A feasible hydrogen supply chain is the answer to energy security

25 March 2022: The unfolding crisis in Ukraine is sending shockwaves through global energy economies and demonstrates the speed with which we must accelerate the clean energy transition.

To identify how Japan and Australia can create a feasible hydrogen supply chain Asialink Business and the Melbourne Energy Institute at the University of Melbourne in partnership with the Consulate-General of Japan hosted a first of its kind event held in Melbourne: 'Suiso Economy: Hydrogen Supply Chains Between Japan and Australia', exploring the collaboration between Australia and Japan, analysing the future of hydrogen, technology developments and how we can strengthen international supply chains.

  • Surging gas and oil prices in the wake of the Ukraine invasion have made hydrogen and ammonia increasingly competitive.
  • As the world looks to renewable energy to lower carbon emissions and meet net-zero carbon targets, hydrogen presents as an irresistible long-term solution to mitigate climate change threats.
  • Developing a robust supply chain with Japan is key to support growth of Australia’s hydrogen sector.
  • Australia sees great opportunity for clean hydrogen and derivative products such as clean ammonia in helping to address global climate challenges while also creating jobs and economic growth opportunities in Australia.

Australia and Japan’s milestone partnership

In January 2022, Australia and Japan partnered to successfully produce, liquefy, and transport liquid hydrogen from Victoria, Australia to Kobe, Japan as a part of the Hydrogen Energy Supply Chain (HESC). The project has the potential to revolutionise the energy sector and efforts to reduce the threat of climate change through decarbonisation by providing a safe, environmentally conscious and economically viable solution to hydrogen production through gas production and carbon capture and storage.

Future of Hydrogen and leading technologies

Examining the future of hydrogen, world-renowned Nobel Prize Winner in Chemistry and Director of the Global Zero Emission Research Center (GZR) Dr Akira Yoshino, says “There are three main important initiatives to realise carbon neutrality: the first to make renewable energy a main power source and to develop next generation solar; the next is to develop technologies for the storage and transportation of renewable energy and carbon recycling. We are conducting research and development of artificial photosynthesis and hydrogen/ carbon recycling. The third is negative emission technology.”

Dr Alan Finkel AC, Special Adviser to the Australian Government on Low Emissions Technology, says “The future as we shift to hydrogen will be the actual hydrogen is coming from Australia and utilizing Japanese technology. We must focus on reducing atmospheric emissions. Many think the goal is to get rid of coal but it’s not, it’s to reduce atmospheric emissions. There are huge global challenges, the first is to decarbonize and the second is global energy security. To really give the world a fresh start on energy security – the solution is investing in renewables.”

“Australia is poised to supply to Japan with vast high quality renewable resources, being a reliable supplier with low sovereign risk and a trusted trading partner. Australia and Japan are friends, but no one wants to be completely tied to a single supplier for a primary commodity. The answer is shipping hydrogen, converting our renewable energy into renewable electricity, then into hydrogen, liquefying it and putting on a ship and taking into Japan.”

The role of government and national hydrogen strategies

“Certification scheme is vital to understand the production history for the hydrogen. We need a well-to-gate certification scheme. Australia is doing a world-first trial with the Australian government providing $9 billion in funding to the clean energy regulator to get a certification scheme landed and ready to use internationally,” says Dr Alan Finkel AC.

For hydrogen to become competitive and become cheaper, it needs to have scale. Dr Alan Finkel AC, says “The quickest opportunities to build upscale, is if countries including Australia, either mandate or encourage existing users of hydrogen that is unmitigated i.e., Gray Hydrogen to switch to green or blue hydrogen. If it were mandated or otherwise encouraged across all countries, that would be enormous for producers and then the price would come down and the market would grow by itself. There is also a Japan led opportunity. Japan has declared that it is planning to start by replacing 20% of its coal in coal fired electricity generators with ammonia. They make ammonia by taking nitrogen from the air and combining this with hydrogen. If Japan starts to progressively replace all its coal use with ammonia, that's a huge demand for hydrogen exported as ammonia.”

The opportunity for Australia has been spurred by the development of Australia's national hydrogen strategy. James Hetherington, Director, Hydrogen Strategy Team, International Climate Change and Energy Innovation Division, Department of Industry, Science, Energy and Resources (DISER), Australia, says “Australia through its national hydrogen strategy has a vision for an innovative, safe and competitive clean hydrogen industry, which benefits all Australians in which we're a major global player by 2030. Japan's leadership in hydrogen technologies will be important in supporting Australia to produce hydrogen at a cost-competitive price. A key component of our approach is the creation of hydrogen hubs. These hubs will bring together producers, exporters and users of hydrogen in single set regions and the co-location approach will create scale, reduce infrastructure needs and costs and look to focus skills in order to speed up the industry’s growth. The Government is providing 464 million to support the development of hubs across Australia.”

The relationship in the deployment of hydrogen implementation and utilisation, Mr Tadashi Mogi, Director-General, Energy Conservation and Renewable Energy Department says “The hydrogen-based society will never be realised without tremendous efforts to accelerate the public implementation of hydrogen energy for 2030. We need more technology innovation. We need more investment. And we need more cooperation with global partners including Australia.”

Creating feasible hydrogen supply chains

In a Q&A session, host Ali Moore, Journalist and Broadcaster, ABC, Australia Nine Network, BBC’s Global News Network addressed the key debate of blue and green hydrogen, as well as the milestone developments in international hydrogen transportation. Panellists explored the scalability, hydrogen vehicles and current and recommended policies for hydrogen regulation.

The HESC project is predicated on a commercial scale operation including carbon capture and storage and its product being classified as “blue hydrogen”. As to whether blue hydrogen has a role to play in Australia or if the industry should rely solely on green hydrogen, Malcolm Rushin, Future Energy - Hydrogen Lead, GHD, says “The role that hydrogen is required to play in getting us to net zero is that blue hydrogen is absolutely required to be developed in parallel with green hydrogen. We need to be pursuing ways of decarbonizing our fossil fuels so that we can produce those volumes of hydrogen that we need for hydrogen to fulfill its role.”

In Australia, the focus is on reducing hydrogen production costs to around $2/kg of hydrogen. As a leader in hydrogen transportation Dr Motohiko Nishimura, Director-General, Kawasaki Heavy Industries, Ltd., Japan Corporation Australia Limited, says “Scaling up is important at keeping costs down. We have been awarded support from the Japanese government's Green Innovation Fund which will allow us to accelerate commercialisation.”

Guarantee of Origin certification for “green” and “blue” hydrogen is a key to unlocking trade. James Hetherington, Director, Hydrogen Strategy Team, International Climate Change and Energy Innovation Division, Department of Industry, Science, Energy and Resources (DISER), Australia, says “We are currently establishing a guarantee of origin certification system. The key components to this are being able to measure the associated carbon emissions production technologies and core metrics that will enable the trade. From there, countries such as Japan will be able to buy hydrogen that suits their needs, and the qualities of hydrogen they require. Once we have some foundational work in place, we will see some of those new rules around the trade that suits country dynamics.”

The utilisation of hydrogen in the transport industry fundamentally revolves around the availability of infrastructure to support it - the refuelling infrastructure. Reflecting on the availability of infrastructure to support the refuelling of hydrogen, Matt Macleod, Manager Energy Solutions, Toyota Motor Corporation Australia Limited, says “Refuelling infrastructure is the key challenge. We need this infrastructure to enable the industry’s growth. We also need to target key areas of industry to transition first, for example the captive fleets like forklifts or buses that go back to base and in the long-term transition to business fleets and individuals.”

Japan ranks sixth in the world of installed capacity for renewable energy and third in terms of solar power generation. Although Japan is disadvantaged by its small size and mountainous terrain, policy support has led to the rapid introduction of solar power generation. The Japanese government intends to continue to expand the introduction of renewable energies and to promote offshore wind power.

With the cost of hydrogen production, storage and transportation being one of the perils of making the process more competitive and regulated, Ms Sumiko Takeuchi, Deputy Project Leader of the 21st Century Public Policy Institute, says “In order to expand the use of hydrogen it is essential to reduce procurement costs and ensure the diversity of suppliers. The government will also need to introduce incentives across the supply chain including at the transportation and storage stages. The IAEA assessed that the costs of storing and transporting hydrogen is three times higher than the cost of producing hydrogen. There is room for improvement in the way hydrogen is used to reduce overall transportation costs. We believe that the use of city gas pipeline for example, should be promoted in Japan.”

Global Outlook

The instability of the energy market triggered by Russia's invasion of Ukraine has highlighted the critical importance of energy security and the efficacy of hydrogen in ensuring energy security. The implications for global energy markets now require there to be an increased focus on security of supply.

Malcolm Rushin, Future Energy - Hydrogen Lead, GHD, says “There are several aspects of these emerging industries that can really improve a country's security of supply. If you have your own way of producing fuel that you can store and use in a flexible way to keep your transport systems going or your power systems going, it will have an impact.”

Although hydrogen is a promising energy source, we have yet to establish a global supply chain. Mr Kiyoshi Odawara, State Minister for Foreign Affairs, Japan, says “To truly make hydrogen the key energy resource for a decarbonized society, we must grow the seeds of the hydrogen supply chain sewn by Japan and Australia to create a whole Asia Pacific hydrogen supply chain. This can be achieved through the additional participation of the United States, which shares similar values and advanced technology and with Asian countries which have a strong demand for energy.”