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How Europe aims to book a seat on Australia’s hydrogen express

Europe’s bid to stake a claim rivalling that of Japan and Korea over Australia’s huge potential in green hydrogen – the energy source that could power the 21st century – is gathering steam, as state governments step up their overtures to potential European partners and customers.

Queensland’s trade promotion office in London last year ran a marathon of virtual roadshows in European capitals, while West Australian Regional Development Minister Alannah MacTiernan sat down for a Zoom meeting with Dr Falk Boemeke from the German Energy Ministry just before Christmas.

“The smart Europeans are looking at WA and other locations to get in on the ground floor. A lot of projects have got European interest and support. There is a growing recognition of the opportunities here,” says Western Australia’s Agent-General in London, Mike Deeks.

Australia’s federal and state governments are gung-ho for green hydrogen, produced using renewable wind and solar, as a fuel of the future. They’ve pumped out strategy documents and are bankrolling innovation, as they hunt for a sustainable energy source to ease the pain of shifting from coal and ultimately gas.

Japan and Korea, both of which have set challenging net-zero emissions targets, are keen to tap Australia’s abundant land and sunshine, and the Japanese have already invested in a hydrogen liquefaction project in Victoria’s Latrobe region.

Germany and other European countries have arrived later to the party, but with great conviction.

“The challenges of the pandemic have made the Europeans reconsider their reliance on single markets. There’s a recognition that they need to diversify the supply chain and Australia offers a well-regulated, ethical environment, ticking all the boxes the EU requires,” Deeks says.

The German government signed a memorandum of understanding with the Morrison government in September on developing a hydrogen supply chain, but a decent chunk of the momentum is coming from the states.

“The state governments see that this is where the next massive push for investment will be – and they want to make sure they get a piece of it,” says Geoff Ward, CEO of ASX-listed hydrogen and graphite start-up Hazer Group.

Copenhagen Infrastructure Partners, which in November launched a partnership with Hydrogen Renewables Australia to develop the 5000-megawatt Murchison renewable hydrogen project in WA, says the extent of government activism Down Under had influenced its investment.

“When we looked at Murchison, we considered several options including whether it was an isolated project or whether there would be export opportunities,” says Copenhagen-based CIP partner Michael Hannibal.

“We could see export opportunities potentially coming out of all the bilateral talks going on – the national government-to-government discussions, the activities of different state governments. That was part of our decision.”

Linda Apelt, the Queensland Agent-General in London, has run a roadshow to industry and government in Belgium, France, Germany, Britain and the Netherlands.

Her hope is that Europe’s massive subsidies to hydrogen, and its dauntingly ambitious emissions targets, will help put rocket boosters under the development of hydrogen in Australia.

“There’s nothing like demand to drive supply. Here in Europe, we’ve been picking up the signals about how serious they are about using green hydrogen as an energy source for the future,” she says.

“The Europeans can look to North Africa, places like Morocco, for sources of green hydrogen fuelled by sunshine, but it won’t be enough. Australia is well-positioned to produce plenty in the future, but we’re not there yet.”

She reckons that over the eight months during which she has been building a network of hydrogen contacts and partnerships in Europe, the expectations for how soon green hydrogen can be a serious energy source have gone from “years and years off” to “really on the horizon”.

Germany has a €9 billion ($14.2 billion) hydrogen strategy, France has committed €7 billion, and the Netherlands is converting its LNG ports and facilities to cater for green hydrogen. There’s also EU money from the green-oriented €750 billion pandemic recovery fund, among other pots of cash, with up to €65 billion potentially available for hydrogen by 2030.

Some of these funds could bankroll projects in third countries such as Australia, if the activities can be shown to benefit the bloc.

And they’ll fuel an appetite, and a demand, that could help Australia take the initiative, says Mobin Nomvar of Scimita Ventures, a Sydney-based company that is working on the feasibility study under the Germany-Australia MoU.

“Germany is a great client for Australia, they are able to articulate what they need to see in that space, in green hydrogen. Whether it’s safety aspects, cost aspects, green aspects – it’s no longer an internal conversation, it’s a customer coming to you and saying ‘I want this, and if you don’t have it then I’m not interested’. That makes it real.”

But how real? Even if Germany and the other Europeans may have a gaping appetite, there’s a big question over how soon can Australia start to feed it.

In a recent report, ratings agency S&P said Australia’s hydrogen exports would have to be in liquefied form, which requires specialist vessels, and the retooling of ports and even pipelines.

“Building a liquefied hydrogen chain will likely take a long time, and may not be realistic given the onerous start-up costs for hydrogen versus converting cheap gas into liquefied natural gas,” the report said. “Scaling up hydrogen production appears to be a long shot.”

Another analyst, who didn’t want to be named, reels off the challenges: “We will need to build: renewable energy supplies, hydrogen production facilities, export facilities, ports, ships, import facilities, logistics facilities to get it to the place of demand. That is a big supply chain to build out, and in LNG it took decades.”

That analyst sees a chicken-and-egg problem: “Investors will want to see infrastructure, and infrastructure providers will want to see supply and demand.”

CIP’s Hannibal says there are already players looking at the infrastructure challenge, including purpose-built vessels, and the possibility of blending 15 to 20 per cent hydrogen into today’s LNG pipelines.

Ian Mackinnon, a professor of chemistry at QUT and an adviser to the Queensland government, admits it won’t happen overnight. But he’s very much on the bullish side.

“It takes a while to not only put the renewable energy part of it in place but also the electrolysis, the production capacity, to make the hydrogen and then store it. To export you’ve got to have a lot of stuff. You’re not just going to send a teaspoonful of hydrogen to Belgium. So you’ve got to build a lot of capacity,” he says.

“The pivotal time will be about 2025. It could be a little bit earlier, but that will be the most likely time.”

Hazer’s Ward agrees that the sector is on the verge of its critical moment.

“We’re at that tipping point within a government planning cycle, a national planning cycle, and within a big company’s investment strategy, where they’re seeing the old assets become stranded and they need a new class of assets,” he says.

“We’ve actually got a really quite advanced industry that has been beavering away quietly on the sidelines, supplying industrial gases, making electrolysers for production of things like chlorine. It’s an industry that has enough maturity and heft that it’s ready to explode with volumes, the same way that solar panels were.”

Source: Financial Review