Energy Networks Australia 2022: keynote address by Dr Alan Finkel

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21 March 2022

Special Adviser to the Australian Government on Low Emissions Technology, Dr Alan Finkel, gave a keynote address at the Energy Networks Australia conference and exhibition last week.

The Energy Networks Australia conference is held every two years. It brings together key industry players to share expertise and discuss transformation in the energy sector.

Keynote speech: Accelerating the Move Towards a Hydrogen Economy

Thank you, Andrew. 

And good afternoon to everyone here in Brisbane today.  

As has been noted by other speakers, it’s wonderful to be speaking at an event in person, after what has been a very difficult couple of years. 

While I’m delighted to be speaking here today, like Andrew Dillon and others, I cannot help but sadly note the tragic flooding that has once again occurred along the coast, and here in Brisbane, and the many lives and livelihoods it has impacted. 

I moreover note, that as we are gathered here to plan for the exciting opportunities of the future, the people of Ukraine are desperately fighting for their survival. 

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

Outside the immediate conflict, the impacts for supply chains and markets are being felt far and wide.  The reliance of Europe on Russian energy supplies, and the energy security implications flowing from the sanctions needed to curb Russian aggression, have put the critical need for reliable energy into sharp relief.  It is a reminder to all of us of the importance of diversity and resilience in our global energy supply.  Now, and in the future.

Perhaps guided by Genevieve Bell in her superb presentation earlier this morning, before we look to the future, I’d like to take you on a trip back in time to see the challenges that Australia faced in constructing our energy network.  Knowing where we’ve come from can help give context for the challenges that lie ahead. 

The early history of Australia’s electricity supply is a story of six separate states. 

A vast land area and relatively small, dispersed population meant the early development of Australia’s transmission system was marked by the ‘tyranny of distance’. 

For this reason, along with locally abundant coal reserves, electricity generation in Australia was mostly built close to the population centres in each of the separate states.

The first state to build transmission was Tasmania in 1916, connecting the Waddamana hydroelectric power station to Hobart with a 100 km, 88 kV transmission line. 

The next was Victoria in 1924, with a 160 km, 132 kV transmission line connecting the Yallourn power station to Melbourne.  These two states led the way in the development of high voltage transmission for years to come. 

A milestone for transmission was reached when construction of the Snowy Mountains Hydroelectric Scheme began in 1949.  Its establishment created the first interconnection between states: New South Wales and Victoria, in 1959, decades ahead of when interconnection might have otherwise become economically feasible. 

Interconnectors were built to connect South Australia and Victoria in 1990, Queensland and NSW in 2001, and finally Tasmania and the mainland in 2005.  Western Australia and the Northern Territory remain unconnected to their neighbours. 

So, you can see that over a period of six decades, the separate networks across the east coast of Australia became interconnected, to eventually form what we now know as the NEM or the ‘National Electricity Market’. 

Our network of gas pipelines also began as a story of six separate states. 

Our gas pipelines were originally built to accommodate town gas, a blend of hydrogen, carbon monoxide and methane produced from coal at plants located close to the population centres.  Town gas heated our homes, but it was smelly, dirty and toxic, with poisoning deaths by accident and suicide occurring far too frequently.

In the 1960’s and 70s, natural gas was discovered in South Australia, Western Australia, Queensland and Victoria.  It was highly desired as a clean, safe and economical replacement for town gas.

Construction of long natural gas pipelines began across the country, eventually producing a gas transmission network that interconnects all the states and territories except Western Australia.

***

Challenges of distance, safety, energy security and cost have shaped the development of our gas and electricity networks in Australia, and they continue to do so today.  But there is a new challenge we face. 

That challenge is climate change. 

Climate modelling predicts that extreme weather events, like the devastating floods this year in Queensland and New South Wales, and the widespread destructive bushfires in the summer of 2019 and 20, will continue to become more frequent and severe. 

The distinction between climate and weather is important, and explained eloquently in the recently released Energy Networks Australia report, Electricity networks: a guide to climate change and its likely effects, which tells us that:

“Climate is what we expect, whereas weather is what we get”

So, we need to transform our energy systems to accommodate new fuels, new generation, and new ways in which energy is used, and modernise our energy networks to continue operating in a changing climate.

I am delighted to observe that the transformation is underway, at an ever-increasing pace.

As the transformation unfolds, we need to ensure that our evolving networks have resilience.  

Resilience in the face of events that put additional demands on the system, like more frequent and severe floods and bushfires.  

But simply making networks more resilient will not be sufficient – we also need to tackle the root cause of climate change. 

We need to turbocharge our ongoing transition to clean electricity generation. 

This transition will require our energy networks to further adapt, in ways that are not yet clear.

We’ll need to navigate a complex interplay between energy storage, transmission and distribution networks and pipeline infrastructure as we shift towards distributed, variable generation. 

Not wanting to make it easy for any of you, to add to the challenge, we’ll also be ramping up our hydrogen production.

We’ll be integrating ever more electric vehicles through slow home charging and stunningly powerful public quick charging.

We must accept that consumers are becoming producers, and producers are re-calibrating their business models. 

It’s a long list!

***

Part of the solution will be sector coupling and ever-more systems thinking as we design our future energy networks. 

And cheap, reliable, large-scale electrical energy storage such as pumped hydro and batteries will play a significant role in a clean energy future. 

Storage can help improve the operating capabilities of the grid, lower costs and ensure high reliability of the system.  This can be used to smooth out the difference between excess supply, when the sun is shining, and excess demand, when we switch on our appliances at night. 

With ‘peak shaving’, using storage close to the source of generation or load, the need for additional transmission may in some cases be deferred or scaled back.  Although as AEMO’s ISP shows, even with Australia becoming a hydrogen superpower, more transmission will clearly be needed. 

Alternatively, failure to deploy enough storage could see higher than anticipated investment in high voltage transmission lines to smooth out demand and supply across the network. 

This is the complex interplay between the need for storage and transmission.  It is up to the system level planners and the market to work out the least cost solutions.

Another issue that that we must consider is the balance between transmission and pipelines. 

Consider a renewable hydrogen production facility that is inland, a distance from the ports for export and the desalinated seawater that might be needed for electrolysis. 

Developers will need to build either transmission lines to the coast to produce hydrogen at the coast, or water pipelines to the interior to produce hydrogen inland and hydrogen pipelines back to the coast.

At the moment, pipelines look to be cheaper.  However, the answer will be project specific.

We’ll also need to solve the challenge of hydrogen storage – and this isn’t discussed nearly enough.

We need to develop economical ways to store thousands of tonnes of hydrogen at a time.  We need that affordable storage to smooth out the supply to liquefication plants for export, for building heating, for industrial heating, and for use as a chemical feedstock.

Our ambition to build large-scale hydrogen production facilities has the potential to enhance system and energy security, increasingly important in the face of a changing climate and the challenges to the global geopolitical order.

***

As both Darren Miller from ARENA and I have often said, a serious hydrogen export industry in Australia will require a vastly greater level of electricity production.  We’ll need at least a 700% increase on current generated output.  And a lot of that will be in big plants. 

Construction at this scale creates a related opportunity to enhance the electricity system reliability.

Imagine that in future a developer builds a 40 gigawatt solar plant coupled with 20 gigawatts of wind, being 60 gigawatts purpose built for hydrogen production.  It could operate entirely independent of the grid. 

Now think outside the box and further imagine that they build a 3 gigawatt high voltage transmission line to connect the facility to the NEM.  Even if solar and wind generation at the plant fell to just five percent of its rated 60 gigawatt capacity, the 3 gigawatt interconnector would still be able to operate at full capacity.

This would represent a major source of clean, firm dispatchable power for the NEM, and would dramatically reduce the need for short, medium and long-term storage. 

This future scenario is just a dream, but if the dream were to come true, it would be a powerful reality.

Talking about dreams, I wake up every day excited by the pace of change.  When I did my electrical engineering degree a long time ago, the power generation and distribution system was basically finished.  It was static.  I decided to stay away from boring power engineering, and I specialised in microelectronics.  Today, in contrast, if I were a student, I would choose to specialise in some form of power engineering because there is so much happening, and it is for such good social purpose.

But back to the present.

A moment ago, I talked about off-grid hydrogen production, but of course, much of the hydrogen we will need for domestic purposes will be made locally in electrolysers connected to the electricity grid.  But that will add network transmission and distribution charges to the cost of the electricity, upping the marginal cost of producing the hydrogen.

We’ll need to find equitable ways to minimise transmission charges and ensure the economics for hydrogen producers and network operators.  This will include running the electrolysers flexibly to enhance network utilisation, thereby soaking up excess supply during periods of abundance, and ensuring hydrogen producers don’t outcompete householders and ordinary businesses for supply during periods of relative scarcity.

In the race towards a clean energy future, the balance between batteries, transmission and pipeline infrastructure will emerge over time.  All these important technologies are picking up pace – the horses are shedding their weights.  Who crosses the finish line first will be determined by cost, convenience and resilience.

It is not the role of government to pick a winner in this race.  In my role as chair of Australia’s Technology Investment Advisory Council, I help inform development of the Technology Investment Roadmap. 

The Roadmap seeks to guide public and private investment in priority low emissions technologies, to help train all the horses, and give them each a fair go. 

By bringing down the cost of these technologies, the market will decide their application – which to deploy at scale, where, and when.

Exactly how the market does that is out of scope for the Roadmap.  That’s left to regulators, investors, developers, consumers and energy ministers.

The Roadmap is updated annually, thereby supporting an iterative approach.  It allows us to be adaptive by adjusting our focus and priorities in a rapidly evolving technology environment.  

And that’s why our update to the Roadmap last year introduced a new category, called enabling infrastructure.  Its purpose is to support infrastructure that will help deploy technologies at a commercial scale, and support consumer choice. 

Our first enabling infrastructure priority is battery charging and hydrogen refuelling stations for electric vehicles. 

The second priority infrastructure emphasises the importance of building out the digital grid. 

***

I have been lucky enough to have a front row seat for the race to the new energy economy and the role of hydrogen.  I have seen us speed past a few important milestones. 

In January, I was at a 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’ll ship clean energy between the continents, just as we have shipped fossil fuels for hundreds of years.

We’ll need hydrogen distribution on a domestic scale too.  Initially, we’ll need fleets of fuel trucks delivering hydrogen across the country in pressurised tanks.  As demand continues to grow, the economics of investing in hydrogen pipelines will begin to look more favourable. 

It’s anyone’s guess what the balance between trucking and pipeline distribution will look like at the finish line. 

But there are projects underway to encourage hydrogen use in our existing gas distribution networks as well.  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. 

The Australian Gas Infrastructure Group is managing a similar project to blend up to 10% hydrogen for 40,000 homes in the Albury Wodonga area.  ATCO is also at the front of the pack, leading a project to blend hydrogen for 40,000 homes in Perth. 

But the switch from a 10% blend to 100% hydrogen running through our networks is much more challenging.  To make that switch, appliances and pipes in residential, commercial and industrial buildings would need to be replaced or upgraded. 

And it’s clear electrification will play a major role in many applications.  This is leading to uncertainty over the long-term role of gas networks for some customer groups, as the Australian Energy Regulator recognises in its paper Regulating Gas Pipelines Under Uncertainty.

What I am certain of is that domestic and global demand for hydrogen and ammonia will continue to grow. 

That’s why we set a stretch goal for hydrogen in the Low Emissions Technology Roadmap.  If we bring the cost of production down to $2 per kilogram, clean hydrogen will begin to become competitive with high emitting alternatives. 

Internationally, many nations, including regional partners like Japan and Korea will need to import large volumes of hydrogen and its ammonia derivative.  This will be for steel production, shipping, and applications where electrons don’t make sense.  But it will also be as bulk energy supply, for those without abundant renewable energy resources like Australia.

In the short term, Japan is likely to represent the strongest driver for demand.  They were the first in the world to publish a National Hydrogen Strategy in 2017, and they’ve picked up the pace since then.  Japan sees applications for hydrogen in a range of applications, including as a fuel source for heavy industry and to replace coal in electricity generation.

But there are other drivers on the horizon as well.  More accurately, there are other drivers in the skies. 

In February, Airbus signed an agreement with GE and Safran Aircraft Engines to test a hydrogen powered turbine on one of their existing A380 aeroplanes.  According to Airbus’s plans, medium haul flights across Australia, or within Europe, could be in hydrogen powered aeroplanes by 2035.

And the world has its sights set on the seas as well. 

The International Maritime Organisation has declared its ambition to cut their fleet greenhouse gas emissions by at least 50 percent on 2008 levels by 2050.  Some industry experts believe ammonia could represent 25 percent of the maritime fuel mix by then. 

These examples all represent drivers on an international scale.  They speak to Australia’s ambition to become a globally significant hydrogen producer and exporter. 

But the challenge is the same for accelerating the move to a domestic hydrogen economy. 

We need to stimulate demand and build scale.

We need more gas blending projects and refuelling stations. 

We need more renewable generation and electrolysers. 

We need a modern energy network to support this transition. 

And while there are plenty of horses in the race, we all stand to share the winnings: lower emissions, lower energy costs, and greater resilience in our energy systems. 

May the Force be with you.

Thank you. 

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