State of Play: Australia:

Australia is a core global supplier of hydrocarbons and other natural resources and, as Mark Williams reports, the country is well positioned to replicate its success in the post-hydrocarbon world

Australia is a nation with a longstanding environmental conscience and a longstanding split environmental personality. Its natural resources create wealth for the nation and contribute to government coffers. But they sometimes get embroiled in controversy from coral reef destruction to religious site desecration.

When it comes to decarbonisation, the federal government has an enlightened perspective compared to many of its Western peers. The federal government established the Australian Renewable Energy Agency (ARENA) in 2012 ‘to improve the competitiveness of renewable energy technologies and increase the supply of renewable energy through innovation that benefits Australian consumers and businesses.’

In 2014, as part of the global 2050 Deep Decarbonisation Pathways Project, the thinktank ClimateWorks Australia and the Australian National University published ‘Pathways to Deep Decarbonisation by 2050: How Australia can prosper in a low carbon world’. The report illustrated a pathway to reach net zero emissions by 2050 and maintain economic prosperity.

Here’s the starting point, according to the Australian government’s Australian Energy Update 2019 edition.  Oil, including crude oil, LPG and other refined products, accounted for the largest share of Australia’s energy consumption, at 39% in 2017–18. Coal was second with 30% but fell from 40% in 2009. Natural gas was 25% of energy consumption, around 37% of which was for electricity generation and around 33% industrial use. Renewables accounted for 6% of Australian energy consumption in 2017-18. The largest source of renewable energy that year was bagasse, the residuum from sugar cane processing. Wind and solar energy grew by 20% and 17% respectively in 2017-18 but combined they accounted for only half the energy consumption from bagasse.

Some 28% of Australia’s energy consumption comes from transport, 26% from electricity supply, 17% from manufacturing and 12% from mining. If Australia were able to convert two of these to renewables, its GHG emissions could be slashed precipitously.

All eight Australian states and territories now have net zero carbon targets. Meeting them involves switching electricity generation to 100% renewables, switching light road transport to electric and fuel cell power, while switching other transport to biofuels, synthetic fuels, ammonia, hydrogen and electricity; moving to sustainable agricultural practices; and switching industry to bioenergy, green electricity, solar thermal and hydrogen.

There is a long way to go. Thinktank ClimateWorks Australia published analysis in April 2020 which shows that under an ‘innovation’ scenario, GHG emissions from electricity generation can fall by 65% in 2030 compared to 2005, and building by 67%, while land use emissions can fall by 44% and industry by 41%, but that transport is a major lagging sector with emissions up by 1% in 2030 compared to 2005. For Australia to meet its Paris Accord commitment to a 2oC limit in temperature increases, electric vehicles will have to account for 50% of all car sales by 2030, compared to a government forecast of 20%. Electricity generation will have to be at least 70% renewables-fuelled compared to a government projection of around 48%.

ARENA therefore has three priorities:

  1. To integrate renewables into the electricity grid by investing in the means to store, manage and share renewable energy
  2. To accelerate hydrogen by driving innovation in hydrogen supply chains from production to end use across the domestic economy and positioning Australia as a hydrogen exporter.
  3. To help industry reduce emissions by encouraging the adoption of renewable energy including renewable electricity, renewable fuels, solar thermal, hydrogen and bioenergy

Hydrogen is the Next Big Thing in Australia. The Council of Australian Governments published its National Hydrogen Strategy in November 2019. It established a Hydrogen Working Group led by Dr Alan Finkel, Australian Chief Scientist. A key element of the strategy is to create hydrogen hubs – clusters of large-scale demand at ports, in cities, or remote areas, to provide the nascent hydrogen industry with its springboard to scale. Hubs are designed to make the development of infrastructure more cost-effective, to create economies of scale, foster innovation, and promote synergies from sector coupling. These will be complemented and enhanced by other early steps to use hydrogen in transport, industry, and gas distribution networks, and integrate hydrogen technologies into electricity systems. As Australia aims to be a world leader in exporting green hydrogen the strategy also encompasses a system to track and certify the origins of internationally traded clean hydrogen.

In his instruction to the published strategy paper Dr Finkel refers to ‘shipping sunshine with our hydrogen exports’ while the paper notes that ‘industries such as shipping, steel making and chemical production see hydrogen as a long-term alternative to their dependence on fossil fuels.’ The report also estimates that by 2030 the cost of producing clean hydrogen for ship fuel will approach cost competitive status with alternatives.  The potential for exporting H2 is central to the strategy. ‘In the long term, the cost of shipping hydrogen will be substantially reduced. Where it is shipped as liquefied hydrogen, the significant energy required for liquefication will be supplied by low-cost renewables. Where the hydrogen is shipped as ammonia, the efficiency of turning the ammonia back into hydrogen at the import terminal will be enhanced by breakthrough separation processes, possibly based on membrane technology already in development.’

If shipping is to switch to hydrogen as a fuel for direct burn, as ammonia or in fuel cells, it will need H2 molecules in abundance. Australia aims to build on its natural resources and industrial expertise to be the world leader in green H2 production and export.

In January 2020, Australia and Japan signed a joined statement of co-operation for hydrogen production and export as a gas and in fuel cells. The Hydrogen Energy Supply China project is being built to establish ‘an integrated commercial-scale hydrogen supply chain that encompasses production, transportation and storage, with a goal of delivering liquefied hydrogen to Japan.’ The pilot phase is under way and involves a H2 production facility in Latrobe Valley, Victoria, adapting existing brown coal gasification technology. The H2 will be transported to a liquefaction and loading terminal at Port of Hastings and shipped to Japan on the world’s first specially built liquefied hydrogen tanker. According to the project manager Hydrogen Engineering Australia, ‘The decision to proceed to a commercial phase will be made in the 2020s with operations targeted in the 2030s depending on the successful completion of the pilot phase, regulatory approvals, social licence to operate and hydrogen demand.’

On 10 September 2020 Germany and Australia signed a Green Hydrogen Alliance to produce a feasibility study into the potential for closer collaboration on producing green H2, sharing technology and developing a hydrogen supply chain between the two countries. The Australian Minister for Energy and Emissions Reduction Angus Taylor told reporters that collaborating with key partners such as Germany will help to drive down the cost of new hydrogen technologies: ‘Australia has the natural competitive advantage to be a world leader in exporting hydrogen. Australia’s future hydrogen industry has the potential to generate…exports estimated to be worth around A$ 11 billion a year in additional GDP. This is why the Australian Government has committed more than A$ 500 million to back this industry’s development.’

Around 30 Hydrogen and other renewable power generation and production plants are being planned or are into engineering stages in Australia. There are too many to list here but we have selected three examples from Western Australia, home to some of the world’s largest iron ore mining operations.

The WA government has just (16 October 2020) approved stage one of the Asian Renewable Energy Hub, a 10GW wind and 5GW solar power plan, which when all stages are complete will generate up to 26GW of electricity. As well as providing Pilbara region with power, the AREH aims to provide green hydrogen and ammonia to export markets. The ten-year construction project go-ahead follows a decision to bring the Western Australian Renewable Hydrogen Strategy goals forward from 2040 to 2030 and a WA government agreement to invest A$ 22 million into developing WA’s hydrogen strategy.

In the same region, the Yara Pilbara Renewable Ammonia Feasibility Study will produce renewable hydrogen for conversion to ammonia via electrolysis, using purified seawater and electricity from solar. The study aims to deliver a 10 MW electrolyser powered by solar energy to provide the required renewable energy. Subsequent phases would see the scale-up of this approach to underpin a new green ammonia export industry based entirely on renewable energy inputs. The project is expected to go operational in 2023.

Further south, bp Australia’s Project Geraldton Export-Scale Renewable Investment (GERI) feasibility study will explore the potential for developing a green hydrogen and ammonia production supply chain using grid connected power, and procuring renewable electricity through a power purchase agreement (PPA), to produce renewable hydrogen via electrolysis. Renewable hydrogen would then be used instead of natural gas to produce renewable ammonia. bp’s concept aims to produce approximately 20,000 tonnes of renewable ammonia per year for domestic use and export. A feasibility study will deliver a detailed valuation of pilot and commercial scale green ammonia production plants, with publication slated for February 2021.

As for shipping, the Australian flag fleet is a shadow of its former self as the capital, operational, environmental and reputational risks of operating ships have been largely outsourced over the years. There are limited achievements to forcing a change to marine fuels policy. In 2020 the Australian flag fleet numbers around 1,300 units, the largest of which by some distance is Shell’s flagship LNG processing vessel Prelude. Around 12 other FPSOs and LNG tankers make up the rest of the bulk of the fleet by Gross Tonnage.

The small Australian flag fleet should not blind us to Australia’s reliance on shipping. According to Ports Australia, in 2018-19 at the biggest 48 ports in Australia, there arrived 14,474 bulk carriers; 5,910 container ships; 2,739 liquid tankers; 1,694 gas tankers; 1,616 car carriers; 336 livestock carriers and 7,300 general and ‘other’ cargo ships. These could represent a significant market for LNG and Hydrogen marine fuels with the gases sourced in Australia.

Australia’s miners employ thousands of bulk carriers every year to ship iron ore and coal to export markets in Asia and beyond. There has been an opportunity there for them to support low-emission fuels for shipping their products. Accordingly, a multi-year, international co-operation reached a milestone in September 2020 when BHP awarded the world’s first LNG fuelled Newcastlemax bulk carrier tender to Eastern Pacific Shipping.  The five year time charter is for five LNG fuelled ships which will begin to deliver in 2022. Eastern Pacific Shipping CEO Cyril Ducau says that, ‘When these vessels deliver in 2022, they will be the cleanest and most efficient in the entire dry bulk shipping fleet and will be IMO 2030 compliant, eight years ahead of schedule.’

It is appropriate then that the WA government in May this year announced it would offer an A$ 50 per cent discount on port dues from 1st July 2020. The discount is expected to save an average of A$ 20,000 per visit, and will last for five years.  The Pilbara Ports Authority has awarded the first LNG bunkering licence to Woodside Energy at Port Hedland and Dampier. Switching iron ore exports from heavy fuel oil vessels to LNG fuelled vessels could reduce carbon emissions by up to six million tonnes per annum, according to the McGowan Government.

As a core global supplier of hydrocarbons and other natural resources, Australia is positioned to replicate its success in the post-hydrocarbon world. As the national and state/territory governments see it, decarbonisation is an economic opportunity as much as an issue of environmental conscience. If that is the case world-wide then decarbonisation will happen because consumers and suppliers want it to rather than being forced to by governments.

Mark Williams

Mark Williams