Plenty of hurdles for much-hyped hydrogen industry

Demand for hydrogen globally is low, costs are high, and there remain regulatory challenges to overcome for the nascent but much-hyped industry to succeed.

Demand for hydrogen globally is low, costs are high, and there remain regulatory challenges to overcome for the nascent but much-hyped industry to succeed, the Australian Petroleum Production & Exploration Association’s annual conference has heard.

There is also no global consensus or standard for what constitutes green, blue, grey and black hydrogen, with these labels used to describe the relative carbon intensity of hydrogen produced using, at one end, renewable energy, through to coal.

The oil and gas industry, with its expertise in areas such as pipelines, infrastructure management and the production and transportation of gases, is a natural fit to drive the evolution of the hydrogen industry, the conference has heard.

But while hydrogen ambitions are high – evidenced by the $2bn Hydrogen Headstart program announced in last week’s federal budget and projects such as the South Australian government’s $593m hydrogen hub slated for development at Whyalla – there are numerous hurdles to overcome.

Chief among these was finding customers for the many proposed hydrogen projects around the world, and safely and cost-efficiently transporting the gas once it is produced.

BloombergNEF senior associate – hydrogen Kathy Xitong Gao told the conference that cost and demand were the key issues.

“This is the real struggle for hydrogen right now, the slow pick-up from the demand side,’’ she said.

“(And) the transportation of hydrogen is a big issue, and to liquefy hydrogen is still very, very expensive. It’s around $US5-$US7 per kilogram, so it’s very ­expensive.’’

Ms Gao said transporting hydrogen as ammonia could reduce this transportation cost to about $3 a kilogram. But the overall process remained expensive.

Industry commentators often talk in terms of green, blue or grey hydrogen – with the latter two involving stripping hydrogen out of natural gas, with or without the use of carbon capture and storage. But Chevron Australia general manager energy transition David Fallon agreed there was no standard for what these terms meant.

Mr Fallon said there was a preference to move away from these simplistic definitions in favour of talking about the “carbon intensity’’ of the hydrogen being produced, and said Australia’s Clean Energy Regulator had been tasked with putting in place an appropriate mechanism to ­facilitate that.

“We all want to get to the lower carbon future and we need to focus on lower carbon intensity fuels rather than specific colours,’’ Mr Fallon said.

Deloitte partner Matthew Walden told the conference that low-emissions hydrogen was emerging as a key element in the pathway to net zero, but said costs and regulatory issues remained.

“Important mechanisms to achieve this include the implementation of targets and mandates for low-emission hydrogen production and uptake,” he said.

ExxonMobil low carbon solutions president Asia-Pacific Irtiza Sayyed said his company was planning to build what would be the world’s largest single hydrogen production facility in Texas.

Half of that would be used by ExxonMobil’s own refinery, reducing its emissions by 30 per cent, and Mr Sayyed said there was “significant hydrogen demand’’ in the region, with customer to be supplied either via pipeline or as ammonia.

Originally published as Plenty of hurdles for much-hyped hydrogen industry