APEC Low-Carbon Hydrogen International Standard Workshop: keynote address by Dr Alan Finkel

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Speech

21 March 2022

Special Adviser to the Australian Government on Low Emissions Technology, Dr Alan Finkel, gave a keynote address at the Asia-Pacific Economic Cooperation (APEC) Low-Carbon Hydrogen International Standard Workshop last week.

Workshop topics included:

  • discussion on the need to define low-carbon hydrogen 
  • the benefits of certifying low-carbon hydrogen 
  • how an international low-carbon hydrogen standard could be implemented.

Keynote speech: Low-Carbon Hydrogen

Thank you, Paul.

And good afternoon to those of you joining us from New Zealand, Australia, and across the Pacific, and a very warm hello to the rest of our colleagues dialling in from around the globe. 

It’s a pleasure to be speaking at this important workshop today, although I cannot help but sadly note that we are gathered to optimistically plan for the future while the people of Ukraine are desperately planning for their survival. 

The tragedy of the humanitarian crisis resulting from the Russian invasion is beyond comprehension.

Outside the conflict zone, for the rest of us, among many other warnings, it is a reminder of the importance of diversity and resilience in our global energy supply.  Now, and in the future.

The future starts with the present, and I am confident that we stand today in one of the most exciting times in our long history of energy revolutions.  

But this revolution is different.  Historically, our use of energy has been a story of accumulation.  This time, it is a story of replacement.

Let me explain.

We started to burn wood for cooking and warming our homes at least 7,000 years ago, as many people still do today.

When we learned to harness the immense energy in coal, it did not replace our use of wood.  It added to the energy mix. 

When we discovered free-flowing oil in the 1800s, it allowed our transport industry to boom.  But we continued to burn coal for industrial processes and electricity generation. 

When we began large scale utilisation of natural gas in the 1900s, we used it to heat our homes and generate electricity.  But we continued to use coal and oil for these purposes – natural gas increased our generation capacity and broadened our energy diversity.  

Coal, oil and natural gas, each of them added to the mix.

This time, we need to replace, not accumulate.

We need to replace coal, oil and natural gas to prevent anthropogenic greenhouse gases from further changing our climate. 

We need to completely transform our energy mix.

This is widely recognised, but consumers are not prepared to give up the benefits of an abundant energy supply.  Instead, they expect government and industry to curb the growth in emissions while delivering the benefits of 21st century existence.

In other words, to have our cake and eat it too.

To achieve this, we need innovation and new solutions.

We need low emissions energy and low emissions industrial technologies.  

The main tool will be zero emissions electricity. The world will deploy solar, wind, hydro and nuclear at scale, with each country pursuing a unique combination. 

But there are some instances where electrons are not ideal.  For those, the world will need hydrogen and ammonia.

We are picking up the pace as we race through the early stages of our energy revolution, in Australia and around the world. 

I have been lucky enough to have a front row seat as we sped past some important landmarks. 

In January, I was at the ceremony to celebrate the arrival of the world’s first liquid hydrogen carrier ship, the Suiso Frontier, at the Port of Hastings in Victoria.  A few days later it was loaded with the world’s first shipment of liquid hydrogen to travel 9,000 km back to Japan.

This marked the beginning of a new era for humanity, in which we will ship clean energy between the continents, in the same way we have shipped fossil fuels for hundreds of years.

The following week I visited a factory where hydrogen fuel cell buses and garbage trucks were being constructed. 

And last year I was at the launch of Hydrogen Park in Adelaide, South Australia, where hydrogen is being blended into the gas supply of seven hundred homes.

These are exciting first steps and provide us with a glimpse of the change heading our way. 

***

Governments have provided substantial financial support to nurture their early hydrogen industries.  While this support is invaluable, ultimately the global hydrogen industry will only flourish if there are sustainable markets.

Sustainable markets are built on scalable technology, cost effectiveness and above all, trust. 

To build trust, consumers must have transparency about what they are buying. 

The French wine industry worked this out years ago, thus we have Champagne labels for sparkling wine made in the Champagne region, but all the rest is just sparkling wine.

In principle, if a bottle of champagne were not labelled you could analyse it and prove its provenance.

However, even intense laboratory analysis will not reveal the history of a hydrogen molecule.

Hydrogen is hydrogen is hydrogen.

The only way a purchaser can know about the methane and carbon dioxide emissions associated with their hydrogen is for the emissions to be tracked and reported.

Tracking and reporting these attributes in a consistent way across the globe is essential to building trust.  A critical step in achieving this consistency is the development of internationally accepted methods for measuring the emissions intensity of hydrogen and its derivative products. 

In the same way Champagne labels tell you where your wine is from, these methods will provide transparency of the origin of the hydrogen.  Importantly, they will give choice to consumers on whether they wish to pay a premium for their hydrogen. 

The International Partnership for Hydrogen and Fuel Cells in the Economy, known as IPHE, is leading the charge on efforts to develop an internationally aligned measurement approach for emissions across the hydrogen supply chain. 

The work of the IPHE is expected to feed directly into a formal international standard through the International Organisation for Standardisation, better known as ISO.  I am delighted that Australia has been an active partner in this process from the very beginning. 

The IPHE has made significant progress, reaching consensus on approaches to measure emissions from some of the main hydrogen production pathways. 

There are two approaches to categorising emissions being debated in the international community. 

The first categorises hydrogen using arbitrary qualifiers such as ‘clean’, ‘low-emissions’, green, blue, and a myriad of other colours.

At a surface level the rationale for this approach is sound – we don’t want people calling something “renewable hydrogen” when renewable electricity is, perhaps, only 1% of the input.  We don’t want people labelling something as “clean or low-carbon hydrogen” when it is more emissions intensive than the fossil fuels it is replacing.

At first glance, these categories seem intuitive – an efficient way of communicating important information. 

But if we dig a little deeper, we start to see flaws.  In practice, these categories set a restriction on what we consider to be acceptable.  They can act to conceal differences in how hydrogen is made, moved and stored. 

Any work to set such hydrogen definitions should carefully consider three problems:

The first problem is that placing strict and somewhat arbitrary requirements on an industry that is in its infancy can stifle progress.  This is particularly true where the requirements are not comparable with those faced by established, competing sectors. 

We see this in cases of proponents contemplating the addition of a plethora of factors to hydrogen definitions.  These often include extensive environmental, social and governance requirements, or requirements for hydrogen to be produced in newly built facilities. 

My advice is, don’t do that.  A broad brush will undermine the effort to reduce emissions – which is what this is all about.  Use one policy lever for one policy outcome. 

That is, use agreed standards for low emissions hydrogen to support informed trade.  Use other schemes to focus on the ethical credentials of the producer and non-emissions attributes of production and supply.

The second problem is that poorly set definitions risk inhibiting future market sophistication for trading hydrogen.

I expect to eventually see blending into a single pipeline, ship or refuelling station of hydrogen from a variety of sources that have differing emissions intensities.  We should encourage this, rather than set definitions that might inhibit these activities.

The third problem is that definitions could also inhibit companies from going the extra mile. Poorly set definitions could fail to distinguish the producers and suppliers who are extensively reducing their emissions from the ones that are doing the bare minimum. 

***

What is called ‘green’ hydrogen represents an enormous opportunity for Australia.  With extensive sources of solar and wind energy, Australia has the potential to become a major global exporter of hydrogen produced using electrolysis and powered by renewable energy.

We also have a huge opportunity for what is called ‘blue’ hydrogen.  Blue hydrogen could have an important role in our journey towards net zero emissions.  But unlocking this potential depends on a range of factors. 

We’ll need to ensure that fugitive emissions from the extraction and handling of fossil fuel feedstocks are very low.  We’ll need to ensure that the rates of carbon capture and storage from methane’s chemical conversion to hydrogen are very high.  And we’ll need to ensure that the process pressure and process heat are powered by zero emissions electricity. 

Low emissions blue hydrogen is achievable, if customers have clarity on the emissions credentials of the hydrogen they’re buying.  This clarity will enable willing customers to reward the producer for going the extra mile to reduce emissions.

We’re already seeing some industry players push harder than ever before to improve efficiency and reduce environmental impact. 

For example, the oil and gas giant Shell states that their worst facilities today have upstream emissions of approximately 0.6% of production.  Their target is to maintain methane emissions intensity below 0.2% by 2025.  They note that this target covers all oil and gas assets for which Shell is the operator.

0.2% for well to gate emissions is stunningly low.  Much lower than the worst-case assumptions of up to 3.5% used in the paper published last year by Robert Howarth and Mark Jacobson, from Cornell and Stanford universities.  The negative conclusions of that paper about blue hydrogen were based on worst case assumptions and legacy technology and were not representative of the industry of the future.

The second approach, which I’ll state in advance I prefer, does not categorise hydrogen into arbitrary qualifiers or colours.  It is the approach we are pursuing in Australia.  It implicitly acknowledges that what counts in the battle against global warming is a relentless focus on atmospheric emissions.

The EY issues paper prepared for the APEC secretariat acknowledges the importance of focusing on atmospheric emissions when it says that “colours can fail to capture key information such as the carbon intensity.”

We are taking the IPHE work on standards, and we are building on it.  We are creating a scheme that will provide transparency over all emissions-related attributes of hydrogen.

We call this a Guarantee of Origin scheme, and our aim is in the name. 

We want to provide confidence to Australian hydrogen consumers that they are getting what they paid for.  We want to provide confidence to international customers that they are getting what they paid for.

Further, I anticipate that a Guarantee of Origin scheme will be important if Europe or other markets implement a carbon border adjustment mechanism.

A Guarantee of Origin scheme will track and verify attributes related to the emissions intensity, such as energy source, production technology, and production location.  But its essential role is to always declare the number, rather than a pass or fail.

With the emissions intensity declared numerically in kilograms of carbon dioxide equivalent, per kilogram of hydrogen produced, we can trade, we can redirect shipments, we can meet the expectations of every single buyer.

This approach of focussing on emissions intensity during production is more powerful than setting standards to define arbitrary categories of hydrogen.

It is to society’s benefit to recognise and reward the efforts of hydrogen producers to lower their emissions.

To accelerate the pace of our modern energy revolution, we need to encourage all clean sources of supply.

As we continue to gain momentum, I see more clearly a future where technology innovation is supported through a sophisticated market.  The market sophistication will rely on consistent measurement approaches that enable customers to know the emissions intensity, and emissions-related attributes, of the hydrogen they purchase. 

It will allow countries to set their own acceptability thresholds for the hydrogen they import and produce, and allow industry to demonstrate that they can meet those needs.

It will allow for market diversity, support competition, and set a pathway that will continually push industry to improve their operating procedures. 

We are already seeing different regions take jurisdictional approaches to what is acceptable.  For example, the U.S. defines clean hydrogen as 2 kilograms of carbon dioxide equivalent, emitted per kilogram of hydrogen produced, measured at the production facility.  The U.S. Government does not define clean hydrogen as green, blue, yellow, pink or turquoise. 

The European industry-based scheme called CertifHy defines clean hydrogen as 4.3 kilograms of emissions per kilogram of hydrogen produced.  This is very high, about two thirds of the emissions from burning methane directly. 

Instead of accepting an industry definition of clean, my recommendation is for each country or customer to be provided the actual emissions intensity of the hydrogen they wish to buy so that they can make their own decision.

APEC, as the pre-eminent economic forum of the Asia-Pacific region, can be the strong voice advocating, supporting and leveraging the work of the IPHE. 

The IPHE and others have already made great strides in developing internationally agreed measurement standards, but there remains a long way to travel in our energy transition.

As we proceed, there could be a role for APEC to consolidate views in the Asia-Pacific region around critical inputs that would feed into these standards.  For example, these considerations might include the acceptability of offsets.

But we should not stop at hydrogen standards.  Hydrogen is but one piece of the puzzle to achieve global net zero ambitions.  We should extend this work to cover derivative products such as ammonia – work that is already underway through the IPHE.

The same logic applies to other commodities in the clean energy future.  Just like hydrogen, if you take samples of ammonia, steel and aluminium to the most sophisticated forensic science lab in the world, you won’t learn anything about the emissions intensity associated with their production.

These commodities all need a Guarantee of Origin scheme to give confidence to the market, and most schemes will build on the hydrogen emissions intensity certification scheme.

Progressive industry sees it the same way.  I know this from my role as Chair of the panel of experts that advises the Australian Government on its low emissions technology roadmap.

During the last few weeks, I have been leading a number of industry consultations, including with leading players in the hydrogen industry.  No surprise, they wanted more government investment in hydrogen and more government support to build demand.  But top of their list, they wanted a transparent Guarantee of Origin scheme to provide market certainty.

I am delighted that Tim Karlsson, Executive Director of the IPHE is here today, and I look forward to hearing more about the great work that is underway at the IPHE. 

May the Force be with you.

Thank you.

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