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Priority low emissions technologies are those expected to have a significant impact on Australia’s big technological challenges and opportunities. These technologies have the highest abatement and economic potential in areas of comparative advantage for Australia.

They are priorities where government investments can make a difference in reducing prices and improving technology readiness.

The priority low emissions technologies identified in this Statement are:

  • clean hydrogen
  • energy storage
  • low carbon materials (steel and aluminium)
  • carbon capture and storage
  • soil carbon.

Economic stretch goals are ambitious but realistic goals to bring priority low emissions technologies to economic parity with existing mature technologies. Stretch goals have been set for each priority technology.

Investors can have confidence that identified priority low emissions technologies are of long-term strategic importance for the Government. We will report on progress towards these goals through annual Low Emissions Technology Statements. We will be responsive to local and global technology developments, and add or alter priority low emissions technologies and goals with advice from the Technology Investment Advisory Council.

We will target international partnerships that support these economic stretch goals, including access to global markets and more competitive supply chains. We will also prioritise partnerships that focus on critical research, development and deployment challenges for economically important, hard-to-abate sectors.

Priority low emissions technologies and economic stretch goals are described further in the following sections. For all priority low emissions technologies, stretch goals have been set with reference to the current costs of today’s incumbent technologies.

These priority low emissions technologies will offer emissions reduction opportunities across Australia’s economic sectors, with sequestration technologies also providing additional decarbonisation pathways for key industries, while protecting and preserving jobs.

The Government’s role in helping bring down technology costs towards the stretch goals is to influence and co-invest with the private sector and other levels of government and encourage a supportive enabling environment.

Box 2: Economic stretch goals for priority low emissions technologies

  • Clean hydrogen under $2 per kilogram
  • Energy storage — electricity from storage for firming under $100 per MWh (this would enable firmed wind and solar at pricing at or below today’s average wholesale electricity price)
  • Low carbon materials — low emissions steel under $900 per tonne and low emissions aluminium under $2,700 per tonne
  • CCS — CO₂ compression, hub transport, and storage under $20 per tonne of CO₂
  • Soil carbon measurement under $3 per hectare per year

For all priority low emissions technologies, stretch goals have been set with reference to the current costs of today’s incumbent technologies.

Clean hydrogen under $2 per kilogram

Why is it a priority?

Hydrogen is a transformative fuel. It can be used to power vehicles, generate heat and electricity, and serve as a feedstock in industrial applications. It also allows for the export of renewable and low emissions energy – either as clean hydrogen or a hydrogen derivative, such as clean ammonia. Australia’s competitive advantages – abundant land and energy resources, extensive carbon storage reservoirs, and excellent reputation as a trusted energy exporter – mean we are well positioned to be a world leading hydrogen producer.

Conservative estimates developed for the National Hydrogen Strategy indicate a domestic industry could generate over 8,000 jobs and $11 billion a year in GDP by 2050.[5]

Setting the stretch goal

Achieving ‘H₂ under 2’ at the site of production will be a key step in unlocking hydrogen industry growth. At $2 per kilogram, clean hydrogen becomes competitive in applications such as producing ammonia, as a transport fuel and for firming electricity.

Indicative deployment pathways

To achieve this stretch goal, industry will need to scale up quickly and cost effectively while reducing input and capital costs. Clean hydrogen from off-grid gas with CCS, and coal gasification with CCS might be the lowest cost clean production methods in the short-term, although renewable production methods will come down in cost as clean hydrogen demand grows.

Establishing domestic demand for hydrogen will help the industry to scale up and prepare Australia to be a global exporter to emerging international markets. Using clean hydrogen in heavy vehicles, as industrial feedstocks, blended into gas distribution networks, for export as clean ammonia, and for power generation at remote sites, offer early hydrogen growth opportunities. For example, cost-effectively deploying hydrogen in remote mine sites could avoid expensive supply of diesel and reduce associated emissions.

The National Hydrogen Strategy sets out the initial actions needed to support this emerging industry. A range of actions can accelerate industry growth, such as encouraging hydrogen hubs, developing international supply chains, ongoing research and investment in both proven and emerging production technologies, and domestic incentives to create hydrogen demand. The Government’s new

$1.9 billion investment package in new energy technologies includes new commitments that will support hydrogen, including $1.6 billion in new funding for ARENA, a $74.5 million Future Fuels package, and a $70.2 million to activate regional hydrogen export hubs. This will build on over $500 million committed towards hydrogen projects by the Government at the launch of the National Hydrogen Strategy in 2019.

Establishing hydrogen as a priority technology and working towards this stretch goal will reinforce these commitments and ensure Australia can capture a significant share of the growing global export demand for this technology.

…technologies to produce hydrogen are attractive because they support multiple sectors and applications, including transport, electricity generation and industrial processes that are difficult to decarbonise, opening opportunities to decarbonise that are not available through renewable electrification alone.

Woodside Energy Ltd

Energy storage – electricity from storage for firming under $100 per MWh (enabling firmed wind and  solar at pricing at or below today’s average wholesale electricity price)

Why is it a priority?

Grid-scale electricity storage will be a critical element of Australia’s future electricity system. Broad deployment of storage will facilitate more low-cost solar and wind electricity in the grid. Storage will also provide system security services and be a source of reliable, dispatchable electricity. It can reduce pressure on electricity prices by meeting peaks in consumer demand.

Low-cost backup and storage will enable more solar and wind electricity in the grid and has the potential to reduce Australia’s cumulative emissions by over 700 Mt CO₂-e to 2040.[6]

Setting the stretch goal

This stretch goal is consistent with an average wholesale electricity price under $70 per MWh and represents the cost at which low emissions electricity, available on demand for eight hours or more, will be competitive with conventional mid-merit gas generation in the National Electricity Market (NEM).[7] The market contracts firming services by way of capacity contracts. The stretch goal represents the capacity cost plus the short run marginal cost of mid-merit generation.

Indicative deployment pathways

A mix of storage options will be needed to meet the needs of Australia’s electricity system. Initially, the lowest cost storage option will likely be pumped hydro. Batteries and solar thermal energy storage (charged by solar thermal generation) will become increasingly cost competitive, and will be suitable in places where pumped hydro is unavailable or where other characteristics are valuable, such as the ability to provide frequency control or heat for industry. These are emerging technologies and there is scope for costs to fall as experience with them grows and global supply chains mature.

Governments and industry can pursue a range of actions to bring down technology costs, including ongoing investment in research and demonstration projects, de-risking projects through offtake agreements, deepening international supply chains for critical battery minerals, and electricity market reforms to recognise and value the strengths of emerging storage technologies.

The Australian Government has already invested over $270 million in innovative energy storage projects since 2014-15.[8] In 2019, it committed $25 million over six years for the Future Battery Industries CRC. The development of new battery mineral reserves is also being encouraged through the 2019 Critical Minerals Strategy.[9] Prioritising energy storage and working towards this stretch goal will further accelerate the development of this critical technology and its deployment in Australia’s electricity system.

As one of the world’s largest per capita installed solar countries in theworld,theimpactfromsolarislimitedwithouttheadditionof energy storage technologies, such as batteries, to supportit.

Australian Battery Society

Low carbon materials – low emissions steel under $900 per tonne and low emissions aluminium under $2,700 per tonne

Why is this a priority?

Steel and aluminium are important global commodities and thousands of people are employed in these industries in Australia, many in regional areas. Australia can help to unlock the technologies that will reduce emissions from these sectors.

Low emissions steel and aluminium could reduce Australia’s cumulative emissions by around 200 Mt CO₂-e to 2040, while increasing economic activity and generating many thousands of new jobs in the long-term. If Australian low emissions steel and aluminium exports can meet a greater share of projected global demand for these metals, we could help to reduce international emissions cumulatively by over 500 Mt CO₂-e over the period to 2040.

Setting the stretch goal

In the long-term, achieving stretch goals of $900 per tonne for low emissions steel and $2,700 per tonne for low emissions aluminium would retain cost-competitiveness with existing steel and aluminium production. These stretch goals are based on the three year average market price for steel and aluminium.[10]

The stretch goals would cover emissions associated with steel and aluminium production, including direct process emissions and supplied electricity emissions. While emerging technologies to reduce upstream emissions from iron ore mining and alumina production are not included in the stretch goal, the Government will continue to monitor global learnings, research and investment trends.

Indicative deployment pathways

One possible pathway for low emissions steel is likely to be ‘greenfield’ developments involving direct reduction of iron (initially using natural gas and then clean hydrogen) and electric arc furnaces using low-cost renewable electricity. Direct reduced iron using natural gas may be commercially viable in Australia by 2030, with hydrogen steel-making available by 2040. Partially reducing emissions by optimising blast furnaces with hydrogen is also being explored internationally.

For low emissions aluminium, increasing supply of low-cost firmed renewable electricity, more efficient smelter technology, and inert anodes that do not produce emissions will reduce direct emissions. There may also be ways to reduce the emissions in the supply chains (e.g. alumina production for aluminium).

Governments and businesses will need to work together to unlock and integrate new technologies while maintaining and expanding existing industries. Alongside ongoing research, development and demonstration investments, and building international partnerships, technology deployment will be accelerated where the regulatory environment recognises and rewards broader co-benefits. Electricity market reforms, such as pricing demand response to improve

grid reliability and reduce costs for all users, will reward aluminium smelters for the services they provide and may enable the adoption of new production technologies.

Efficient deployment of technological changes will support the transition of economically important industrial sectors such as alumina and aluminium, enabling a greater manufacturing sector.

Australian Aluminium Council

CCS – CO₂ compression, hub transport, and storage under $20 per tonne of CO₂

Why is this a priority?

Large-scale deployment of CCS will underpin new low emissions industries (including hydrogen) and provide a potential decarbonisation pathway for hard-to-abate industries such as natural gas processing and cement. CCS currently offers strong potential where a facility produces a pure and high pressure CO₂ stream, as this negates the need for capture technology. Such processes include oil and gas extraction, natural gas processing, and coal gasification or methane reforming for hydrogen production.

Australia has a comparative advantage in CO₂ transport and storage, with a number of sources of CO₂ located close to suitable geological storage basins and with established pipeline easements between the two. Australian CCS projects could also play an important long-term role in storing CO₂ drawn down from the atmosphere, likely to be crucial in global efforts to meet the Paris Agreement’s temperature goals (Box 3).

Setting the stretch goal

Achieving a stretch goal of under $20 per tonne for CO₂ compression, hub transport (in the vicinity of 100 km) and storage would position CCS to be competitive over the long term with other forms of abatement supported by the Emissions Reduction Fund.

The stretch goal covers CO₂ compression, hub transport and storage, but does not cover capture processes, noting the cost of capture technologies varies between applications and depends on factors such as the relative concentration of CO₂ produced by an industrial process.

Indicative deployment pathways

Collaboration and partnerships between governments, industries and communities will be necessary to enable large-scale CCS development and deployment in Australia. Governments play a role through investments in research, development and demonstration and by providing targeted incentives for technology adoption. CCS hubs and shared pipeline and storage infrastructure could provide pathways

to scale and lower costs, and enable emissions to be safely stored from a range of sources including hydrogen production, power generation, gas and oil production, and hard-to-abate industrial processes.

The Australian Government has begun work on a new method for CCS to incentivise adoption through the Emissions Reduction Fund.

Recommendations of the King Review, such as below-baseline crediting under the Safeguard Mechanism and a technology neutral remit for ARENA and the CEFC, will also encourage technology development

and adoption in industry.[11] Establishing CCS as a priority technology and working towards this stretch goal will build on and reinforce these commitments, and accelerate the development of this critical technology as a potential decarbonisation pathway for key industries.

Box 3: Role of negative emissions technologies, including ccs, in achieving the paris agreement’s global goals

As outlined in the King Review, global institutions such as the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA) have concluded the Paris goals cannot be achieved without carbon sequestration deployed at scale. Over 90% of the IPCC’s scenarios consistent with a 66% chance of avoiding a 2oC temperature rise rely on negative emissions technologies, including bioenergy coupled with carbon capture and storage (BECCS) and afforestation and reforestation. All scenarios consistent with a 50% chance of keeping temperatures within 1.5oC require negative emissions in addition to deep emission reductions.

CCS is a critical factor in de-carbonising industry and in the development and scale-up of the hydrogen industry.

Hydrogen Energy Supply Chain Project Partners

Soil carbon measurement under $3 per hectare per year

Why is this a priority?

Australia has untapped potential as a globally significant source of carbon sequestration in our soils. Improving land management practices on a quarter of Australia’s crop and grazing lands could draw between 35 and 90 million tonnes of CO₂ per annum from the atmosphere while improving agricultural productivity and soil resilience.[12] Offsets created by soil carbon projects can provide a valuable additional revenue stream for farmers, and provide decarbonisation pathways for new and existing industries, which will preserve jobs.

Increasing the soil carbon concentration (in the form of organic material) can improve farm productivity and crop yields through better nutrient and water retention, and boost resilience to drought and erosion. Realising the sequestration potential of Australia’s soils would deliver positive economic outcomes and exploit a powerful

competitive advantage for our nation, and help position our agriculture sector to meet its aspiration to exceed $100 billion in farm-gate output by 2030.[13] However, the current cost of accurately measuring changes in soil carbon is a barrier to widespread adoption of practices that would unlock soil carbon sequestration on a broad scale.

Setting the stretch goal

Industry experts confirm that achieving a stretch goal for soil carbon measurement of under $3 per hectare per year would transform the economics of soil carbon projects for Australian farmers. It would remove measurement as a barrier to participation in Emissions Reduction Fund soil carbon projects, and enable farmers to be credited for the emissions reductions these projects would achieve.

Currently, soil carbon measurement for Emissions Reduction Fund projects cost around $30 per hectare per year.[14]

With the seventh largest land mass globally, approximately half of which is agricultural lands, Australia’s ability to sequester carbon through land-based projects is a clear competitive advantage.

Climate Friendly

Rural and regional communities are well positioned to play a key role in our energy future. Low emissions technologies provide opportunity for growth in jobs and income in regions.

Ag Energy Taskforce

Indicative deployment pathways

Options proposed by industry and researchers involve the expanded use of remote and proximal sensing technologies, improved national soil carbon datasets and the development of the next generation of soil carbon computer models.

If successfully developed and deployed, these measurement approaches would enable farmers and other landholders to reduce the number of direct physical measurements needed to understand soil carbon changes, while maintaining accuracy.

The Government will explore opportunities to partner with industry and researchers to improve soil carbon measurement. Based on this early work, a competitive challenge-based approach, where industry and researchers put forward proposals for meeting the stretch goal, is likely to be the best approach to revealing an effective development pathway.

This will complement the actions the Government is already taking to encourage and incentivise soil carbon projects. Incentives for soil carbon are available through the Emissions Reduction Fund, and the Government is progressing reforms recommended by the King Review to encourage greater participation. The CEFC is investing in the agricultural technology sector to build the industry’s capabilities.

Through the National Soil Strategy, the Government is exploring how it can help farmers to make better decisions about soil health and identify the productivity benefits of replenishing soil carbon on their properties.

Footnotes

[5] COAG Energy Council 2020, National Hydrogen Strategy

[6] Estimate by the Department of Industry, Science, Energy and Resources that includes over 200 Mt arising from renewable electricity dispatched from energy storage technologies to offset electricity generated by higher emitting sources, and around 500 Mt arising from energy storage technologies providing system security services that enable a greater penetration of variable renewable energy in the grid.

[7] AEMO’s 2019 Wholesale Electricity Market: Electricity Statement of Opportunities (page 18) defines ‘mid-merit capacity’ as Scheduled Generators that operate between 10% and 70% of the time.

[8] The estimate of government investment in energy storage technologies includes non-transport energy storage technologies, such as batteries and pumped hydro, but does not include hydrogen or fuel cells.

[9] Department of Industry, Science Energy and Resources 2019, Critical Minerals Strategy

[10] Steel (hot rolled coil) 3 year average price for 2017-2019 is estimated at $878 per tonne derived using London Metal Exchange settlement prices and Bloomberg’s Hot Rolled Coil Steel Index (HRCITOTL). The London Metal Exchange aluminium spot price three year average for 2017-2019 is $2,599 per tonne. Currency conversion used RBA exchange rate data.

[11] Department of Industry, Science, Energy and Resources 2020, Final report of the Expert Panel examining additional sources of low cost abatement (the King Review)

[12] Based on an average sequestration rates for improved management of cropland and non-improved grazing land across Australia from Sanderman, Jonathan; Farquharson, Ryan; Baldock, Jeff. Soil carbon sequestration potential: A review for Australian agriculture Urrbrae, S.A.: CSIRO; 2010 and agricultural land area data from ABS, 2018

[13] National Farmers Federation 2019, 2030 Roadmap: Australian Agriculture’s Plan for a $100 Billion Industry

[14] CSIRO estimate based on a land area of 300 hectares. CSIRO estimates current measurement costs would be lower for larger areas.

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