* Trial set for Australia's biggest coal-fired power plant
* Designed to create a new export industry for Australia
* Japan exploring clean energy alternatives to nuclear
By Byron Kaye
SYDNEY, April 12 (Reuters) - Japan's Kawasaki Heavy Industries Ltd 7012.T will use a power station owned by top Australian electricity producer AGL Energy Ltd AGL.AX for a trial of coal-to-liquid hydrogen conversion, the companies and the Australian government said on Thursday.
If successful, the companies said they would build a facility at AGL's massive Loy Yang coal-fired power station, Australia's biggest. Success could also establish a new export industry for the country, extracting hydrogen from coal then converting it to liquid for export to Japan.
The trial comes amid a long-running clash between AGL and the Australian government over energy policy. AGL wants to close coal-fired power stations and become a 100 percent renewable energy firm by 2050, while the conservative government wants to reinforce a secure baseload energy supply following a string of major blackouts in recent years.
Meanwhile Japan is keen to develop new clean energy sources amid uncertainty about its future use of nuclear power in the wake of the March 2011 disaster at the Fukushima Daiichi plant. is critically important that we invest in the energy sources of the future and we effect the transition from older forms of generation to new forms of generation and we do so seamlessly," said Australian Prime Minister Malcolm Turnbull, speaking at the Loy Yang site in southeastern Victoria.
Turnbull said his government was contributing A$50 million ($39 million) to the trial, which would create 400 local jobs. The companies involved in the project didn't disclose details of their own investment.
Engineering group Kawasaki Heavy has been keen to tap the coal-to-liquid hydrogen market and has been looking at using brown coal from Victoria, where supplies are plentiful. But it has hedged its bets with a project in Norway to derive hydrogen using power from hydroelectric dams and eventually wind farms. Australian coal requires removing its climate-changing carbon and burying it in old oil or gas wells there. For the trial, Kawasaki Heavy has also teamed up with Japan's Marubeni Corp 8002.T , J-Power Systems Corp and Iwatani Corp 8088.T .
"The global hydrogen market is booming," said Kawasaki Heavy's Eiichi Harada, Deputy General Manager of the firm Corporate Technology Division, in a joint statement released on behalf of the companies involved.
The project "has the potential to deliver a critical option for future global energy needs", he said. If the pilot is successful, the project would enter its commercial phase in the 2030s, according to the statement.
The project is a "major turning point for CCS (carbon capture storage) in Australia by securing jobs, sustaining communities, and paving the way for a global hydrogen economy that combats climate change," the Global CCS Institute said.
But green lobby group Environment Victoria rejected claims the project would promote clean energy.
"Japan doesn't want dirty hydrogen. They want clean hydrogen but today's announcement simply creates a plant that will lock-in dirty hydrogen," Environment Victoria campaigns manager Nicholas Aberle said in a statement. ($1 = 1.2897 Australian dollars)