Although touted as a clean energy project, the government’s investment in hydrogen production is in fact protecting the fossil fuel industry – a paradox that may limit the value of the new technology. By Mike Seccombe.

Hydrogen strategy backs dirty coal

At first blush, last Saturday’s media release from two of the Morrison government’s biggest defenders of fossil fuels looked like evidence of some kind of Damascene conversion.

Angus Taylor and Matt Canavan were suddenly enthused about the prospects of clean energy. They were talking about hydrogen, a wonderful fuel source that, when burned, produces no greenhouse emissions at all. And they were talking big.

“Australia will become a world leader in hydrogen production and exports thanks to a new fund set up by the Government,” began the release.

It went on to quote the Energy minister, Taylor, predicting Australia would become “a hydrogen supplier to the world”.

And Resources Minister Canavan, who has long run a scare campaign that renewables would cost jobs and damage the economy, was quoted spruiking the “potential for thousands of new jobs … and billions of dollars in economic growth between now and 2050” through the export of hydrogen to countries such as Japan, South Korea, Singapore and Taiwan.

The ministers also announced $370 million in funding towards the implementation of a national hydrogen strategy, prepared by Australia’s chief scientist, Dr Alan Finkel, and approved by the Council of Australian Governments (COAG) Energy Council the day before.

It looked like a major shift in the government’s position on climate change, and no doubt this was its purpose – for the government’s recalcitrance in addressing the great issue of our time is the subject of increasing criticism, both internationally and domestically.

In the past week, two more surveys of public opinion – an Essential Media poll and the big, definitive annual “Mapping Social Cohesion” report by the Scanlon Foundation – showed vastly increased public concern about climate change. And an alarming new report from the United Nations Environment Programme put the lie to Scott Morrison’s claim that Australia is “doing our bit” to reduce global emissions.

The $370 million earmarked for the hydrogen strategy, however, is not new money. It will come from the existing allocations to the Clean Energy Finance Corporation and the Australian Renewable Energy Agency (ARENA), the two agencies that currently exist to fund renewable projects – and which the Abbott government tried, and failed, to abolish.

More importantly, though, there is evidence to suggest the government’s intent in getting into the hydrogen economy is, as ever, to protect the fossil fuel industry by locking it in as the preferred source for Australia’s hydrogen production.

Though hydrogen is colourless, people close to the issue are apt to talk about it in vivid terms. There is “green” hydrogen, which is produced by a process of electrolysis, splitting water molecules into their component elements: oxygen and hydrogen. This is an energy-intensive process, but if that energy comes from renewable sources, such as solar or wind power, the result is a completely clean source of storable, transportable energy.

There is also “blue” hydrogen, made from gas, and “brown”, made from coal. Both these processes produce large amounts of carbon dioxide, the principal cause of global heating. Hydrogen produced this way can be rendered cleaner, although still not totally clean, by capturing much of the CO2 and sequestering it somewhere so it does not enter the atmosphere – a process called carbon capture and storage (CCS).

Unsurprisingly, the fossil fuel industry has put vast effort over the years into talking up the prospects of CCS technology – not only in relation to hydrogen production but also more generally – because the prospect of CCS allows the fossil fuel industry to perpetuate the myth of clean coal.

Although it has never been used in the context of coal-fired electricity generation, CCS technology has been employed at large scale elsewhere, particularly for the “enhanced recovery” of petroleum, where CO2 is pumped underground to force up more oil – a zero-sum game whereby carbon sequestration produces more fossil fuel.

Nonetheless, CCS may have a useful role to play in the latter part of this century. If we are to prevent runaway global heating, it will probably be necessary to remove from the atmosphere some of the CO2 already there.

But that’s in the future. Right now, en route to its grand goal of becoming a “renewable energy superpower”, Australia is at a fork in the road.

One way leads to producing hydrogen from water; the other continues down the path of dependence on fossil fuels, albeit substantially cleaned up by the addition of expensive CCS technology.

Enormous amounts of money could hinge on making the right choice. According to Finkel, a “cautiously optimistic scenario” could see an Australian hydrogen industry generate about 7600 jobs and add about $11 billion a year in additional gross domestic product by 2050.

As his national hydrogen strategy states, “If global markets develop faster, it could mean another ten thousand jobs and at least $26 billion a year in GDP.”

Perhaps the strongest indicator that the federal government, as well as some states, will choose the fossil fuel route came out of last Friday’s COAG Energy Council meeting.

Shane Rattenbury, the ACT minister for Climate Change and Sustainability, went into the meeting with a proposal to amend the national hydrogen strategy so it supported only green hydrogen, produced from renewable electricity. The plan would mean hydrogen produced from fossil fuels would not be defined as “clean”.

He got zero support for the idea.

Rattenbury also proposed that hydrogen generated from fossil fuels using CCS be defined as “clean” only if a minimum of 90 per cent of carbon emissions were captured.

He lost on that idea, too. What was particularly frustrating, Rattenbury told The Saturday Paper, was that none of the other states and territories backed him.

“If you go to the strategy which Professor Finkel wrote, there’s a chapter [with] a little sort of two-page blurb on each jurisdiction,” he said. “And most of the jurisdictions, except New South Wales and Victoria, talk about how they want to do renewable hydrogen production. So that’s Queensland, Western Australia, South Australia, Northern Territory, Tasmania.”

Rattenbury said the man running the meeting, Angus Taylor, rebuked him for even trying.

“The federal minister said to me, ‘Ministers cannot amend the draft strategy.’ He actually said that in front of the entire meeting,” Rattenbury said. “I mean, if ministers can’t amend this, I don’t know what we’re doing with our jobs. Why have the meeting?

“It was the most galling thing. Quite extraordinary.”

Rattenbury means no criticism of Finkel, who produced the strategy.

“He was given riding instructions at the previous meeting, last December, that the strategy should be technology-neutral,” Rattenbury said. “At that meeting, I also sought to insert that it should only be green hydrogen, and got nowhere.

“I don’t know what Professor Finkel’s personal view is. His stated position – and this is a positive thing that’s in the strategy – is a clear commitment to having a certification and labelling scheme, identifying the hydrogen’s emissions intensity and its source. Alan will argue, as will others, that the market will take care of it, and there will be a preference for renewable hydrogen or green hydrogen.”

Yet Australia is devoting far more money to pursuing the coal-to-hydrogen option. Of the $370 million funding announced by Taylor and Canavan, only $70 million is earmarked for work towards generating hydrogen from water.

Compare this with the amount being spent right now on a single project called the Hydrogen Energy Supply Chain (HESC). A consortium of Japanese and Australian interests is spending almost $500 million, including $50 million of federal government money and another $50 million from the Victorian government, on building a pilot coal-to-hydrogen plant, due to operate for one year over 2020 and 2021.

Last year, in answer to written questions from Dr Nick Aberle, campaigns manager for Environment Victoria, the HESC said the pilot would produce at most three tonnes of hydrogen during its one year of operation. To achieve that it would use 160 tonnes of brown coal – the most polluting of all fossil fuels – and would emit 100 tonnes of carbon dioxide.

The pilot plant would not attempt to capture and store that CO2, but was “considering purchasing carbon offsets to mitigate emissions from the pilot”.

Only if the project went on to commercial-scale production, at some unspecified date around 2030, would it seek to sequester the carbon dioxide. It would be pumped into the rocks under Bass Strait, as part of the CarbonNet Project, on which the federal and Victorian governments have invested some $150 million – so far.

It’s a lot of money to spend to produce a few tonnes of hydrogen and extend the life of Victoria’s dirty brown coal industry. But the greater concern for Aberle and others is that the HESC is the not-so-thin end of a wedge – that having spent half a billion dollars on the HESC pilot, and billions more on CCS projects, we will be locked in to the hydrogen-from-coal approach.

Meanwhile, Richie Merzian, the climate and energy program director at The Australia Institute, notes researchers at the Queensland University of Technology exported Australia’s first green hydrogen, made from water, using solar energy, to Japan in March.

Their work, using proprietary Japanese technology, is separate from but aligned with a $7.5 million research project to build a hydrogen production pilot plant at the Redlands Research Facility, south of Brisbane. The project was announced by ARENA last year.

Merzian said the green hydrogen exported to Japan “wasn’t much – just a few kilograms – but it was able to show proof of concept”.

“With the right support and commitment,” he continued, “Australia could build a cost-competitive renewable hydrogen industry in five to 10 years that will serve the country for decades to come. The same can’t be said for any high-emissions fossil-fuel-based hydrogen industry.

“There is a once-in-a-lifetime opportunity for Australia to build a zero-emissions energy export and it could be squandered by the fossil fuel industry and its backers locking the country into high-emissions hydrogen using fossil fuels.”

The joke used to be that hydrogen was the fuel of the future and always would be. But there is no doubt it is a technology whose time is at last coming. Across the world, governments have set ambitious targets for its use. Japan’s Prime Minister Shinzō Abe, for example, declared at this year’s World Economic Forum in Davos a goal of making hydrogen cheaper than natural gas by 2050. China has asserted its determination to be the world leader in the technology.

But all refer to time frames of a decade or more.

“And so,” says Nick Aberle, “you’ve got to ask yourself the question: what’s the point of rushing to invest in coal-to-hydrogen right now?”

He suggests an answer: that the motivation is less to respond to climate change than to protect the coal industry and the jobs it provides.

Canavan’s comments to the media back in July, while speaking about the HESC project, add weight to the suggestion.

“It’s great to see a new life being given to those brown coal resources to create jobs in Australia, too,” he said.

And for now, at least, the government can offer the rationale of cost. Producing hydrogen from water is still a developing technology and is expensive.

However, says Frank Jotzo, director of the Centre for Climate and Energy Policy and co-director of the Energy Transition Hub at the Australian National University, that will change.

“The cost gap is going to narrow,” he told The Saturday Paper. “Renewable energy is becoming cheaper; we know that. And the costs of the electrolysers will come down as there is more investment in using electrolysis to generate green hydrogen, due to economies of scale and technological advances.”

Jotzo notes the International Energy Agency, as well as calculations made by his own centre, suggests that hydrogen from water is likely to become cost-competitive within a decade.

Even he, an expert in the field, is a bit startled by the rapid growth of ambition for a renewable future, including hydrogen. Only a few months ago he attended a conference in Brisbane, organised by climate activist and former US vice-president Al Gore, at which the Australian tech billionaire Mike Cannon-Brookes suggested Australia should aim to generate 200 per cent of its domestic power needs from renewables, and export the excess. Now credible people are talking about even bigger numbers – 500 per cent, 700 per cent.

“People have finally understood broadly that if this goes well there is really no practical size limit to our renewable-based export industry,” says Jotzo. “That’s why you’re getting 500, 700 per cent. Some people now are talking 2000 per cent.”

It may sound preposterous, but, says Jotzo, “if you had all of the bauxite, all of the iron ore that’s mined in Australia actually processed in Australia using cheap Australian renewables, then you’d be beyond 2000 per cent”.

And that is on top of the potential to export billions of dollars’ worth of clean energy, in the form of hydrogen, to parts of the world that do not have Australia’s vast space and renewable resources of wind and solar energy.

Another of the country’s leading experts on the subject, Associate Professor Malte Meinshausen, of the Climate and Energy College at the University of Melbourne, worries that Australia is backing the wrong horse by funding coal-to-hydrogen projects.

“Technically,” he says, “you can do it either way.”

But if Australia goes with hydrogen produced by fossil fuels, then it “shoots itself in the foot”, Meinshausen says, for the world will simply choose to buy green hydrogen if it can.

“If you really want to be a renewable energy superpower,” he says, “if you want to do it at scale, then electrolysis is the way to go.

“Electrolysis already is being done on a large scale in Germany. And Germany is looking to import large amounts of hydrogen in the future.”

The European Union as a whole is moving towards hydrogen. But in order to fulfil future demand, Meinshausen says, it is “vital” that it be green. As concern about the climate crisis grows, the same will be true of potential markets everywhere. There simply will be no social licence for something produced through fossil fuels and their pollution.

“If Australia gets known for producing brown hydrogen from brown coal, it won’t work,” Meinshausen says.

On Tuesday this week, the United Nations Environment Programme’s report on climate action underlined the need for the world to increase its efforts at decarbonisation.

The yearly “Emissions Gap Report” measures the discrepancy between countries’ planned fossil fuel production and the global production levels needed to limit heating to 1.5 degrees or 2 degrees.

“The summary findings are bleak,” the report said. In aggregate, planned fossil fuel production by 2030 remains 53 per cent higher than that consistent with keeping a global temperature rise of less than 2 degrees, and 120 per cent more than that consistent with a rise of 1.5 degrees.

It was particularly critical of Australia, noting that, between now and 2030, “Australia’s coal production is projected to increase by 34 per cent [and its] government also envisions gas production growing by 20 per cent by 2024 and 33 per cent by 2030 relative to 2018 levels”.

Overall, Australia’s “extraction-based emissions from fossil fuel production” would go up 95 per cent by 2030 compared with 2005 levels.

So much for Morrison’s assurance that Australia is “doing our bit”.

In reality, we are among the leading contributors to history’s greatest tragedy of the commons, by our insistence on protecting our fossil fuel industry. Instead, not only could we take a leading role in combating climate change, but we could also enrich ourselves vastly by doing so.

This article was first published in the print edition of The Saturday Paper on November 30, 2019 as "Played for a fuel".

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Mike Seccombe is The Saturday Paper’s national correspondent.

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