Australia Remains In The Race To Meet Europe’s Growing Green Energy Demand – For Now
Around 50 Australian industry and government trade agency representatives turned out in force last week at the World Hydrogen Summit in Rotterdam in the Netherlands, to put on a strong showing at the globe’s biggest hydrogen conference and trade fair, which drew 11,000 attendees.
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15 May 2023
The event pulled triple the number of attendees as last year’s summit. Some guessed that the late but highly consequential entry by the US onto the playing field last August when the Inflation Reduction Act (IRA) was passed, had energised activity and interest.
The location of the annual convention is significant in itself. Rotterdam is home to Europe’s largest port which supplies ~13 per cent of the EU’s total consumed energy, and a large part of North-West Europe’s industries with fossil fuels and feedstock, much of it travelling on from the port along the Rhine River into Germany’s industrial heartland.A port tour reveals a breathtakingly vast industrial complex, spanning more than 40 kilometres inland from the North Sea and taking our group five hours to traverse by boat.Last decade, the port’s management began to explore diversification opportunities into ‘new energies’, recognising the dangers of high levels of exposure to fossil fuel-based commodities. Little did they know that ‘energy security’ would soon trump ‘climate’ on the risk matrix. Green hydrogen and its derivatives, such as renewable ammonia and methanol, became a strategic priority.The port is now planning multiple hydrogen (or H2 derivative) import terminals, as well as four new pipelines to run parallel to its existing oil pipeline to Germany: green hydrogen, ammonia, green LPG, and a ‘CO2 return’ pipeline back to Rotterdam, with the contents destined for sequestration in depleted offshore gas basins. (Let’s hope they have more success than Australia on this…)The port’s international hydrogen supply chain manager, Martijn Coopman, believes that Australia has a red hot chance at being a substantial supplier of green hydrogen derivatives to Europe, provided that it can scale up quickly. ‘Quickly’ is the operative word here, with international competition strong and growing.Martijn is a man in demand, with many prospective suppliers knocking on his door from Africa (locations such as Egypt, Mauritania, and Namibia), the Gulf States (Oman, Saudi Arabia), the Americas (Canada, Chile and Brazil), and elsewhere.Many of Australia’s states (most notably South Australia and Western Australia) have been working closely with the port to prepare the way for future trade. But concerns have been growing that Australian projects could struggle to get a foothold in this emerging market, given the dramatic reduction in production costs in other potential supply markets.According to Deloitte, the Act’s US $3/kg subsidy for green hydrogen means that the United States is expected to close the commercialisation gap for projects in the coming year (see chart below). By contrast, in Australia – absent new policy and incentives – commercially viable renewable hydrogen projects would not be possible until the mid-2030s.And it’s not just the US who are running ahead. Soon after the US introduced the IRA, Canada followed suit with its generous hydrogen incentives, and the port now considers it a frontrunner to supply the European market.
So, given the strong incentives from our ‘friendpetitors’ – a term in high rotation at the summit – how could Australia get a look in?
Serendipitously for the Australian delegation, news of the first Federal production incentive to support new green hydrogen projects (‘Hydrogen Headstart’) broke a few hours before Austrade hosted the Summit’s opening drinks, putting Team Australia on a somewhat stronger footing to promote momentum down under.
And while the AUD $2 billion program is clearly dwarfed by the giant US $369 billion clean energy package in the IRA and stops well short of the investment that will be needed for a big green energy exports future, it should help a handful of large-scale projects get off the starting line in the next year or two, and keep Australia in the international race – for now.
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