The burning question: hydrogen, hype or hope?

Fans call it the Swiss Army knife of energy, able to do vital things in a net-zero world that electricity and batteries cannot, that could turn Australia into a green superpower. Should we buy in?

Jack Annear uses hydrogen gas in his kitchen in Adelaide. Picture: Ashleigh Lyons

Jack Annear is excited about the flame from his kitchen cooktop. It won’t make dinner any quicker but mixed with the ­natural gas is stuff that was created in the Big Bang, powers the sun, and is touted as one of the saviours of a warming world. Hydrogen, or H2. A gas you can make out of water. A fuel that burns cleanly. A virtual battery that can carry energy around the globe. It’s a headline, with a head-­spinning list of proposed billion-­dollar projects – but it is also a headache, with big financial and technical challenges. Is it hype or hope?

Spruikers such as iron ore magnate Andrew Forrest, the nation’s former chief scientist Alan ­Finkel and even Prime Minister Scott Morrison are in no doubt. They say H2’s time has come. It’s not only able to help slash our own emissions, they say, but it could make us a green energy superpower by exporting to a world that needs to hit net zero by 2050.

The Annear family hopes they are right. Along with 700 other residents of Mitchell Park in ­Adelaide, they are burning hydrogen thanks to an experiment by the Australian Gas Infrastructure Group, which aims to replace natural gas (which is mainly methane) with hydrogen for its two million customers by 2040. Pip, the baby daughter of Jack and his wife Ivana, would not even be 20 by then. I’ve crept into the house with Jack hoping not to wake her, but by the time we sit down she’s already up, grinning in Ivana’s arms. She’s their world, so they do what parents do: worry about what might lie ahead.

“We think about her future all the time,” says Ivana, a risk and security manager. “We hope to instil in her how finite the resources we use to raise her are. We have a home battery, we separate wastes as much as possible, we have a ­garden out the back, and we’ve borrowed some land for a bigger vegetable garden at Jack’s parents’ place.” So, when AGIG’s local arm ­Australian Gas Networks offered a trial in which their supply would be blended with five per cent hydrogen, made at the southern hemisphere’s biggest electrolyser a few kilometres away, the Annears were intrigued. Jack, an environmental officer, “went down the YouTube rabbit-hole” to bone up, even reading the 2019 National Hydrogen Strategy. He emerged convinced the gas was a good idea, especially if made from renewable electricity and water – so-called “green” hydrogen. “That’s the gold standard,” he says.

Theirs is green, made by the process of electrolysis that zaps renewable electricity through purified water to split it into two gases, hydrogen and oxygen. It takes nine litres to make one kilo of hydrogen, which would drive a hydrogen fuel-cell passenger car 100km or heat 20 showers.

Jack Annear with wife Ivana and daughter Pip in their home in Adelaide. The Annears are using hydrogen gas in their kitchen as part of a trial. Picture: Ashleigh Lyons

Jack also discovered hydrogen comes in other colours. Grey is made when hydrogen is stripped from methane in a process that leaves behind greenhouse gas carbon dioxide, which is vented into the air. More than 100 million tonnes of grey H2 is used globally to refine oil, make ammonia for fertilisers to feed the planet, and produce methanol. It also comes in blue – which big Aust­ralian gas producers Woodside and Santos have their eye on. Santos plans to make hydrogen from ­natural gas, but instead of venting the CO2, ­burying it in depleted gas fields at Moomba in central ­Australia, using “carbon capture and storage” (CCS) technology.

But whatever the colour – and more of that later – there’s a bigger question. If hydrogen is so good, why isn’t it widely used already? There’s a catch or two. The good news is it has 2.6 times the energy of natural gas, and it’s the most common element in the universe. It won’t run out. Yet it’s tricky to get your hands on because it’s usually bound up with something else, such as oxygen or carbon. And separating it takes a lot more energy than hydrogen will give you back. The H2 the Annears burn has only about 70 per cent of the energy used to make it; the gas in a hydrogen ­fuel-cell car has around 30 per cent. Moving hydrogen is also a challenge. In order to compress it into a liquid for maximum portability, you need to cool it to minus 253C (and keep it there). That uses more energy.

So why make something that gives you less power than you started with? Because, fans say, it’s the Swiss Army knife of energy, able to do vital things in a zero-emission world that electricity and batteries cannot. That’s why Canberra is spending more than a billion dollars to support hydrogen, and it expects big returns. Its emissions reduction plan forecasts the gas to be worth between $50 billion and $130 billion by 2050, spread across hubs ­nationwide, and exporting up to 10 per cent of global demand.

The states have plans too. NSW has a $3 billion strategy to fuel 10,000 hydrogen vehicles by 2030; South Australia’s Labor opposition is promising a state-owned green hydrogen plant; in Queensland, Gladstone is emerging as a hotspot; Western Australia is planning to be a major exporter; ­Tasmania’s hydroelectricity is being wooed by rival hydrogen proposals; and Victoria has a pilot project to send liquid hydrogen to Japan.

Hydrogen Park SA. Picture: Roy Van Der Vegt

A short drive from the Annears’ home is a ­compact industrial site grandly called Hydrogen Park SA. Inside a large shed is a 1.25MW Siemens electrolyser, the size of a small truck, making 20 kilos of hydrogen an hour using renewable electricity whenever the spot price on the national grid is cheap. It is then blended with the methane bound for nearby Mitchell Park’s cooktops, heaters and hot water systems. Owen Sharpe from AGIG says the share of hydrogen in the mix will increase to 10 per cent by 2030 and 100 per cent by 2040. In new suburbs, the aim is to offer 100 per cent of what he calls “renewable gas” – largely green hydrogen – by 2025. For that, customers would need hydrogen-ready hardware, which he says will be available by then.

Next year, more than 770 homes and businesses in Gladstone will also go onto the hydrogen mix, and in 2023, 40,000 homes and businesses in Albury-Wodonga will join them. Another energy infrastructure company, Jemena, has also just started mixing H2 into the natural gas supply of thousands of customers in NSW.

Hydrogen requires some adjustments. The Annears’ flame is still blue, but a pure hydrogen flame is colourless. Hydrogen can also make metal brittle. While Sharpe says much gas delivery is via Polyethylene pipe that wouldn’t present a problem, some large lines and storage might need work.

But 20 kilos of hydrogen an hour is a drop in the ocean. Sharpe says AGIG would need to deliver about a million tonnes of green hydrogen a year to its two million customers nationally. That would require gigantic electrolysers fed by massive amounts of renewable electricity and water. And the power would need to be very cheap to drive the cost of green hydrogen, now $5-$9 a kilo, down to the national target of $2 and under where it becomes competitive with natural gas.

The nation’s chief hydrogen evangelist, Professor Alan Finkel, thinks all this is possible. Australia’s chief scientist from 2016-2020 and now special adviser to the government for low emissions technologies, Finkel says hydrogen’s potential is “almost beyond imagining”.

A little over a decade ago, he was giving it short shrift. Then working in the electric car-charging business, he could see that a hydrogen fuel cell, which converts the gas into electrical energy emitting only water vapour, was nowhere near as efficient as a battery charged by electricity. But when he led a national review of the electricity market in 2017, he found himself being asked a lot about what he planned for hydrogen. “My ­initial response was, ‘nothing’,” he admits.

Professor Alan Finkel. Picture: AAP Image/Lukas Coch

He realised he needed a rethink. He pulled together experts, produced a 60-page report for government called Hydrogen for Australia’s Future in 2018 and the following year chaired the development of Australia’s National Hydrogen Strategy. Now, he is pushing for solar farms the size of cattle stations to power electrolysers to make millions of tonnes of this gas to help replace fossil fuels. “What’s different is the need and the price,” he says of hydrogen’s sudden switch from perpetual “future fuel” to realistic alternative. “The problem is global warming. The biggest contributor is the energy sector. In Australia somewhere between 70 and 75 per cent of all the greenhouse gas emissions are due to the energy sector, which is pretty much the use of fossil fuels – oil, coal and gas.”

Fortunately, he says, another thing to change has been the price of producing renewable energy. Yes, it’s intermittent and not yet stored in sufficient quantities, but “we are getting to the point where solar and wind electricity is, as an integrated source, cheaper than the fossil fuel-­generated sources they want to replace, and that’s critically important”. And those prices should keep going down, with the government targeting a two-thirds cut in the cost of renewable ­electricity by 2030.

Finkel says we need to triple the amount of ultra-cheap electricity we generate to replace fossil fuels. That would enable us to take carbon out of most of the energy supply, the transport sector, and things like heating and cooking. “At that point I call it the electric planet,” he enthuses. But with all that cheap power, why would we need hydrogen? Finkel says electricity isn’t always the solution. Clean hydrogen can fill the gaps and provide perhaps 15 per cent of clean energy needs, starting by replacing grey hydrogen (the dirty stuff vital for making things such as fertilisers).

Clean hydrogen – and he doesn’t care if it’s blue or green, providing it comes with a ­certificate of origin – can also power heavy vehicles where ­batteries may be too big and heavy or take too long to charge. Examples include long-­distance trains and trucks using hydrogen fuel cells that generate electricity. By adding nitrogen, hydrogen can also be turned into ammonia, which is easier to transport and can act as a fuel, including for big ships. While electric vehicles powered by batteries currently hold the edge, passenger cars are being made that travel about 600km on six kilos of hydrogen and are much quicker to refuel.

Hydrogen could help balance Australia’s renewable electricity grid, he says. Operators could quickly switch on power-hungry electro­lysers when there was too much energy, and store the resulting hydrogen like a battery, to generate electricity when sun and wind aren’t available. And, as one of the best places for renewable ­electricity in the world, Finkel says Australia can become one of the biggest hydrogen exporters. Selling 33 million tonnes of green hydrogen would equal the energy in our current liquefied natural gas (LNG) exports.

But that’s a herculean task, requiring roughly eight times the electricity Australia currently produces. The renewable energy needed, about 1000 gigawatts, is mind-boggling: a single gigawatt is the power produced by an average nuclear power plant in the US, 364 giant wind turbines, or more than 3 million solar panels. Finkel calculates 20,000 sq km of solar farms could do it (plus the equivalent of a third of the water ­consumed by the nation’s mining industry). The result, he says, would be “shipping sunshine” – hydrogen or ammonia – to the likes of Germany, Japan, Singapore and South Korea, which are all focused on hydrogen.

Then there is the opportunity to clean up steelmaking, an industry responsible for a hefty seven per cent of global greenhouse emissions. Making one tonne of steel produces about two tonnes of CO2, because of the use of coking coal. Efforts are now advanced to make hydrogen a viable replacement for that coal. It’s a topic of keen interest in the Pilbara, where Fortescue Metal Group has made a fortune shipping iron ore to China’s blast furnaces. Now the man who forged that company is using a slice of its profits to create what he hopes will be a global green hydrogen business – and be the first miner to make green iron, vital for the anticipated market for green steel.

Fortescue Future Industries CEO Julie Shuttleworth. Picture: Colin Murty

If Finkel is a hydrogen evangelist, Andrew ­Forrest is a fundamentalist. To save the world, he says, there’s only one true path: green hydrogen. Blue hydrogen is a con, he reckons, because methane escapes in the process and it relies on carbon ­capture and storage, which he calls a failed technology. It’s just an oil and gas company ruse to stay in business and pretend to be green, he says.

Helping lead Forrest’s crusade is Julie ­Shuttleworth, who once managed Fortescue’s vast mines and now heads Fortescue Future Industries. Recently FFI hijacked an advertisement by natural gas giant Woodside touting its green credentials after announcing a possible ­billion-dollar plant in Perth to produce both methane and water-based hydrogen. FFI edited the ad to promote its own green hydrogen and sent the image out on Twitter. ­Shuttleworth is unapologetic. “We need to lower emissions to stop the planet cooking, and you ­cannot do that with ­fossil fuels,” she says. “There’s a lot of misinformation and greenwashing out there.”

FFI’s ambitions are enormous. It plans to make 15 million tonnes of green hydrogen by 2030, mostly for export. That would require four to five times as much electricity as the national grid ­produces (and remember, Finkel says we’ll have to triple that grid’s output just to decarbonise the domestic economy). To achieve these numbers, Shuttleworth has been on a global shopping spree, announcing, but not financially committing to, hydrogen, ammonia, and about 300 gigawatts of renewable energy projects from South America to Africa, Asia, and the Middle East worth about $200 billion. So, hydrogen might be produced abroad? “That’s correct,” she says. “And the projects that get going first are the projects where the governments and communities are supportive.”

Closer to home, FFI wants to build a hydrogen plant in Tasmania using hydroelectric power, is investigating turning hydrogen into ammonia for fertilisers in Brisbane and is committed to the first phase of a Gladstone plant to build bigger, cheaper, more efficient electrolysers. Shuttleworth has $800 million to spend this financial year, much of it to decarbonise Fortescue’s operations. She says she’s developing a “green fleet” of hydrogen and electric haul trucks, hydrogen drill rigs, ammonia locomotives, and ammonia ship engines (Fortescue has eight ore carriers). Hydrogen-based ­aviation fuel is on the list, too, and research is underway to produce “green iron”, using hydrogen instead of coal.

For exports, FFI’s plan is to convert hydrogen into ammonia, which is already shipped globally. It recently signed a contract with British firm JC Bamford Excavators and Ryze Hydrogen to take 10 per cent of FFI’s hydrogen in a “multi-billion pound” deal. The price per kilo wasn’t disclosed. Shuttleworth says that amount would be equivalent to “eliminating pollution from about a quarter of Britain’s vehicles by 2030”.

Yet to date FFI has made zero hydrogen. Isn’t this a giant, risky bet? “I don’t see this as a gamble at all,” Shuttleworth says. “This is actually a well-planned strategy. The decarbonisation of our fleet needs to be done, and we’ve proven in our workshop facility we can run the equipment on hydrogen and ammonia. The technologies are there globally, they just need to be scaled up.

“It’s completely possible. No one said it’s going to be easy. But you look back at when Fortescue started, we began at over $50 per tonne [to produce] iron ore. Within 10 years, we were less than $15. That was done by getting the project started, learning, making improvements, applying technology and innovation, and getting the flywheel turning. The next project, the price comes down. That’s our track record. We’re going to do it again in green hydrogen.”

FFI’s plan might sound incredible, but it is what the International Energy Agency’s road map to net zero argues the world must do. The IEA forecasts the amount of hydrogen needed by 2050 will rise almost sixfold to 528 million tonnes. Forrest, who eventually aims to make 50 million tonnes a year, can see a massive opportunity.

One major problem is price. Green hydrogen may eventually be cheaper than blue, but not until 2030, many experts think. So, who will be prepared to pay for it? Finkel says hydrogen would meet resistance even if it was free. “The biggest challenge is demand,” he says. How quickly will steel makers switch to clean hydrogen technology? How fast will trucks, trains and ships convert to hydrogen or ammonia? How soon will cities shift natural gas distribution to partial and full hydrogen?

The world is feeling its way. There are plenty of plans, pockets of innovation and billions of dollars of investment, with Europe leading the way. South Korea is aiming for three million hydrogen vehicles by 2040. Japan flagged its big ambitions by burning hydrogen in its Olympic cauldron and using a few hydrogen-fuelled buses for athletes.

In the US, California is the standout, with 50 hydrogen buses and about the same number of ­hydrogen fuel ­stations for 12,000 hydrogen cars. H2 is also being used to make low-carbon steel in Austria, mixed with natural gas into homes in parts of Germany, and powering some trains in France. But it’s chicken and egg – more supply is needed to convince businesses they can rely on hydrogen, but more companies need to use H2 before investors will make more of it.

The need to build markets is why hydrogen shouldn’t be oversold, argues Dr Jake Whitehead, a transport engineer and scientist at the University of Queensland. A vastly bigger electricity grid is the main game, and hold-ups on getting new solar farms into the grid are already making that “electric planet” harder to achieve, he says. Australia risks wasting billions of dollars, precious time and a lot of renewable power unless we only use H2 for things electricity can’t do. Hydrogen-fuelled cars are not a priority, Whitehead says, as battery vehicles are much more efficient, and in sufficient numbers can back up the grid. As for H2 trucks, he thinks it will be a decade or more before they can compete with ­diesel. But chemical feedstock for fertilisers, ammonia for ship engines and possibly synthetic fuel for aircraft are areas where hydrogen can work.

Woodside boss Meg O'Neill. Picture: Woodside via NCA NewsWire

More cautiously than Forrest, two of the big Australian gas producers, Santos and Woodside Petroleum, also sense opportunity and are looking to use some of their methane to make hydrogen. Santos plans one of the biggest ­carbon capture and storage (CCS) projects in the world at Moomba, which it says will store millions of tonnes of CO2 underground. While critics say CCS is unreliable, Finkel and the International Energy Agency say it is a proven technology and vital if the world is to reach net zero. “The goal is to get rid of emissions, so it doesn’t matter at the end of the day whether you use natural gas or the sun to make zero ­emissions hydrogen, and you can call it whatever colour you like,” Santos CEO Kevin Gallagher told a business conference. He reckons his price would be about a third of what Forrest could make green hydrogen for: “The cost advantage is what positions hydrogen made from ­natural gas with CCS so strongly – and don’t our opponents know it!”

Woodside boss Meg O’Neill has plans for a ­billion-dollar hydrogen plant in Perth – the one mocked by FFI in the doctored advert – and a wind- and hydroelectricity-powered hydrogen plant in Tasmania to make 200,000 tonnes of ammonia annually. The company intends to start slowly in Perth with what it calls blue hydrogen and gradually move mostly to green (although that would depend on it sourcing new renewable electricity supplies). Eventually it plans to make 1500 tonnes a day. However, Woodside’s “blue” product won’t be burying the CO2 – there is no CCS facility in Perth – but venting it into the air. O’Neill argues that by using offsets such as planting trees, it would still be net zero.

As for what she thinks of the viability of ­Forrest’s plans, O’Neill will only say: “I commend FFI’s ambition, and we wish them all the best.” But she adds: “A lot comes down to what the customer is willing to pay, and trying to do hydrogen from solar, for example, you’re running your electrolysis facility six hours a day. That means it’s going to be a very expensive cost to the customer.”

And even although Woodside and Santos are dipping their toe in the hydrogen water, they’re pushing ahead with new natural gas projects and confidently believe they will be selling fossil fuels for decades to come. Gallagher points out that in 1992, when the first climate conference was held, the world relied on hydrocarbons for more than 80 per cent of its energy – and it still does.

Picture: iStock

So is hydrogen hype or hope? Jack Annear believes it is no silver bullet, “but on balance I think hydrogen represents hope for a decarbonised planet and a future for our daughter”. And those colours? “I see blue as a way to get there because… to get mass market adoption, ultimately it needs to be economically possible,” he says. “But green is the gold standard Australia should be striving for – it’s literally bottling sunshine for use on a rainy day.”