Hydrogen – the hype and the hope

Jorgo Chatzimarkakis wiggles a small jar, revealing its contents. Inside are grey, dense spheres of iron the size of marbles, which have been made by directly reducing iron ore with hydrogen. “This could be a great opportunity for Australia,” says Hydrogen Europe’s CEO.

Hydrogen has been heralded as a future fuel that could help end the world’s reliance on fossil fuels and accelerate the transition to net-zero emissions. Upscaling green hydrogen production will take extraordinary effort, but it could be critical to meeting the Paris Agreement’s targets.

According to the International Energy Agency, clean hydrogen should account for roughly a tenth of total energy consumption by 2050, and an additional US$380 billion in hydrogen investment is needed by the end of this decade, on top of the $320 billion already announced.

“The EU has understood the message,” Chatzimarkakis says, and it has set ambitious global clean hydrogen production targets, with projects stretching beyond the 27-country bloc’s borders.

What role is Australia to play?

Why hydrogen?

Hydrogen is the most abundant element in the universe, but on Earth, pure hydrogen is extremely scarce. Instead, it exists primarily in combination with oxygen in the form of water. Hydrogen is a useful energy carrier and doesn’t release greenhouse gas when that energy is recovered, but to convert it into a fuel, it must be extracted by splitting water molecules, which requires energy.

Until large-scale renewables became available, producing hydrogen required massive amounts of fossil fuel or nuclear energy, making hydrogen more expensive and less efficient than other storage and delivery methods. But if the energy used to produce it is renewable, hydrogen has the potential to be a truly green fuel. “We could have done it in the 1920s, but the economies and political leaders chose fossil energy at the time because it was convenient and cheap,” says Chatzimarkakis.

Much of the hydrogen used in the world is made using natural gas, resulting in significant greenhouse gas emissions. Green hydrogen could find its place in heavy industry and long-distance transportation. “You can electrify many things, but not everything,” says Chatzimarkakis. “Hydrogen’s role cannot be challenged; it’s there.”

The European hydrogen strategy

For the hydrogen revolution to take place, governments, investors and industry need to put in an immense effort. “Whenever you want to change courses, you have a chicken and egg dilemma that you need to overcome,” says Chatzimarkakis. The EU has set highly ambitious goals, which come with huge costs.

In 2022, hydrogen accounted for less than 2% of Europe’s energy consumption and was primarily used to manufacture chemical products, such as plastics and fertilisers. Only 4% of this hydrogen was produced with clean energy sources. In May last year, the European Commission published the REPowerEU plan, which aims to achieve a volume of 20 million tonnes of clean hydrogen produced per year by 2030, while phasing out imports of Russian fossil fuels.

Of these, 10 million tonnes will be produced domestically and 10 million tonnes will be imported.

To meet this lofty goal, the EU has revised its renewable energy directive to set targets for industry to replace at least 42% of the grey hydrogen used today with green hydrogen. These obligations will yield some 8 million tons per year. Far from the final target but a good starting point, says Chatzimarkakis.

The REPowerEU is financed by the European Hydrogen Bank (EHB), which aims to accelerate investment by covering and lowering the cost gap between renewable hydrogen and fossil fuels for early projects. Under similar terms to the US Inflation Reduction Act, EHP is aiming at a cost of €3 (AUD$5) per kilogram of hydrogen.

For such a leap in green hydrogen, Europe must ramp up its current annual production capacity, approximately 3.1 GW, by an astronomical 88% by 2025. “It is possible,” says Chatzimarkakis. “But we need a clear commitment by governments to support the manufacturing capacities. And this hasn’t landed in the brains of policymakers so far.”

The EU has committed to further investments outside of the bloc. Brazil will receive €2 billion (AU$3.2 billion) in investment, with additional cash flowing to other parts of Latin America and the Caribbean. Tunisia, Namibia, Kazakhstan, Egypt, and some Asian countries will receive funds.

“The costs in the next decade will be astronomically high. Big private investment funds, and equity funds, all know this. But they expect a clear regulatory framework and the clear political will to go in that direction,” Chatzimarkakis says.

What is Australia up to?

In Australia, clean hydrogen production is currently almost non-existent and no big projects have been funded. Except for small electrolysers producing small amounts of hydrogen for pilot programs, big projects are still in the making. “The scaling up of green hydrogen facilities is yet to happen, but there are plans afoot to do that,” says Professor Ken Baldwin, Director of the ANU Energy Change Institute and founding Director of the ANU Grand Challenge: Zero-Carbon Energy for the Asia-Pacific.

The Australian Renewable Energy Hub is under development in the Pilbara region of Northwestern Australia. At full scale, the project aims to develop a 26 GW total generating capacity from wind and solar power and produce 1.6 million tonnes of green hydrogen annually, part of which will be converted into ammonia by reaction with nitrogen from the atmosphere and exported.

The Western Green Energy Hub is being developed on the southern coast of Western Australia, consisting of 50 GW of wind and solar capacity. It aims to produce up to 3.5 million tonnes of green hydrogen or around 20 million tonnes of ammonia annually. The hub is estimated to cost A$100 billion. “[Projects] are blossoming all over the country,” says Baldwin. “None of them have reached financial close yet, but there are good prospects that some of them will in the coming decade.”

Using green hydrogen to reduce iron ore to iron is a real prospect for Australia, Baldwin agrees with Chatzimarkakis. Australia is a massive iron ore miner and exporter. Green hydrogen facilities could be developed next to the mine, and the gas used on-site to reduce iron oxide to iron, which is then exported to steel manufacturers globally. This would have two advantages: on the one hand, it cleans the steel-making process, which is responsible for around 7% of CO2 emissions globally; on the other hand, shipping iron marbles rather than iron ore means a significant reduction of transport emissions. “This is a new opportunity for Australia, which has lots of iron ore and land for solar and wind farms,” Baldwin says.

In the May 2023 Federal Budget, the Australian Government announced establishing the Hydrogen Headstart program, a $2 billion budget measure to scale up large-scale green hydrogen in Australia – a thimbleful compared to what the EU and the US are putting on the plate. Australia hopes that the European and US measures will have a global effect. “The Australian government program will help kickstart things in the hydrogen space in Australia,” Baldwin says. “It’s nowhere near as big as the Biden administration’s measures, but we could potentially piggyback on some of these measures overseas because if they do drive demand, then this will benefit all suppliers.”