Despite billions being pumped into trying to kickstart Australia’s hydrogen industry, department officials concede reaching profitability may be a long way off.
Jo Evans, the deputy secretary of the Department of Climate Change and Energy, said costs were still too high for hydrogen production.
“There’s no way they’ll make a profit at those costs,” Evans told Australia’s Joint Standing Committee on Trade on June 23.
“They do need to come down, and other costs need to come down before they’re going to be truly competitive. But we don’t know exactly at what point they will be able to make a profit,” she said.
“There’s still a cost gap between the cost of producing hydrogen and what the market appears willing to pay, and you’re seeing that in a whole range of different places.”
Evans said the department anticipated costs to ultimately drop over a 10-year period and for the industry to be competitive but noted that government support was still needed in the meantime.
The Australian federal government’s $2 billion Hydrogen Headstart program, announced in May, was partly a reaction against European and U.S. efforts to kickstart their own industries, particularly the Biden administration’s Inflation Reduction Act, which offers US$3 per kilogram of hydrogen in tax credits.
“The context overall has become more competitive. And so in that context, Hydrogen Headstart is a part of the consideration about what more we need to do to make sure there’s a good probability of success for Australia to become a renewable energy superpower,” she said.
The program backs two or three flagship projects that must have up to 1,000 megawatts of electrolyser capacity by 2030.
Hopes That Hydrogen Can Be Solution to Net Zero Challenge
Generating hydrogen is a critical piece in the net zero energy puzzle for governments keen on phasing out coal-fired power stations and not building nuclear energy plants.
An energy grid powered by renewables requires enormous amounts of storage—and billions of dollars and materials—to provide the extra backup electricity needed when the wind or sunlight is unavailable.
Currently, giant lithium batteries are the preferred method of storing excess electricity from solar panels and wind turbines.
Although battery technology is improving, there are still limitations; for example, the FPL Manatee Energy Storage Center in Florida provides just two hours of power to approximately 329,000 homes at a time.
Another solution to the backup conundrum is hydro, yet not every region or government has access to bountiful natural water systems.
Hence, governments have invested billions into hydrogen technology, hoping this can be the ideal backup and storage solution for “emissions-free” energy grids.
With hydrogen, instead of charging batteries with excess electricity from solar and wind, the power is fed through electrolysers (itself an energy-intensive process) to create hydrogen. The gas is then stored in reservoirs to be re-used for electricity generation or synthetic fuel.
Yet like many new technologies in the net-zero push, it is still in its early days of development and far from able to support entire energy grids.
“The main problem really is hydrogen is very low density,” said Nick Kastelstein, oil and gas engineer at GPA Engineering. “So it’s a third the energy density of methane, and it takes a lot of energy to compress it.”
“It also affects the material and ability of storage containers to resist fatigue when cycling. So if you have a big bottle and you fill it up and empty it, fill it up and empty it, the bottle would probably fail 10 times sooner than it would for natural gas,” he previously told The Epoch Times.
“Then you have round trip efficiency as well. So the process of creating hydrogen from electricity has a maximum of 80 percent efficiency—so already you lose 20 percent of your energy. Once you take it back to electricity, you lose even more.”
Federal MP Colin Boyce has warned against relying too much on hydrogen to make net zero feasible.
“Coopers Gap Wind Farm in Jandowae in Queensland is Australia’s biggest wind farm. It has a generation capacity of 430 megawatts. If you multiply that over a year, Australia’s biggest wind farm has enough power to make approximately 30,000 tonnes of hydrogen. This is very little in terms of industrial quantities,” he told Parliament in July last year.
“If you multiply that by a factor of a hundred, you get three million tonnes of hydrogen, which is getting into the realms of industrial quantities,” he said.
“I have no doubt that a hydrogen industry will be developed in Gladstone. However, the practical and economic realities of doing this on a huge, industrial scale have not been investigated or understood.”
