Tasmania holds the renewable energy crown in Australia, having already met its 2022 target of being 100% self-sufficient in renewable electricity generation.
Wind and hydroelectric sources account for the majority of Tasmanian renewables but the state plans to add another energy source into the mix - hydrogen.
Hydrogen has quickly become the renewable fuel stock of choice for many countries around the world, with the likes of energy giants Fortescue (ASX:FMG) Metals Group, Woodside Energy Group and Origin Energy actively assessing a pivot into a cleaner type of gas.
Secure domestic supply first, export later
A recently announced round of funding grants for hydrogen projects in the most southern state has offered insight into the Tasmanian Government’s priorities – the grants will go exclusively to projects designed to sell clean fuel to the domestic market.
“The development of a domestic market for the use of locally produced renewable hydrogen will play a critical role in establishing a viable renewable hydrogen industry in Tasmania,” said Minister for Energy and Renewables Guy Barnett upon announcing the grants.
“It will be the latest step in the Rockliff Liberal Government’s plan to become a leader in green hydrogen production and for locally produced renewable hydrogen to be a significant form of energy used in Tasmania by 2030.”
The state has laid out its plans to become a leader in large-scale renewable hydrogen production, targeting globally significant levels of hydrogen production for domestic and export use by 2030.
The Tasmanian Government has published an action plan to achieve that goal, with broad goals including:
- Explore the opportunities for using locally produced renewable hydrogen in Tasmania and for export.
- Provide financial support for renewable hydrogen projects for export and domestic use, and continue investment attraction activities including with international trade partners.
- Ensure a robust and supportive regulatory framework and assess supporting infrastructure.
- Build community and industry awareness, develop skills, and support research and education.
Major corporations like Origin, Fortescue and Woodside had previously pinpointed Tasmania's Bell Bay as a prime location for green hydrogen or ammonia initiatives, given Tasmania's ability to leverage renewable energy sources like hydro and wind.
Initially, Bell Bay was slated to host Fortescue's inaugural green hydrogen venture but disagreements between the company and the Tasmanian Government over energy and water supply prices led to an impasse, stalling the project indefinitely.
“If we had a good source of power, we would do it, but we don’t, so I can’t do it without power,” said Fortescue Future Industries CEO Mark Hutchinson.
“When we have the power we will do that project – whether it’s domestic or for export, we will see at the time,” he said.
He indicated that Fortescue did not plan to build its own power solution for the Tasmanian project, waiting instead to see how the local power sector evolves.
Origin Energy has taken a similar stance, publishing a 2022 feasibility study for a proposed hydrogen or ammonia export project in Bell Bay that noted it was unlikely to be possible before 2027 because of slow progress on wind power projects and transmission infrastructure in the state.
“The cost of electricity generation, transmission and firming have the largest material impact on the levelised cost of ammonia, and these are not yet at a level that supports the project progressing,” Origin’s 2022 study read.
“Early renewable hydrogen and ammonia projects face challenging economics and are unable to take advantage of the cost reduction curve, which is forecast to occur as the industry scales up.
“The project is unable to execute binding agreements with customers without certainty on generation, transmission and firming within timeframe and price ranges.
“The feasibility study found that there is not enough transmission network capacity in the current network to support the project.”
Opportunity for smaller, more nimble companies
The ostensible uncertainty around energy supply and costs isn’t slowing down the smaller companies in Tasmania’s hydrogen sector, many of which are moving full steam ahead despite Origin and Fortescue’s concerns.
ReNu Energy recently signed a definitive agreement with superannuation firm HESTA for the evaluation and co-investment in its wholly-owned subsidiary Countrywide Hydrogen Pty Ltd and its proposed hydrogen projects.
The deal follows a $100 million investment from HESTA the year before.
Another small cal, Line Hydrogen – an as-yet unlisted company, targeting the London exchange – believes it is just months away from production, having recently received the green light for its George Town green hydrogen plant in Tasmania.
“The world is watching what LINE Hydrogen is doing as we’re at the forefront of green hydrogen growth and development,” Line Hydrogen founder and chair Brendan James said
“Our George Town Project is the first green hydrogen project for Tasmania as well as the first in our pipeline of green hydrogen production and activation projects across the country and internationally.
“The need to put in place a green energy solution to diesel replacement, particularly in the areas of heavy transport and heavy industry, has never been greater.”
Given we just passed over the 1.5 degrees Celsius mark, a greater sense of urgency – and some corporate fortitude – may be needed to achieve the energy transition before disastrous climate conditions are here to stay.