Hydrogen excitement ahead of reality

Andrew “Twiggy” Forrest is clearly excited about hydrogen. The Fortescue Metals Chair has been splashing his hydrogen ambitions across the Australian media for most of 2021, re-packaging his plans to build the worlds biggest green steel supplier and the worlds biggest renewables and hydrogen based electricity utility.

The numbers being thrown by Forrest are staggering: plans to build 300 gigawatts of new hydro and geothermal, another 500 gigawatts of solar and wind generation, and new green steel mills supplying 10 per cent or around 187 million tonnes each year from the Pilbara region in WA. Green steel production at this scale would require roughly 10 million tonnes of green hydrogen per annum. Heady stuff.

Australians appear to share this hydrogen excitement. Half of the 10 largest green hydrogen projects in the world are proposed to be built in Australia. In the real world, the scale of global hydrogen electrolysis remains small: a few megawatts of capacity each year, but is expected to scale up to more than 1000 MW of capacity by 2023. This is still very much at the research and development scale.

Not to be deterred, Forrest has re-announced he is “willing to” build a $1 billion gas and hydrogen generator at Port Kembla in NSW, on the same site as Fortescue’s proposed gas import terminal. It is unclear what share of the 650 to 1000 megawatts of generation would be fuelled by hydrogen and when the plant comes on line, although work will apparently start as soon as state and federal approvals are granted.

There are many challenges in co-firing a gas generator with any meaningful share of hydrogen, especially by 2023 when the Liddell coal fired generator will close, which appears to be the time frame in which Forrest is talking. Let’s take a closer look.

The largest hydrogen electrolyser in the world has been recently installed by Air Liquide in Canada. The 20 megawatt PEM electrolyser is run from hydroelectricity to maximise its utilisation (because green hydrogen electrolyses are so expensive). Bolting a 20MW PEM electrolyser to the power station in Port Kembla would cost around $40 million and could produce about 1000 tonnes of wind and solar powered hydrogen a year.

Because the hybrid gas-hydrogen generator would typically be running when there is low or no wind and solar, the hydrogen it produced would need to be stored at industrial scale. This is incredibly novel technology, with total supply costs currently estimated by RMIT running at around $490 per MWh.

That’s expensive fuel. At these costs, the more hydrogen is blended into the power station, the more money it will lose. Hydrogen investments are currently at the small demonstration scale, often loss leading. The four key factors that will drive hydrogen production costs are: the capital costs of the electrolyser (measured in $/KW), the utilisation rate of the electrolyser (intermittent renewables can only utilise the electrolyser for some (say 30 per cent) of the time), the cost of renewable electricity ($/kwh) and the conversion efficiency of the electrolysis technology (kWh/kg H2). Storage and generation capital costs are in addition to these. Hydrogen storage R&D is further behind electrolyser costs.

Given the high cost of hydrogen electrolysis and the non-existence of industrial scale hydrogen storage for power stations, it would seem unlikely that Fortescue is really going to build a hydrogen-gas generator at Port Kembla, unless the hydrogen runs when there is abundant renewable generation, which would seem a bit pointless and make the project a PR stunt rather than pioneering hydrogen as a future fuel. It would be great if he could prove us wrong.