氢能：炒作、希望还是努力？（英文版）--Grattan InstituteVIP专享VIP免费

下载本文档

阅读 505
格式 pdf
大小 7.54 MB
约68页
2024-01-27
收藏
点赞(0)
海报
举报

Hydrogen

Hype, hope, or hard work?

Tony Wood, Alison Reeve, and Richard Yan

December 2023

Hydrogen: hype, hope, or hard work?

Grattan Institute Support

Founding members (2009) Endowment Supporters

The Myer Foundation

National Australia Bank

Scanlon Foundation

Susan McKinnon Foundation

Afﬁliate Partners

Origin Energy Foundation

Scanlon Foundation

Susan McKinnon Foundation

Third Link Growth Fund

Senior Afﬁliates

Cuffe Family Foundation

Medibank Private

Trawalla Foundation

Wesfarmers

Afﬁliates

Allens

Ashurst

Boston Consulting Group

Maddocks

McKinsey & Company

PEXA

Urbis

Westpac

Grattan Institute Report No. 2023-13, December 2023

This report was written by Tony Wood, Alison Reeve, and Richard

Yan. Tarun Chowdhary, Bronwyn See, and Christina Grant

contributed early research.

We would like to thank the members of Grattan Institute’s Energy and

Climate Change Program Reference Group for their helpful

comments, as well as numerous government and industry

participants and ofﬁcials for their input.

The opinions in this report are those of the authors and do not

necessarily represent the views of Grattan Institute’s founding

members, afﬁliates, individual board members, reference group

members, or reviewers. The authors are responsible for any errors or

omissions.

Grattan Institute is an independent think tank focused on Australian

public policy. Our work is independent, practical, and rigorous. We

aim to improve policy by engaging with decision makers and the

broader community.

We acknowledge and celebrate the First Nations people on whose

traditional lands we meet and work, and whose cultures are among

the oldest in human history.

For further information on Grattan’s programs, or to join our mailing

list, please go to: www.grattan.edu.au. You can donate to support

future Grattan reports here: www.grattan.edu.au/donate.

This report may be cited as: Wood, T., Reeve, A., and Yan, R. (2023). Hydrogen:

hype, hope, or hard work?. Grattan Institute.

ISBN: 978-0-6457978-5-5

All material published or otherwise created by Grattan Institute is licensed under a

Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

Grattan Institute 2023 2

Hydrogen: hype, hope, or hard work?

Overview

Hydrogen can help meet Australia’s emissions reduction targets and

underpin economic growth opportunities. But to date, governments

have seemed more concerned with hyping Australia’s hydrogen

prospects and hoping for the best, rather than doing the hard work

to establish integrated industry policy for proportionate, targeted, and

timely support.

The best way to seize the hydrogen opportunity is to make strategic

choices about its industrial applications that can leverage Australia’s

comparative advantage in renewable energy resources and minerals,

and build on existing export industries.

The most promising uses of hydrogen are in the production of

ammonia, alumina, and iron. These applications could use hydrogen

efﬁciently and cost-effectively at a scale that could support a viable,

long-term hydrogen industry that won’t require subsidies.

But in each of these cases, hydrogen still faces a ‘green premium’ – the

gap between the cost of using hydrogen for zero-emissions production,

and the cost of conventional production.

Three things can close that gap. First is cheaper electricity. Hydrogen

costs are driven by electricity costs, and each hydrogen producer

will need to understand its speciﬁc electricity supply chain, including

potential links to development of Australia’s renewable electricity

transmission grid.

Second is higher carbon prices. Heavy industry is covered by the

Safeguard Mechanism, which imposes a carbon price to drive down

emissions. But under the Safeguard’s current settings, this price isn’t

likely to be high enough to close the cost gap before 2040.

Third is support for ‘green’ versions of these commodities. The

best support would be an industry policy that evolves from the

federal government’s Hydrogen Headstart program and uses

contracts-for-difference – contracts designed to support investment by

underwriting part of the additional cost of production – to help industry

grow.

This program should be broadened to form part of a comprehensive

Australian green industry policy. It should also support green

commodity production using technology beyond hydrogen.

The cost to the government would probably be between $600 million

and $2 billion per year. The prize would be reduced emissions from

domestic production of green ammonia, alumina, and iron, and export

industries with a robust future for all three commodities.

Other uses of hydrogen, where the opportunities are less certain, tend

to have complex supply chain logistics or face competing technologies,

or both. These uses should be supported through policies that remove

barriers to both hydrogen and competitor technologies.

It’s time to get serious about hydrogen. The reforms recommended

in this report would give Australia the best chance to build a viable

hydrogen industry that leverages our comparative advantages, is

proportionate to our ﬁscal capacity, and won’t lead to inefﬁcient

subsidies and trade distortions.

Grattan Institute 2023 3

/68

下载本文档

文本预览下载提示常见问题

HydrogenHype,hope,orhardwork?TonyWood,AlisonReeve,andRichardYanDecember2023Hydrogen:hype,hope,orhardwork?EndowmentSupportersGrattanInstituteReportNo.2023-13,December2023GrattanInstituteSupportTheMyerFoundationThisreportwaswrittenbyTonyWood,AlisonReeve,andRichardFoundingmembers(2009)NationalAustraliaBankYan.TarunChowdhary,BronwynSee,andChristinaGrantScanlonFoundationcontributedearlyresearch.SusanMcKinnonFoundationWewouldliketothankthemembersofGrattanInstitute’sEnergyandAffiliatePartnersClimateChangeProgramReferenceGroupfortheirhelpfulcomments,aswellasnumerousgovernmentandindustryOriginEnergyFoundationparticipantsandofficialsfortheirinput.ScanlonFoundationSusanMcKinnonFoundationTheopinionsinthisreportarethoseoftheauthorsanddonotThirdLinkGrowthFundnecessarilyrepresenttheviewsofGrattanInstitute’sfoundingmembers,affiliates,individualboardmembers,referencegroupSeniorAffiliatesmembers,orreviewers.Theauthorsareresponsibleforanyerrorsoromissions.CuffeFamilyFoundationMedibankPrivateGrattanInstituteisanindependentthinktankfocusedonAustralianTrawallaFoundationpublicpolicy.Ourworkisindependent,practical,andrigorous.WeWesfarmersaimtoimprovepolicybyengagingwithdecisionmakersandthebroadercommunity.AffiliatesWeacknowledgeandcelebratetheFirstNationspeopleonwhoseAllenstraditionallandswemeetandwork,andwhoseculturesareamongAshursttheoldestinhumanhistory.BostonConsultingGroupMaddocksForfurtherinformationonGrattan’sprograms,ortojoinourmailingMcKinsey&Companylist,pleasegoto:www.grattan.edu.au.YoucandonatetosupportPEXAfutureGrattanreportshere:www.grattan.edu.au/donate.UrbisWestpacThisreportmaybecitedas:Wood,T.,Reeve,A.,andYan,R.(2023).Hydrogen:hype,hope,orhardwork?.GrattanInstitute.GrattanInstitute2023ISBN:978-0-6457978-5-5AllmaterialpublishedorotherwisecreatedbyGrattanInstituteislicensedunderaCreativeCommonsAttribution-NonCommercial-ShareAlike3.0UnportedLicense.2Hydrogen:hype,hope,orhardwork?emissions.ButundertheSafeguard’scurrentsettings,thispriceisn’tlikelytobehighenoughtoclosethecostgapbefore2040.OverviewThirdissupportfor‘green’versionsofthesecommodities.TheHydrogencanhelpmeetAustralia’semissionsreductiontargetsandbestsupportwouldbeanindustrypolicythatevolvesfromtheunderpineconomicgrowthopportunities.Buttodate,governmentsfederalgovernment’sHydrogenHeadstartprogramanduseshaveseemedmoreconcernedwithhypingAustralia’shydrogencontracts-for-difference–contractsdesignedtosupportinvestmentbyprospectsandhopingforthebest,ratherthandoingthehardworkunderwritingpartoftheadditionalcostofproduction–tohelpindustrytoestablishintegratedindustrypolicyforproportionate,targeted,andgrow.timelysupport.ThisprogramshouldbebroadenedtoformpartofacomprehensiveThebestwaytoseizethehydrogenopportunityistomakestrategicAustraliangreenindustrypolicy.ItshouldalsosupportgreenchoicesaboutitsindustrialapplicationsthatcanleverageAustralia’scommodityproductionusingtechnologybeyondhydrogen.comparativeadvantageinrenewableenergyresourcesandminerals,andbuildonexistingexportindustries.Thecosttothegovernmentwouldprobablybebetween$600millionand$2billionperyear.TheprizewouldbereducedemissionsfromThemostpromisingusesofhydrogenareintheproductionofdomesticproductionofgreenammonia,alumina,andiron,andexportammonia,alumina,andiron.Theseapplicationscouldusehydrogenindustrieswitharobustfutureforallthreecommodities.efficientlyandcost-effectivelyatascalethatcouldsupportaviable,long-termhydrogenindustrythatwon’trequiresubsidies.Otherusesofhydrogen,wheretheopportunitiesarelesscertain,tendtohavecomplexsupplychainlogisticsorfacecompetingtechnologies,Butineachofthesecases,hydrogenstillfacesa‘greenpremium’–theorboth.Theseusesshouldbesupportedthroughpoliciesthatremovegapbetweenthecostofusinghydrogenforzero-emissionsproduction,barrierstobothhydrogenandcompetitortechnologies.andthecostofconventionalproduction.It’stimetogetseriousabouthydrogen.ThereformsrecommendedThreethingscanclosethatgap.Firstischeaperelectricity.HydrogeninthisreportwouldgiveAustraliathebestchancetobuildaviablecostsaredrivenbyelectricitycosts,andeachhydrogenproducerhydrogenindustrythatleveragesourcomparativeadvantages,iswillneedtounderstanditsspecificelectricitysupplychain,includingproportionatetoourfiscalcapacity,andwon’tleadtoinefficientpotentiallinkstodevelopmentofAustralia’srenewableelectricitysubsidiesandtradedistortions.transmissiongrid.Secondishighercarbonprices.HeavyindustryiscoveredbytheSafeguardMechanism,whichimposesacarbonpricetodrivedownGrattanInstitute20233Hydrogen:hype,hope,orhardwork?Unblockconstructionconstraints∙Stategovernmentsshouldco-ordinateandsequencemajorRecommendationsconstructionprojectstoavoidlabour,material,andequipmentconstraints.Bestrategicaboutthehydrogenopportunity∙SetaclearobjectivetodevelopahydrogenindustrycapableofUsecarbonpricingappropriatelysupplyingreliablelow-costhydrogenfortheAustralianindustries∙The2026-27reviewoftheSafeguardMechanismshouldconsiderwhereitwouldaddgreatesteconomicvalue.howsteeperbaselinedeclines,higherpricecaps,andalowerthresholdcouldreducegreenpremiums.∙Focusfirstonproducinggreenammonia,greenalumina,and∙TheCarbonLeakageReviewshouldconsidertheroleaCarbongreenironasthemostpromisinghydrogenuses.BorderAdjustmentMechanism(CBAM)couldplayindevelopingviablegreencommodityproduction.Useneutralcontracts-for-differencetoclosethegreenpremiumgap∙TransformtheHydrogenHeadstartprogramintoacontract-for-Removebarrierstohydrogenuseinothersectorsdifferenceprogram,tosupportthegrowthofgreencommodity∙Usesector-widepolicytoencouragedecarbonisationofindustrialproductioninAustralia.Conductreverseauctionseveryyearforheat,sustainableaviationfuel,methanol,back-upelectricity10years.generation,andlong-distanceroadfreight.Delivercheap,green,reliableelectricityRuleoutfurthergovernmentinvestmentinusesthatappearlesslikely∙Embedgreenhydrogenproductionandusemorefullyintoproveviableelectricity-systemplanning,includingtheroleofhydrogenasfuelforback-uppowerintheelectricitygrid.∙Donotinvestfurtherinhydrogenforhomesandcommercialbuildings,lightvehicles,andoilrefining.∙ContinuetoreducethecostofrenewableelectricityinAustralia,throughnewrenewableenergygeneration,storage,and4transmission.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?TableofcontentsGrattanInstitute2023Overview................................3Recommendations...........................41Whyhydrogenmatters.......................62Hydrogenneedspolicysupporttosucceed............103Assessingtheopportunities....................154Startwithammonia,alumina,andiron...............215Whatgovernmentsshoulddo...................336Otherpotentialusesofhydrogen..................46AUsesofhydrogen..........................54BScenarioassumptions.......................595Hydrogen:hype,hope,orhardwork?Often,thismeansthatdecarbonisingthroughelectrificationischeaperthanusinghydrogen,forseveralreasons:1Whyhydrogenmatters∙Hydrogen-basedprocessesofteninvolvemultipleenergyHydrogenisamoleculethatcanhelptheworldtodecarbonise.Itisconversionstepsalongthechain.Energylossesatconversionalight-weight,andenergy-dense(byweight)moleculethatcanbemeanthathydrogen-basedprocesseswillbelessefficientandproducedandburnedwithzeroemissions.Liketraditionalfuels,itcanhencemorecostly.bestoredandtransportedforuseatadifferenttimeandlocation.Itisalsoanirreplaceablecomponentofimportantchemicals,including∙Greenhydrogenproductionrequiresrenewableelectricityasnitrogenfertilisersthathelpfeedtheworld.aninput.Inmanycases,itmaymakemoresensetousetherenewableelectricitydirectly,givenenergyconversionpenalties.Theseadvantagesmustbesetagainstthecurrenthighcostofhydrogenproductionandsupply.Hydrogenshouldbeusedwhereit∙Electricitycantakeadvantageofsignificantexistinginfrastructuremakesthemostsensetechnicallyandeconomically.Thoseusesareintheformofthegrid,whichcanbemadebiggertomeetlikelytobefewerthanhadbeenhoped.futuredemands.Hydrogenoftenrequiresanentirelynewandspecialisedinfrastructure.Wherehydrogenwillplayaroleinglobaldecarbonisation,itislikelyAustralianhydrogenwillplayanoutsizedrole.Australiaisendowed∙Renewableelectricitytechnologieshavebecomecheaperthroughwithasignificant,butuntapped,clean-energycomparativeadvantage–research,development,anddeployment,whereaslow-emissionsthatis,wehavealargerendowmentofrenewableenergyresourcesbuthydrogenproductiontechnologieshavebarelystartedonthissmallerdomesticdemandthanmanyothercountries.Oursignificantjourney.mineralreservesandproximitytolargeAsianmarketsarealsoimportantfactors.Inafuturedecarbonisedworldeconomy,someGiventheserealities,thebestdecarbonisationdecisionwillusuallybeenergy-intensiveprocessescouldshifttoAustralia,andhydrogenwill‘electrifyeverythingwecanandusehydrogenwherewecan’t’.bekeytosomeoftheseopportunities.ButitislikelythathydrogenwillplayapartindecarbonisingsomeTheinitialhypearoundhydrogenissettlingintorealism.Sinceactivities,because:Australia’sfirstNationalHydrogenStrategywaspublishedin2019,understandingoftherolethathydrogenislikelytoplayin∙Hydrogenisneededasamoleculeorfeedstockinsomeindustrialdecarbonisationhasimproved.processes.Inthesecases,thereisnoalternative.1.1Hydrogenisonetoolinthedecarbonisationtoolkit∙Hydrogenmaybeabletoreplacefossilfuelsinsomeapplicationstoachievehigh-temperatureindustrialheatatlowercostthanTheinteractionbetweenthetechnicalandeconomiccharacteristicsofelectricity.hydrogenanditsderivativeswilldeterminetheroleitplaysinthefuturedecarbonisedeconomy(seeBox1onthefollowingpage).6GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Box1:Whatishydrogen?–burnedtocreateheatformanufacturingHydrogenisthelightestelementintheperiodictable.Compared–burnedtogenerateelectricityusingasteamturbine;withfossilfuelssuchasnaturalgas,petrol,anddiesel,itismoreenergy-densebyweight,butlesssobyvolume.Burninghydrogen–usedinhydrogenfuelcellstogenerateelectricity;releasesenergyintheformofheat,whileleavingnothingbutwaterasabyproduct.–combinedwithotherelementstoproducechemicalssuchasammoniaandmethanol.Thesecanthenbeburnedasfuels;Theworldproducedabout95milliontonnes(Mt)ofhydrogenin2022–overwhelminglyusingcarbon-emittingproductionprocesseswith–synthesisedwithcarbontocreatesynthetichydrocarbonsnaturalgasandcoalasthefeedstock–leadingtomorethan900Mt(suchaskerosene,whichisusedasjetfuel).CO2-e(carbondioxide-equivalent)inemissions.aAustraliaproducesabout0.5Mtofhydrogenayearusingnaturalgas,creatingabout5MtFormoreinformationontheseusecasesofhydrogen,seeAppendixA.CO2-einemissions.bCurrently,themostcommonmethodforproducinghydrogenusesHydrogeniscurrentlyusedfortheproductionofammonia(usedinnaturalgasasafeedstock,aprocesswhichcreatesCO2emissionsfertiliserandcommercialexplosives),methanol,andotherchemicals;–thisisoftencalled‘greyhydrogen’.Low-emissionshydrogencanandtorefinecrudeoilfortransportfuels.beproducedbycapturingandstoringCO2(CCS)–thisisoftencalled‘bluehydrogen’–butthisprocessisnotinwidespreaduse.Hydrogencancontributetodecarbonisationintwoways:Zero-emissionshydrogencanbeproducedthroughelectrolysis,usingwaterand100percentrenewableelectricity–thisiscommonlycalled∙Decarbonisingtheproductionofhydrogenintendedforitscurrent‘greenhydrogen’.uses.∙Usingzero-emissionshydrogentoreplacefossilfuelsinotherenergy-intensiveprocesses.Hydrogencanbe:a.IEA(2023a,p.13).b.DCCEEW(2023a).GrattanInstitute20237Hydrogen:hype,hope,orhardwork?Figure1.1:Hydrogen-basedprocessescouldhelptoabatesomecarbon-intensiveprocessesinAustralia∙Hydrogenmaybeabletocost-effectivelyreplacefossilfuelsinEmissionsduetoprocessesthatcouldbereplacedwithhydrogen-basedsometransportapplications,andasawaytostoreenergytoprocesses,%ofAustralianemissionsbalanceagridthathasahighproportionofvariablerenewableenergygeneration.AmmoniamanufacturingUnavoidableOilrefininguses∙Hydrogenanditsderivativesareawaytotransportenergy.Wheretherearesevereimbalancesinenergyavailability,itcouldmakeIronmakingeconomicsenseforcountriestotradeenergyusinghydrogenasthevector.AviationLikelyusesAluminarefining1.2HydrogencanhelpAustraliadecarboniseAustralia’scommitmentunderthe2015ParisAgreementtoreachnet-Marinetransportzerocarbonemissionsby2050willrequiresawiderangeofactionsacrossallofthesectorsthatcontributetoourdomesticemissions.Long-distanceroadfreightZero-emissionsprocessesusinghydrogenwillplayaroleinAustralia’sElectricitygenerationPossibleusesdecarbonisation.WeestimatethathydrogencouldhelpreduceAustralia’semissionsbyupto8.6percent(seeFigure1.1).Cementmanufacturing1.3Hydrogenwillhelptheworlddecarbonise,andAustraliacan0%1%2%3%playanoutsizedroleNotes:Allnumbersarefor2020or2019-20exceptoilrefining,whichisfor2022.ThisAustraliaiswell-placedtoprosperinadecarbonisedworld.Infuture,isascenarioanalysisofthemaximumscope1domesticemissionsabatementthatcanAustraliacouldhostmoreenergy-intensiveeconomicactivity,becausebeachievedifallcarbon-emittingprocessesthatcouldtechnicallybereplacedbyzero-wehavesignificant,butlatent,clean-energycomparativeadvantages.emissionshydrogen-basedprocessesarereplaced(seeAppendixA).MarinetransportTheyinclude:andaviationusetotaldomesticmarineandaviationemissions.Thecategorisationofprocessesisbywhethertheyarelikelytorequiregreenhydrogentodecarbonise.∙ahigherratioofrenewableenergyresourcestodomesticdemandSomeminorusesareomittedforspace.Thisisnotapredictionoftheabatementthatthanmanyothercountries;1willbeachievedbytheadoptionofzero-emissionshydrogen-basedprocesses.1.Woodetal(2020,p.15).OurrenewableenergyresourcesincludelargeamountsSource:GrattananalysisofABS(2020),CementIndustryFederation(2023),oflandthatarehighinsolarphotovoltaicandwindpotential.OurdomesticDCCEEW(2023a),DCCEEW(2023b),DCCEEW(2023c),DCCEEW(2023d),Deloittedemandisafunctionofpopulationandenergy-intensiveexports,notingthatbothandARENA(2022),InternationalAluminiumInstitute(2023),Kildahletal(2023),mayincreaseinthefuture.McConnelletal(2023),RockyMountainInstitute(2020),PardoandMoya(2013),USGS(2022),VDZ(2021,p.11),andWorldSteelAssociation(2023).GrattanInstitute20238Hydrogen:hype,hope,orhardwork?Chapter3surveysthepotentialusesofhydrogenandexplainswhygovernmentsshouldfocustheirindustrydevelopmenteffortsonsome∙anendowmentofmineralresourcesthatwillremainindemandusesandnotothers.(includingsomethatarecrucialtotheenergytransition),andChapter4presentsinformationontheusesgovernmentshouldfocusexistingexpertiseinminingthem;andonfirst:ammonia,alumina,andiron.Chapter5recommendsindustrypolicytotargetinitialsupporttothese∙proximitytogrowingAsianmarkets.priorityuses.Chapter6suggestspolicyapproachesforotheruseswhererelevantButAustraliaalsohascompetitivedisadvantages,suchashighertechnologiesandcase-specificbarriersmeanthecaseforhydrogenlabourandconstructioncosts,aswellaschallengesinfirmingtheappearslesscompellingfornow.electricitygridatlowcost.29ThebalanceofthesefactorsmeansAustraliacanplayanoutsizedroleintheworld’sdecarbonisation,especiallywhereenergy-andcapital-intensiveprocessesareinvolved.Hydrogenislikelytobethemoleculeatthecentreoftwokeyopportunities:exportingcleanenergyembeddedinenergy-intensiveproducts,andreplacingsomehigh-carbonimportswithdomesticproductionofgreenalternativesfordomesticuse.Itmayalsobringemploymentopportunities,sometimesintheplacesthatarefacingthelossofcarbon-intensiveindustriessuchascoalminingandproductionofliquefiednaturalgas(LNG).Thiswouldbeasignificanteconomicprize.1.4ThestructureofthisreportChapter2showsthatsupplyinghydrogenisexpensiveandcomplex,andthatthegovernmentneedstoengageinindustrydevelopmentforhydrogentosucceed.2.HerdandHatfieldDodds(2023,p.40).Firmingreferstomaintainingasteadysupplyofelectricity,whenitislargelysuppliedbyavariablesource,suchassolarorwind.Zero-emissionsfirmingcanbeachievedthroughthestorageandreleaseofenergyinbatteries,traditionalhydropower,orpumpedhydrosystems.Costsforthesedependonaccesstolow-costtechnologiesandinstallationand–inthecaseofhydro–suitablegeography.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure2.1:Hydrogencostswillonlyfallifelectricitycostsatthepointofproductionfalltoo2HydrogenneedspolicysupporttosucceedAU$/kgofhydrogenSupplyinggreenhydrogenincreasinglyappearstobemoreexpensive$7andcomplexthanpreviouslyhoped.$5.86UsinggridelectricityThecostofelectricitydrivesthecostofhydrogenatthepointofproduction,sothekeytolow-costhydrogenproductionisreducing$6$5.57$5.56$5.66wholesalepricesforelectricity.$5Operations&Thefullcostofthehydrogensupplychainalsoincludesthecostofgettingthehydrogentowhereitisneededforuse.Thisinvolvesmaintenanceachoicebetween‘movingmolecules’or‘movingelectrons’,witheachpathwayhavingdifferentcosts.Thelowestcostsolutionwillbe$4project-specific,butthesupplychainaddssignificantlytothecostofdeliveredhydrogen.$3WaterElectricity$2InstallationAthrivinghydrogenindustryinAustraliawillneedpolicysupport$1Electrolysertosucceed.Thefederalgovernment’sNationalHydrogenStrategy$0shouldcontinuetofocusonthethingsthatstandinthewayofAustralia203020352040realisingitsgreenenergypotential.Thegovernmentshouldalsomake2025thehardchoiceofrulingoutsomepotentialusesforhydrogenand$7Usingbehind-the-meterelectricityfocusingattentiononothers.$6$3.86Butitalsomakessenseforthefederalgovernmenttodevelopamore$5.03comprehensivegreenindustrypolicy,tosupportindustrytodevelop$3.16intotheformsuggestedbyAustralia’scompetitiveadvantagesinclean$5energy,regardlessofthetechnologyused.$4$2.70$32.1SupplyinghydrogenisexpensiveandcomplexThecostofhydrogenproductioncouldfalloverthenexttwodecades.$2Thiswouldinpartbedrivenbythedeclineinthecostofelectrolysers,includingtheirinstallationcosts.$1GrattanInstitute2023$02030203520402025Notes:Hydrogencostsareinreal2023dollars,levelisedover20yearprojectlife.Source:Grattananalysis.AfulllistofassumptionsanddatasourcesisinAppendixB.10Hydrogen:hype,hope,orhardwork?renewables,thechoiceisbetweenmovingmoleculesorelectrons(seeFigure2.2onthenextpage).Butthelargestpartofthecostofgreenhydrogenproductionisthecostofelectricitytoruntheelectrolyser(seeFigure2.1ontheprevious‘Movingmolecules’involvesproducingthehydrogenclosetothepage).3Whileusinggridelectricitymayallowthehydrogenproductionrenewablegeneration,andthentransportingittoitsultimateuser.Thistobeco-locatedwiththehydrogenuser,thecostofsuchhydrogenismeanspayinglessforelectricitytransmission,butmoreforpipelines,notexpectedtofall(seethetopchart),becausethedeliveredcostoftrucks,andstorage.electricitytakenfromthegridisexpectedtoremainhigher.‘Movingelectrons’involvesproducingthehydrogenclosertoitsultimateWhereanelectrolyseruseselectricitysuppliedbyco-located,dedicateduser,withrenewableelectricitytransportedviapowerlinesfromwhererenewablegenerationandfirming,the‘farmgate’costofhydrogentherenewablegenerationislocated.Thismeanspayingmoreforproductionisexpectedtofallinthefuture(seethebottomchartelectricitytransmission,butlessforpipelines,trucks,andstorage.inFigure2.1ontheprecedingpage).4ThisisdrivenbyaforecastUsinggrid-suppliedelectricitywithanelectrolyserclosetoanaluminareductioninthecostofdedicatedgenerationandfirming.refineryisonewaytodothis.2.1.1GettinghydrogentowhereitisneededSupplychainchoicesarealsoinfluencedbythehydrogenuser.SomehydrogenuserswillneedacontinuoussupplytofeedacontinuousHydrogenischeaperifproducedwithdedicatedrenewableenergy.process.Otherswillwantbatchesofhydrogenatintervals.Ifhydrogenproductionisintermittent–forexample,becauseitusesdedicatedButthisdoesn’ttakeaccountofthefullcostsofthehydrogensupplyrenewableenergywithnostorageorback-uppower–storageandchain.Dedicatedrenewablescanonlybeeconomicallybuiltintransporthavetosupplythebuffertoallowcontinuoususe.Theareasthathavealowopportunitycostforlanduse,andwhichhaveamountusersrequirealsoplaysapart:smallusersofhydrogencansignificantsolarandwindpotential.Accountingfortheadditionalcostusetankstorageandtrucktransport;largeuserswillwantlargerofgettingthehydrogentowhereitisneededhasasignificanteffectonstoragecapacity.Locationalsomatters:saltcavernsdon’texistthetotalcost.everywhere,andtherearelikelytobesafetyconcernssurroundinglarge-scalehydrogenstoragenearbuilt-upareas.Whereco-locationofhydrogenproductionwiththehydrogenuserispossible,itisoftenagoodchoice,sinceitcanbecheapertotransportThebestcombinationofinfrastructurewillbeproject-specificandtheresultingcommodity(suchasiron,steel,oralumina)ontrucks,requireanassessmentof:operationalflexibilityatboththeproductiontrains,andshipsthantomovethehydrogenortheelectricitytoproduceandusestage;thecostofgridelectricitycomparedwithdedicated(orthehydrogen.Butwheretheendusecan’teasilybeco-locatedwiththe‘behind-the-meter’)generation;constructioncosts;location;andthelogisticalchallengesofotherinputs,suchaswater(Box2onpage13)3.Throughoutthisreport,unlessotherwisenoted,hydrogencostsaregivenasand,possibly,anorebody.levelisedcosts.Levelisedcostsarecalculatedbytakingallofthecostsoverthelifetimeofaplant,discountingthembytheyearinwhichtheyoccur,anddividing11thetotalbythediscountedtotalamountofhydrogenproducedoverthesameperiod.AfulllistofassumptionsanddatainputscanbefoundinAppendixB.4.Farmgatecostreferstoproductioncostatthepointofproduction.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?‘Movingmolecules’pathwayFigure2.2:HydrogensupplychainsandassociatedcostsAU$/kgofhydrogen‘Movingelectrons’pathwayTransmissionElectricityCompression:Compression:WaterElectricity$0.58-$2.32Trucktransport$0.58-$2.32HydrogenWater$1.61-$3.13H2production:Renewable(green)pathwayHydrogen$5.35Conventional(grey)pathwayproduction:Compression:Tankstorage:$5.99$0.58-$2.32$0.49Compression:$0.58-$2.32CO2SteamH2Tankstorage:Saltcavernmethane$0.49storage:$0.12reforming:SiteforusepluscushionWater$3.82gasGasproductionPipelinetransportPipelinetransportLine-packstorage:$0.01-$0.26$0.20-$0.43Notes:Hydrogenproductioncostsareforaprojectstartingin2024.Thehydrogenproductioncostforthe‘movingelectrons’pathwayassumesgridelectricityisused.Thehydrogenproductioncostforthe‘movingmolecules’pathwayassumesbehind-the-meterelectricityisused.Lowercompressioncostsarefor4,500kg/day,upperfor200kg/day.Lowerpipelinecostsarefor25km,upperfor500km,assumingthroughputof417tonnesofhydrogenadayandnostorage.Line-packcostsarefor24hours.Lowertruckcostsarefor200kg/day,upperfor1,000kg/day.Cushiongasishydrogenoranothergasthatremainsinsaltcavernstoragetomaintainworkingpressure.Additionalcostsfromcushiongaswillvarywiththegasused,theyearthestoragefacilityopens,itsvolume,theexpectedlengthofusefullife,andtheexpectedend-of-lifevalueofthecushiongas.Source:Electrolytichydrogenproduction:seeAppendixB.Steammethanereforming:GrattananalysisofPlattsS&PGlobal(2023a),RockyMountainInstitute(2023),Saulnieretal(2020).Tankstorage,compression,andtrucktransportcostsfromWolfeandCassano(2023).Pipelinetransportandline-packstoragecostsfromGPAEngineering(2022).SaltcavernstoragecostsfromARUP(2023).Iconsfromflaticon.com.GrattanInstitute202312Hydrogen:hype,hope,orhardwork?Box2:WateravailabilitycouldbecomeaconstraintWaterisakeyinputintogreenhydrogenproduction.Toproduce2.2Hydrogenneedspolicysupporttosucceed1kgofhydrogenrequires9to11litresofhighlypurewaterfortheelectrolysertosplitintooxygenandhydrogen,aswellasHydrogenwillnotbethesolecleanfuelofthefuture.Instead,anywherefrom3to60litresofwaterforcooling(dependingonhydrogen’srolewillprobablybelimitedtotheactivitiesthataremorethelocalclimate).adifficultormorecostlytoabateusingalternatives.WateravailabilitywillbeadeterminingfactorforwheregreenTherearesufficientbarrierstogrowingaviablehydrogenindustrytohydrogencanbeproduced.Makingthegreenhydrogenrequiredwarrantkeepinganationalstrategyinplace,sothattheopportunitiestodecarbonisecurrentammonia,alumina,andironproductionitpresentscanberealised.ButitisnowtimetobecometrulystrategicinAustralia(consistentwiththevolumessetoutinTable5.1abouthydrogen–toruleoutsomepotentialusesandfocusattentiononpage34)wouldrequireabout23gigalitresofwatereveryonothers,andtoconsiderthedevelopmentofahydrogenindustryinyear(assuming17litresofwaterareusedperkgofhydrogen,thebroadercontextofAustralia’stransitiontonetzero.includingfeedstockandcoolingwater).bThefederalgovernment’sNationalHydrogenStrategy,whichisHydrogenproductionfacilitiesofagloballycompetitivesizewillcurrentlybeingrevised,shouldfocusonthefactorsspecifictohydrogenprobablyputpressureonlocalwatersupplies.TheindustryneedsthatstandinthewayofAustraliarealisingitsgreenenergypotential.tofocusonefficientwateruseifitistogainsupportfromlocalcommunities.cButitalsomakessenseforthefederalgovernmenttodevelopamorecomprehensivegreenindustrypolicy.ThisindustrypolicyshouldCommunityacceptancehasalreadyemergedasanissuefortheallowthegovernmenttotakeawideportfolioofbetsonindustriesandhydrogenpowerplantinWhyalla,SouthAustralia.dGovernmentsapplicationsbasedonabroadviewofouradvantagesincleanenergy,shouldensureplanningapprovaldecisionstakeaccountofregardlessofthecleanenergytechnologyorfuelthatisused.communityconcernsaboutwateraccessanduse.Thecasefora21stCenturyindustrypolicyinAustraliahasbeena.Arup(2022,p.6).madeinpreviousGrattanreports.5Therearethreeargumentsforb.Grattancalculation.governmentplayingarole:c.Lesteretal(2022).d.Holder(2023).∙First,marketsdonotgenerallyprovideadequateincentivesforresearchanddevelopmentofnewtechnologies,because13knowledgeisoftenintangible,risky,anddifficulttoappropriate.Low-emissiontechnologiesandthepayoffsfromdevelopingthemareparticularlycomplexanduncertain.∙Second,manyofthetechnologiesthatmightproducelargeemissionsreductionsareexpensiveandhigh-risk.Earlyinvestors5.Woodetal(2022),Woodetal(2021),Wood(2012).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?facehighcosts,lowreturns,andtheriskofcompetitorsfree-ridingontheirinitiative.Investorsrequireareliable,long-termcarbonpricetounderpintheirinvestments.Yetacarbonpriceisinherentlyuncertainbecauseitdependsonthedecisionsofgovernments.Forboththesereasons,investmentinlow-emissiontechnologiesis,andwillremain,criticallyinadequate.∙Third,theclockisticking.Australiaandotherdevelopedeconomiesarestrivingtoachievenet-zeroemissionsby2050orearlier.Marketforcesarenotgoodatmanagingstructuraltransformationsinheavyindustryathighspeedwhenthefutureisdeeplyuncertain.Moreover,thelong-livednatureofindustrialassetsmeansthatindustryisparticularlypoorlysuitedtofastchanges.Theseargumentsholdforahydrogenindustry,aswellasforindustriesthatmightusehydrogen,aswewillshowinlaterchapters.GrattanInstitute202314Hydrogen:hype,hope,orhardwork?industrytofocuseffortsonbuildingahydrogenindustryforthoseuseswherehydrogenisthebesttoolforthejobandcanbringthelargest3AssessingtheopportunitiesbenefitstoAustralia.Hydrogencouldbeusedformanythings,butitwon’talwaysbetheBeingselectiveaboutwhichapplicationstosupportisnot‘pickingbestdecarbonisationoption.Australiashoulddevelopitshydrogenwinners’:itisastrategytomaximisethevalueofgovernmentpolicyindustrytoprovideAustralianusersthatwillmostlikelyusehydrogenandsupportwithinalimitedfiscalenvelope.Governmentpolicyshouldwithareliable,competitively-pricedsupply.Attemptingtodoeverythingcreateaportfolioofconsidered‘bets’wherethefuturevalueoftheandsupporteveryendusenowwouldriskdilutingeffortandspendingoverallportfolioisexpectedtobepositive.limitedfundsineffectively.AustraliangovernmentsshouldchoosethehydrogenapplicationstoGovernmentswillneedtomakechoicesaboutwheretofocus.Inthissupportbasedonthesecriteria:chapter,werecommendcriteriaformakingthesechoices,focusedontechnicalalternatives,supplychaincomplexity,abatementpotential,∙Technicalalternatives:theactivityislikelytoendupusingandexportreadiness.Weidentifyusecaseswheretheopportunityishydrogenratherthananotherzero-emissionsenergysourceasclearandwherethegovernmentshouldactnow–ammonia,alumina,therearefewpromisingalternatives.andiron.Werecommendmoreconsideredactionwherethingsarelesscertain–manufacturing,electricity,syntheticfuels,methanol,and∙Supplychaincomplexity:thelevelofcomplexity–andhencelikelylong-distancetransport.Andweadviserulingoutuseswherethecasecost–ofthelogisticaltaskofgettinghydrogentoitsenduses.againstusinghydrogenisstrong–replacingnaturalgasinhomesandcommercialbuildings,replacingpetrolanddieselinlightvehicles,and∙Abatementpotential:thereissignificantdomesticabatementreplacinggreyhydrogenusedinoilrefinerieswithgreen.potentialfromtheuseofhydrogen.3.1Australiashouldbestrategicaboutwhereandhowituses∙Exportreadiness:Australiahasorcouldeasilybuildanexporthydrogenindustryfortheenduse.8Toproduceandusehydrogenonalargescale,AustraliawillneedtoOurassessmentofhydrogenapplicationsagainstthesecriteriaisbuildanindustry.CurrentlyAustraliaproducesabout0.5milliontonnessummarisedinFigure3.1onthefollowingpage,andindetailinofhydrogeneachyear–equivalentto60petajoules(PJ)ofenergy.6Chapter4andChapter6.Thisisabout1percentoftotalfinalenergyconsumptioninAustralia.78.SeeWoodetal(2022)foralongerdiscussionaboutwhyAustralianindustrypolicyBuildinganindustryalmostfromscratchinashorttimeisanexpensiveshouldbeexport-focused.andcomplexundertaking.Itmakessenseforgovernmentsand156.DCCEEW(2023a).7.DCCEEW(2023e).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure3.1:PotentialusesforhydrogeninAustraliaTechnicalSupplychainAbatementExportApplicationalternativescomplexitypotentialreadinessAmmoniamanufacturing:replacegreyhydrogenwithgreenhydrogenintheHaber-BoschprocessN/AAluminarefining:replacenaturalgaswithgreenhydrogenforhigh-temperatureheatforcalcinationN/AIronmaking:replaceblastfurnaceandcoalwithdirectreductionusinggreenhydrogenN/AElectricitygeneration:replacegasgeneratorswithgreenhydrogenforback-upelectricityN/ASyntheticfuel:replacefossilfuelswithfuelssynthesisedusinggreenhydrogenandcarbonforaircraftMethanolmanufacturing:replacegreyhydrogenwithgreenhydrogeninthemethanolsynthesisprocessLong-distanceroadfreighttransport:replacedieselvehicleswithgreenhydrogeninfuelcellvehiclesCementmanufacturing:replacefossilfuelswithgreenhydrogenforhigh-temperatureheatforclinkercalcinationOthermanufacturing:replacenaturalgaswithgreenhydrogenformedium-andlow-temperatureheatResidentialandcommercialheatingandcooking:replacenaturalgaswithgreenhydrogenforcombustionOilrefining:replacegreyhydrogenwithgreenhydrogenforloweringthesulfurcontentofdieselLightvehicles:replacepetrolanddieselvehicleswithgreenhydrogeninfuelcellvehiclesLiquidhydrogenexports:producehydrogenforexportinliquidhydrogentankersN/ANote:Darkercoloursareformorepromisinguses.Severalminorusesareomittedforspace.Abatementpotentialonlyconsiderscurrentdomesticemissions.Source:Grattananalysis.GrattanInstitute202316Hydrogen:hype,hope,orhardwork?complicatedorlengthy,theuseofhydrogenmaynotbecommerciallyviable.3.1.1Criteria1:TechnicalalternativesApplicationsthatscorehighlyarethosewherelargevolumesofThiscriteriaanswersthequestion:ishydrogenthebesttechnicalhydrogenareusedcontinuously,suchasforanindustrialprocess.Itoptiontoreplacefossilfueluse?wouldbeworthwhilebuildingasupplychainforsuchapplications.Inapplicationsthatscorewell,hydrogenwilleitherhaveonlyoneorThosewherelargevolumeswillbeneeded,butonanintermittentbasistwocompetitors–andhydrogenlookslikethebetteroption;orthere(forexample,exportingammonia),couldbeattractive,althoughdealingwillbenoalternativetousinghydrogenbecausetheprocessusesthewithstorageaddscomplexity.moleculeratherthantheenergycontent.Examplesofapplicationsthathaveahightechnicalscoreincludehigh-temperatureindustrialheat,Applicationsthatscorepoorlyarethosewherethepotentialvolumesandchemicalsmanufacturing.ofhydrogenrequiredbytheendusearesmall.Smallusestendtobegeographicallydispersed,whichmakesitchallengingtobuildForsomeapplications,itisnotyetclearwhetherhydrogenwillbethesupplychainstosupportthem.Smallcontinuoususersmaybeabletoclearwinner.Anexampleispowergeneration.Asthepowergenerationpiggy-backonsupplychainsforlargerusers.Somesmallintermittentsectorbecomesdominatedbysolarandwind,thekeychallengeisuserscandothesamewheretheyarelocatednearalargeuser,butensuringthatthesystemremainsreliable.Overbuildingrenewableothers–suchaslong-distanceroadusersrefuellinginremoteareasgenerationtotheextentrequiredtoensurereliability,andgreater–willrequireasignificantinvestmentofcapitalandeffortintoasupplydeploymentoftransmissionandbatterystorage,willbecomeverychaintoprovidethehydrogentheyneed.expensive.9Likelysolutionsincludepumped-hydrostorage,naturalgaswithoffsetsorcarboncaptureandstorage,orhydrogenusedin3.1.3Criteria3:Abatementpotentialturbines.AcorerationaleforusinghydrogenistoreduceAustralia’semissions.Applicationsthatscorepoorlyarethoseinwhichhydrogenwillhaveonlyasmallnicheapplication,orthosethathavecompetitorItwouldbespeculativetoattempttoquantifyhowAustralianhydrogentechnologiesthataremoreefficientthanhydrogenatdeliveringthemightdecarboniseactivitybeyondourshores.Atpresent,onlycurrentsameservice.Examplesincludelightvehicles(battery-electriccarsdomesticemissionsshouldbeconsidered.out-competehydrogenfuel-cellcars),andresidentialheatingandcooking(heatpumpsandinductioncooktopsout-competehydrogenIncasessuchaspowergeneration,wheretheemissionsfromgasheatersandstoves).peakinggenerationwillfallwiththefurtherroll-outofrenewables,usingcurrentemissionsasabenchmarkislikelytooverstatethepotentialfor3.1.2Criteria2:Supplychaincomplexityreducingemissions.Agivenuseforhydrogenmaybethebestoptionontechnicalgrounds,17butifthesupplychainrequiredtogethydrogentotheenduseris9.WoodandHa(2021).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?∙Aresignificanttechnologicaldevelopmentsneededbeforewearesureaboutthelikelyroleofhydrogen?3.1.4Criteria4:Exportreadiness∙DoestheroleofhydrogendependsignificantlyongovernmentOneofthepotentialopportunitiesfromhydrogenistoexpanddecarbonisationpolicyinotherrealms–suchastheelectricityAustralia’sexportindustries,takingadvantageofourabundantsectorandroadtransport?renewableenergyandmineralresources.103.2.1Moveimmediatelyonammonia,alumina,andironButitiseasiertodevelopafutureexportindustryfromanexistingbase,ratherthanbuildingnewindustrieswhereAustraliahasnoexperience.Ammonia,alumina,andironlooklikethecommoditiesmostlikelytoIfgovernmentshavelimitedcapacitytosupportindustrygrowth,itisamakegooduseofhydrogen.betterbettosupportestablishedindustries.SinceAustraliaalreadyhassignificantindustriesproducingtheseApplicationsthatscorepoorlyonthiscriteriaarethosewhereAustraliacommodities,wehavecomparativeadvantagesthatarelikelytodoesnotproducetherelevantcommodity,orwherenoneofitiscarryovertothedecarbonisedversionsofthoseindustries.Thesecurrentlyexported.Thosethatscorehighlyareapplicationswherecommoditieshaveastrongdemandoutlook,includingforexports.AndAustraliaalreadyproducesthecommodity,eitherforamixofdomestictheycanbeasourceofsignificant,earlydemandforhydrogen(seeusesandexports(suchasaluminaorammonia),orpredominantlyforTable5.1onpage34foranestimate)–largeenoughtobuildaviable,exports.long-termhydrogensupplyindustry.3.2WheregovernmentsshouldfocusChapter4discussesammonia,alumina,andironinmoredetail.Applyingthesecriteriatothemanypossibleusesofhydrogenin3.2.2Moveslowlyonmanufacturing,syntheticfuels,electricity,Australiarevealsagroupofapplicationsthatcanberuledout,andmethanol,andlong-distancetransportanothergroupwherehydrogenappearstobepromisingandmaywarrantgovernmentsupport.Therearefiveusesforhydrogenthatmaybecomeviableoptionsinfuture,butatpresentareunclear:manufacturing,syntheticfuels,Tobesttargetpolicytothesemorepromisinguses,weneedtothenelectricity,methanol,andlong-distancetransport.assessthosethatshouldbesupportedwithspecificpolicyinterventionsnow,andthosewheregovernmentsshouldproceedmorecautiously.SignificantlyboostingtheseuseswillnotprovidethescaleandsteadyTodothat,threefurthercriteriashouldbeconsidered:demandneededtobuildaviablehydrogensupplyindustry.However,ifammonia,alumina,andironproductionexpandsusinggreenhydrogen∙DoesAustraliahaveasignificantexistingindustry?WherethereproducedinAustralia,thesefiveuseswillhavetheirbestchanceofisanexistingindustry,itisasaferbetthatcomparativeadvantageplayingaroleindecarbonisingtheeconomy.willpersistwiththedecarbonisedversionsofthoseindustries.1810.ThisisexploredmorefullyinWoodetal(2022).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Hydrogenforoilrefininghasbeenasourceofgrey-to-greenhydrogenindustrydevelopmentinothercountries.ThereisnosubstituteforHydrogencouldbeusedasafuelforindustrialheatinmanufacturing,hydrogenintherefiningprocess,andthesupplychainisnotcomplex.butbecauseitisinefficientandexpensive,ithascompetitorsforbothButAustraliaonlyhastwooilrefineries,andbetweenthemtheysupplylowandhightemperatures.only9percentofAustralia’sliquidfuels.Neitherhascommittedtostayopenpast2027,13andtheshifttowardszero-emissionstransportHydrogencouldbeaninputforsyntheticfuelstoreplacefossiljetfuel,meansrefiningwillbeashrinkingbusiness.doingtheheavyliftingfordecarbonisingaviationinfuture,butbiogenicjetfuelscurrentlyseemlikeabetterprospect.Lightvehiclesusinghydrogenhavefailedtogainmarketshare.InthepassengercarandlightSUVcategory,only38hydrogenfuelcellHydrogenmaybeasubstitutefornaturalgasforuseindispatchablevehiclesweresoldinAustraliain2021,comparedwith8,147batterypeakinggenerationinahigh-renewableselectricitygrid.Butitsrole,inandplug-inhybridelectricvehicles.14Thesefiguresaremirroredinafieldofalternatives,isuncertain.mostinternationalmarkets.Methanolproducedusinggreenhydrogenisapotentialsubstitutefuel3.2.4Focusonsupportinghydrogenusefordomesticindustryforshipping,butAustraliahasnomanufacturingbase,andtherearebeforeconsideringliquidhydrogenexportspotentialcompetitorfuelssuchasammonia.WhenAustralia’sfirstNationalHydrogenStrategywaspublishedHydrogenfuelcelltruckscouldreplacedieseltrucksforlong-distancein2019,liquidhydrogenwasconsideredapotentiallargeexportroadfreight.ButthesupplychainforhydrogeninthiscaseiscurrentlyopportunityforAustralia.Thisviewreflectedsignificantcommitmentsnon-existent,andbatteryelectrictrucksmayyetdeveloptomeetthisbygovernmentsinenergy-poorAsiancountries,inparticular,tobegindemand.replacinggasandcoalimportswithzero-emissionsalternatives.And,atthetime,AustraliahadnocommitmenttonetzeroandnopoliciesChapter6discussesthesepotentialusesofhydrogeninmoredetail.todrivedecarbonisationthatwouldhavejustifieddomesticuseofhydrogen.3.2.3Proceednofurtherwithresidentialandcommercialheatingandcooking,oilrefining,andlightvehiclesButmovinghydrogenlongdistancesbyshipisdifficultandexpensive.Tobeshippedeconomically,hydrogenmustbeinliquidformduetoUsinghydrogenforheatingandcookinginhomesandcommercialitslowvolumetricenergydensity.Thisrequirescompressionandbuildingsisunrealistic.Efficientheatpumpsandinductioncooktopscoolingto-253∘C,anextremelylowtemperature,whichconsumesusingelectricityarealreadyfarmoreeffective,cheapertorun,andlargeamountsofenergy.Liquidhydrogenalsorequiresbespokeimportcleaner.11Waitingforhydrogentobecomecommerciallyviablewouldandexportterminals.becostlyanddelayabatement.1213.JoseandPaul(2021).11.SeetheGrattanInstitutereportGettingoffgas:When,how,andwhoshouldpay14.NationalTransportCommission(2022,p.61).forthefullcaseagainstusinghydrogeninhomes:Woodetal(2023).1912.Ibid(pp.10–11,15).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Movinghydrogen-containingcommoditiessuchasammoniaormethanol–orenergy-intensivecommoditiesthatusehydrogeninproduction,suchasironandalumina–iseasierandcheaper.15Thesecommoditiesarealreadygloballytraded,andlogisticsandpricingarewellunderstood.Globalliquidhydrogensupplychainswillonlydevelopiftherearecountriesthatarewillingtoimportverylargeamountsofhydrogenratherthanmakeitthemselvesorrelocatepartsofheavyindustrysupplychains.AsisthecasewithLNG,onlyabuyerwillingtobuylargeamountsofhydrogenforalongperiodwouldbeabletoprovidethecertaintytounderwritethecapitalrequiredfortheinfrastructure.Ifsuchabuyerweretoappear–onewhowantedtobuyAustralian-producedhydrogenforexport,andwaswillingtounderwritethecapitalforthesupplychain–thenAustraliashouldwelcomethatinvestment.Butifgovernmentsareseekingthebestreturnforeffort,theyshouldnotgochasingafterliquidhydrogenexportsattheexpenseofdomesticusesthatcouldbuildaviableindustry.15.Ammoniaexportscanbeusedasis,orconvertedbacktohydrogenforuse.Inthelattercase,althoughtransportofammoniaiseasierandcheaper,therearesignificantenergyconversionlossesassociatedwithcrackingitbackintohydrogen.Regardless,shippingammoniaseemstobethemosteconomicwayoftransportinghydrogenoverlongdistances:IRENA(2022).GrattanInstitute202320Hydrogen:hype,hope,orhardwork?Box3:Whataregreenpremiumsandmarketpremiums?4Startwithammonia,alumina,andironTheterm‘greenpremium’commonlyreferstotheextracosttoaproducerofreducingtheenvironmentalimpactoftheirproductionAmmonia,alumina,andironarethethreeusesforhydrogenonwhichprocess.Australiangovernmentsshouldfocustheirinitialefforts.Inthisreport,wemainlyconsiderthegreenpremiumrelatedAllthreecommoditiesarelikelytoremainindemand(orhavegrowingtocarbonemissionsresultingdirectlyfromproduction,butdemand,inthecaseofammonia)inafuturenet-zeroworld.Thesearegreenpremiumscanalsocoverotherenvironmentalimpactsofbulkmaterialsthatwillremainimportantforbuildingandfeedingtheproductionandsupplychains.world,andwhicharecrucialforbuildingtheinfrastructurenecessaryfortheworld’senergytransition.SomeanalystsalsousegreenpremiumtodenotetheextraamountacustomeriswillingtopayforaproductwithlowerThesethreecommoditiesalreadyhaveanindustrialbaseinAustralia,aenvironmentalimpact.Inthisreportwerefertothisasthe‘marketsourceofdomesticdemandfromwhichtogrow,andareeconomicallypremium’foragreenproduct.valuable.4.1AmmoniaAustraliaproducesammonia,forinstance,butmostofourfertiliserscomefromoverseasbecauseofcheapnaturalgasavailableelsewhere.Ammoniaisachemicalcomposedofnitrogenandhydrogen,andisButasdemandforgreenammoniagrows,Australianproductioncouldcurrentlyanimportantfeed-stockfortheproductionofnitrogenoushelpsupplytheworldinstead.Inthecaseofaluminiumandsteel,fertilisersandcommercialexplosives.16BecauseitischeapertoAustraliaisalreadyagloballysignificantsupplieroftheirrawinputstransportthanhydrogen,anddoesn’tcontaincarbon,ammoniaalsoofbauxite,alumina,andironore.Australia’scompetitiveadvantageinhaspotentialusesinafuturenet-zeroeconomyinpowergenerationrenewableenergymayallowittomovefurtherdownthevaluechain.andasashippingfuel.Respectively,thisinvolvesreplacingfossilfuelswithammoniainpowerplants,andburningammoniainplaceofGreenhydrogenisexpensive.Touseitintheproductionofthesecarbon-intensiveshippingfuel.commoditiesrequireseitherexistingplantstoberetrofittedornewonestobebuilt.Therewillprobablybeaproductioncostgapbetween16.ThemostcommonlyusednitrogenousfertiliserinAustraliaisurea,followedbygreyproductsandgreenproductsproducedusinghydrogen–agreenammoniumphosphates.Ammoniumnitrateisusedforcommercialexplosives,andpremium(seeBox3)–foraconsiderabletimetocome.canbeusedasafertiliser,althoughthatuseisnowbannedinAustraliaandsomeothercountriesbecauseitcanbehazardous.Currently,carbonpricesinAustralia,andemergingmarketpremiumsforgreenproducts,arenotsufficienttomakeproducingthesethree21commoditieswithhydrogencommerciallyviable.Bothofthesefactorsarealsohighlyuncertain,whichmeanshighriskwillbeaninvestmentbarrierforsometime.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure4.1:Worldammoniademandwillremainsteadyacrossitscurrentuses,andprobablygrowfornewusesinshippingandpowergenerationToday,ammoniaismadefromgreyhydrogenderivedfromnaturalgas,Demandforammonia,milliontonneswithcarbondioxideasaby-product.Greenammoniacouldinsteadbe600madefromgreenhydrogen.AppendixAprovidesfurtherdetailonhowthisprocessworks.Powergeneration4.1.1Demandoutlookforammonia450Demandforammoniawillendure,becauseabouthalftheworld’spopulationreliesonsyntheticnitrogenfertiliser.17IncomegrowthandMaritimefuelthecorrespondingincreaseindemandforfertiliser-intensivemeatanddairyproductswillalsopushupper-capitafertiliseruse.18300ButtheuseofnitrogenousfertiliserhasbeenassociatedwithCurrentusesofenvironmentalproblemssuchasalgalbloomsandsoilacidification.Nitrogenousfertilisersalsocreatesignificantgreenhousegasammonia:emissionswhenthey’reused–aboutdoubletheemissionsgeneratedduringtheirproduction.19150non-fertiliser,Theseconcernshaveledtochangesinfarmpracticesandtothenon-ureanitrogendevelopmentofproductswithoutthosenegativeimpacts,whichisputtingsomedownwardpressureonthedemandoutlookforfertilisers,andnitrogenousfertilisers.FurtherdownwardpressurewillresultfromtheKunming-MontrealGlobalBiodiversityFramework,aninternationalureafertiliserstreatyagreedinDecember2022thatcommitssignatoriestohalvingexcessnutrientsintheenvironmentby2030.2002020202520302035204020452050Globally,demandforcommercialexplosivesandhenceammoniumnitratewillfallwithanet-zero-drivendeclineincoalmining.21ButthisNote:ProjectionsfromtheInternationalEnergyAgency’s2021NetZeroEmissionsbymaybepartlyoffsetbygrowthinminingforcriticalminerals.2050Scenario.Source:GrattananalysisofIEA(2021).17.Ritchie(2017).18.IEA(2021).2219.Dwyer(2023).20.Excessnutrientscandamageaquaticecosystems.Theyresultfromover-useoffertiliser,andpoormanagementofhumanandanimalwaste:ConventiononBiologicalDiversity(2022).21.IEA(2021,p.69).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?GibsonIslandinQueensland,havingclosedattheendof2022.SomelocallyproducedammoniumnitrateismixedwithimportedureatoBalancingthesefactors,theInternationalEnergyAgency’s(IEA)Netproduceureaammoniumnitrate,whichisusedasaliquidnitrogenousZeroEmissionsby2050Scenarioseesglobalammoniademandforfertiliser.existingagriculturalandindustrialusesgrowingslightlyby2050(seeFigure4.1ontheprecedingpage).22TotaldependenceonimportedureawillchangewithPerdaman’sdevelopmentofalarge-scaleureaplantusingnaturalgasatKarrathaIntheIEA’sscenario,powergenerationandshippingbecomemuchinthePilbararegionofWesternAustralia.IncitecPivotFertilisershasmoresignificantdriversoffuturedemandgrowthforammonia.23Tosigneda20-yearofftakeagreementforupto2.3Mtofureaperyearwhatextentthisprojectionisrealiseddependsonthetechnologicalfrommid-2027,whentheplantisexpectedtoopen.27IncitecPivotandeconomicdevelopmentofotherlow-carbonalternatives.Co-firingFertilisersintendstomarketupto50percentofthisureainAustralia,ammoniawithcoalisanoptionforsomerenewableenergy-poorandexporttheremainder.28Ifthisplaneventuates,thisisenoughtocountrieswithnewercoal-firedpowerstations,suchasJapan.24Forreplaceasmuchas40percentofourcurrentagriculturaldemandshippingfuel,ammoniawillcompetewithotherlow-carbonalternativesfornitrogenousfertiliser.29Perdamanintendstomakeitsnewplantsuchasbiofuels,greenmethanol,andgreenhydrogen.25net-zeroby2050.304.1.2TheAustraliancontextNet-zeroureaproductioncouldbeacceleratedwithfavourablepolicies.Astheworldmovestowardsgreenfertiliser,AustraliangreenammoniaAustraliacurrentlyhasfiveammoniaproductionfacilities.Thesemayenjoyacostadvantage,leadingtoashifttowardmorelocalfacilitiesusenaturalgastoproduceammoniaintendedmainlyproduction.Thiswouldbeasignificantsourceofdemandforgreenfordomesticammoniumnitrateproduction,orfordirectexportashydrogen.ToproduceallthenitrogenousfertiliserusedinAustraliaforammonia.agriculturewouldrequireabout0.3Mtayearofhydrogen.31Nitrogenousfertilisers27.IncitecPivotLimited(2023).28.Ibid.Australianfarmsusedabout1.3Mtofnitrogenousfertiliserin2021.2629.Assumingdemandremainsconstant.AsasignatorytotheGlobalBiodiversityNearlyallofthisisnowimported,withAustralia’sonlyureaplant,atFramework,Australiaisobligedtoreduceexcessnutrients,includingfertiliser,22.TheIEA’sNetZeroEmissionsby2050ScenarioachievesnetzeroCO2emissionsbyhalfby2030.Asyet,nopolicyhasbeenimplementedtogiveeffecttothisfromtheenergysectorby2050,leadingtolimitedovershootofthe1.5∘Climitsetcommitment.outinthe2015ParisAgreement,buttheincreaseinglobalaveragetemperature30.PerdamanChemicalsandFertilisersPtyLtd(2023).fallsbelow1.5∘Cby2100:IEA(2023b,p.56).31.GrattananalysisofFoodandAgricultureOrganizationoftheUnitedNations(2023).Allsyntheticnitrogenfertilisersrequireatmosphericnitrogentobefixed23.IEA(2021,p.72).withhydrogeninammonia.24.BloombergNEF(2022).25.IRENA(2021a,p.15).2326.FoodandAgricultureOrganizationoftheUnitedNations(2023).Therearedifferenttypesofnitrogenousfertiliser;1.3Mtistheweightofcontainednitrogenacrossalltypesofnitrogenousfertiliser.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure4.2:Evenwithelevatedworldgreyammoniaprices,greenammoniaissignificantlymoreexpensiveCommercialexplosivesGlobalammoniaprices,US$/tammoniaInAustralia,annualdemandforammoniumnitrateforcommercial$800Greenammoniaexplosives(2.6Mt)isalmostentirelysatisfiedbydomesticproduction.32Theseexplosivesareusedinthermalandmetallurgicalcoalminingin$700Greypricesspikedin2021asAustraliancentralQueenslandandintheHunterValleyinNSW;andinironore,$600theworldre-openedpost-greenpricegold,andnickelmininginWA.$500pandemicandgaspricesroseTheoutlookfordomesticammoniumnitratedemandislikelytobe$400Greyammoniadeterminedbythesamefactorsdrivinginternationaldemandfor$3002023minerals.$200Greyammonia-historicGreypricescontinuetobehigherItislikelythatAustralianminerswillcontinuetorelyondomestic$100thanthehistoricaverageastheproductionofammoniumnitrate.ImportedammoniumnitrateismorewarinUkrainekeepsgaspricesexpensivethanthedomesticproductbecauseoftheadditionalfreight,highstorage,andregulatorycompliancecostsassociatedwithimportingthishazardoussubstance.33Thiswillprobablycontinuetobethecase,$0andthecost-competitivenessofdomesticproductioncouldbefurther20162017201820192020202120222023improvedbyAustralia’scostadvantageinrenewableenergyasminersworkonreducingtheirscope3emissions.34Notes:Greyammoniapricesarecost-and-freight.GreenammoniapricesareassessmentsofdeliveredpriceslessanaverageshippingcostofUS$60/tonne4.1.3Theeconomicsofammoniaammonia,asatAugust2023,andassumealkalineelectrolysis.Nopricedataavailablefor2022.2023pricesvarybyregion,chartshowslowestandhighestprices.Ammoniapricesarelinkedcloselytogasprices,becauseconventionalammoniaproductionissoreliantongas.CurrentammoniapricesareSource:GrattananalysisofPlattsS&PGlobal(2023b),Shiozawa(2020),Statistahigherthanthehistoricaverage(Figure4.2).(2023).Atpresent,onlyabout0.004percentofworldammoniaproduction24isgreen,andthistradesatamuchhigherpricethanconventionalammonia–amarketpremiumofabout90percent.35Australiangreen32.Anti-DumpingCommission(2021,pp.25,31)andAustralianIndustryEnergyTransitionsInitiative(2023,p.108).33.Anti-DumpingCommission(2021,pp.27–28).34.Scope3emissionsarethosewhichareproducedupstreamordownstreamofapointinasupplychain.35.PlattsS&PGlobal(2023b).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure4.3:Undercurrentpolicysettings,usinggreenhydrogentoproduceammoniaaddsaconsiderablegreenpremiumpremiumsarecurrentlyconsistentwithmarketpremiumsglobally–AU$/tonneammonia,abovecurrentgreyproductioncostinotherwords,thecostofproducinggreenammoniainAustraliaisconsistentwithwhatinternationalmarketsarewillingtopayforgreen$1,400Greenpremiumammonia.$1,200Butmostofthedealsstruckforgreenammoniaseemtobeassociatedwithlargeproducersfamiliarisingthemselveswiththetechnologyvia$1,000pilotsandtrials.Manygreenammoniaprojectsaresubsidisedheavilybygovernments.Amarketpremiumof90percentisunlikelytobe$800Grey-greensustainedinthelongterm.$600production$400costgapThereisawidespreadbetweenthebest-andworst-casescenarios$200forthegreenpremiumassociatedwithretrofittingammoniaplantstoCostofusegreenhydrogeninAustralia(seeFigure4.3).Usingdebtfinanceto$0emittingfinancetheseretrofitsthuscarriessignificantfinancialrisk.-$200carbonBetweenhalfandtwo-thirdsofthegreenpremiumisaccountedforby2030204020302040thecostofgreenhydrogen.Theremainderiscapitalexpendituretoretrofitfacilities,andadditionalelectricitycoststoreplacenaturalgasWorst-casescenarioBest-casescenariousedforheat.Notes:Existingammoniaplantsfacetwochoices:theycanpaytoemitcarbon,orRetrofittinganammoniaplanttousegreenhydrogenavoidstheneedswitchtousinggreenhydrogen.Forusinghydrogentobecost-competitive,thecosttobuynaturalgasforfeedstock.Thereisalsoasavingforavoidingtheofemittingcarbonmustbehigherthanthegreenpremium,whichisthecostofusingcarboncostsimposedbytheSafeguardMechanism.36hydrogenlessthemoneysavedfromnotusinggas.Thatis,thegrey-greenproductioncostgapshouldbeclosetozeroornegative.Detaileddescriptionsofbest-andUndercurrentpolicysettings,evenifhydrogencostsfall,andcarbonworst-casescenarioscanbefoundinAppendixB.costsincrease(thebest-casescenarioinFigure4.3),theadditionalcostofusinggreenhydrogentoproduceammoniaisnotoffsetbySource:Grattananalysis.SeeAppendixBforassumptionsandsources.avoidedgasandcarboncosts.Australiangreenammoniaproductioncostslooklikelytoremainwellaboveconventional(grey)production25intothe2040s,particularlyifhydrogencostsstayhigh,andcarboncostsremainlow(theworst-casescenarioinFigure4.3).3736.TheSafeguardMechanismrequireslargeindustrialfacilitiestograduallyreducetheiremissionseveryyear,eitherbyadjustingtheiroperationsorusingoffsets.37.Thesecalculationsarebasedoneastcoastgasandelectricityprices.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure4.4:Globalaluminiumproductionwillincreaseduetodemandforenergytransitiontechnologies,butwillincreasinglyuserecycled4.2AluminaaluminiumAluminiumproduction(milliontonnes)Australiaistheworld’slargestaluminaexporter,owinginlargeparttoitsabundantbauxitereserves.Bauxiteistherawaluminiumore160thatisrefinedtobecomealumina(aluminiumoxide),andthatisthenconvertedtoaluminiuminanelectricalsmelter.AppendixAprovides140furtherdetailontheseprocesses.Secondary4.2.1Demandoutlookforaluminium120aluminiumWorlddemandforaluminiumislikelytogrowslightlyto2050,thoughmuchofthiswillbesatisfiedbyincreasedrecyclingofaluminium(seeproduction,whichFigure4.4).100usesrecycledAsakeyinputintoenergytransitiontechnologies,suchaselectricvehicles,solarpanels,andtheelectricitygrid,38aswellasmanyotheraluminium,growstohigh-valuegoods,demandforaluminiumisexpectedtocontinuetogrowstrongly.39morethansatisfyTheIEAseesdemandforaluminium(frombothprimaryandsecondary80increaseddemandproduction)40increasingbyabout35percentfrom2021to2050,drivenlargelybyitsincreaseduseinelectricvehiclemanufacturingandin60electricitygenerationandgrids.4140PrimaryaluminiumButmuchofthisgrowthindemandwillbemetbyincreasedrecyclingratherthanprimaryproduction.TheIEAestimatestheshareofproductionrequiresaluminiumrecycling–secondaryproduction–willincreasefrom36percenttodaytoreach56percentin2050.42Takentogether,20aluminaasaninputworlddemandforprimaryaluminiumwillfallslightly.TheInternationalAluminiumInstitutehasputforwardasimilar,butslightlymore0202220252030203520402045205038.IEA(2023c,p.154).39.IEA(2023d).Notes:ProjectionsfromtheInternationalEnergyAgency’s2023NetZeroEmissionsby40.Primaryproductionisproductionfromrawore.Secondaryproductionis2050Scenario.Source:GrattananalysisofIEA(2023b).productionfromrecycledorscrapmaterial.41.IEA(2023c,pp.154–155).2642.IEA(2023b,p.95).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure4.5:Australiaisasignificantproducerofbauxiteandalumina,butoptimistic,outlookforprimaryaluminiumdemandundera1.5∘Cofexportsmostofitsaluminaforsmeltingintoaluminiumoverseasglobalwarmingscenario–demandgrowsbyamodest6.25percentfrom2020to2050.43%ofAustralianproduction4.2.2TheAustraliancontext100%Production:Production:Production:101Mt;$1.3b20Mt;$9.6b1.5Mt;$6.1bCompetitiveadvantagealongthealuminiumvaluechainisbuiltonthebasisof:80%∙Bauxite:bauxiteresourcesandminingproductivity.60%61%(60Mt)ofOnly15%Exported40%Australian(3Mt)of∙Alumina:proximitytobauxiteminesandlow-costgasandcoalfor20%bauxiteAustraliandigestionandcalcination(energymakesup30-to-40percentofproductionisaluminaisrefineries’costbase).0%processedintoprocessedinto20Mtof1.5Mtof∙Aluminium:low-cost,uninterruptedelectricitysupplyforsmeltingaluminainaluminiumin(electricitymakesup30-to-40percentofsmelters’costbase).44AustraliaAustraliaAustraliahasasignificant,existingfootprintalongthebauxite-alumina-Processedaluminiumsupplychain,owingtoitshistoricaladvantagesintheabovefurtherorusedfactors.inAustraliaForaluminarefining,digestionandcalcinationarethekeyBauxiteAluminaAluminiumcarbon-intensivestepsthatwillneedtobedecarbonised.ThemostpromisingtechnologiesfordecarboniseddigestiondonotuseNote:Exportfiguresforbauxiteandaluminacontainasmallamountofeachhydrogen.High-temperaturecalcinationisthekeystepthatcouldbecommoditynotintendedforuseinaluminiummetalproduction.cost-effectivelyreplacedwithahydrogen-basedprocess.Calcinationtypicallyrequirestemperaturesexceeding1,000∘CandconsumesSource:GrattananalysisofAustralianAluminiumCouncil(2023).aboutathirdoftheenergyrequiredforaluminarefining.45Currently,Australianrefineriesusenaturalgasforcalcination,producingabout273.5milliontonnesofCO2-eemissionsayear.4643.InternationalAluminiumInstitute(2021).44.AustralianAluminiumCouncil(2023).45.DeloitteandARENA(2022).46.Ibid.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Australia’srenewableenergyadvantagecouldalsobeconducivetocheap,cleanaluminiumproduction.Butaluminiumsmeltingisdepen-Butcalcinationcanalsobeachievedwithelectricity.Electricanddentonfirmedelectricityandissignificantlymoreelectricity-intensive.hydrogen-poweredcalcinationareatasimilartechnology-readinessItmaybedifficultforAustraliatocompeteoncostwithcountriesthatlevel;bothrequirefurtherdevelopmentbeforetheycanbeimplementedhavebettertraditionalhydropowerendowments.53Thescaleoftheatacommercialscale.AlcoaandRioTintoarelookingtodeployrenewablegenerationbuild-outrequiredforasizeablegreenaluminiumfirst-of-a-kindelectricandhydrogencalcinationtechnologies,manufacturingindustryisalsosignificant.54respectively.474.2.3TheeconomicsofaluminaAkeybenefitofhydrogencalcinationisthatitcanbecheapertoretrofittoexistingplantsthanelectriccalcination,meaninglowerupfrontTherearefewerdataonglobalmarkets’willingnesstopayasignificantcapitalexpenditure.48Whileit’smoreefficienttogenerateheatusingmarketpremiumforgreenaluminaoraluminium.Forlow-carbonelectricitythanhydrogen,49thefutureevolutionofhydrogenandaluminium(upto4tCO2-e/taluminiummeasuredoverscope1andelectricitycosts,includingtransmission,transport,andstorage,couldscope2emissions),estimatesofthemarketpremiumrangefrompushtheeconomicsinfavourofoneortheother.ThesefactorsalsoUS$10toUS$40pertonneforEuropeansales.55ThiscompareswithameanthatthedecisiontoadoptoneovertheotherislikelytobehighlyglobalpriceofmorethanUS$2,000pertonneforthealuminiumitself.56facility-specific,withindustryneedingtopursuebothoptions.50AluminasellsforaboutAU$500pertonne.57FuturegreenpremiumsforReplacingallnaturalgas-basedcalcinationwithhydrogencalcinationinaluminaproductionrangefrom18to28percentin2030,butcouldbeAustralianrefinerieswouldrequireabout0.5milliontonnesofhydrogenaslowas10percentin2040(seeFigure4.6onthenextpage).annually(Table5.1onpage34).Butnotallcompaniesarepursuinghydrogencalcination.51Takingthisintoaccount,demandismorelikelyForAustralianproductionofalumina,hydrogenitselfmakesup80pertobeintheorderof0.18Mtofhydrogen.52centofthegreenpremiumforcalcination,withtherestbeingtherelativelycheapcostofretrofittingthecalciner($19/tonneofalumina).Australia’shydrogencompetitiveadvantagemayallowafurtherpushThegasconsumptionforcalcinationthatthehydrogenissubstitutingalongthevaluechaintoproducemorealuminadomesticallythanitcurrentlydoes,usingthebauxitethatisminedhere(seeFigure4.5on53.Zero-emissionsfirmingcanbeachievedthroughthestorageandreleaseoftheprecedingpage).energyinbatteries,traditionalhydropower,orpumpedhydrosystems.Ofthese,traditionalhydropoweristhecheapest,butAustralialackssignificantgeographical47.Ibid.potentialfortraditionalhydropower,makingfirmedelectricitymoreexpensiveto48.Ibid(p.29).supplyhere:HerdandHatfieldDodds(2023,p.41).49.Ibid(p.29).50.Ibid(p.20).54.Australia’sfouraluminiumsmeltersusedabout24.3terawatthoursofelectricity51.Ibid.in2018-19(about10percentofAustralia’stotalannualelectricityconsumption):52.GrattananalysisofDeloitteandARENA(ibid).Butler(2020).GrattanInstitute202355.BoneandDudman(2023).56.LondonMetalsExchange(2023a).57.LondonMetalsExchange(2023b).28Hydrogen:hype,hope,orhardwork?Figure4.6:Undercurrentpolicysettings,usinggreenhydrogenforaluminacalcinationwillnotbecompetitiveby2040eveninthebest-casefor,however,ismodest(3.4GJofgaspertonneofalumina)–meaningscenariothattherearefewfuelsavingstobehadbyswitchingfromnaturalAU$/tonnealumina,abovecurrentgreyproductioncostgas.Avoidedcarboncostsarecorrespondinglysmall,becauseonlyone-thirdofemissionsofaluminaproductioncomefromcalcination.$150GreenpremiumUndercurrentpolicysettings,thecostofproducingAustralianalumina$125withhydrogenislikelytoremain18to28percenthigherthancurrentworldpricesin2030,and10to28percenthigherin2040(see$100Grey-greenFigure4.6).58$75production$50costgap4.3Ironandsteel$25Australiaisagloballeaderintheminingandexport,largelytoAsia,of$0Costofironoreandmetallurgicalcoal.-$25emittingcarbonThesematerialsarecombinedinblastfurnacestomakeiron,whichisthenfurtherprocessedintosteel.Steelmakinginthiswayresults2030204020302040inabout7percentofglobalemissions.59Greenhydrogencanbeusedwithironoreinanalternativeprocess,calleddirectreduction,toWorst-casescenarioBest-casescenarioproducelow-emissionsiron.60ThisgreenironcanthenbeprocessedintosteeleitherinAustraliaoroverseas,dependingonwhereNotes:Existingaluminaplantsfacetwochoices:theycanpaytoemitcarbon,orswitchproductioncostsarelowest.AppendixAprovidesfurtherdetailontousinghydrogen.Forusinghydrogentobecost-competitive,thecostofemittingtheseprocesses.carbonmustbehigherthanthegreenpremium,whichisthecostofusinghydrogenlessthemoneysavedfromnotusinggas.Thatis,thegrey-greenproductioncostgap58.Thesecalculationsarebasedoneastcoastgasandelectricityprices.shouldbeclosetozeroornegative.Detaileddescriptionsofbest-andworst-case59.MissionPossiblePartnership(2022,p.10).scenarioscanbefoundinAppendixB.60.Industrial-scaledirectreductionironfacilitiesthatusenaturalgasalreadyexistSource:Grattananalysis.SeeAppendixBforassumptionsandsources.aroundtheworld,andhavealowercarbonintensitythanblastfurnaces.Thesefacilitiesproducedabout114Mtofdirectreducedironin2021,comparedwithtotal29worldpigironproductionof1,354Mt(ironproducedusingironoreandcokeinablastfurnace):WorldSteelAssociation(2022).Thesedirectreductionfacilitiescanberetrofittedtousehydrogeninstead.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure4.7:Worldsteelproductionislikelytoremainflat,andwillincreasinglyusescrapratherthannewironmanufacturedusingiron4.3.1DemandoutlookforironandsteeloreCrudesteelproduction,milliontonnesWorlddemandforsteelislikelytoremainstrongbutflat,andalargershareoffuturedemandwillbemetbyincreasedrecyclingofsteel2,000scrap,reducingthedemandfornewiron(seeFigure4.7).1,500ShareofmetallicDemandforconsumerandindustrialgoodsthatcontainsteelisinputfromrecycledlikelytorisewithincomes.Asmoreeconomiesreachmaturity,steelsteelscrapdemandforbuildingsandtransportisexpectedtodeclineasnew-buildinfrastructuretapersoff,andreplacementofexistinginfrastructure1,000becomesalargersourceofdemand.61ShareofmetallicWhilesteelisimportantfortheconstructionofenergyinfrastructureandelectricitygenerationtechnologies,suchaswindturbines,theseuses500inputfromnewironareonlyasmallshareofcurrentsteeldemand,sotheirexpectedfuturegrowthwillnotcontributesignificantlytooverallsteeldemand.62manufacturedusingFurther,theenergyandemissionsintensityofsteelproducedusingironorenewironismuchgreaterthanrecycledsteel.Forthisreason,futuresteelproductionwillusemoresteelscrap,leadingtoareductioninthe0useofironmanufacturedfromironore.TheIEAestimatingthatthe2022202520302035204020452050shareofscrapinmetallicinputstosteelwillincreasefrom33percentin2022to48percentin2050.63Notes:ProjectionsfromtheInternationalEnergyAgency’s2023NetZeroEmissionsby2050Scenario.Takentogether,worlddemandforprimarysteelisexpectedtobelessSource:GrattananalysisofIEA(2023b).thanitistoday,thoughstillsignificant.304.3.2TheAustraliancontextThoughworlddemandforprimarysteelislikelytofall,ironisarguablyalargereconomicprizeforAustraliathantheothertwocommodities61.IEA(2023c,pp.154–155).62.Ibid(pp.154–155).63.IEA(2023b,p.95).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?ofdirectreducediron(DRI),hotbriquettediron,iseasytoship,andturningitintosteelrequiresmorelabourandlessenergythanthedirectexploredinthischapter(ammoniaandalumina).Australiaistheworld’sreductionprocess,givinglow-wagecountriesanadvantageinthatsteplargestexporterofironore,withexportsworth$123.5billionin2022.64oftheprocess.71Australiacurrentlyproduces37percentoftheworld’sironore65andTocapturethisopportunityalsorequiresaccesstotherighttypeofiron18percentofitsmetallurgicalcoal.66Yetitonlyproducesabout0.3perore.Thedirectreductionprocessrequiresaprocessedironoreproductcentoftheworld’ssteel.67Thisisbecauseitischeapertoshiptheironthatcontainsmoreironcontentandfewerimpuritiesthandoesablastoreandcoaltomajormanufacturingandsteel-consumingcountries,furnace.Currently,however,theoverwhelmingmajority(96percent)ofsuchasChina,Japan,Korea,andIndia.theironoreminedandexportedfromAustraliaishematite,whichisnotwell-suitedforfeedingadirectreductionprocess.72Shippingtypicallyaddslessthan10percenttothetotalcostofAustraliancokingcoaldeliveredtomajorAsianmarkets.68TheMagnetiteisthetypeofironorethatisbettersuitedfordirectreduction.costssavedbyavoidingshippingoreistoosmalltoovercometheWhile38percentofAustralia’seconomicdemonstratedresources73ofdisadvantagesofproducingsteelinAustralia,mainlyhighwages.ironorearemagnetite(primarilylocatedinWAandSA),itiscurrentlyConsequently,Australiahasonlytwointegratedsteelworks,whichnotminedasextensively.74Theavailabilityofmagnetiteandhightogetherproducestwo-thirdsofAustralia’ssteeldemand.69qualityrenewableresourcesalsomaynotbealignedgeographically.Theworld’sneedtodecarbonisesteelproductionwillchangethisItispossibletoprocesshematitetobesuitablefordirectreduction,butsupplychainmodel.Themostpromisinglow-carbonproductionmethodthetechnologiesareimmature.75Australiawillprobablyhavetoexpandformakingiron(intheformofdirectreducediron)requireshydrogen,effortsonbothfrontsifitistosucceedincapturingalargersliceofthewhichismuchmoreexpensivetotransportthanmetallurgicalcoal.70greenironpie.CombinedwithAustralia’slikelycomparativeadvantageingreenhydrogenproduction,anopportunityexistsforittomovefurtheralong4.3.3Theeconomicsofironandsteelthevaluechaintoironproduction.Fortheotherpriorityusesdiscussedinthischapter,ammoniaandGrattanInstitute’s2020report,Startwithsteel,showedthatforthealumina,productionwithhydrogeninvolvesretrofittinganexistingbulkofironoreminedinAustralia,ironproductionisprobablytherightoperation.Forironandsteel,ahydrogenretrofitoptionisonlyavailableplacetostopalongthevaluechain,andthatAustraliacouldproduceforexistingdirectreducediron(DRI)plants,whereitcanreplacethegreenironcheaperthanmanyofitsneighbours.Acompactedform71.Ibid(p.24).64.GrattananalysisofDFAT(2023).72.GeoscienceAustralia(2023).65.USGS(2022,p.85).73.Economicdemonstratedresourcesareresourcesforwhichprofitableextractionor66.IEA(2023e).67.WorldSteelAssociation(2020).productionarepossibleundercertaininvestmentassumptions.68.Woodetal(2020,p.22).74.AustralianIndustryEnergyTransitionsInitiative(2023,p.57).69.Smith(2021).75.Ibid(p.57).70.Woodetal(2020,p.22).31GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure4.8:Undercurrentpolicysettings,Australianproductioncostsforgreenironcouldapproachcost-competitivenessinthe2040suseofnaturalgas.Forsteelplantsthatuseablastfurnace,thereisnoAU$/tonneiron,abovecurrentgreyproductioncostretrofitoptionthatuseshydrogen.76ThismeansmakinggreenironinAustraliawillinvolvebuildingnewDRIplants.$400Overseas,emergingmarketpremiumsforgreensteelhavebeen$350GreenpremiumestimatedtobebetweenAC150andAC300pertonne.77Offtakeagreementsarelargelydrivenbytheautomobilemanufacturing$300sectors,seeminglybecauseEuropeancarmanufacturersface‘lifecycle’–ratherthan‘tailpipe’–emissionsregulation.78Inaddition,usinggreen$250Grey-greensteeladdsverylittletotheretailpriceofacar–between0.1percent$200productionand1.6percent.79$150costgapAustralia’seconomicadvantageliesinironproductionratherthansteel$100Costofproduction,whencompetingwithlow-wagecountries.80$50emitting$0carbonUndercurrentpolicysettings,Australiangreenpremiumsforiron-$50productionaresignificantthroughto2040intheworst-casescenario2030204020302040(seeFigure4.8).BecauseanewDRIplantusinggasandoneusinghydrogenhaveapproximatelythesamecapitalandoperatingcosts,Worst-casescenarioBest-casescenariothegreenpremiumcomesentirelyfromusinghydrogen,andbecauseinourworst-casescenario,hydrogencostsdonotfallmuch,theNotes:Acompanybuildinganewironplantfacestwochoices:itcanusegas(andpaygreenpremiumdoesnotfalleither.Inourbest-casescenario,wheretoemitcarbon),orusehydrogen.Forusinghydrogentobecost-competitive,thecosthydrogencostsfallconsistentlyto2040,thegreenpremiumforironofemittingcarbonmustbehigherthanthegreenpremium,whichisthecostofusingreducestoabout$116pertonneofiron.Whilethisisconsiderablylesshydrogenlessthemoneysavedfromnotusinggas.Thatis,thegrey-greenproductionthanintheworst-casescenario,itisstillasignificantpremiumonthecostgapshouldbeclosetozeroornegative.Detailsofbest-andworst-casescenariosworldpriceofiron,whichiscurrentlyabout$721pertonne.81canbefoundinAppendixB.76.Anemissionsreductionofupto20percentcanbeachievedbyinjectinghydrogenSource:Grattananalysis.SeeAppendixBforassumptionsandsources.intoabasicoxygenfurnaceaftertheblastfurnacestage:Santisetal(2022).3277.BolotovaandYeo(2023).78.Attwood(2023).79.Prasad(2021).80.Woodetal(2020).81.SMM(2023).Pricegivenforpigiron(producedinblastfurnaces)ratherthandirect-reducediron(DRI).DRIisdenser,hasalowercarboncontent,andhigherpuritythanpigiron.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?users.Andthegovernmentshouldruleoutfurtherinvestmentoftimeandmoneyintohydrogenusesthataredeadends.5Whatgovernmentsshoulddo5.1SmartinvestmentsinfundamentalfactorsforsuccessAnAustralianhydrogenindustryshouldbecapableofprovidingtheindustriesthatmostneedhydrogenwithreliablelow-costsupply,Developingahydrogenindustryisjustonepartofalargerindustrialwithoutlong-termsubsidies.transformationthatmusttakeplaceinAustraliaoverthenexttwo-and-a-halfdecades.Governmentsshouldfocusonindustriesthatwillbelong-termusersoflargevolumesofhydrogen.TheseindustriesshouldmostlybeTwofactorswillunderpinthesuccessorfailureofthistransformation:export-focused–orhavethepotentialtobecomesoinanet-zeroreliablegreenelectricity,andunlockingconstraintsonconstruction.globaleconomy–becausethedomesticAustralianmarketistoosmallDeliveringthesewillbenefitthewholeindustrialsector,whetheritstogeneratesufficienthydrogendemandforaviableindustryinthelongpathwaytonetzerolieswithhydrogenorwithelectrification.term.Establishingstrong,viabledemandwillpositiontheAustralianhydrogenindustrytoexpandintootheropportunities,shouldthose5.1.1Cheapandreliablegreenelectricityisthebackbonearise.RenewableelectricitywillbeindemandfromallsectorsoftheeconomyTherearetwoareaswheregovernmentcanconfidentlyactnowinthetransitiontonet-zeroemissionsby2050.AndAustralia’sbecausethesewillbeessentialbothforhydrogenandforbroaderrenewableenergysuperpowerambitionsrelyonanabundanceofindustrialtransformation:first,deliveringareliable,green,low-cost,low-costrenewableelectricity.electricitysystem;andsecond,unblockingconstructionconstraints.Australia’slatentrenewableenergycompetitiveadvantagecomesfromButthecostgapbetweengreencommodityproductionandincumbenthavingalotofrenewableresources,andloweropportunitycostsin(grey)productionwillpersistunlessfurtherstepsaretaken.Therearemakinguseofthemthanisthecaseinmanyothercountries.Thesetwo,complementary,waystoclosethisgap:pushupthecarbonprice;loweropportunitycostslargelyarisebecauseofourlowpopulationanduseindustrypolicytounderwriteproductionofgreencommodities.density:thelikelihoodoftherebeingamoreeconomicallyvaluableThegovernmentshouldincreasetheambitionofSafeguardMechanismuseofaparticularpieceoflandislowerinAustraliathaninother,moresettings,todecreasetheburdenontaxpayersofclosingthecostgap.crowded,countries.ButAustraliawillmaintainacompetitiveadvantageAndthegovernment’sHydrogenHeadstartprogramshouldevolveonlyifthemarginalcostofanothermegawattofrenewablegenerationintoaneffectiveindustrypolicythatusescontracts-for-differencetoislowerthaninothercountries.sharetheriskoftransformingAustralianheavyindustryto‘superpower’status.Electricitydemandwillgrowregardlessofwhetherkeyenergy-intensiveprocessesendupusinggreenhydrogen,becausethekeycompetitorTheNationalHydrogenStrategyshouldberevisedtocomplementanevolvedHeadstart,andfocusonfactorsspecifictohydrogenthatstand33inthewayofcreatingaviableindustrycapableofsupplyingAustralianGrattanInstitute2023Hydrogen:hype,hope,orhardwork?Table5.1:Alotofelectricitywouldbeneededtomakethegreenhydrogenfordecarbonisedammonia,alumina,andironproductiontohydrogen-basedtechnologiesacrossalmostallusesisaformofelectrification.Forhydrogenproduction:ItwilltakealotofrenewablesjusttobuildthefirststageofaviableAustralianHydrogenElectricityGenerationhydrogenindustryproductionrequiredrequiredcapacity(Mt)(MtH2)(TWh)requiredEvenamodestlevelofambitionforahydrogenindustryrequiresalot(GW)ofrenewableelectricity,andtransmission.Basedon2022Australianproductionvolumes,simplyreplacingthe‘hydrogen-replaceable’Ammonia2.10.3618.78.5processesinammonia,alumina,andironproductionwouldrequireAlumina7.0-20.10.18-0.509.0-25.84.1-11.81.02to1.34Mteachyearofhydrogenand23.8to31.5gigawatts(GW)Iron6.60.4824.511.2ofrenewablegenerationcapacity(seeTable5.1).Ifitisallsourcedfromsolarphotovoltaics(PV),thiswouldrequireabout853squareTotal1.02-1.3452.1-69.023.8-31.5kilometresofland.82Forcomparison,onlyabout19GWofgrid-scalesolarandwindwasconnectedtotheNationalElectricityMarketbytheComparison:177TWh19GWofsolarendof2022.83NEMin2022operationalandwindconsumptionThefutureusersofgreenhydrogenwilloftenalsohavesignificantdemandforrenewableelectricitythemselves.Zero-emissionsNotes:TWh=terawatthour.GW=gigawatt.Hydrogenrequiredisonlythatforsteel-makingusingelectricarcfurnaces,andaluminiumsmeltingwill‘hydrogen-replaceableprocesses’,assumingproductionactivityat2022levels.bothrequiresignificantamountsofrenewableelectricity.Hydrogen-replaceableprocessesare:steammethanereforminghydrogenproductionforammonia;calcinationofaluminiumhydroxideforalumina;blastfurnacesmeltingofGettingelectricitycostsdowniscriticalforaviablehydrogenindustryironoreforiron.TheseprocessesaredetailedfurtherinAppendixA.Foralumina,thelowendoftherangeisforproductionatRioTinto’sfacilitiesonly(becausecurrentlyThecostofgreenhydrogendependsheavilyonthecostofgreenonlyRioTintoisinvestigatinghydrogen),thehighendoftherangeisforallAustralianelectricity,andlargelyforthatreason,Australiaisnotpresentlyarefineries.Assumes65percentelectrolyserefficiencyandsolarphotovoltaiclow-costlocationforhydrogenproduction.generationisusedwitha25percentcapacityfactor.6.6MtisthevolumeofdirectreducedironrequiredtoproduceenoughcrudesteeltomatchAustralianproductioninMostlargeplannedhydrogenprojectsarelookingtoconnecttheir2022(5.7Mt).electrolyserstodedicatedrenewablegeneration,ratherthantothegrid(seeFigure5.1onthenextpage).ThisenablestheseprojectstoSource:GrattananalysisusingcalculationsinFigure1.1,andAEMO(2023a),AEMO(2023b),DeloitteandARENA(2022,p.27),andWoodetal(2020,p.44),82.Co-locatedwindandsolarwouldrequirelessland,buttheamountwouldbesite-specific.Solarisusedhereforillustrativepurposes.3483.AEMO(2023a).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure5.1:Largerplannedhydrogenprojectsaremorelikelytobeusingdedicatedrenewablesgetcheaperelectricity,althoughtheyneedtobalancethisagainsttheNumberofprojectsneedtomanagetheintermittencyofrenewablegeneration.Goingwith10dedicatedrenewablegenerationalsounlockslocationsnotwell-servedbythegridforhydrogenproduction,butitisnotpossibleeverywhereDedicatedrenewables–especiallywherethereisahighopportunitycostforusinglandforgeneration.Grid−connectedInothercases,greenhydrogenproducersmayprefertoconnecttothe5electricitygrid–iftheelectricityisclean,andifthewholesaleprice,includingtransmission,ischeapenough.Thiswouldenableproducers00−1,0001,000−100,000Morethan100,000tosaveontransportandstorageofhydrogen,andavoidhavingtodealwiththeintermittencyofrenewablegeneration.Plannedmaximumhydrogenproductioncapacity(tonnesperannum)TheseconsiderationsreinforcetheneedforahighlevelofcoordinationNotes:Includesallelectrolysishydrogenprojectsthatwereunderconstructionorunderbetweenhydrogenandbroaderenergysystemplanning.developmentasat5September2023.Projectswithoutareportedhydrogenproductioncapacityorpowersourceareexcluded.Recommendation1ContinuetoreducethecostofrenewableelectricityinAustralia.Source:GrattananalysisofdatafromCSIRO(2023a).Acceleraterolloutofrenewableenergygenerationandstorage,anddeploymentoftransmission.35Forgrid-connectedprojects,embedgreenhydrogen’selectricitydemandintoelectricity-systemplanningthroughtheAustralianEnergyMarketOperator’sIntegratedSystemPlan,andintothedesignanddevelopmentofRenewableEnergyZones.5.1.2UnblockingconstructionconstraintsAtpresent,governmentsandtheprivatesectorarebuildingalargenumberofinfrastructureprojectsallatonce,contributingtohighconstructioncostsandwidespreadprojectdelays.84Australia’s84.InfrastructureAustralia(2022).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Australianeedscarbonpricesignalsthatarestrongenoughtogiveindustrytheincentiveandthesignaltodecarbonise.Carbonsignalshighconstructioncostsalreadydetractfromourrenewableenergycanbeexplicitprices–suchasthoseintheSafeguardMechanism–orsuperpowercompetitiveadvantage.85Andtheproblemisexacerbatedimplicitones,suchasthosecreatedbyemissionsstandards.whensignificantdomesticcompetitionforlabourandmaterialsmeanstheconstructionsectorrunsupagainstcapacityconstraints.Butcarbonsignalsarenotindustrypolicy.Decarbonisationpolicyshouldfocusonreducingemissionsatleastcost.AseparateindustryAustralia’slabourshortageswillonlybeexacerbatedbyadditionalpolicyisthebestwaytofocusonindustrydevelopment.competitionforskilledlabourastherestoftheworlddecarbonisesandalsoseekstocapturegreenexportopportunities.86ThethreecommoditiesidentifiedinthisreportasagoodbasisforaviableAustralianhydrogenindustry–ammonia,alumina,andironThereisnosimplesolutiontotheseissues,but,givenbetter–areallproducedinfacilitiessubjecttotheSafeguardMechanism.coordination,andtherightpricesignals,marketswillultimatelybetheTheyarerequiredtoreducetheiremissionseachyearinlinewithabestmechanismforallocatingresourcesthroughouttheeconomy.decliningbaseline,andoffsetanyemissionsabovethebaseline.Also,newfacilitiesmustbebuilttoworld’sbestpracticeemissionsintensity.Recommendation2StateandterritorygovernmentsshouldmanagedemandbyChapter4showedthatthecarbonpricegeneratedbydecliningcoordinatingandsequencingmajorconstructionprojects.aSafeguardMechanismbaselineswillnotmakegreenammonia,alumina,andironcost-competitivewithexistingcarbon-intensivea.Terrilletal(2021).processesby2040.5.2ClosingthecostgaprequirescarbonpricingtoalignWhilethisispartlybecausethecostsofproducinggreenhydrogenandinvestmentwithclimategoalsretrofittingorbuildinggreencommodityproductionfacilitiesarehigh,itisalsobecausethepriceofemittingcarboninAustraliaistoolow(seeEvenwithcheaperelectricity(andthereforecheaperhydrogen)andFigure5.2onthefollowingpage).withimprovementstomakeconstructioneasier,thegreenpremiumforammonia,alumina,andironislikelytopersistforsometime.TheincentivetoswitchtogreenhydrogendependsonthepriceofThegapbetweenwhatitcoststoproducegreencommodities,andcarbon.Ifthepriceofcarbonislow,theincentivetoswitchtogreenwhatbuyersarewillingtopayforthemcanbeclosedusingtwo,hydrogenisweak.Undercurrentpolicysettings,Safeguardfacilitiescomplementarytools:raisingthecarbonpricetomakenon-greenonlymakesmallsavingsbyavoidingliabilityforcarbon,comparedproductionmoreexpensive;andusingindustrypolicytomakegreenwiththecostofhydrogenitself.Thebalancewouldchangeiftheproductioncheaper.Safeguardhadacostofcarbonconsistentwithkeepingglobalaveragetemperaturerisesto1.5∘C.85.HerdandHatfieldDodds(2023).86.JobsandSkillsAustralia(2023,p.132).Theplanned2026-27reviewoftheSafeguardMechanismisanaturalopportunitytoconsiderwaystoestablishstrongercarbonpriceGrattanInstitute202336Hydrogen:hype,hope,orhardwork?Figure5.2:UndercurrentAustralianpolicies,minimalsavingsresultfromavoidingcarboncoststrajectoriesbeyond2030.ThesecouldincludesteeperbaselineCarboncostsfromfossilfuels,AU$declines,andhigherpricecaps(throughthecostcontainmentmeasure)toincreasethecarbonliability.Diesel$2.00Consistent(litre)$1.50with1.5oCOutsidetheindustrialsector,changesshouldbemadetotheSafe-guardMechanism–oranalternativepolicyputinplace–toensure$1.00ACCUpriceSafeguardotherusesofhydrogenfaceasufficientsignaltodecarbonise.For$0.50forecastpricecapexample,whilesomeaviationandroadfreighttransportbusinesses,andenergy-intensivemanufacturingfacilitiesareincludedunderthe$0.00100,000tonnesofCO2-ethresholdfortheSafeguard,notallofthemare.87LoweringthethresholdtocapturemoreoftheseemitterswouldGas$40increaseincentivestoswitchtolowcarbonfuels,includinghydrogen.Similarly,electricityremainseffectivelyuntouchedbySafeguard(GJ)Mechanismreforms.$30PolicyrecommendationsforthesesectorsaredetailedinChapter6.$20Recommendation3ThereviewoftheSafeguardMechanismin2026-27should$10considertherolethatsteeperbaselinedeclines,higherpricecaps,andalowerthresholdcouldplayinclosingthecostgapongreen$0commodityproduction.Coal$2,000Carbonborderadjustmentmechanisms(tonne)CalculationsoftheimpactofcarbonpricesimpliedbytheSafeguard$1,500Mechanisminthisreportassumethatammonia,alumina,andironarenoteligibleforconcessionsbecauseoftradeexposure.88$1,00087.CleanEnergyRegulator(2023a).$50088.Eligibilityfortradeexposureconcessionsisdeterminedonafacility-by-facility,$020302050year-by-yearbasis,dependingonthecostofSafeguardcompliancescomparedto2024EarningsBeforeInterestandTaxes(EBIT):DCCEEW(2023f).ThisisseparatetoNotes:ACCU=AustralianCarbonCreditUnit.GascarboncostsarepergigajouleforGrattanInstitute2023combustion,notfeedstock.DieselcarboncostsareperlitreforuseastransportfuelinaheavydutyvehiclemeetingEuroIVstandards.Coalcarboncostsarepertonneofmetallurgicalcoal.Source:GrattananalysisofdatafromDCCEEW(2023c),HerdandHatfieldDodds(2023),andNetworkforGreeningtheFinancialSystem(n.d.).37Hydrogen:hype,hope,orhardwork?5.3IndustrypolicyshouldunderpindevelopmentofahydrogenindustryIftheseconcessionsaregranted,thecostgapbetweengreyandgreenproductionwillbelarger.Australia’scleanenergyopportunitiesarelarge,buttheyarefarfromcertain.Governmentscannotsingle-handedlydrivethecreationofAcarbonborderadjustmentmechanism(CBAM)ensuresimportednewglobal-scaleindustries,norinvestthehundredsofbillionsofgoodsaresubjecttoacarbonpriceequaltothatfacedbydomesticdollarsrequired.Butthefederalgovernmentcanandshouldimplementproducersofthesamegoods.WhereAustraliaisanetcommoditypoliciesthatplanfor,andfacilitate,thisfuture.importer,suchasforammoniaandsteel(butnotalumina),thiswouldreplacetheneedfortradeexposureconcessions,andmeandomesticOncethefundamentalsofreliable,green,low-costelectricity,productionwouldfacethefullimpactofcarbonpricing,whichwouldcompetitiveconstruction,andstrongercarbonpricingareinplace,thehelpclosethecostgapforgreenproduction.roleofagreenindustrypolicyistobringdowntheproductioncostsoflow-carboncommoditiessooner,byreducingthegreenpremium.91InconjunctionwithastrengthenedSafeguardMechanismorothercarbonsignalmechanismthatworksondomesticsupply,aCBAMClosingthegapbetweengreenandgreyproductioncostsisessentialcouldhelpensurethatdomesticdemandworkstodecarbonisebecausethesizeofthemarketpremium92ishighlyuncertain,asdomesticindustrywithoutdestroyingit–thatis,withoutleadingtoisthelengthoftimethatthegapwillpersist.Thismakesitharderso-calledcarbonleakage,wherefirmsmovetheiroperationsfromtousedebttofinancefacilityupgradesornewfacilitiestoproduceAustraliatocountrieswithless-stringentemissionspolicies.greencommodities,becausefutureuncertaintyincreasesthecostofborrowing.AslongascapitalprefersthecertaintyofreturnfromThegovernmentisconsideringpolicyoptionsthroughitsCarbontraditionalproduction,low-andzero-carbontransformationwillbeheldLeakageReview,duetoreportby30September2024.89Thereviewback.willlookatcarbonleakagerisksandpolicyoptionstoaddressthoserisksacrosskeyproducts,withaparticularfocusonsteelandIndustrypolicyshiftsthegreenpremiumriskfromindustrytowardscement.90governmentorconsumers.Thiscanbeviagreenmandatesimposedonconsumersoftheend-product(creatingguaranteeddemand);Recommendation4productioncreditspaidtoproducers(reducingthegapbysubsidisingproduction);orcontracts-for-difference(CFDs),whichpartlyfilltheAspartoftheCarbonLeakageReview,considertheroleacarbongreenpremiumgap.borderadjustmentmechanismcouldplayindevelopingviablegreencommodityproduction.Greenmandatesareonlysuitableforproductsthatarenotsubjecttoimportcompetition,unlesstheyarecomplementedbyCarbonBorderEmissions-IntensiveTradeExposed(EITE)concessionsundertheRenewableAdjustmentMechanisms.ProductioncreditsandCFDscouldbeEnergyTarget,whichshieldammonia,alumina,andironproductionfromtheelectricitycostimpactsofthatpolicy:CleanEnergyRegulator(2023b).91.SeeBox3onpage21forthedefinitionofgreenpremium.89.DCCEEW(2023g).92.SeeBox3onpage21forthedefinitionofmarketpremium.90.Ibid.38GrattanInstitute2023Hydrogen:hype,hope,orhardwork?5.3.2ProductioncreditsareexpensiveusedwheredemandforAustralianproductsisdrivenmorebysomeProductioncreditshelpbridgethegapbetweenthemarketpremiumcombinationofglobalmarkets,policies,andprivateinvestment.andthegreenpremium,byprovidingaper-unitsubsidytogreencommodityproducers.TheUSInflationReductionActmakes5.3.1ExtendingHydrogenHeadstartrisksencouragingoverlyproductioncreditsavailableforhydrogenproducers,providingaexpensivedecarbonisationalternativessubsidyofuptoUS$3perkilogramofhydrogen.ThroughitsHydrogenHeadstartprogram,thefederalgovernmentProductioncreditsarearisktogovernmentsbecausetheylockinahasrecognisedtheneedtoclosethegreenpremiumgap.93Thefixedsubsidy.Ifgreenpremiumsfallfasterthanexpected,governmentsgovernmentwillenterintocontractstounderwritehydrogenprojectsenduppayingmorethantheyneedto.InthecaseoftheUS,somebyprovidingaproductioncreditequivalenttothegapbetweenanforecasterspredictthatthemaximumhydrogenproductioncreditwillbeexpectedfuturemarketpriceandtheexpectedproductioncost.94greaterthanthetotalcostofproductionby2030.95Whereproductioncreditsaremadegenerallyavailabletoallproducers,asintheUStaxThisisagoodstart.ButifHeadstartisextendedwhilesolelyfocusedcreditexample,governmentscanalsobeexposedtoanuncappedonhydrogenandretainingeligibilityforallenduses,itmayencouragedrawonthebudget.usesofhydrogenthatareuneconomicandinefficientinthelongterm.AsweshowedinChapter3,formanyapplications,hydrogenis5.3.3Capitalgrantsareexpensive,anddon’tsolvetherightcurrentlyasecond-bestoption,andfuturetechnologicalandeconomicproblemdevelopmentscouldmakehydrogenmoreorlesscompetitiveasatooltodecarbonise.Makingcapitalgrantsavailablemaynudgeplantreplacementdecisionstowardslow-orzero-carbontechnology.ButanupfrontcapitalgrantCurrentlyHeadstartreliesonafundingcapandmeritassessmentdoesnothingtohelpwiththeongoingcostofthehydrogen,whichiscriteriatoweedoutuneconomicusesofhydrogen.Thisistherightalargepartoftheadditionalcostforallthreeofthepriorityusesofthingtodo–notdoingsocouldresultinahydrogenindustrywherehydrogenidentifiedinthisreport(seeFigure5.3onthefollowingpage).demandispermanentlydependentonsubsidies,whichwouldwastetaxpayerdollars,andprobablyleadtopersistentlyhigherpricesand5.3.4Contracts-for-differenceareabetterrisk-sharingsmaller-scaleproduction.Butitisnotthebestlong-termsolution.mechanismMeanwhile,otherprogramsthatsupportindustrialdecarbonisation,suchasthePoweringtheRegionsfund,focusonupfrontcapitalcosts.Wherecapitalreplacementisfundedbydebt,ahighercostofAsweexplaininSection5.3.3,capitalgrantsdon’talwaysaddresstheproductionpost-replacementisrisky,unlessthefuturesellingpriceofmostpressingproblems.thecommodityisalsogoingtobeconsistentlyhigher.Forammonia,alumina,andiron,marketpremiumsforgreencommoditiesarewell93.SeemoreinformationontheHydrogenHeadstartprogramatARENA(2023).94.Ibid.95.Bhashyam(2023).GrattanInstitute202339Hydrogen:hype,hope,orhardwork?Figure5.3:Hydrogencostsdominatethegreenpremiumforammonia,alumina,andironbelowAustraliangreenpremiums,andfuturemarketpremiumsareBreakdownofcostofusinghydrogenhighlyuncertain.100%Contracts-for-differencewouldbeanidealwaytosharesomeofthisrisk.Thesecontractsarebasedonthedifferencebetweenthemarket80%Hydrogenpriceforacommodity,andanagreedprice,knownasthe‘strike60%price’.96If,duringthetermofthecontract,themarketpriceislowerthanthestrikeprice,athirdparty(inthiscasethegovernment)pays40%Otheropextheproducerthedifference.Ifthemarketpriceishigherthanthestrike20%price,theproducermustpaythedifferencetothethirdparty.97Retrofit0%costBecausethestrikepriceisknowninadvance,thisarrangementgives100%theproducercertaintyoverfuturerevenue.ButunlikewithaproductionAmmonia2030Alumina2030Iron2030credit,theproducerhasanincentivetoseekoutbuyersthatarewillingtopayhigherpricesforagreenproduct.80%Hydrogen60%Contracts-for-differenceshiftsome,butnotall,marketpriceriskontogovernment.40%Otheropex5.3.5Pursueatechnology-neutralgreenindustrypolicy20%Retrofit0%costIfAustraliaistomaintainathrivingindustrialsectorinanet-zeroglobaleconomy,itneedstoproducegreencommodities.TheseAmmonia2040Alumina2040Iron2040mightbeproducedusinggreenhydrogen,ortheymightbeproducedusinggreenelectricity.Ultimately,whatmattersisthattheproductionNote:NocapexorotheropexcostsshownforironbecauseDRIplantshavethesameiscompetitive.Italsodoesn’tmattertotheeconomywhatmixofcapexandnon-fuelopexregardlessofwhethertheyusegasorhydrogen.greencommoditiesAustraliaendsupproducing,providedtheyarealldeliveringeconomicvalue.Sources:Grattananalysis.SeeAppendixBforassumptionsandsources.Asnotedabove,thoughHydrogenHeadstartmaywellbetheright40toolfornow,expandingtheprogramcouldskewinvestmenttowards96.Ideally,thestrikepriceiscloselylinkedtoaproducer’scostofproduction,includingajustifiablereturnoncapital.97.Additionalfeaturessuchasproportionalupsidesharing,andcapsandcollarsondifferences,canbeusedtomanagetheamountofriskheldbyeachparty,buttheseareoptional.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Biddersineachreverseauctionwouldnominateanindependentreferencepriceandtheirproposedstrikeprice,andprojectedhydrogenatthepotentialexpenseofotherindustrialtransformationproductionamountsforthenext10years.Eligiblebidderswouldprojects.ItwouldalsobeinefficienttoestablishmultipleHeadstarthavetocommittousingtransformativetechnologythatcanachieveprogramsfordifferentcommodities,particularlygiventhateachlarge-scaleemissionsreductions,notsimplysmalltweakstoplantcommoditysectorhasonlyafewplayersandonlyafewfacilities.operations.WhatAustralianeedsisasingle,technology-neutralprogramthatAboveallelse,theprogramshouldonlybemadeavailableforsharesriskonprivatedebt-financingofindustrialtransformation,projectsforgreencommoditiesthatgenuinelyhaveachanceatbeingregardlessofthecommoditybeingproduced,usingcontracts-for-cost-competitivetoproduceinAustralia.difference.Thiswouldhelpbuildaviablehydrogenindustryanditwouldalsogiveeffecttothegovernment’sbroader‘renewableenergyToensurethatriskstogovernmentarehedged,themeritcriteriaandsuperpower’vision.HydrogenHeadstartcouldevolveintosuchanassessmentprocessshouldalsobedesignedtoensureadiversityoverarching,technology-neutralprogram.ofcommodities,technologies,andproponentsisintheresultingportfolioofprojectsbeingsupported.Thisincludes,butisn’tlimitedtoUnderwritinggreencommodityproductionforalimitedperiodwouldaccountingforthefuturecostreductionpotentialofatechnology,evenincreasethechancesofpositioningAustralianproducerstobegloballywherethecurrentgreenpremiumcostgapislarge.competitive.Usingcontracts-for-differencemeanssubsidiesnaturallyfallawayovertime.Ideally,whencontractsend,globalcarbonpricesDoingsowouldalsoattractalargerandmorediversesetofbiddersforhaverisenandhydrogencostshavefallensothatAustralianproducersthereverseauctions,andputcompetitivepressuretoworktoensurecancontinueproducingwithoutneedingfurthersubsidies.governmentgetsvalueformoney.Howshouldtheprogrambedesigned?AsiscurrentlythecasewithHydrogenHeadstart,therecouldbesharingofupsidegains,andprovisionforclawingbackwindfallgains.AnevolvedHeadstartprogramshouldbeavailablefor20years.EveryContractscouldbecappedatatotaldollaramountoranumberofyearforthefirst10years,thegovernmentshouldholdareverseyears,whicheverisreachedfirst.auctiontoallocatecontracts.Foreachreverseauction,itwouldindicateaheadoftimeanindicativeupperlimitforthetotalvalueofcontractsWhatwoulditcost?itispreparedtoenterinto.Thecontractswouldlast10years,givingtheprogramanoveralllifespanof20years.ProvidingclarityontheDeterminingthefullcostofapolicyopentoallgreencommoditiesisavailabilityofyearlyauctionswillgiveindustrythepredictabilityitbeyondthescopeofthisreport.needs.98But,foranindicationofthescaleofsupportneeded,wecalculate98.Thefederalgovernment’sexpandedCapacityInvestmentScheme,whichintendsthecostofacontracts-for-differenceprogramthatunderwritesnearlytounderwritenewrenewablegeneration,setsoutascheduleofsix-monthlyallexistingammonia,alumina,andironproducerstomovetousingauctionsforthisreason:Wood(2023).hydrogen.Specifically,welookatthereplacementofthetwoexistingGrattanInstitute202341Hydrogen:hype,hope,orhardwork?Figure5.4:Supportingexistingammonia,alumina,andironfacilitiestousehydrogencouldcostbetween$11.6billionand$36.8billionoversteelworkswithtwogreenironfacilities,andtheretrofitofthefive18yearsexistingammoniafacilities,andtwoexistingaluminafacilitiesinCostofsupportbyproject,AU$Australia,tousehydrogen.99Suchaprogramcouldcostbetween$11.6billionand$36.8billionover18yearsin2023dollars(seeFigure5.4).Best−casescenario($11.6b)Thisscenarioassumesthattheprojectproponentsusehydrogen-$1.9bIronprojectsbasedprocessestodecarbonisetheproductionprocessesanalysedin$1.5bAluminaprojectsChapter4only,anddonotproposetoengageinotherdecarbonisation$2.3bAmmoniaprojectsactivitiesaspartoftheirbidforacontract-for-difference.Italso$2.1bassumesthatsuccessivecontracts-for-differenceareawardedeachyear,eachtosupportoneprojectfor10yearsofproduction,andthat$0.9bthegovernmentbeginsmakingpaymentsfrom2030onwards.$0.8bThiscost-estimaterangereflectsthebest-andworst-casescenariosforthesizeofgreenpremiumgapsacrossthethreecommodities,as$0.7bdeterminedbyreasonablebest-andworst-caseforecastsofelectricitycostsandcarbonprices.100$0.6bOurcostestimateassumesthatonecontractissignedforaproject$0.6bforproducingthecommoditythathasthelowestexpectedgreenpremiumcostgap(inpercentageterms)ineachyear,withnocaponWorst−casescenario($36.8b)thecostofeachcontractoroftheprogramoverall.Ineachscenario,oncethenumberoffacilitiesweassumewillbesupportedforeach$4.2bcommodityisreached,thecommodityisremovedfromcontentionfor$4.2bfuturecontracts-for-difference.Wealsoassumethathalfoftherecently$6.4bobservedmarketpremiumforgreenammonia,andgreenironpersists$6.3bintothefuture.$3.1b$3.1b99.Therearecurrentlyfiveammonia,sixalumina,andtwointegratediron/steel$3.1bproductionfacilitiesinAustralia.Weassumethatonlytwoaluminafacilities$3.2baresupported,becauseRioTintoistheonlyaluminarefinertohavepublicly$3.3bannouncedthatitisinvestigatinghydrogencalcination.20302035204020452050100.Thesebest-andworst-casescenariosdirectlycorrespondtothosepresentedinYearFigure4.3,Figure4.6,andFigure4.8.Notes:AssumesfacilitiessupportedhaveproductionvolumesequivalenttotheGrattanInstitute2023averageAustralianfacilityinoperationtoday.Thatis,ammoniaplantsaverage0.4Mtofammoniaperyear,aluminarefineriesaverage3.4Mtofaluminaperyear,andironfacilitiesaverage3.3Mtofdirectreducediron,whichiswhatisneededtoachievetheaveragecrudesteelproductionofanAustralianintegratedsteelmakingfacility(2.8Mt).Source:GrattananalysisofscenariosdescribedinFigure4.3,Figure4.6,andFigure4.8.FullassumptionsinAppendixB.42Hydrogen:hype,hope,orhardwork?Acommonwayofreducingtheriskofanyinvestmentstrategyistotakeaportfolioapproach.Forthispolicy,aportfolioapproachisconsistentThecostofaCFDprogramthatisopentoallgreencommoditiesandwithsupportingarangeofcommodities.Buttheproblemwithtakingalldecarbonisationtechnologiesmaybelower,especiallyifotherthelowestbidderineachreverseauctionisthattheCFDprogramcommoditiesandotherdecarbonisationtechnologieshavesmallermayendupskewedtowardsparticulartypesofcommodities.Thegreenpremiumgaps.Thecostofthepolicywillalsodependonthegovernmentcouldchoosetooverlaysupportingthelowestbiddereligibilitycriteria.Criteriathatachievemoresignificanttransformationalineachauctionwithanassessmentofhoweachadditionalprojectchangewillrequiregreatergovernmentsupport.willsupporttheoverallportfoliomanagementobjectivesoftheCFDprogram.Thecostofthepolicywillbedifferentifourestimatedgreenpremiumgapsarenotrealisedinthefuture.OurcostingisacentralestimateThereisalsoariskthataCFDprogramcoulddisplaceorincreaseoftworeasonablepotentialscenariosforelectricitypricesandcarbonemissionsratherthanreducethem.Forexample,ifaprojectwinsaprices,anddoesnotaccountformarketpriceandproduction-costrisk.CFDonthebasisofusingbluehydrogen,101whichthenfailstoachieveTheserisksareexploredbelow.highlevelsofcarboncapture.OrifaprojectwinsaCFDonthebasisofusing100percentrenewableelectricitybutfailstomaintainapowerWhataretheriskstogovernment?purchaseagreement.Governmentsshoulddesigncontracts-for-differencepolicytomitigateTomitigatethisrisk,CFDsshouldbevoidediftheydisplaceorincreaseandmanageriskswherepossible.emissions.GiventhesmallnumberoflikelyprojectproponentsinAustralia,oneRecommendation5riskisthattherewon’tbeenoughcompetitivepressuretoensurethatMakeHydrogenHeadstartacontracts-for-differenceprogram,toonlytheprojectsthatmakemosteconomicsenseinthelongtermsupportthegrowthofgreencommodityproductioninAustralia.(evenintheabsenceofgovernmentsupport)aresupportedbytheConductreverseauctionseveryyearfor10yearstoallocateCFDprogram.Thisriskcanbemitigatedbythedesignoftheeligibilitycontracts.criteria.5.4SomeissuescanbeputofffornowThegovernment’sexposuretomarketriskscanbemitigatedinseveralways.RatherthanadoptingapureCFDarrangement,thegovernmentGrowingaviablehydrogenindustryisalong-termproject.Noteverycouldputinplacea‘capandcollar’,togettheprojectproponenttoissueneedstobesolvedtoday.Inparticular,twoissuesthatmaybebearmorerisk.101.SeeBox1.Anotherwaytocontrolriskistoimposehardcapsonmaximumgovernmentliabilities,suchasalimitonthecostoftheentireprogram43orofaparticularfacility.Theoptimaldesignofthepolicymaybedifferentinthefuture,butapolicywithsomeofthesefeatures(similartoHeadstart)couldbeappropriateinitially.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?5.4.2Embodiedcarbonstandardscanbeimplementedlaterimportantforalarge-scaleindustrycanbedeferredfornow:furtherInGrattanInstitute’s2022report,Thenextindustrialrevolution,developmentofhydrogenhubs,andembodiedcarbonstandards.werecommendedstategovernmentsimplementembodiedcarbonstandardsforconstruction,tosupportdemandforcement,steel,and5.4.1Hydrogenhubsareunlikelytodrivegrowthaluminiumwithagreenpremium.StateandfederalgovernmentshaveThefederalgovernment’sHydrogenHubsgrantsprogramprovidestakenthefirststepinthisdirection,agreeingtodevelopconsistentfundingtofacilitatetheco-locationofvariousproducersandusersofnationalstandardsformeasuringembodiedcarbonininfrastructurehydrogen.Thisco-locationwasdesignedtocreateandshareapoolofprojectsandtoconsiderfurtherpolicytoreducetheseemissions.103skilledlabour,andtogenerateopportunitiesforcommon,larger-scalehydrogenproduction,ortransportandstorageinfrastructure.102ThisIfembodiedcarbonstandardsaretodriveincreaseddemandforcouldleadtomaterialcostsavings.greencommoditiesproducedinAustralia,therewillneedtobeenoughproductionofthesecommoditiestomeetthestandard;andthecom-Butanoteofrealismisimportanthere.Thehydrogenhubmodelmoditieswillneedtobecheaperthanimportedones.ThestandardsforAustraliawasdevisedin2019,whenitseemedhydrogencouldshouldthereforebeimplementedaftercontracts-for-differencehavebeasimplelow-emissionsreplacementfornaturalgasandusedforbeenusedtokick-startproduction.thesamelargerangeofapplications,includingexports.Asnotedthroughoutthisreport,however,wenowknowthatthisisunlikelytoOtherwise,theeffectofanembodiedcarbonstandardwillsimplybetobethecase.increaseimportsofgreencommodities.Thatwouldcontributetoglobaldecarbonisation,butitwon’tbringaboutindustrialtransformationhere.Itismorelikelythat,inAustralia,hydrogenwillbeusedforspecific,largeindustrialuses.And,inthemediumterm,theseuseswill5.5Stategovernmentsshouldrethinkgreengastargetsprobablybelockedinto‘singleproducer,singleofftaker’arrangements.Co-locationwithotherhydrogenuserswillmatterlessthanotherOnepolicythathasbeenraisedasapotentialmechanismtosupportdeterminants,suchastheavailabilitybauxiteorironore.hydrogenproductionisagreengastarget.Initssimplestform,agreengastargetwouldrequiregasretailerstobuyapercentageofgasIfacaseforco-locationandcommon-usehydrogeninfrastructurefrom‘green’sources(typicallybiomethaneandhydrogen),withthisemerges,governmentsshouldalsoaskwhatitsrole,ifany,shouldpercentagerisingovertime.be.Thereisnoreasonindustrycan’tcoordinateitself.Theroleofgovernmentmayjustbetosetuptheregulatoryenvironments,suchAlternatively,governmentscanissuecertificatesforeverykilogramofthatanypotentialbenefitsofco-locationarerealised.hydrogenproduced–regardlessofwhetheritreplacesnaturalgasornot–andrequiregasretailerstobuyandsurrenderthesecertificates.102.DCCEEW(2023h).103.InfrastructureandTransportMinisters’Meeting(2023).GrattanInstitute202344Hydrogen:hype,hope,orhardwork?Inbothcases,thecostofthegreenpremiumofhydrogenispassedontogasconsumers.Thisraisesquestionsaboutwhoshouldbearthesecosts:thosewhowillneedgreengasinthefuture,orthosewhowon’t.Wehavemadethecaseinthisreportthatthebulkoffuturehydrogenusewillbeinafewnicheindustrialapplications.Biomethaneuseislikelytobelimitedtoindustrialusers,too,buttheyaremorelikelytobesmallerusersthanthoseproducingammonia,alumina,andiron.Mosthouseholds,aswellassmallbusiness,thecommercialsector,andlightmanufacturing,willbeeconomicallybetterofftodayiftheyreplacegasusewithelectricity.104TheNSWGovernmenthasestablishedagreengastargetwhichusescertificates.ThecostoftheseisrecoupedfromNSWhouseholdsandsmallbusinesses.105TheVictorianGovernmentisconsideringintroducingagreengastarget.106Itisinequitabletoaskhouseholdstobearthecostofcreatingahydrogenorabiomethaneindustryiftheyarenotgoingtobetheultimatebeneficiaries.Bothgovernmentsshouldrethink.Theyshouldensurethatthecostsofgreengastargetsarebornebytheindustrialsector.104.Woodetal(2023).105.NSWClimateandEnergyAction(2023).106.DEECA(2023).GrattanInstitute202345Hydrogen:hype,hope,orhardwork?setAustraliaupforsuccess,ifandwhentheeconomicopportunitiesfromtheseuseseventuate.6Otherpotentialusesofhydrogen6.1IndustrialheatThisreportidentifiesthreeusesofhydrogenthatAustraliangovernmentsshouldfocusoninitially:ammonia,alumina,andiron.Hydrogenisoftenseenasazero-carbonfuelforenergy-intensiveThesearerelativelydiscreteusesthatareeconomicallyvaluable,andmanufacturingthatcanbeburnedinplaceoffossilfuelsforheat.arelargeenoughtohelpunderwriteaviable,broaderindustry.Inreality,itfacessignificantcompetitionfromothertechnologies,dependingonthetemperaturesrequired.Thischapteridentifiesfiveotherpotentialapplicationsofhydrogenthatarelesscertain:heatformanufacturing;syntheticfuels;energyForlow-temperatureheat(uptoabout250∘C),heatpumpsandotherstorageforelectricity;methanol;andlong-distanceroadfreight.Theseelectricalheatingtechnologieshavethemarketcornered.107Theyapplicationsaretoouncertaintowarrantspecificpolicysupportatthisaremostlycommerciallyavailableandhighlyefficient.Mostenergystage,foroneormoreofthefollowingreasons:demandforprocessheatinAustraliaisattheselowertemperatures(seeFigure6.1).∙ThereisnoexistingbaseofindustrialandtechnicalexpertisetorelyoninAustralia.But,atpresent,medium-temperatureheat(250-800∘C)andhigh-temperatureheat(morethan800∘C)aredifficulttoachievewith∙Theyaretoosmalland/orhavecomplicatedlogisticsthatwillbeheatpumps.108Thisiswherehydrogenmayremainacompetitiveeasiertosolveoncethere’sanexisting,steadiersupplyofcheaperoption,althoughevenforveryhightemperaturesthereareotherhydrogenunderwrittenbyotheruses.zero-emissionscompetitors,includingelectrictechnologies,andbioenergy.109Therearealsomorebespokesolutionsthatcouldmake∙Thereissignificanttechnicaluncertaintyandcompetitionbetweensense,suchasgreateruseofwasteheat.hydrogen-basedtechnologiesandotherzero-carbontechnologies.Thethreemostpromisingusesforhydrogenidentifiedinthisreport–∙Thegroundworkfortheuseneedstobesetbybroaderenergyammonia,alumina,andiron–allrequiresignificantamountsofhigh-anddecarbonisationpolicyframeworks.temperatureprocessheat(seeFigure6.1onthenextpage).Thesefiveapplicationsshouldbesupportedwithsector-wide107.AustralianAllianceforEnergyProductivity(2023,p.4).decarbonisationpolicies,andbyassessingandplanningfortherole108.IRENA(2023,p.88).ofhydrogeninother,broaderenergyanddecarbonisationpolicy109.Liebreich(2023).frameworks.46Implementingtherecommendationsinthischapterwouldcreateanindustrialbasethatwouldbenefitotherusesifastrongercaseforthememerges.Thegoalshouldbetoensurethatthesehydrogenusesdeveloptoplayaneconomicroleindomesticdecarbonisation,andtoGrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure6.1:MostenergydemandinAustraliaforprocessheatisforlow-temperatureheat;high-temperatureheatdemandisdominatedbyCementammonia,alumina,andironandsteelEnergyuseforheat,petajoulesperyearTheotherkeyuserofhigh-temperatureprocessheatinAustraliaisthecementindustry.Theindustryusesabout20PJofhigh-temperature400heat,mostlyforproducingclinker,acrucial,butverycarbon-intensive,inputintocement.InAustralia,mostofthisenergydemandiscurrently300Othermetbycoalandnaturalgas.110AmmoniaCementandlimeMostofthecementusedinAustraliaisdomesticallymanufactured.About60percentoftheclinkerrequiredforthisisalsoproducedin200andotherAustralia,andtherestisimported.111VerylittleclinkerorcementisexportedfromAustralia.112AluminaandchemicalsAsitstands,low-carboncementisdifficulttoproduce,andhydrogenothernon-ferrousseemsunlikelytoplayarole,evenifotherpartsoftheproductionprocesscanbedecarbonised.metalsIronandsteelHydrogencan,technically,producetheheatrequiredforclinker(mainlydigestion)production,andthenecessarysupplychainwouldberelativelyeasytomanagesincetheprocessuseslargevolumesofhydrogen100continuously.Butreplacementoffossilfuelswithcombustionofbiomass(suchasrefuse-derivedfuels)seemsmorelikelyatthisstage.AluminaandWasteischeap,anditisalreadyusedasafuelatsomefacilities;cementproductionisanapplicationthatcanacceptrefuse-derivedothernon-ferrousfuelsthathaveimpurities.113metalsButcementproductioncan’tbefullydecarbonisedjustbyfindingalternativestofossilfuel.Processheatonlymakesup26percent(or0(mainlycalcination)about1.3MtCO2-eofemissions)ofthecementandconcreteindustry’stotalemissions.114Morethanhalfoftheindustry’stotalemissions(55<250°C250-800°C>800°C110.ITPThermal(2019,pp.29,129–131).Notes:Forlow-temperatureheat(<250∘C),thelargestsourcesofdemandinthe111.VDZ(2021,p.8).112.GrattananalysisofDFAT(2023).‘Other’categoryarefoodandbeverages,oilandgasextraction,andpetroleum113.ITPThermal(2019,p.132).refining.Formedium-temperatureheat(250-800∘C),thelargestsourcesofdemand114.GrattananalysisofVDZ(2021).Includesupstreamelectricityemissionsandsomeinthe‘Other’categoryarepetroleumrefining,foodandbeverages,andpulpandpaper.downstreamemissions.Forhigh-temperatureheat(>800∘C),thelargestsourcesofdemandinthe‘Other’GrattanInstitute2023categoryarebricksandceramics,glassandglassproducts,andpetroleumrefining.Source:GrattananalysisofITPThermal(2019).47Hydrogen:hype,hope,orhardwork?6.2Syntheticfuelspercent)areprocessemissions,largelyduetotheCO2emittedbytheSyntheticfuels,otherwiseknownase-fuels,areliquidhydrocarbonschemicaltransformationoflimestoneintoclinkerduringcalcination.115(forexample,kerosene,gasoline,anddiesel)thataremanufactured(synthesised)usinghydrogenandCO2.Therearecurrentlyfewtechnologiesthatcancapturetheseprocessemissions.Globally,thefirstfull-scaleprojectusingcarbon-captureSyntheticfuelsareadrop-inreplacementforliquidfossilfuels.Burningtechnologiesisplannedfor2024.116IntheAustraliancontext,themostthemstillleadstocarbonemissions,butifthesyntheticfuelsarepromisingtechnologiesforCCScurrentlyimplyarelativelyhighcostproducedusingrenewablehydrogenandcapturedcarbon,thereisapertonneofcarbonavoided,comparedwithcurrentcarbonprices.117Innetcarbon-emissionsreductionovertheirlifecycle.120addition,functioninginfrastructureforCO2transport,storage,anduseisstilltobedevelopedinAustralia.118Butsyntheticgasolineisanuneconomicalwaytoreduceemissions,comparedwithalternativessuchasbatteryelectricvehicles.121TheThesedifficultiesassociatedwithdecarbonisingclinkerareleadingeconomicsofsyntheticdieselcomparedtobatteriesarelessclearatcementproducerstolookinsteadatsubstitutingclinkerwiththispoint,anddependonwhereandhowvehiclesareused.supplementarycementitiousmaterials.119AnypotentialroleforhydrogenwilldiminishifmanufacturershavesuccessreducingThemain,andmostpromising,useofsyntheticfuelfordecarbonisationclinker-to-cementratios.isinaviation.Moderncommercialairlinersrunonfossiljetfuelmainlycomprisedofkerosenederivedfromcrudeoil.InAustralia,Recommendation6emissionsfromdomesticaviation,largelyfromtheuseofjetfuel,wereabout8.5MtCO2-ein2019.122MostofthejetfuelsoldinAustraliaisForlow-temperatureheat,encouragetake-upforenergy-intensiveimported,ratherthanbeingrefinedhere,andverylittleofourproductismanufacturingofprovenlow-carbontechnologieswhereexporteddirectlyoverseas.123commerciallyavailable.Providelow-costfinancethroughtheCleanEnergyFinanceCorporation,orencouragetheprivatesectortoThepathwaytoaviationdecarbonisationaroundtheworldisstillprovidefinanceforcapital-constrainedgasusers.highlyuncertain.Butintheshortterm,asignificantpartofthetaskwillprobablyfalltotheadoptionofsustainableaviationfuel(SAF).SAFcanFormedium-andhigh-temperatureheat,continuetofundbesynthesised(syntheticSAF),orproducedusingorganicfeedstocksresearch,feasibilitystudies,andknowledge-sharingonrenewablesuchaswasteandbiomassresidues(biogenicSAF).heatoptionsthroughtheAustralianRenewableEnergyAgencyandbodiessuchasCooperativeResearchCentres.Regardlessofwhichkind,SAFisessentiallyadirectreplacementforfossiljetfuel:itworksinexistingairlinersandinfrastructure,and115.Ibid(p.8).116.IEA(2023c,p.195).120.CSIRO(2023b,pp.22–23).117.VDZ(2021,p.32).121.Collins(2023).118.VDZ(2023).122.DCCEEW(2023d).119.VDZ(2021).123.DCCEEW(2023i).GrattanInstitute202348Hydrogen:hype,hope,orhardwork?minimumshareofbiogenicandsyntheticSAF,aligningtheaviationsectortotheEU’sclimatetargetsfor2030and2050.129iscurrentlybeingtestedinblendswithfossiljetfuelofupto50percent.124Recommendation7ThefederalgovernmentshouldimplementamandateontheuseIntheshortterm,biogenicSAFwillprobablyplayamoresignificantofsustainableaviationfuel(SAF).ThismandateshouldnotspecifyrolethansyntheticSAF.ThebiogenicversioniscurrentlycheaperwhethertheSAFbebiogenicorsynthetic.toproduce,andorganicfeedstockproductioninAustraliaisalreadyenoughtosatisfy60percentofcurrentjetfueldemand–ifAustralia6.3Electricityhadthefacilitiestoproduceit.125Variablerenewableenergy(VRE),suchassolarandwind,willbetheButwideruseofSAFwillprobablyrelymoreonsyntheticSAF,becauselowest-costzero-emissionssourceofgeneration.Firmersuppliesproductionofitsfeedstocksiseasiertorampupthanfortheorganicwillberequiredtobalanceintermittentsolarandwind,andthatfeedstocksrequiredforbiogenicSAF.126requirementwillincreaseasmoreintermittentgenerationcomesonline.130IfsyntheticSAFistobearealisticoptioninthefuture,workneedstostartnow.ItstwokeyinputswillbothbeinshortsupplyifitisproducedBatterytechnologyisrapidlydevelopingtoastagewhereitcanbeatalevelthatmatters.Alotofgreenhydrogen–and,therefore,acost-effectivesourceofshort-termstorageandhelpmeetgridrenewableelectricity–isneededtoproduceameaningfulamountofstabilisationrequirements.ButweatherandseasonalpatternsmeansyntheticSAF.127Lufthansa,forexample,hasestimatedthatitwouldtherewillbeinfrequentbutextendedperiodsinwinterwhenhighrequirehalfofGermany’sentireelectricityproductiontoswitchitsfleetelectricitydemandcoincideswithshorterdays,lowwind,andcloudytogreenfuelssuchassyntheticSAF.128skies.Thismeansthatasmuchas10percentofelectricitydemandisunlikelytobeeconomicallyservedbyVRE.131Economicalaccesstotheotherkeyinput,CO2,isalsonoteasy.IdeallythesourcewouldbecapturedcarbonfromunavoidableemissionsOptionstomeetthischallengeincludebuildingmoreinterconnecting(suchascapturedprocessemissions,asdiscussedinSection6.1ontransmission;storage,suchaspumpedhydroorlong-durationpage46),or,infuture,directaircapture(DAC).Thesetechnologiesarebatteries;andgaswithoffsets.GrattanInstitute’s2021Gofornetzeroasyetbothcostlyanddifficulttoscale.reportfoundthat,basedoncurrentinformation,lowest-costnet-zeroAleaderinthisarea,theEuropeanCouncil,hasissuedamandate129.EuropeanCouncil(2023).thatjetfuelavailabletoaircraftoperatorsatallEUairportscontaina130.WoodandHa(2021).131.Ibid.124.CSIRO(2023b).125.Ibid(p.8).49126.IRENA(2021b,p.19).127.CSIRO(2023b,p.53).128.Wilkes(2023).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Recommendation8Theroleofhydrogeninprovidinglong-durationstorageandintheelectricitysectorwouldbeachievedbyusingaround90percentdispatchablecapacityshouldbeincludedforassessmentintherenewables,andusinggas(withoffsets)forthelast10percent.132longer-termperspectivesoftheAustralianEnergyMarketGreenhydrogenpowerplantsusingturbinesorfuelcellscouldplayOperator’sIntegratedSystemPlan.asimilarroletogaspeakers,133andwouldavoidtheneedforoffsetsorcarboncaptureandstorage(CCS).Aswiththeusesdescribedin6.4MethanolChapter4,thecaseforhydrogeninthiscontextwilldependontheMethanoliscurrentlyusedmainlyasafeedstockforimportanttechno-economicsofthehydrogensupplychain,andthesewillvaryindustrialchemicalsandconsumerproductssuchasformaldehydeandwithlocation.plastics,andtoalesserextentasafuelfortransportandheat.Adedicatedhydrogenpowerplant,andseveralnaturalgasplantswiththepotentialtoconverttohydrogen,areprogressinginAustralia.TheAroundtheworld,themostcommonprocessformanufacturingSouthAustralianGovernmentisplanninga200megawatthydrogenmethanolusesnaturalgasorcoalandproducessignificantemissions.generatortobecommissionedinWhyallain2025.134TheKurriKurriandTallawarraBgas-firedpowerplantsinNSWarebothplanningfora‘Greenmethanol’canbeproducedusingbiomassorthroughthelevelofgreenhydrogenblending.135synthesisofgreenhydrogenandcarbondioxide.Lifecycleemissions,ThefederalgovernmenthasbeguntoimplementitsCapacityfromproductionthroughtouse,aresignificantlylowerforthesegreenInvestmentScheme,amechanismdesignedtofunddispatchable,processes,buttheyarenotzero,becauseburningmethanolcreateszero-emissionelectricityandVREthroughgovernmenttenders.136CO2.137ButthebenefitofsynthesisedgreenmethanolisthatisoffersHydrogengeneratorsareeligibletoparticipateinthescheme,butitawayforcapturedCO2tobere-usedtoproduceausefulchemicalorisnotyetclearwhethertheywillbeabletocompetewithothercapacityfuel.toachievefundingsupport.Globally,thedecarbonisationopportunityformethanolisinusinggreen132.Ibid.methanoltohelpdecarboniseexistingmethanoluses,andtodisplace133.Gaspeakersaregeneratorsthatareonlyusedatpeaktimes.heavier-emittingfossilfuelsfortransport,mostnotablyintheshipping134.OfficeofHydrogenPowerSouthAustralia(2023).industry.135.SnowyHydro(2023)andCSIRO(2023c).136.DCCEEW(2023j).InAustralia,thefirstopportunityissmall.Australiacurrentlyhasnext-to-noexistingindustrialbaseinmethanolmanufacturingandGrattanInstitute2023137.IRENA(2021c,p.63).50Hydrogen:hype,hope,orhardwork?space,meaningmoreweightandspacecanbeallocatedtofreight.Butdevelopmentofbothtechnologiesisstillatanearlystage,soit’shardalsoverylittledemandforit,asevidencedbyminimalimportsofthetoseeaclearwinneryet.commodity.138Atpresent,ahydrogentruckcanrefuelmorequicklythanabatteryThelargerpotentialopportunityforAustraliaisinproducinggreenelectrictruckcanrecharge:20minutesforsufficientfueltotravelmethanolforuseasalower-carbonshippingfuel.Largeshipping1,000km,versusanhourormoretorechargeanelectrictrucktocovercompaniessuchasMaerskarealreadyorderingshipsthatcanrunonthesamedistance.Andthefuelisportable,whichisusefulforatruckifmethanol,asawayofdecarbonisingtheiroperations.139Someports,itrunsshortoffuelwithnorefuellingpointnearby.includingSingaporeandthePortofMelbourne,arealsomovingtoenableshiprefuellingusingmethanol.140Thelogisticsforrefuellingbothelectricandfuel-celllong-distancetrucksarecomplex,especiallyinremoteareas.BothrequireanButmethanolfacessignificantcompetitionfromzero-emissionselectricitysourcethatcanprovideenoughelectricitytorechargethealternativesforshippingfuel,suchasammonia.Thoughammoniatruck,ortomakethehydrogentorefuelthetruck.Thefuelmustalsorequiresmoresubstantialenginemodifications,methanolproductionbeavailableondemand–justastruckiesdonotwanttowaitforhoursrequiresCO2asafeedstock,andtheCO2wouldhavetocomefromwhileabatterycharges,theydonotwanttowaitwhileanelectrolysertechnologiessuchasbioenergycarboncaptureandstorageanddirectmakesenoughhydrogentofilltheirtruck.aircapture,andislikelytobecostlytoacquireatscale.141Forthatreason,ammoniawillprobablyplayamuchlargerroleindecarbonisingRoadsinremoteareas,suchastheStuartHighwayortheGreatshipping.142NorthernHighway,havelimitedelectricityinfrastructure.Thisisachallengeforbothhydrogenandelectrictrucks,andwillneedtobe6.5Long-distanceroadfreightsolvedwhichevertechnologycomestodominate.Theseremoteroadsalsorunthroughareaswithlimitedwater,whichmeanshydrogenLong-distanceroadfreighttransportrunsondieselcombustionproductionprospectsarelimited.engines,andresultedinabout12MtCO2-eofemissionsin2020.143Unliketheotherpotentialusesinthischapter,hydrogentruckshaveHydrogenusedinafuelcellorcombustionenginecouldsubstituteoneadvantage:theirhigherupfrontcostisbalancedbycheaperforthesedieselcombustionengines.Fortrucks,hydrogenfuelcellsrunningcosts,evenwhilehydrogenisstillcomparativelyexpensive.havetwoadvantagesoverbatteries:theyarelighterandtakeuplessIndeed,undertherightconditions,thefuelcostsofahydrogentruckcouldbelowerthanadieseltruckasearlyas2029(seeFigure6.2138.Coogee(2023),andGrattananalysisofDFAT(2023).onthenextpage).Thisisbecausedieselenginesareinefficientat139.Maersk(2022).turningfuelintousefulwork.Electricmotors–whetherpoweredbya140.Wiggins(2023)andNeoandNg(2023).fuelcellorabattery–wastemuchlessenergy.Theyalsohavelower141.IRENA(2021a,p.80).maintenancecosts.142.Ibid(p.80).143.GrattananalysisofABS(2020)andDCCEEW(2023c).Calculatedusingdiesel51consumptionbyarticulatedandrigidtrucksthathadaninterstateornon-urbanintrastateareaofoperationinABS(2020).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Figure6.2:Initially,fleetsizehasmoreimpactonfuelcostsavingsthanhydrogencosts,butthiswillchangeAsaresult,atsomepoint,switchingawayfromdieselislikelytoFuelcostsavingsforaSydney-Melbourneroadfreighttripbecomethemostcost-effectiveoption.Intheearlyyearsofbuildingahydrogentruckfleet,alargerfleetcanreduceper-truckcostsfor$300thesamehydrogencosts(thedifferencebetweentheredanddarkorangelinesinFigure6.2).Butnosingletruckbreaksevenonfuel$200Bestcase:highfleetnumbers,lowcosts,unlesshydrogencostscomedown.Makinghydrogencheaperelectricityprices,highcarbonpricestillmatters.$100Undercurrentpolicysettings,carbonpricingmakesalmostnodifferencetotheeconomicsofahydrogen(orelectric)truck.Thisis$0Worstcasebutpartlybecausecarboncostsaresolow(addinglessthan$2.60tothe-$100withlowercostofaSydney-Melbournetrucktripatpresent,forthosecompanies-$200electricitythataresubjecttotheSafeguardMechanism),butalsobecausemuch-$300costsorhigherofthesectorisnotsubjecttoanypriceatall.fleetnumbersCurrentlylessthan2percentofheavyvehicleemissionsaresubject-$400toregulationtoreducethem:thoseemittedbythetwologisticscompanieswhosetotalemissionsarelargeenoughtobringthem-$500Worstcase:lowfleetnumbers,highundertheSafeguardMechanism.electricityprices,lowcarbonprice-$600Emissionsfromroadfreightalsoneedtobeconsideredinthecontext2025203020352040ofawiderstrategyfordecarbonisingalltransport.Notes:SeeAppendixBforassumptionsanddatasources.Alloftheabovefavourstechnology-agnosticpolicythatlevelstheSource:Grattananalysis.playingfieldbetweenzero-carbontrucksanddieseltrucks,andremovesbarrierstoadoptionofzero-carbontrucks.GrattanInstitute202352Hydrogen:hype,hope,orhardwork?Recommendation9Toacceleratetheswitchtozero-emissionstrucks:∙Thefederalgovernmentshouldapplyprogressivelytightercarbon-emissionstandardsontheenginesofnewdieseltrucks,andsetbindingsalestargetsforzero-emissionstrucks,reaching70percentofarticulatedtrucksalesby2040.∙Bothfederalandstategovernmentsshouldensureelectricityinfrastructureissufficientalongallmajorfreightroutestosupporteitherchargingpointsoron-siteproductionofhydrogen.TheGrattantruckplan,publishedin2022,containsotherrecommendationstoreducepollutionfromtrucks,includingaproposaltoassistearlyadopterswiththeupfrontcost.aa.Terrilletal(2022).GrattanInstitute202353Hydrogen:hype,hope,orhardwork?FigureA.1:AmmoniacanbeproducedusingeithergreyorgreenhydrogenAppendixA:UsesofhydrogenElectrolysisThisappendixdescribesingreaterdetailtheindustrialapplicationsinwhichhydrogenislikelytoplayaroleindecarbonisation.NitrogenWaterRenewable(separatedfromair)electricityA.1AmmoniaHaber-BoschGreenRenewablepathwayAmmonia(NH3)productionrequireshydrogenasafeedstock(seeprocesshydrogenGaspathwayFigureA.1).Thekeyprocessthatneedstochangetodecarboniseammoniaproductionisthehydrogenproductionprocessitself.GreyhydrogenCurrently,nearlyallworldhydrogenproductionusesfossilfuels.InAustralia,allcommercialhydrogenisproducedusingnaturalAmmoniaWater-gasCarbonmonoxide+gasthroughthesteammethanereformingprocess.Thisprocessshifthydrogenseparatesthehydrocarbonstoisolatethehydrogenmoleculesfromthecarbonmolecules,producingcarbondioxidewhichisventedintoEmissionsdirectlySteamNaturalgastheatmosphereintheprocess.offsetbyhydrogenCO2methaneWaterreformerThealternative,low-carbon,processistoreplacethegreyhydrogenfeedwithagreenhydrogenfeed.Thisisrelativelysimple,butrequiresSource:Grattananalysis.Iconsfromflaticon.com.theretrofitofammoniaplantstoallowthemtoreceiveapurestreamofhydrogenratherthannaturalgas,sinceammoniaplantsareset54uptohaveintegratedhydrogenandammoniaproduction.144Oncethisisdone,thehydrogencanbeproducedon-site,orsourcedfromelsewhereandtransportedtothefacility.Thefacilityalsorequiresextraelectricityforsteam.A.2AluminaAlumina(aluminiumoxide,orAl2O3)isproducedfrombauxite,andistheprecursortoaluminium(seeFigureA.2onthefollowingpage).Twokeyprocessesthatneedtochangetodecarbonisealuminarefiningaredigestionandcalcination.144.AustralianIndustryEnergyTransitionsInitiative(2023,p.111).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?FigureA.2:HydrogencanreplacenaturalgasatthecalcinationstepforaluminarefiningDigestionusescompressedsteamatanywherebetween175∘Cand400∘C(dependingonthespecificchemicalcompositionofBauxiteWaterCO2thebauxite)toheatabauxiteandcausticsodaslurrytodissolvethealuminacontentofbauxite.145TheemissionsfromthisstepBoilerFossilarefromthecombustionofcoalorgasinaboilertocreatesteam.fuelsHydrogen-basedtechnologieswillnothelptoeconomicallydecarboniseCompressed(currently)thisprocess.Instead,digestionwillbedecarbonisedthroughtheuseofsteamelectricboilersandmechanicalvapourrecompression(MVR)usingDigestionrenewableelectricity.MVRrecompresseswastewatervapourthatwouldotherwisebelostforreuse,savingonfuelrequirements.146TheFossilfuelpathwayAluminiumhydroxideHydrogenpathwayresultingproductisaluminiumhydroxide,achemicallyboundmixtureof(aluminacrystalsandwater)waterandalumina.CO2SteamThecalcinationprocessinvolvesheatingaluminiumhydroxideattemperaturesexceeding1,000∘Ctoremovethewater,leavingtheEmissionsCalcinationCalcinationGreenfinalwhite,powderyaluminaproduct.Asisthecasewiththedigestiondirectlyoffsethydrogenorprocess,theemissionsfromthisstepcomefromthecombustionofbyhydrogenelectricityfossilfuelsforheat–inAustralia,thisisnaturalgas.NaturalHydrogencalcinationisapromisingmethodtoreplacetheuseofgasfossilfuels.Thisinvolvesthecombustionofhydrogenwithoxygentoachievethehigh-temperatureheatrequired,whichleavesonlyapureNitrogensteamwastestream.ThissteamcanalsobeusedinotherpartsoftheandaluminarefiningprocessusingMVR,ifitisinstalled.steamElectriccalcinationisthekeycompetitorzero-emissionstechnology,Aluminawithmanyofthesamebenefits.ElectriccalcinationislikelytobeableSource:Grattananalysis.Iconsfromflaticon.com.togenerateheatmoreefficientlythanhydrogengiventhesameamountofrenewableelectricity.Butelectriccalcinerswillprobablyrequiremore55upfrontspendingonretrofittingexistingrefineries.147145.DeloitteandARENA(2022,p.24).146.Ibid(p.24).147.Ibid(p.29).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?aprovenprocess–industrial-scalefacilitiesproducedabout114Mtofdirectreducedironin2021,comparedwithtotalworldpigironA.3Ironandsteelproductionof1,354Mt(ironproducedusingironoreandcokeinablastfurnace).151Ironore(ironoxide)isprocessedintoiron(ironmetal),andthenfurtherTheDRI-EAFprocessalsoavoidstheneedtoheatmetallurgicalcoalprocessedtosteel(seeFigureA.3onthenextpage).Thevastmajorityinacokeoven,andtheresultingcokeovengasemissions.Thiscanbeoftheworld’sprimarysteel(steelmadefromironoreratherthanconsideredanothersourceofemissionsdirectlyavoidedbytheuseofscrap)ismadeusingtheblastfurnace-basicoxygenfurnace(BF-BOF)hydrogenintheDRI-EAFprocess.Theuseofanelectricarcfurnacemethod.148Currently,allprimarysteelinAustraliaisproducedattwoavoidstheuseofabasicoxygenfurnace,butabatementfromthisintegratedsteelworksusingtheBF-BOFprocess,thoughLIBERTYsubstitutionisnotconsideredadirecteffectofusinghydrogen,becauseSteelismovingtowardscommissioningadirectreductionplantinrenewableelectricityisused.Whyalla.149151.WorldSteelAssociation(2022).TheBF-BOFmethodisacarbon-intensiveprocessthatusesmetallurgicalcoalasaninputforbothitsfuelandchemicalproperties.56Themethodleadstocarbonemissionsatvariousstages,butemissionsfromtheblastfurnacearebyfarthemostsignificant.150Intheblastfurnace,ironoreisstrippedofoxygen(aprocesscalled‘reduction’)andthenmelted.Thisisdonebyblowingheatedairintothebaseofthefurnace,andburningcoke(lumpsofmostlycarbonmadefrommetallurgicalcoalincokeovens)toproduceheatandmakethegasesnecessaryforreductiontooccur.Theresultingwastegasiscarbondioxideandcarbonmonoxide,andasmallamountofhydrogen.Themainpromisinglow-carbonalternativetoBF-BOFsteelmakingisthedirectreductioniron-electricarcfurnace(DRI-EAF)process.ForDRI-EAF,adirectreductionshaftfurnacereplacestheblastfurnace.Thedirectreductionshaftfurnacecanusegreenhydrogenasa‘reductantgas’forthedirectreductionpartoftheprocess,playingtherolethatcokeplaysinablastfurnaceandstrippingoxygenfromtheore.Bykeepingtheinputsmostlyfreeofcarbon,theresultingoutputsarewaterandalittlebitofcarbondioxide.TheDRI-EAFprocesscanalsousenaturalgasasaninputratherthangreenhydrogen.Thisis148.IEA(2020,p.29).149.LIBERTYSteel(2023).150.DCCEEW(2023b,pp.10–11).GrattanInstitute2023Hydrogen:hype,hope,orhardwork?FigureA.3:Ironorecanbeprocessedintolow-emissionsironusingthedirectreductionmethodIntegratedblastfurnace-basicoxygenDirectreductioniron-electricarcfurnace(DRI-EAF)steelmakingusinghydrogenfurnace(BF-BOF)steelmakingIronoreLumpironCokeovenMetallurgicalcoalIronoreLumpironH2O(andverylittleCO2)miningore,pellets,miningore,pellets,andsinterandsinterCokeGreenhydrogenCO2EmissionsdirectlyDirectReductantoffsetbyhydrogenreductiongasesCokeovengasesshaftfurnace(incl.CO2)SmallamountDirectreducedofnaturalgasBlastfurnaceHotairiron(DRI)Low-emissionsScrapsteelMoltenOxygenScrapsteelelectricityironCO2andwastegasesCarbonElectricarc(forsteelproperties)furnaceBasicCrudesteeloxygenfurnaceSecondarymetallurgicalRefinedCrudesteeltreatmentRefinedsteelCastingandsteelSecondaryCastingfabricationFabricationmetallurgicalSource:Grattananalysis.Iconsfromflaticon.com.treatmentGrattanInstitute202357Hydrogen:hype,hope,orhardwork?A.4OtherhydrogenusesForpotentialusesofhydrogen,thespecific‘hydrogen-replaceableprocesses’thatweassumeforthepurposesofcalculatingpotentialhydrogendemandandpotentialabatementareasbelow:∙Electricitygeneration:greenhydrogenisusedinturbineorfuelcellgeneratorsinplaceofgas-firedpeakinggenerators,toprovidezero-emissionsdispatchablestorage.∙Syntheticfuel:greenhydrogenissynthesisedwithcarbondioxidetocreatesynthetickerosene,andusedinplaceoffossiljetfuel.∙Methanolmanufacturing:greenhydrogenreplacesgreyhydrogenproducedusingnaturalgas-basedsteammethanereforminginthemethanolproductionprocess.∙Long-distanceroadfreighttransport:greenhydrogenisusedinfuelcelltrucksinplaceofdieselininternalcombustionenginevehicles.∙Cementmanufacturing:greenhydrogenisusedinplaceofnaturalgasforhigh-temperatureheatintheclinkercalcinationprocess.∙Othermanufacturing:greenhydrogencombustionreplacesfossilfuelcombustionformedium-andlow-temperatureheat.∙Residentialandcommercialheatingandcooking:greenhydrogencombustionreplacesnaturalgascombustionforspaceandwaterheating,andcooking.∙Oilrefining:greenhydrogenreplacesgreyhydrogenforuseinthedieseldesulphurisationprocess.∙Lightvehicles:greenhydrogenisusedinhydrogenfuelcelllightvehiclesinplaceofpetrolanddieselininternalcombustionvehicles.GrattanInstitute202358Hydrogen:hype,hope,orhardwork?surchargesapplyingonethirdofthetime(IPART(2020)).Projectlifespan20years.Realdiscountrate6.28percent.AppendixB:ScenarioassumptionsB.1.1HydrogenproductioncostsensitivityanalysisThroughoutthisreport,wepresentscenariosforfuturehydrogenElectrolyserefficiencyproductioncosts,carboncosts,andgreencommodityproductioncosts.Weassumeanelectrolyserefficiencyof51.3kWh/kg.ThisisequivalentResultsareshowninFigure2.1,Figure4.3,Figure4.6,Figure4.8,toanelectrolyserefficiencyrateof65%.Figure5.2,Figure5.3,andFigure5.4.Noefficiencyimprovementsareassumedinourscenarios.AnalysisThesescenariosareinternallyconsistent,andusethesamesetofofthesensitivityofhydrogenproductioncoststothisassumptionassumptionswhererelevant.Allinputswereadjustedforinflation,ispresentedatFigureB.1onthefollowingpage.A5percentagediscountrates,andexchangerates.pointhigherorlowerefficiencyratedoeslittletochangethecostofhydrogenproductioninboththegrid-connectedelectricity,andtheB.1Hydrogenproductioncostsbehind-the-meterelectricityscenarios.Hydrogenproductioncostsaredeterminedusingabottom-upproject-Electrolysertechnologybasedmodel.Productionisassumedtobemodular,thatis,thecostforWeassumePEMelectrolysersareusedtoproducehydrogen.PEM10MWofproductioncapacityistentimesthecostof1MWofcapacity.electrolysersarecurrentlymoreexpensivethanalkalineelectrolysers,themainalternative.Electrolyser:protonexchangemembrane(PEM).CapitalcostforecastfromGrahametal(2023),assumingtheglobalnet-zero2050scenario.AnalysisofthesensitivityofhydrogenproductioncoststotheInstallationcostsstartat50percentofcapitalcosts,consistentwithelectrolysertechnologyused,holdingelectrolyserefficiencyconstantAurecon(2022),andfallby3percenteachyear.Electrolyserefficiencyat51.3kWh/kg,ispresentedatFigureB.2onthenextpage.The51.3kWh/kghydrogen,consistentwithIRENA(2020).Noallowanceforcostofhydrogenproducedusingalkalineelectrolysersislowerthanimprovementsinelectrolyserefficiency.OperatingandmaintenanceforPEMinitially,buthasanegligibleimpactin2040,asthepriceofcosts(otherthanelectricity)of$75/kW,consistentwithAurecon(2022).PEMelectrolysersconvergeswithalkalineelectrolysers(GrahametStackdesignlife80,000hours.Capacityfactor90percent.al(2023)).Electricitycosts:twoscenariosareused.Behind-the-meterelectricity59productionco-locatedwithelectrolyserconsistentwithGrahametal(2023).Grid-connectedelectrolyserbackedwithrenewablepowerpurchaseagreementconsistentwithOakleyGreenwood(2022).Other:waterconsumption17litresperkghydrogen,consistentwithNewboroughandCooley(2021).Noallowanceforcoolingwater.WatercostsconsistentwithNSWbulkunfilteredwaterprices,droughtGrattanInstitute2023Hydrogen:hype,hope,orhardwork?FigureB.1:SmallchangestoelectrolyserefficiencydolittletochangeFigureB.2:HydrogenproductioncostsconvergeforPEMandalkalinehydrogenproductioncostselectrolysersAU$/kgofhydrogenAU$/kgofhydrogenUsinggridelectricityUsinggridelectricity60%efficiency$6$6PEM65%efficiencyAlkaline70%efficiency$4$4$2$2$0$0Usingbehind-the-meterelectricityUsingbehind-the-meterelectricity$6$6$4$4$2$2$02030Year20352040$02030Year2035204020252025Source:Grattananalysis.Assumptionsanddatasourceslistedinthisappendix.Source:Grattananalysis.Assumptionsanddatasourceslistedinthisappendix.GrattanInstitute202360Hydrogen:hype,hope,orhardwork?B.3.2AluminaB.2CarboncostsBest-case:hydrogenproductionco-locatedwith90%renewableenergywithfirmingandstorage,minimaltransportofhydrogen,SafeguardMechanismcost-containmentmechanism:carboncostscarboncostsconsistentwithaSafeguardFacilityaccessingthecoststartat$75pertonnein2024andincreaseby2percenteachyearcontainmentmechanismforallabove-baselineemissions.(DCCEEW(2023f)).Worst-case:electricitysourcesatwholesaleprice,carboncostsAustraliancarboncreditunits:consistentwithHerdandHatfieldconsistentwithaSafeguardFacilityusingAustralianCarbonCreditDodds(2023)centralestimate.Units(ACCUs)tooffsetallabove-baselineemissions.1.5∘C-consistent:NetworkforGreeningtheFinancialSystem(n.d.),Bothcases:retrofitofexistingplant.Fuelsavingsbasedoneastcoastnet-zero2050scenario.gasprices.B.3GreencommodityproductioncostsDatasources:retrofitcapexandnon-fuelopexfromAustralianIndustryEnergyTransitionsInitiative(2023).HydrogencostsasB.3.1AmmoniadescribedinAppendixB.1onpage59.GascostsfromLewisGreyAdvisory(2023).EnergyconsumptionfromAustralianIndustryEnergyBest-case:hydrogenproductionco-locatedwith90%renewableTransitionsInitiative(2023).EmissionsintensityfromDCCEEW(2023c)energywithfirmingandstorage,minimaltransportofhydrogen,andDCCEEW(2023b),carboncostsasdescribedinAppendixB.2.carboncostsconsistentwithaSafeguardFacilityaccessingthecostcontainmentmechanismforallabove-baselineemissions.B.3.3IronWorst-case:electricitysourcesatwholesaleprice,carboncostsBest-case:hydrogenproductionco-locatedwith90percentrenewableconsistentwithaSafeguardFacilityusingAustralianCarbonCreditenergywithfirmingandstorage,minimaltransportofhydrogen,Units(ACCUs)tooffsetallabove-baselineemissions.AssumesretrofitcarboncostsconsistentwithaccessingtheSafeguardMechanismforanexistingplant.cost-containmentmechanismforallemissions.Bothcases:retrofitofexistingplant.FuelsavingsbasedoneastcoastWorst-case:electricitysourcesatwholesaleprice,carboncostsgasprices.consistentwithusingACCUstooffsetallemissions.Datasources:energyconsumptionfromBazzanellaandAusfelderBothcases:assumesnewbuildwithanew-entrantbaselineofzero(2017)andAustralianIndustryEnergyTransitionsInitiative(2023).tonnesCO2pertonneofiron.Comparatorisadirect-reductionironRetrofitcapexandnon-fuelopexfromAustralianIndustryEnergyTran-plantusinggas.Fuelsavingsarebasedonalong-runeastcostgassitionsInitiative(ibid).HydrogencostsasdescribedinAppendixB.1onprice.page59.GascostsfromLewisGreyAdvisory(2023),electricitycostsforcompression,airseparationandstemconsistentwithelectricity61pricesforhydrogenproduction.EmissionsintensityfromDCCEEW(2023c),carboncostsasdescribedinAppendixB.2.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Datasources:capexandnon-fuelopexfromAustralianIndustryEnergyTransitionsInitiative(2023).Electric-arccomponentofDRI-EAFpathwayassumedtocostthesameasastand-aloneEAF.HydrogencostsasdescribedinAppendixB.1onpage59.GascostsfromLewisGreyAdvisory(2023).EnergyconsumptionfromSohn(2019).EmissionsintensityfromDCCEEW(2023c)andDCCEEW(2023b),carboncostsasdescribedinAppendixB.2onthepreviouspage.B.4Long-distancefreighttransportBest-case:hydrogenproductionco-locatedwith90%renewableenergywithfirmingandstorage.CarboncostsconsistentwithaSafeguardFacilityaccessingthecost-containmentmechanismforallabove-baselineemissions.Refuellingstationthroughput45trucksperday.Worst-case:electricitysourcesatwholesaleprice.CarboncostsconsistentwithaSafeguardFacilityusingAustralianCarbonCreditUnitstooffsetallabove-baselineemissions.Refuellingstationthroughputoftwotrucksperday.Bothcases:hydrogenconsumptionbasedonaHyzonHymaxtruck,dieselconsumptiononAustralianaverage.Noallowancemadeforcostofpurchasingormaintainingthetruck.Datasources:long-runcostofdiesel$1.33perlitre,heavyvehiclechargeexcludedasassumedtoapplytohydrogentrucksinequivalentbasis,dieselfuelexcisenotincludedasthisisrebatedtomostoperators.Hydrogenstorage,trucktransportation,compressionandrefuellingpointcostsfromCSIRO(2023d).CarboncostsasdescribedinAppendixB.2ontheprecedingpage.HydrogencostsasdescribedinAppendixB.1onpage59.AveragedieselconsumptionfromABS(2020).HydrogenconsumptionfromHyzon(2023).GrattanInstitute202362Hydrogen:hype,hope,orhardwork?AustralianAllianceforEnergyProductivity(2023).Bringingtheheat-Hydrogen’sroleindecarbonisingAustralianindustrialprocessheat.AustralianAllianceforBibliographyEnergyProductivity.https://www.a2ep.org.au/_files/ugd/9a2735_b68dbc3929f445b6b6b2a68197c380f1.pdf.ABS(2020).SurveyofMotorVehicleUse,Australia.AustralianBureauofStatistics.https://www.abs.gov.au/statistics/industry/tourism-and-transport/survey-AustralianAluminiumCouncil(2023).StrengtheningOurAluminiumIndustry.motor-vehicle-use-australia/latest-release.AustralianAluminiumCouncil.https://aluminium.org.au/wp-content/uploads/2022/07/230802-AAC-Factbook.pdf.AEMO(2023a).NEMGenerationInformation.https://aemo.com.au/en/energy-systems/electricity/national-electricity-market-nem/nem-forecasting-and-AustralianIndustryEnergyTransitionsInitiative(2023).Pathwaystoindustrialplanning/forecasting-and-planning-data/generation-information.decarbonisation–Phase3report.ClimateworksCentreandClimate-KICAustralia.https://energytransitionsinitiative.org/wp-(2023b).2023ElectricityStatementofOpportunities.AustralianEnergycontent/uploads/2023/08/Pathways-to-Industrial-Decarbonisation-report-MarketOperator.https://aemo.com.au/en/energy-systems/electricity/national-Updated-August-2023-Australian-Industry-ETI.pdf.electricity-market-nem/nem-forecasting-and-planning/forecasting-and-reliability/nem-electricity-statement-of-opportunities-esoo.Bazzanella,A.M.andAusfelder,F.(2017).LowcarbonenergyandfeedstockfortheEuropeanchemicalindustry.DECHEMAGesellschaftfürChemischeTechnikAnti-DumpingCommission(2021).ReportNo.565inquiryintothecontinuationofundBiotechnologiee.V.https://dechema.de/dechema_media/Downloads/Posanti-dumpingmeasuresapplyingtoammoniumnitrateexportedfromtheitionspapiere/Technology_study_Low_carbon_energy_and_feedstock_for_theRussianFederationeitherdirectlyorviaEstonia._European_chemical_industry.pdf.https://www.industry.gov.au/sites/default/files/adc/public-record/565_-_050_-_report_-_final_report_-_rep_565.pdf.Bhashyam,A.(2023).USHydrogenGuidance:BeStrictorBeDamned.https://about.bnef.com/blog/us-hydrogen-guidance-be-strict-or-be-damned/.ARENA(2023).HydrogenHeadstartProgramGuidelines.AustralianRenewableEnergyAgency.https://arena.gov.au/funding/hydrogen-headstart/.BloombergNEF(2022).Japan’sCostlyAmmoniaCoalCo-FiringStrategy.BloombergNEF.https://about.bnef.com/blog/japans-ammonia-coal-co-firing-ARUP(2023).NationalHydrogenInfrastructureAssessment:FinalReport.ARUP.strategy-a-costly-approach-to-decarbonization-renewables-present-more-https://www.dcceew.gov.au/sites/default/files/documents/national-hydrogen-economic-alternative/.infrastructure-assessment-final-report.pdf.Bolotova,J.andYeo,R.(2023).“GreenpremiumforflatsteelstableinfirstEuropeanArup(2022).WaterforHydrogen.Arup.assessment”.Fastmarkets.https://www.fastmarkets.com/insights/green-flat-https://h2council.com.au/wp-content/uploads/2023/02/221114-Arup-steel-premium-stable-first-european-assessment/.Technical-paper-Water-for-Hydrogen-report-FINAL.pdf.Bone,C.andDudman,I.(2023).“ConsumerfocusonScope3emissionsbringsAttwood,J.(2023).GreenSteelDemandisRisingFasterThanProductionCanRamplow-carbonopportunitiesforaluminiumproducerHydro,CEOsays”.Up.https://about.bnef.com/blog/green-steel-demand-is-rising-faster-than-Fastmarkets.https://www.fastmarkets.com/insights/consumer-focus-on-production-can-ramp-up/.scope-3-emissions-opportunities-aluminium/.Aurecon(2022).2022CostsandTechnicalParameterReview.Aurecon.https:63//aemo.com.au/-/media/files/stakeholder_consultation/consultations/nem-consultations/2022/2023-inputs-assumptions-and-scenarios-consultation/supporting-materials-for-2023/aurecon-2022-cost-and-technical-parameter-review.pdf.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?(2023c).TallawarraBDualFuelCapableGas/HydrogenPowerPlant.https://research.csiro.au/hyresource/tallawarra-b-dual-fuel-capable-gas-Butler,C.(2020).WhyAluminiumSmeltersAreaCriticalComponentinAustralianhydrogen-power-plant/.Decarbonisation:ACaseStudyofTomagoAluminiumandtheHunterRegion.InstituteforEnergyEconomicsandFinancialAnalysis.(2023d).Hydrogenvehiclerefuellinginfrastructure:prioritiesandhttps://ieefa.org/articles/ieefa-how-aluminium-smelters-can-help-opportunitiesforAustralia.CSIRO.https://www.csiro.au/-/media/Missions/Hydecarbonise-australias-industrial-economy.drogen/Hydrogen_Vehicle_Refuelling_Infrastructure_Report.pdf.CementIndustryFederation(2023).AustralianClinkerandCementProduction.DCCEEW(2023a).StateofHydrogen2022.DepartmentofClimateChange,Energy,https://cement.org.au/australias-cement-industry/about-cement/australias-theEnvironmentandWater.cement-industry/.https://www.dcceew.gov.au/energy/publications/state-of-hydrogen-2022.CleanEnergyRegulator(2023a).Safeguardfacilityreportedemissions2021-22.(2023b).SafeguardMechanism:Prescribedproductionvariablesanddefaulthttps://www.cleanenergyregulator.gov.au/NGER/The-Safeguard-emissionsintensities.DepartmentofClimateChange,Energy,theMechanism/safeguard-data/safeguard-facility-reported-emissions/safeguard-EnvironmentandWater.facility-reported-emissions-2021-22.https://www.dcceew.gov.au/sites/default/files/documents/safeguard-mechanism-document-production-variable-definitions-2023.pdf.(2023b).Eligibleactivitiesandactivitygroupeligibility.https://www.cleanenergyregulator.gov.au/RET/Scheme-participants-and-(2023c).NationalGreenhouseAccountsFactors:2023.industry/emissions-intensive-trade-exposed-activity-information-for-https://www.dcceew.gov.au/climate-change/publications/national-companies/applying-for-an-exemption-certificate/am-i-eligible-to-apply-for-greenhouse-accounts-factors-2023.an-exemption-certificate/eligible-activities.(2023d).Australia’sNationalGreenhouseAccounts.Collins,L.(2023).“‘Expensiveandpolluting’Whyhydrogen-basede-fuelsshouldnothttps://www.greenhouseaccounts.climatechange.gov.au/.beconsideredaclimatesolutionforroadtransport”.HydrogenInsight.https://www.hydrogeninsight.com/transport/expensive-and-polluting-why-(2023e).AustralianEnergyStatistics,TableC.hydrogen-based-e-fuels-should-not-be-considered-a-climate-solution-for-https://www.energy.gov.au/publications/australian-energy-update-2023.road-transport/2-1-1450930.(2023f).SafeguardMechanismReforms.ConventiononBiologicalDiversity(2022).COP15:Nationsadoptfourgoals,23targetshttps://www.dcceew.gov.au/sites/default/files/documents/safeguard-for2030inlandmarkUNbiodiversityagreement.mechanism-reforms-factsheet-2023.pdf.https://www.cbd.int/article/cop15-cbd-press-release-final-19dec2022.(2023g).Australia’sCarbonLeakageReview.Coogee(2023).Methanol.https://www.dcceew.gov.au/climate-change/emissions-reduction/review-https://www.coogee.com.au/capabilities/manufacturing-supply/.carbon-leakage.CSIRO(2023a).HyResourceprojectsspreadsheet.(2023h).Creatingjobsandspurringinvestmentinnewenergyindustries.https://research.csiro.au/hyresource/projects/projects-spreadsheet/.https://www.dcceew.gov.au/sites/default/files/documents/oct-budget-2022-23-jobs-fs.pdf.(2023b).SustainableAviationFuelRoadmap.CommonwealthScienceandIndustrialResearchOrganisation.(2023i).AustralianPetroleumStatistics.https://www.csiro.au/en/research/technology-space/energy/sustainable-https://www.energy.gov.au/government-priorities/energy-data/australian-aviation-fuel.petroleum-statistics.GrattanInstitute202364Hydrogen:hype,hope,orhardwork?Herd,E.andHatfieldDodds,S.(2023).SeizingAustralia’sEnergySuperpowerOpportunities.EYNetZeroCentre.DCCEEW(2023j).CapacityInvestmentScheme.https://www.ey.com/en_au/sustainability/the-energy-superpower-opportunity.https://www.energy.gov.au/government-priorities/energy-supply/capacity-investment-scheme.Holder,S.(2023).“StakeholdersquestionSAgovernment’suseofRiverMurrayforWhyallahydrogenplant”.ABCRiverland.DEECA(2023).Victoria’sRenewableGasConsultationPaper.https://www.abc.net.au/news/2023-05-23/river-murray-water-allocation-for-https://engage.vic.gov.au/victorias-renewable-gas-consultation-paper.whyalla-hydrogen-project/102380566.DeloitteandARENA(2022).AroadmapfordecarbonisingAustralianaluminarefining.Hyzon(2023).HyzonHymaxseries.DeloitteandARENA.https://arena.gov.au/assets/2022/11/roadmap-for-https://www.hyzonmotors.com/vehicles/hyzon-hymax-series.decarbonising-australian-alumina-refining-report.pdf.IEA(2020).IronandSteelTechnologyRoadmap.InternationalEnergyAgency.DFAT(2023).Tradestatisticalpivottables.https://www.iea.org/reports/iron-and-steel-technology-roadmap.https://www.dfat.gov.au/trade/trade-and-investment-data-information-and-publications/trade-statistics/trade-statistical-pivot-tables.(2021).AmmoniaTechnologyRoadmap.InternationalEnergyAgency.https://www.iea.org/reports/ammonia-technology-roadmap.Dwyer,O.(2023).“Fertiliseremissionscouldbecutto‘one-fifthofcurrentlevels’by2050”.CarbonBrief.https://www.carbonbrief.org/fertiliser-emissions-could-(2023a).GlobalHydrogenReview2023.InternationalEnergyAgency.be-cut-to-one-fifth-of-current-levels-by-2050/.https://www.iea.org/reports/global-hydrogen-review-2023.(2023b).NetZeroRoadmap:AGlobalPathwaytoKeepthe1.5∘CGoalinEuropeanCouncil(2023).RefuelEUaviationinitiative:CounciladoptsnewlawtoReach2023.InternationalEnergyAgency.https://www.iea.org/reports/net-decarbonisetheaviationsector.zero-roadmap-a-global-pathway-to-keep-the-15-0c-goal-in-reach.https://www.consilium.europa.eu/en/press/press-releases/2023/10/09/refueleu-aviation-initiative-council-adopts-new-law-to-(2023c).EnergyTechnologyPerspectives2023.InternationalEnergyAgency.decarbonise-the-aviation-sector/.https://www.iea.org/reports/energy-technology-perspectives-2023.FoodandAgricultureOrganizationoftheUnitedNations(2023).FertilizersbyNutrient.(2023d).Aluminium.https://www.iea.org/energy-system/industry/aluminium.https://www.fao.org/faostat/en/#data/RFN.(2023e).CoalInformation.GeoscienceAustralia(2023).AustralianResourceReviews-IronOre.https://www.iea.org/reports/coal-information-overview.https://www.ga.gov.au/scientific-topics/minerals/mineral-resources-and-advice/australian-resource-reviews/iron-ore.IncitecPivotLimited(2023).IncitecPivotsecureslong-termureasupplyforAustralianandinternationalmarkets.https://investors.incitecpivot.com.au/static-GPAEngineering(2022).PipelinesvsPowerlines–ATechnoeconomicAnalysisinthefiles/9cc46c31-802d-4b08-8286-ca61e79f32ae.AustralianContext.GPAEngineering.https://www.apga.org.au/sites/default/files/uploaded-InfrastructureandTransportMinisters’Meeting(2023).CommuniqueforInfrastructurecontent/field_f_content_file/pipelines_vs_powerlines_-andTransportMinisters’Meeting._a_technoeconomic_analysis_in_the_australian_context.pdf.https://www.infrastructure.gov.au/sites/default/files/documents/itmm-communique-9-june-2023-final-with-minor-amendments.pdf.Grahametal(2023).Graham,P.,Hayward,J.,Foster,J.andHavas,L.GenCost2022-23:Finalreport.CommonwealthScienceandIndustrialResearch65Organisation(CSIRO).https://doi.org/10.25919/zmvj-tj87.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?(2023).Innovationlandscapeforsmartelectrification.InternationalRenewableEnergyAgency.InfrastructureAustralia(2022).2022InfrastructureMarketCapacityreport.https://www.irena.org/Publications/2023/Jun/Innovation-landscape-for-smart-InfrastructureAustralia.electrification.https://www.infrastructureaustralia.gov.au/publications/2022-market-capacity-report.ITPThermal(2019).Renewableenergyoptionsforindustrialprocessheat.ITPThermal.https://arena.gov.au/assets/2019/11/renewable-energy-options-for-InternationalAluminiumInstitute(2021).1.5degreesscenario-amodeltodriveindustrial-process-heat.pdf.emissionsreduction.InternationalAluminiumInstitute.https://international-aluminium.org/resource/1-5-degrees-scenario-a-model-JobsandSkillsAustralia(2023).TheCleanEnergyGeneration.JobsandSkillsto-drive-emissions-reduction/.Australia.https://www.jobsandskills.gov.au/publications/the-clean-energy-generation.(2023).Aluminaproduction.https://international-aluminium.org/statistics/alumina-production/.Jose,R.andPaul,S.(2021).“Australiatopaylasttwooilrefineriesupto$1.8blntostayopen”.Reuters.https://www.reuters.com/business/energy/australia-prop-IPART(2020).MaximumpricesforWaterNSW’sGreaterSydneyServicesfrom1Julyup-its-last-two-refineries-with-up-179-bln-2021-05-16/.2020.IndependentPricingandRegulatoryTribunal.https://www.ipart.nsw.gov.au/sites/default/files/documents/final-Kildahletal(2023).Kildahl,H.,Wang,L.,Tong,L.andDing,Y.“Costeffectivedetermination-waternsw-maximum-prices-for-water-nsws-greater-sydney-decarbonisationofblastfurnace–basicoxygenfurnacesteelproductionservices-from-1-july-2020-june-2020_0.pdf.throughthermochemicalsectorcoupling”.JournalofCleanerProduction.https://www.sciencedirect.com/science/article/pii/S095965262300121X?viaIRENA(2020).Greenhydrogencostreduction:scalingupelectrolyserstomeetthe%3Dihub.1.5∘Cclimategoal.InternationalRenewableEnergyAgency.https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Dec/IRLesteretal(2022).Lester,R.,Gunasekera,D.,Timms,W.andDownie,D.WaterENA_Green_hydrogen_cost_2020.pdf.requirementsforuseinhydrogenproductioninAustralia:Potentialpublicpolicyandindustry-relatedissues.DeakinUniversity.(2021a).APathwaytoDecarbonisetheShippingSectorby2050.https://www.deakin.edu.au/__data/assets/pdf_file/0009/2539584/Water-InternationalRenewableEnergyAgency.energy-nexus-whitepaper.pdf.https://www.irena.org/Publications/2021/Oct/A-Pathway-to-Decarbonise-the-Shipping-Sector-by-2050.LewisGreyAdvisory(2023).GasPriceProjectionsworkbook.LewisGreyAdvisory.https://aemo.com.au/-(2021b).ReachingZerowithRenewables:BiojetFuels.International/media/files/stakeholder_consultation/consultations/nem-RenewableEnergyAgency.consultations/2022/2023-inputs-assumptions-and-scenarios-https://www.irena.org/publications/2021/Jul/Reaching-Zero-with-Renewables-consultation/supporting-materials-for-2023/lewis-grey-advisory-2023-gas-Biojet-Fuels.price-projection-workbook.xlsx?la=en.(2021c).InnovationOutlook:RenewableMethanol.InternationalRenewableLIBERTYSteel(2023).NewElectricArcFurnaceAndDirectReductionPlantForEnergyAgency.https://www.irena.org/publications/2021/Jan/Innovation-Whyalla.https://gfgalliancewhyalla.com/stories/liberty-steel-in-whyalla-Outlook-Renewable-Methanol.announces-the-phase-out-of-coal-based-steelmaking-with-purchase-of-a-low-carbon-emissions-electric-arc-furnace/.(2022).GlobalHydrogenTradetoMeetthe1.5°CClimateGoal:TechnologyReviewofHydrogenCarriers.InternationalRenewableEnergyAgency.Liebreich,M.(2023).Liebreich:TheNextHalf-Trillion-DollarMarket–Electrificationofhttps://www.irena.org/publications/2022/Apr/Global-hydrogen-trade-Part-II.Heat.https://about.bnef.com/blog/liebreich-the-next-half-trillion-dollar-market-electrification-of-heat/.GrattanInstitute202366Hydrogen:hype,hope,orhardwork?Pardo,N.andMoya,J.A.(2013).“ProspectivescenariosonenergyefficiencyandCO2emissionsintheEuropeanIronandSteelindustry”.Energy.https://www.LondonMetalsExchange(2023a).LMEAluminium.sciencedirect.com/science/article/abs/pii/S0360544213001928?via%3Dihub.https://www.lme.com/en/metals/non-ferrous/lme-aluminium.PerdamanChemicalsandFertilisersPtyLtd(2023).Perdamanclosesthefinancingfor(2023b).LMEAlumina(Platts).https://www.lme.com/en/Metals/Non-itssignificantWesternAustralianureaproject.https:ferrous/LME-Alumina_#Trading+day+summary.//perdaman.com.au/2023/04/20/perdaman-urea-project-closes-financing/.Maersk(2022).A.P.Moller-MaerskcontinuesgreentransformationwithsixadditionalPlattsS&PGlobal(2023a).MethodologyandSpecificationsGuide:GlobalHydrogen&largecontainervessels.Ammonia.PlattsS&PGlobal.https:https://www.maersk.com/news/articles/2022/10/05/maersk-continues-green-//www.spglobal.com/commodityinsights/PlattsContent/_assets/_files/en/our-transformation.methodology/methodology-specifications/hydrogen-prices.pdf.McConnelletal(2023).McConnell,D.,àCourt,S.H.,Tan,S.andCubrilovic,N.(2023b).Interactive:PlattsAmmoniapricechart.OpenNEM.https://opennem.org.au/.https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/energy-transition/051023-interactive-ammonia-price-chart-natural-gas-MissionPossiblePartnership(2022).Makingnet-zerosteelpossible:Anfeedstock-europe-usgc-black-sea.industry-backed,1.5∘C-alignedtransitionstrategy.MissionPossiblePartnership.https://missionpossiblepartnership.org/wp-Prasad,M.(2021).VirtualPosterPresentationbyDrMousamiPrasadSoERC2021.content/uploads/2022/09/Making-Net-Zero-Steel-possible.pdf.https://www.youtube.com/watch?v=SUKc-IxzpTc.NationalTransportCommission(2022).CarbonDioxideEmissionsIntensityforNewRitchie,H.(2017).Howmanypeopledoessyntheticfertilizerfeed?AustralianLightVehicles2021.NationalTransportCommission.https://ourworldindata.org/how-many-people-does-synthetic-fertilizer-feed.https://www.ntc.gov.au/light-vehicle-emissions-intensity-australia.RockyMountainInstitute(2020).Hydrogen’sDecarbonizationImpactforIndustry.Neo,R.andNg,E.(2023).“Singaporecompletesfirstmethanolbunkering,learningstohttps://rmi.org/wp-content/uploads/2020/01/hydrogen_insight_brief.pdf.bepresentedtoIMO”.S&PGlobalCommodityInsights.https://www.spglobal.com/commodityinsights/en/market-insights/latest-(2023).HydrogenRealityCheck:DistillingGreenHydrogen’sWaternews/shipping/072723-singapore-completes-first-methanol-bunkering-Consumption.https://rmi.org/hydrogen-reality-check-distilling-green-learnings-to-be-presented-to-imo.hydrogens-water-consumption/.NetworkforGreeningtheFinancialSystem(n.d.).Santisetal(2022).Santis,M.D.etal.InvestmentNeeds.GreensteelforEuropeConsortium.https://www.estep.eu/assets/Uploads/GreenSteel-D2.2-Newborough,M.andCooley,G.(2021).“Greenhydrogen:wateruseimplicationsandInvestment-Needs-Publishable-version.pdf.opportunities”.FuelCellBulletin.https://itm-power-assets.s3.eu-west-2.amazonaws.com/Green_Hydrogen_Water_Use_56b96f577d.pdf.Saulnieretal(2020).Saulnier,R.,Minnich,K.andSturgess,P.K.WaterfortheHydrogenEconomy.WaterSMARTsolutions.NSWClimateandEnergyAction(2023).RenewableFuelScheme.https://watersmartsolutions.ca/wp-content/uploads/2020/12/Water-for-the-https://www.energy.nsw.gov.au/nsw-plans-and-progress/regulation-and-Hydrogen-Economy_WaterSMART-Whitepaper_November-2020.pdf.policy/energy-security-safeguard/renewable-fuel-scheme.Shiozawa,B.(2020).“TheCostofCO2-freeAmmonia”.AmmoniaEnergyAssociation.OakleyGreenwood(2022).FinalCEVCWorkbook.OakleyGreenwood.https://www.ammoniaenergy.org/articles/the-cost-of-co2-free-ammonia/.https://www.aer.gov.au/documents/oakley-greenwood-final-cecv-workbook.67OfficeofHydrogenPowerSouthAustralia(2023).HydrogenJobsPlan.https://www.ohpsa.sa.gov.au/projects/hydrogen-jobs-plan.GrattanInstitute2023Hydrogen:hype,hope,orhardwork?Wolfe,S.andCassano,E.(2023).Hydrogenvehiclerefuellinginfrastructure.CSIRO.https://www.csiro.au/-/media/Missions/Hydrogen/Hydrogen_Vehicle_RefuelliSmith,M.(2021).“China’ssteelcurbstohitAustralianconstruction”.TheAustralianng_Infrastructure_Report.pdf.FinancialReview.https://www.afr.com/world/asia/china-s-steel-curbs-to-hit-australian-construction-20210811-p58ht2.Wood,T.(2012).Buildingthebridge:apracticalplanforalow-cost,low-emissionsenergyfuture.GrattanInstitute.https://grattan.edu.au/report/building-the-SMM(2023).Foundrypigironprice.https://www.metal.com/Pig-Iron/202203070001.bridge-a-practical-plan-for-a-low-cost-low-emissions-energy-future/.SnowyHydro(2023).HunterPowerProject.(2023).“Thegovernmentwillunderwriteriskyinvestmentsinrenewables–https://www.snowyhydro.com.au/hunter-power-project/.here’swhythat’sagoodidea”.TheConversation.https://theconversation.com/the-government-will-underwrite-risky-Sohn,H.Y.(2019).“EnergyConsumptionandCO2EmissionsinIronmakingandinvestments-in-renewables-heres-why-thats-a-good-idea-218427.DevelopmentofaNovelFlashTechnology”.Metals.https://doi.org/10.3390/met10010054.Woodetal(2020).Wood,T.,Dundas,G.andHa,J.Startwithsteel:Apracticalplantosupportcarbonworkersandcutemissions.GrattanInstitute.Statista(2023).Ammoniaproductionworldwidefrom2010to2022.https://grattan.edu.au/report/start-with-steel/.https://www.statista.com/statistics/1266378/global-ammonia-production/.Wood,T.andHa,J.(2021).Gofornetzero:Apracticalplanforreliable,affordable,Terrilletal(2021).Terrill,M.,Enslie,O.andFox,L.Megabangformegabucks:Drivinglow-emissionselectricity.GrattanInstitute.aharderbargainonmegaprojects.2021-04.GrattanInstitute.https://grattan.edu.au/report/go-for-net-zero/.https://www.estep.eu/assets/Uploads/GreenSteel-D2.2-Investment-Needs-Publishable-version.pdf.Woodetal(2021).Wood,T.,Reeve,A.andHa,J.Towardsnetzero:Practicalpoliciestoreduceindustrialemissions.GrattanInstitute.Terrilletal(2022).Terrill,M.,Burfurd,I.andFox,L.TheGrattantruckplan:practicalhttps://grattan.edu.au/report/towards-net-zero-practical-policies-to-reduce-policiesforcleanerfreight.GrattanInstitute.industrial-emissions/.https://grattan.edu.au/report/grattan-truck-plan/.Woodetal(2022).Wood,T.,Reeve,A.andSuckling,E.Thenextindustrialrevolution:USGS(2022).MineralCommoditySummaries2022.U.S.GeologicalSurvey.transformingAustraliatoflourishinanet-zeroworld.GrattanInstitute.https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf.https://grattan.edu.au/report/next-industrial-revolution/.VDZ(2021).DecarbonisationPathwaysfortheAustralianCementandConcreteWoodetal(2023).Gettingoffgas:why,howandwhoshouldpay.GrattanSector.VDZ.https://cement.org.au/wp-content/uploads/2021/11/Full_Report_Decarbonisation_Pathways_web_single_page.pdf.Institute.https://grattan.edu.au/wp-content/uploads/2023/06/Getting-off-gas-(2023).DecarbonisationPathwaysfortheAustralianLimeSector.why-how-and-who-should-pay.pdf.https://cement.org.au/wp-content/uploads/2023/06/Decarbonisastion_Pathways_Australian_Lime_Sector.pdf.WorldSteelAssociation(2020).SteelStatisticalYearbook2020conciseversion.WorldSteelAssociation.https://worldsteel.org/wp-content/uploads/Steel-Statistical-Wiggins,J.(2023).“PortofMelbournetoride‘tsunami’ofgreenmethanol”.AustralianYearbook-2020-concise-version.pdf.FinancialReview.https://www.afr.com/companies/infrastructure/port-of-melbourne-to-ride-tsunami-of-green-methanol-20230424-p5d2w6.(2022).WorldSteelinFigures2022.WorldSteelAssociation.https://worldsteel.org/steel-topics/statistics/world-steel-in-figures-2022/.Wilkes,W.(2023).“LufthansaSaysGreenFuelWouldEatUpHalfGermanElectricity”.Bloomberg.https://www.bloomberg.com/news/articles/2023-09-25/lufthansa-(2023).Totalproductionofcrudesteel.WorldSteelAssociation.says-green-fuel-would-eat-up-half-german-electricity.https://worldsteel.org/steel-topics/statistics/annual-production-steel-data/?ind=P1_crude_steel_total_pub/AUS.GrattanInstitute202368

1、当您付费下载文档后，您只拥有了使用权限，并不意味着购买了版权，文档只能用于自身使用，不得用于其他商业用途（如 [转卖]进行直接盈利或[编辑后售卖]进行间接盈利）。
2、本站所有内容均由合作方或网友上传，本站不对文档的完整性、权威性及其观点立场正确性做任何保证或承诺！文档内容仅供研究参考，付费前请自行鉴别。
3、如文档内容存在违规，或者侵犯商业秘密、侵犯著作权等，请点击“违规举报”。

碎片内容

碳中和的最新文档