Main content area

Hydrogen industry development

A purpose of this report is to compare Australia’s hydrogen industry with the industry development signals set out in the National Hydrogen Strategy.

The indicators cover both supply-side and demand-side sectors. They look at domestic and international progress from 2020 to 2025 and from 2025 to 2030.

Australia’s progress is assessed in the context of our 2030 goal to be a major supplier in the global clean hydrogen industry.

Global hydrogen industry development

Australia was one of the first countries to publish a strategy outlining a path to clean hydrogen industry growth.

Other governments have followed, releasing strategies and announcing commitments to develop their own hydrogen industries. Ten countries and the European Union released hydrogen strategies in 2020 and the first half of 2021.

Countries have different focuses for their hydrogen strategies. Resource-rich countries such as Australia, Chile, Canada and Saudi Arabia are focusing on establishing export industries for clean hydrogen. Resource-poor countries with ambitious net zero emission targets, such as Japan and South Korea, want to import clean hydrogen to provide a source of clean energy.

Global trade is an important part of most hydrogen strategies, regardless of whether they focus on imports or exports. Nations are already building relationships to enable future large-scale hydrogen supply. Already 18 memorandums of understanding (MoUs) have been signed for clean hydrogen export.[8]

These MoUs are usually between regions targeting export (such as South America, Saudi Arabia and Australia) and potential import markets, mostly in Asia and Europe. They establish the trading relationships and supply chains to benefit both nations.

Investment and supply

Global investment in hydrogen demonstrates the momentum of the industry. At the end of 2020, total global investment in clean hydrogen projects that have reached financial decision was estimated at US$38 billion (A$54 billion). Another US$45 billion (A$64 billion) was committed to projects in the planning phase.[9] According to the International Energy Agency (IEA), [10] investment has already delivered over 400 operational projects.

Governments are rapidly developing their hydrogen industries by supplementing their strategies with significant funding. Demand for Australian clean hydrogen could increase if our export markets make large funding commitments to develop hydrogen demand in their regions.

To help the hydrogen industry grow, a lot of early investment has gone towards research, development and demonstration (RD&D). In the last 5 years, OECD counties have invested A$3.8 billion in hydrogen and fuel cells RD&D. This represents 2.1% of total global RD&D investment, up from 1.1% 5 years ago.[11]

This early investment in RD&D has helped technologies mature and become commercially viable for early movers in the industry. It has addressed initial production barriers and let public and private spending expand beyond RD&D.

Hydrogen is also one of the largest growth areas for venture capital funding, indicating a growing interest in scaling up the sector.[12]

Private industries are shifting to hydrogen as countries start transitioning to low-carbon fuels. Some of the world’s largest organisations, from oil and gas giants to technology companies, are announcing interests in or commitments to invest in hydrogen. Large-scale projects have already been announced in Europe, Saudi Arabia, Australia and the United States.

Global production of clean hydrogen is low, at around 390,000 tonnes a year. However, the strong ambitions of governments and private industries have produced an exponential increase in the number of announced projects. Clean hydrogen project pipelines suggest that global supply could grow to about 17 Mt by 2030.[13]

Supply costs

Early RD&D funding for hydrogen production will drive innovation and economies of scale. As a result, the costs of producing clean hydrogen are expected to fall significantly over the next decade.

In the short term, hydrogen from coal or gas with carbon capture and storage is expected to cost less than renewable hydrogen in most parts of the world.[14] These production methods use mature technologies for hydrogen production, so costs are expected to remain relatively stable. There are fewer estimates for the cost of hydrogen from fossil fuels with carbon capture and storage than for the cost of hydrogen from renewables, with the global average around $2.90 per kilogram[15].

Gas prices affect the cost of hydrogen produced from natural gas with carbon capture and storage. Australia, the United States, the United Kingdom and Russia all have access to natural gas and options for carbon capture and storage, which lowers estimated production costs.

The cost of hydrogen produced from electrolysis is currently over $5 per kilogram.[16] The main cost drivers are capital costs and electricity costs. Renewable hydrogen production costs could fall below $2 per kilogram after 2030 if electrolysers and renewable energy become cheap enough.[17],[18]

In 2020 the average size of operating electrolysers around the world was approximately 1.1 MW. In early 2021, the 20 MW Air Liquide Plant in Canada commenced operation with a 4-module polymer electrolyte membrane (PEM) electrolyser. The largest single stack electrolyser project is the 10 MW Fukushima Hydrogen Energy Research Field in Japan.

Australia’s largest operating electrolyser is the 1.25 MW project at Hydrogen Park in South Australia. The Australian Government has funded 3 electrolyser projects of 10 MW each, which are expected to be operational in the near future.

Electrolyser size is expected to keep increasing. This will likely unlock a 50-fold increase in total renewable hydrogen production in the next 5 years. It could also reduce electrolyser costs by up to 75%.[19]

Demand

The growth in clean hydrogen supply will be driven by a growing demand for clean hydrogen.

Applications for using hydrogen are increasing, particularly in importing countries where hydrogen is a major part of emission reduction strategies. Some of these countries have set targets for using hydrogen in specific applications.

When and where hydrogen will become cost competitive for particular applications depends on:

  • the cost of alternatives
  • existing technology and markets for using hydrogen.

Industrial applications

Ammonia is expected to become one of the largest sources of demand for clean hydrogen. Using clean hydrogen in place of high-carbon hydrogen to meet existing demand for ammonia is a key opportunity for the industry.

Ammonia made from clean hydrogen can also be used to reduce emissions from electricity production. It can be blended with coal to reduce the amount burned to produce each megawatt-hour of electricity. Countries are considering using clean ammonia to lower emissions from co-fired coal generation plants. For example, Japan has an ambitious target to increase ammonia use in existing coal plants to 20% by 2030.

Clean hydrogen for chemical feedstock is currently at demonstration and pilot scale, with approximately 38 projects focused on chemical production operating around the world.[20]

The first quarter of 2021 saw numerous announcements on using hydrogen for steel making. Some of the world’s largest steel producers (HBIS[21], ArcelorMittal[22], JFE Steels and BHP[23]) have announced decarbonisation plans and targets to reduce emissions over the next 30 years.

In June 2021, SSAB, LKAB and Vattenfall commenced operations at the world’s first hydrogen-reduced sponge iron pilot plant. The HYBRIT plant in Luleå, Sweden, has tested the production of sponge iron, demonstrating that clean hydrogen gas can be used instead of coal or coke to reduce iron ore.[24]

The use of hydrogen for industrial applications will accelerate over the next decade. An additional 30 projects are due to start around the world by 2025.[25]

Transport

Using clean hydrogen in transport is part of many countries’ decarbonisation goals. It is a particular focus for countries with large automobile manufacturing sectors such as Japan and South Korea.

The United States and China deployed the most hydrogen fuel cell electric vehicles (FCEV) in 2019. However Japan, Korea and the Netherlands are also expected to be leading producers in the coming years.

Hydrogen technologies are well advanced for some transport applications. The difference in cost compared to other fuels is small, however new infrastructure will be needed for refuelling. Hydrogen-powered fuel cells have already been developed for many forms of transport, including cars, trucks, buses, trains, ferries and forklifts.

Hydrogen-powered vehicles currently cost more than battery electric vehicles. But they have 2 main advantages over battery vehicles: faster refuelling times and the ability to travel longer distances with larger loads before refuelling.

Road transport

Heavy transport applications such as line haul and back-to-base are the most economical to convert to hydrogen. These vehicles need a lot of diesel for long-distance travel, which will make hydrogen-powered alternatives more affordable as clean hydrogen becomes cheaper. Transitioning heavy vehicle fleets to hydrogen first will reduce capital costs quickly through economies of scale. However, this will depend on sufficient demand.

General Motors, Honda, Hyundai, Hyzon, Kenworth and Toyota are manufacturing or planning to manufacture medium and heavy hydrogen fuel cell trucks.

Hydrogen for light passenger vehicles may not become cost competitive with existing technologies for some time. This is due to:

  • high upfront costs
  • competition with electric vehicles
  • a need for significant new infrastructure.

The IEA expect global hydrogen demand from road transport to exceed 1.6 Mt per year in 2030. By 2050 road transport will likely consume more hydrogen than any other sector, at 66.5 Mt per year.[26] This will be driven by:

  • changing regulatory requirements in many countries
  • the expectation that hydrogen will be cheaper than diesel for buses, trains, trucks and SUVs by 2030.[27]

By 2030, there could be more than 10,500 FCEV refuelling stations supporting 4.5 million on-road FCEVs globally.[28]

Shipping

Cargo and container ships currently produce a significant proportion of global emissions.

Reducing emissions in the shipping sector is a priority for the International Maritime Organisation. The organisation has a goal to halve emissions by 2050 compared to 2008 levels.[29]

This is driving innovation in alternative marine fuels. Clean ammonia is a potential source of low-emissions maritime fuel, particularly for vessels that spend a long time at sea, such as cargo ships.

Gas networks

Forty projects around the world are blending hydrogen into natural gas networks. These projects are all small, with fewer than 1,000 connected buildings.[30]

The use of hydrogen in gas networks is developing quickly, with the biggest advances in countries where gas is used mostly for heating.

The United Kingdom, the Netherlands, Australia and the United States have several demonstration projects. These pilots are testing blends of 5% to 20% hydrogen as well as 100% hydrogen.

Electricity

Hydrogen can be used to generate electricity and support the power grid. Countries with more limited resources, such as Japan and the Republic of Korea, have large targets for using hydrogen for baseload power via hydrogen turbines and ammonia co-firing in coal-fired power plants. Three new Australian gas generators have announced plans to install hydrogen-ready gas turbines at their plants.

Major turbine manufacturers, such as Siemens and General Electric, have also started to produce and sell 100% hydrogen-ready gas turbines.

Australia’s industry development

The Australian hydrogen industry has followed global momentum and seen substantial developments in 2020 and 2021. 

To compare the Australian industry with global developments, an assessment was completed on where Australia is likely to be in 2025 against each of the 13 indicators in the National Hydrogen Strategy.

Each of the 13 indicators was rated as either:

  • advancing slowly
  • advancing quickly
  • advancing.
Table 2: Overview of Australia’s progress across the industry development signals

Industry development signal

2025 pace

2030 pace

Current status

Investment

Advancing quickly

Advancing

  • Private sector investment is growing with committed investment exceeding A$1.6 billion.
  • Public sector investment reached $1.27 billion in June 2021. 

Project scale

Advancing quickly

Advancing quickly

  • Project announcements indicate scale could reach over 100 MW by 2025.
  • Gigawatt-scale projects have been announced and are expected to start operating in the second half of the decade. However, a final investment decision on these projects has not been made.

Cost-competitiveness

Advancing quickly

Advancing

  • Clean hydrogen costs are expected to decline to between A$2 and A$4 by 2030.[31]

Australia’s exports

Advancing

Advancing

  • Investment is being directed to hydrogen supply chains. Front end engineering and design studies are underway.
  • Supply chains still require development for Australia to be a major global supplier.
  • To support supply chain development, supply chain studies are underway with international partners like HySupply.
  • The government has supported hydrogen hubs to stimulate demand and produce clean hydrogen for domestic and export markets.

Chemical feedstock

Advancing quickly

Advancing quickly

  • Projects to use clean hydrogen in existing facilities have been announced.
  • Current announcements account for 20% of total electrolyser capacity.

Steel making

Advancing slowly

Advancing slowly

  • Limited activity in this area. However, several announcements from steel producers indicate an intent in this sector.
  • Clean steel is a priority technology under Australia’s Technology Investment Roadmap.

Electricity grid support

Advancing slowly

Advancing slowly

  • Limited trials are underway to test whether hydrogen can provide frequency control ancillary services (FCAS).

Mining and off-grid

Advancing

Advancing slowly

  • A few projects are exploring hydrogen for microgrid applications. However, there are no plans for either small-scale or wide-scale rollout at this stage. Fortescue and ATCO are exploring hydrogen mobility at a mine site. 
  • $103.6 million in government funding has supported microgrid pilots and deployment.

Power generation*

Advancing quickly

Advancing

  • Two new hydrogen-ready gas generators reached final investment decision in New South Wales: Snowy Hydro’s 660 MW Kurri Kurri gas generator and Energy Australia’s 316 MW Tallawarra B gas generator. Additional projects are also in the pipeline, specifically AIP’s Port Kembla gas generator.

Light transport

Advancing slowly

Advancing slowly

  • Limited deployments or infrastructure to support hydrogen use in light transport.
  • 4 refuelling stations and approximately 30 vehicles are in operation. Some additional projects are targeting operations in 2025.
  • The Australian Government has launched its Future Fuels Fund to take advantage of opportunities offered by electric, hydrogen and bio-fuelled vehicles. This includes support for electric vehicle refuelling infrastructure, including hydrogen fuel cell vehicles.

Heavy transport

Advancing slowly

Advancing slowly

  • Hyzon Motors and Fortescue Metals are collaborating on hydrogen-powered buses for mining applications.
  • The Australian Government’s Future Fuels Fund and Freight Productivity Program will support further heavy transport uptake.

Gas networks

Advancing

Advancing

  • Activity is underway to trial hydrogen blending. Nine projects are expected to be operational by 2025.
  • Gas networks are targeting 100% hydrogen in regions of the network by 2030.
  • Australian Governments have agreed to national gas regulatory framework amendments to bring hydrogen, bio-methane and other renewable gas blends within its scope. Reforms are expected to initially focus on gases and blends that can be used in existing natural gas appliances.

Industrial heat

Advancing

Advancing

  • Limited activity. However, Grange Resources (Tasmania) Pty Ltd is undertaking a feasibility study looking at hydrogen for industrial heat.

* Note: Power generation refers to global progress as the indicator explicitly relates to international electricity demand 

Source: Adapted from KPMG analysis, June 2021

This assessment shows that Australia is progressing well on:

  • the indicators that will support efficient scale-up of the industry by 2030
  • the supply-side factors that will let Australia meet increasing demand for hydrogen.

As is to be anticipated as a new industry develops, progress has been slower on demand-side indicators. This is expected given the early state of the industry and the higher cost of clean hydrogen compared to chemicals and fuels currently being used.

Many of hydrogen’s expected future uses (such as hydrogen blending in gas networks and fuels for vehicles) have only recently begun trials. Like any new industry, it will take some time to build export supply chains and deliver activities to help scale up the industry. For some uses of hydrogen, it will also take time for demand for hydrogen to build. Progress will be slow at first, but will increase as costs decrease and markets increasingly adopt new technologies. This is a natural part of industry development and will be accelerated through government support.

For example, use of hydrogen for transport applications is dependent on uptake of hydrogen vehicles by consumers. These vehicles are currently expensive as the technology is new, but are expected to come down in cost over time, as technologies continue to improve and production volumes increase. Use of hydrogen will increase in line with uptake of vehicles by consumers. Similarly, large industrial users of hydrogen, such as existing ammonia producers, may not switch to using clean hydrogen until their existing hydrogen production plants reach their end of their asset lives.

The Australian Government is helping industry to accelerate these demand-side indicators through a variety of funding programs discussed later in this report. For example, through the Australian Renewable Energy Agency, the Australian Government is funding Yara Pilbara Fertilisers and ENGIE Renewables to develop a 10 MW electrolyser project to produce renewable hydrogen at Yara’s existing ammonia facility in Karratha, Western Australia. This project will see clean hydrogen used to make clean ammonia for global export. Projects like these, and the Australian Government’s $464 million Clean Hydrogen Industrial Hubs program, will help drive the costs of hydrogen down faster, which will increase demand and improve these indictors.

As highlighted in the National Hydrogen Strategy, hydrogen hubs will grow Australian demand in the next few years as the Clean Hydrogen Industrial Hubs program is rolled out. Bringing hydrogen users together will also:

  • reduce infrastructure costs
  • focus innovation efforts
  • develop and share workforce skills.

Locating hydrogen hubs at export sites will provide access to international demand, which is expected to be a large source of offtake for many hydrogen projects.  

Investment and supply

Investment in the Australian hydrogen industry has increased since the release of the National Hydrogen Strategy. This is largely due to government spending to support the strategy’s pathway and priorities.

At the end of June 2021, Australian Government support directly targeting the hydrogen industry was over $1 billion. State and territory governments had committed another $325 million specifically for hydrogen.[32]

Government investment is targeted at:

  • research, development and demonstration (RD&D) projects
  • early enabling actions
  • developing hydrogen hubs as demand sources and as part of export supply chains.

This targeted investment will help the Australian clean hydrogen industry scale up and meet expected global demand by 2030. It is a useful and necessary early step to establish the industry in Australia.

Like the rest of the world, Australia currently produces a small amount of clean hydrogen – 55 tonnes in 2020.[33]

The industry is expected to grow significantly. In June 2021, Australia had the world’s largest pipeline of announced hydrogen projects. If all these projects are completed Australia could be one of the world’s largest hydrogen producers by 2030.

Production costs

In 2025 the cost of producing clean hydrogen in Australia is expected to be between A$2.30 and A$5 per kilogram, depending on the production method. In 2030 it will cost an estimated A$2 to A$4 per kilogram.[34] These are some of the cheapest estimates in the world.

Bringing the cost of clean hydrogen below $2 a kilogram (the stretch goal under the Technology Investment Roadmap) will require:

  • cheaper and more abundant clean energy
  • significant development and deployment of technologies such as electrolysers.

Electrolysers and other clean hydrogen production technologies are still at an early stage of scaling up. Australian projects could increase demand for these technologies, which would help reduce costs.

Shipping hydrogen

Hydrogen cannot be shipped as a gas. To transport it, the gas must be either:

  • liquefied
  • converted to ammonia or some other low emissions product (for example, clean steel)
  • bound to a liquid organic hydrogen carrier.

The best carrier will depend on how the hydrogen is used. Liquid hydrogen has a lower energy density than ammonia, which means less hydrogen can be carried per ship. However, it doesn’t require any cracking to convert back to gaseous hydrogen. This makes liquid hydrogen best for end uses that require liquid or high-purity hydrogen.

Shipping hydrogen as ammonia is easy, but converting to ammonia and back into hydrogen is energy intensive and adds cost. This means shipping as ammonia will likely be the best option only if ammonia is needed for the end use.[35]

Australia is developing both ammonia and liquefied hydrogen supply chain projects:

  • Yara Pilbara and ENGIE are working together on a plant for renewable ammonia production. 
  • The Hydrogen Energy Supply Chain (HESC) project aims to deliver liquefied hydrogen from Victoria’s Latrobe Valley to Japan.

Figure 3: Announced Australian projects by year of operation and output (2019 to 2030)[36]

Bar graph showing the number or projects starting operation between 2019 and 2030 as well as their cumulative output. Text description follows

The number of announced projects starting operation each year between 2019 and 2030 are:

  • 2019: 2 renewable projects
  • 2020: no projects
  • 2021: 9 renewable projects, 1 low-carbon project, 1 other project
  • 2022: 8 renewable projects
  • 2023: 7 renewable projects
  • 2024: 1 renewable projects
  • 2025: 2 renewable projects
  • 2026: no projects
  • 2027: 1 project
  • 2028: 1 project
  • 2029: no projects
  • 2030: 1 project

The cumulative output of these projects remains well below 2 megatonnes per year until 2026, when it starts increasing sharply. By 2030 cumulative output is nearly 4 megatonnes per year.

Despite these encouraging early signs, Australia’s project pipeline is made up of a small number of very large projects (Figure 4). The activities of the next few years will determine if these projects can be delivered.

To deliver these projects on time, Australian governments must keep working together to create a productive regulatory environment supported by necessary infrastructure. This work is already underway. Delivery also depends on technology advancements across the supply chain reducing production costs.

International partnerships

Australia is developing international partnerships to establish ourselves as a preferred supplier of hydrogen.

Since 2018, federal and state governments have entered into various international agreements on hydrogen. These include agreements with Republic of Korea, Japan, Singapore and Germany, all of which are expected to be net importers of hydrogen.[37] These agreements will:

  • share industry knowledge
  • reduce technology costs
  • explore the development of international hydrogen supply chains.

Growing our already strong international relationships in this area will position Australia as a partner of choice for exporting low emissions energy, including clean hydrogen.

In 2021, the Australian Government announced new partnerships with Germany, Singapore, Japan, Republic of Korea and the United Kingdom.

Australia and Germany will work together on a series of new initiatives to accelerate the development of a hydrogen industry under a new Hydrogen Accord. The accord builds on Australia’s existing collaboration with Germany on low emissions technologies including hydrogen, with a 2-year supply chain study between the 2 countries already underway.

Australia and Singapore will establish a $30 million partnership to accelerate deployment of low emissions fuels and technologies (like clean hydrogen) in maritime and port operations.

The Japan–Australia Partnership on Decarbonisation through Technology will increase our shared focus on priority low emissions technologies, including clean fuel ammonia and clean hydrogen.

    •  

The Republic of Korea and Australia will work together to drive increased adoption of low and zero emissions technologies.

Australia and the United Kingdom have agreed to collaborate on research and development across technologies crucial to decarbonising the global economy, including clean hydrogen.

The private sector is also building international partnerships. Some of Australia’s largest organisations have signed memorandums of understanding (MoUs) with supply chain partners. These MoUs will secure trade routes for hydrogen and other low-carbon exports, including low-carbon steel.

For example, Origin Energy has signed an MoU with POSCO, one of Korea’s largest steelmakers and trading and resource companies. The companies will cooperate to produce and supply renewable hydrogen to Korea.[38]

Demand

Australia’s most developed areas of hydrogen demand are:

  • ammonia production, where clean hydrogen can replace the existing use of high-carbon hydrogen
  • blending into gas networks.

Other areas where hydrogen is likely to become cost-competitive early are:

  • heavy transport
  • remote power generation
  • mining vehicles.

Hydrogen for industrial applications and heating is unlikely to reach cost parity with existing fuels anywhere in the world before 2030.

Battery electric vehicles may be more cost competitive for passenger cars such as urban vehicles and mid-range vehicles. However, customer preferences will drive the choice of vehicle.[39]

Clean ammonia

The largest current use for hydrogen in Australia is as a chemical feedstock for ammonia production.

This ammonia is used to manufacture products such as:

  • fertilisers
  • industrial chemicals
  • explosives
  • plastics.

Clean ammonia is also the most developed application for clean hydrogen in Australia. Clean ammonia could also be used to export clean hydrogen and as a new type of fuel for shipping.

Nine clean ammonia production projects are being developed in Australia.[40] These projects range from small-scale pilot and demonstration studies to large-scale developments. Some of the larger projects will produce ammonia for export. 

For example, the Australian Government, through ARENA, is providing up to $42.5 million to Engie Renewables Australia for a 10 MW electrolyser project. The project will produce renewable hydrogen at Yara Pilbara Fertilisers’ ammonia facility in Karratha, Western Australia.

Clean steel

Clean steel is a great opportunity for Australia thanks to our extensive iron ore resources and competitive advantage in producing hydrogen. Low emissions steel and aluminium are priority technologies under the Technology Investment Roadmap because of their economic and emissions reduction benefits.

Clean steel production in Australia is at an early stage. However, Fortescue Metals, Rio Tinto and GFG Alliance have all made recent announcements on clean steel. In 2021, Fortescue began constructing a pilot low emissions steel plant alongside a commercial renewable power plant in the Pilbara in WA.

Electricity

Hydrogen could provide long-duration storage for firming Australia’s electricity grid. It could also help decarbonise power generation in remote areas of Australia.

Using hydrogen for power generation can facilitate sector coupling. For example, hydrogen production and use will more closely link the electricity grid, the gas distribution network and the infrastructure supplying fuel for vehicles. This will see multiple sectors benefit from a rapidly growing clean hydrogen industry.

Like most of the world, hydrogen for electricity is in its early stages in Australia. However, 8 trials with grid-support components are being developed. For example:

  • Horizon Power is developing a hydrogen demonstration plant in the small coastal town of Denham. The plant will provide renewable energy for a microgrid power station.
  • The Clean Energy Innovation Hub in Perth operates a microgrid hybrid energy system that produces, stores and uses hydrogen. This includes blending hydrogen with natural gas and using it to generate power.[41]
  • Three new Australia gas generators have announced plans to install hydrogen-ready gas turbines at their plants (including the Hunter Power Project, Tallawarra B and Port Kembla gas generator), with the Australian Government announcing a $24.9 million to support new gas generators to be hydrogen-ready.

The use of hydrogen for mining and off-grid applications is currently limited in Australia and around the world. However, several major mining companies, including Australian companies, are exploring hydrogen-related opportunities. 

Transport

Transport shows promise as an early use for hydrogen, particularly line-haul and back-to-base vehicles. However, hydrogen for transport is at an early stage in Australia. Various challenges need to be overcome to make hydrogen in transport a reality.

Refuelling infrastructure needs to be deployed, vehicles need to become cheaper and more widely available, and we need low-cost hydrogen supply. Consumer choice will also play an important role in deciding which vehicle technologies become popular.

The uptake of hydrogen fuel cell vehicles is dependent on the rollout of hydrogen refuelling stations. However, Hyundai and Toyota have introduced their hydrogen fuel cell vehicles to the Australian market for fleets and early adopters, with special arrangements being made for refuelling. The government’s Future Fuels Fund will also consider funding for hydrogen refuelling infrastructure across Australia.

Twelve Australian projects in development will focus on hydrogen use in transport. Another 12 projects have potential for hydrogen transport along with other uses. 15 of these 24 projects are scheduled to start operating before 2025.

Most of these projects focus on developing refuelling infrastructure:[42]

  • In March 2021, ActewAGL opened Australia’s first public hydrogen refuelling station in Canberra. The station will service a fleet of 20 Hyundai Nexos being trialled by the ACT Government.
  • Toyota Australia is converting its decommissioned car manufacturing plant in Altona into a renewable energy hub. The hub will produce renewable hydrogen for use in both transport and stationary applications. The project has received $3.07 million in funding from the Australian Government and is expected to be fully operational in 2021.

To date, the Australian Government has provided around $1.4 billion to support low and zero emissions vehicle technologies, including for hydrogen-fuelled vehicles.

The National Hydrogen Strategy identifies several early opportunities for hydrogen vehicles:

  • industrial users such as ports or remote industrial sites
  • ‘back to base’ transport applications such as fleet vehicles and metropolitan public transport
  • freight transport.

Hydrogen hubs will provide an opportunity to bring vehicle manufacturers, hydrogen producers and fuel suppliers together, particularly for back-to-base applications. Hubs will provide a platform to coordinate rollout and share risks.

Gas networks

Hydrogen can be used in Australia’s gas networks for residential, commercial and industrial applications. Using existing gas infrastructure could:

  • maximise the use of this critical infrastructure
  • reduce costs for end users by lowering capital costs for transport.

Australia’s activities in this area are beginning to outpace other countries. Three projects are already testing the blending of hydrogen into gas networks, and 11 more are under development.

One of the most advanced projects is AGIG’s Hydrogen Park South Australia in Adelaide. The project has been supplying 700 houses with 5% blended hydrogen since May 2021.

Figure 4: Current hydrogen blending projects in Australia[43]

Map showing hydrogen blending projects with details of each. Text description follows.

Clean Energy Innovation Hub, WA: Demonstration of gas blending on a small scale to a display home, studying home appliance performance at various H2 blending rates.

Dampier to Bunbury Natural Gas Pipeline, WA: Feasibility study examining the compatibility of the transmission pipeline with blended hydrogen.

Murchison Renewable Hydrogen, WA: Alongside hydrogen export, the facility is anticipated to blend hydrogen into natural gas pipeline connecting Dampier and Bunbury.

Hydrogen Park South Australia (HyP SA): HyP SA is an innovative project that will produce renewable hydrogen to be blended with natural gas to be supplied to nearby homes via the existing gas networks.

Australian Hydrogen Centre, Victoria: Centre assessing feasibility of hydrogen blending into gas networks of Victorian and South Australia regional towns.

Portland Green Hydrogen Project: Wind or solar powered hydrogen production facility near Portland in Victoria for export and gas blending.

Clean Energy Innovation Park, WA: Feasibility study examining potential for a commercial hydrogen production facility for end use in gas networks, transport and industry.

Hydrogen Park Murray Valley: Regional town hydrogen blending initiative, testing up to 10% blended hydrogen to decarbonise gas supply in Albury (NSW) and Wodonga (VIC).

AGN Hydrogen Park Gladstone, Queensland: Australia’s first renewable hydrogen production facility plant will deliver up to 10% blended hydrogen across the city’s residential, small, commercial and industrial customer base.

APA Renewable Methane Demonstration Project, Queensland: Demonstration end-to-end hydrogen system including electrolysis from solar power, fuel cell power and injection into gas networks.

Jemena Western Sydney Green Gas Project, NSW: Project is exploring a power to gas pilot on their gas network, complemented by a refuelling station. Injecting expected to begin in early 2021.

Hydrogen Test Facility – ACT Gas Network: Demonstration gas blending project to enhance understanding of the impact of blending hydrogen into the gas network supplying the ACT and Queanbeyan (NSW).

ARENA’s Renewable Hydrogen Deployment Funding Round is funding 2 gas blending projects:

  • $28.7 million for a 10 MW electrolyser for gas blending at ATCO’s Clean Energy Innovation Park in Warradarge, Western Australia
  • $32.1 million for a 10 MW electrolyser for gas blending at AGIG’s Murray Valley Hydrogen Park in Wodonga, Victoria.

Several of these small pilot projects are also exploring how hydrogen could be integrated into the electricity system. For example, ATCO’s Clean Energy Innovation Hub uses solar-powered electrolysis to produce hydrogen that is stored and injected into a micro-grid as a blended fuel. Although small, this trial shows how different uses of hydrogen can be intelligently combined and optimised.

Energy ministers have agreed to an expedited process to allow hydrogen and biogases to be brought within the existing regulatory framework for natural gas, which will allow for more industry development.

Supporting further progress            

Australia has made a promising start on the pathway set out in the National Hydrogen Strategy. Continuing this pace is crucial for Australia to remain a world leader in hydrogen.

The rest of this report describes the actions of Australian governments since the strategy was released, as well as future opportunities for Australia.

Footnotes

  1. KPMG analysis of government and private media announcements
  2. Hydrogen Council, Hydrogen Insights 2021, February 2021
  3. IEA, Hydrogen Project Database FY21Q1, 2020
  4. IEA, RD&D Budget, IEA Energy Technology RD&D Statistics (database), accessed April 7, 2021, in 2019 values
  5. IEA, Energy Technology Perspectives 2020, 2020
  6. KPMG analysis of the IEA and HyResource hydrogen project databases
  7. IEA, The Future of Hydrogen, June 2019
  8. IEA, Hydrogen Tracking Report, June 2020
  9. Hydrogen Council and McKinsey & Company (2021) Hydrogen Insights Report January 2021
  10. Deloitte, Investing in hydrogen: Ready, set, set zero, November 2020
  11. Advisian, Australian hydrogen market study, May 2021
  12. ReCharge News, Nel to slash cost of electrolysers by 75%, with green hydrogen at same price as fossil H2 by 2025, January 2021 and ReCharge News, Green hydrogen: ITM Power’s new gigafactory will cut costs of electrolysers by almost 40%, January 2021
  13. KPMG, Hydrogen State of the Nation, June 2021
  14. HBIS Group, HBIS Announces its Low-carbon & Green Development Action Plan, 12 March 2021
  15. ArcelorMittal, ArcelorMittal launches XCarb™, signalling its commitment to producing carbon neutral steel, 17 March 2021
  16. JFE Steel Corporation, FE Steels and BHP to address decarbonization in steelmaking process, 10 February 2021
  17. HYBRIT: SSAB, LKAB and Vattenfall first in the world with hydrogen-reduced sponge iron
  18. KPMG analysis of IEA Project Database FY21Q1 supplemented with large scale announcements to April 2021
  19. IEA, Hydrogen, June 2020
  20. Hydrogen Council, 2020
  21. Hydrogen Council, Hydrogen Insights, 2021
  22. International Maritime Organisation, IMO Action to Reduce Greenhouse Gas Emissions
  23. IEA, Hydrogen Project Database FY21Q1, 2020
  24. Analysis from CSIRO National Hydrogen Roadmap (2018), IEA cost data, SA hydrogen export study and ANU Green hydrogen cost report (2020)
  25. CSIRO, A Short Report on Hydrogen Industry Policy Initiatives and the Status of Hydrogen Projects: May 2021
  26. KPMG analysis of CSIRO HyResource project list and individual project analysis
  27. Analysis from CSIRO National Hydrogen Roadmap (2018), IEA cost data, SA hydrogen export study and ANU Green hydrogen cost report (2020)
  28. Hydrogen Council, Hydrogen Insights Report February 2021
  29. KPMG Analysis of HyResource project database as at September 2020, supplemented by additional research to fill data gaps where possible
  30. Hydrogen Council, Hydrogen Insights, 2021
  31. FuelsCellsWorks, Origin Energy and POSCO to cooperate on green hydrogen
  32. Hydrogen Council, Hydrogen Insights Report, February 2021
  33. KPMG, Hydrogen State of the Nation, June 2021
  34. HyResource project database
  35. KPMG analysis of HyResource project database
  36. KPMG, Hydrogen State of the Nation, June 2021