Author: Heidi Breen, CEO H2Q Queensland
It seems the world over that the need to distill and instill regulatory mechanisms is the chicken we need before investors will lay their golden egg and commit with confidence. Having returned from Hydrogen Europe which took place in October 2022, I am enthused and proud of the Australian hydrogen industries and our current state of play with our short-, medium- and long-term plans assuring our competitiveness in the global hydrogen economy. This is what I learned.
Purple, Green, Blue, Brown, Turquoise?
Europe’s energy crisis due to the Russian invasion has upped the ante. It is widely accepted that hydrogen is an indispensable part to reduce fossil fuel dependance, and essential to energy security and activation.
The “demand shock “is forcing action, with plans to produce 10 million tonnes per annum and import 10 million tonnes to meet their demands, by 2030. This is a substantial increase from the pre-Russian invasion plans foreseeing 5,6 million tonnes. This said, it seems the demand for “anything energy” is on the table, with fuel cells, green, turquoise, purple and every imaginable energy source in demand.
A clarion call for speed, scale and synergy with clarity and bold decisions for Europe to be the world leader in Hydrogen
What will it take to achieve these ambitions? These were some key take-outs that resonate with the Australian Hydrogen Economy, and this is what the European experts had to say:
“There is no time to discuss ideology. Success is implementation”Jorgo Chatzimarkakis, CEO, Hydrogen Europe
‘There is a need to front-load funding with double the research policies”Bart Biebuyck, Executive Director, Clean Hydrogen Joint Undertaking
“Incentives will be needed to boost demand”Kardri Simpson, New Commissioner for Energy
“Legislative framework provisions and regulatory framework certainty are required by end 2022”Dr Sopna Sury, COO Hydrogen, RWE (and just about every other presenter)
“We need ports, pipelines, and ships with import from stable regimes that can be trusted”Jon Lokke, President, Hydrogen Europe
“We need to build trust in the supply chain, invest time and money to scale up sub-contractors”Rosalinde van der Fliess, Director Clean Planet, EU Commission
“The off taker needs to be made part of the game”Valerie Ruiz-Domingo, Group Hydrogen VP, Engie
In a special keynote, this is what Frans Timmerman, Vice President of the European Commission had to say:
- Government’s need to stimulate off take. Some suggestions include incentives and/or penalties.
- The chapter is closed on cheap fossil fuels and REPowerEU has made a commitment of EU3 Billion to the European hydrogen industries.
- The Hydrogen Bank to jumpstart in 2023 to de-risk projects.
- Connection agreements and permitting are the biggest SLOW problems.
- Transmission System Operators are still waiting for signals from off takers.
- Our geo-political strategy will ensure we are no longer at the mercy of a few, but rather many.
In conclusion he says, “We need a wartime mentality to create an industrial success story”.
Carrot or Stick? Damned if you do, but more damned if you don’t?
Nils Aldaga, Founder, Sunfire gave feedback on a recent State of Hydrogen Session with Bill Gates, who calls hydrogen “the Swiss Army Knife to replace fossil fuels”. Some of the recommendations included:
- Most importantly an ambitious, pragmatic regulatory framework, particularly in terms of how operators can purchase.
- Demand incentives (or alternatively demand shock) including mandatory quotas, risk reduction instruments and more.
How do we supercharge the Australian hydrogen economy to compete globally with Europe and the US who are placing large bets on a future hydrogen economy?
These are some of the questions raised at the Hydrogen Europe 2022 event, and which left me begging for answers?
- How do we create a unified way of counting carbon content with certification mechanisms that validate true net zero?
- With intimations that Europe will procure their imports from Africa and the Middle East, can they deliver the 500 million tonnes desired?
- Our production targets will require 100 x more electrolysers. Why are there no orders?
- It seems the early movers get the bloody nose. Lack of industrial off take is making projects high risk and less than 10% of investment decisions been made. Why are so few investments realised and committed?
- What is the best simple, clear, and transparent solution to create market demand? The US is getting ahead of Europe with less money on the table than Europe, but more regulatory agility. What can be learned from the US Inflation Reduction Act offering a 10-year production tax credit for clean hydrogen production facilities? How does the “bottle-necked” European Delegated Act stack up, and is there anything for Australia to learn? Which “genius” should we trust?
- With an absence of off takers in the room, it was hard to determine their concerns, but seems they are not willing to sign contracts with no clear definitions. Who will take the lead in defining the terms for good green hydrogen contracting?
- There is a need for common methodology. How is Guarantee of Origin trading across the globe going to work, to avoid double counting across energy carriers? Should there be obligatory sustainable accounting vis a vis GAAP, introduction of ISO standards and agreements with consensus to avoid inaccurate green claims?
What gives Europe the competitive edge?
Despite the barriers, gaps, hurdles and uncertainties, Kerstin Jorna, DG, European Commission is confident that the EU has a strong value proposition spanning:
- Generous investment
- Strong infrastructure and mature project pipelines
- Unified single market
- Robust supply chain
- Very fast technical standardisation strategy including purity standards
- A strong blueprint for skills including: The Erasmus project and other vocational and educational initiatives
How does Australia stack up?
Meredith Annex, Head of Hydrogen and Heating Analysis, BLOOMBERG NEF, suggested that the EU has the same challenges as Australia. Whilst I tend to agree, I do believe Australia stacks up pretty well and with the following game changing success factors:
- Our state and national leadership are committed to growing the industry at speed and scale
- Our Guarantee of Origin plans are nearing completion.
- We have far more electrolyser capacity than Bloomberg Europe suggests.
- Our regulatory policies spearheaded by the Australian Energy Minister’s Forum in June 2021are nearing fruition.
- Standards, safety, expertise and skills are taking shape with robust funding and extensive and intensive collaboration across States and Federal government.
- Our supply chain is robust with offtake becoming a reality across hard to abate industries including exciting new start-ups with new technology to tackle the price challenge.
- Private and Public Sector spending is gaining momentum with our infrastructure and international trade marked with well-established trading relationships translating into firm commitment from key Asian off take markets.
- And more…