

“They all have different impacts on the timing of hydrogen,” she said.

“What I’d say is absolutely the industry needs support right now, just like renewables did in the early days. But I think we see enough opportunity to get after it now.”

Originally published as Origin Energy joins green hydrogen revolution with Tasmania project