GOT GAS: Renewables are the lowest cost source of electricity and that’s a plus for green hydrogen

The recently released CSIRO 2023-24 GenCost report continues to flag renewables as having the lowest cost range of any newbuild electricity technology, which is potentially significant for green hydrogen, and – if you read between the lines – the folly of going the nuclear route.

Just to hammer the nails into the coffin holding the dreams of Australian nuclear proponents, the study found that a large-scale nuclear reactor would cost at least $8.5bn (excluding the nearly inevitable cost overruns), take about 15 years to build and start generating power, and produce electricity at twice the cost of renewables.

And just in case you think that the Coalition’s wonderchild – small modular nuclear reactors – would be the answer, the study found that the unproven technology would likely have costs of between $387 and $641 per megawatt hour (MWh).

That’s significantly higher than the $155-$252/MWh estimate for large-scale nuclear and just laughable against the $100 to $140/MWh for solar photovoltaic (ie solar panels) with firming (batteries and their ilk).

Renewables are a boost for green hydrogen

What does all this have to do with hydrogen?

It is important to remember that green hydrogen involves the use of renewable energy to power electrolysers that crack water molecules into oxygen and hydrogen with zero emissions, which is the entire point of green hydrogen.

This is particularly true given that the GenCost report also found electrolyser costs have decreased in the past year and that as they continue to fall, capital costs would become a smaller part in the total costs of hydrogen production.

CSIRO noted while the very low costs of electrolysers – at the bottom end of its projections – in China could not be immediately replicated in other regions due to differences in engineering standards and operating and maintenance costs, it nonetheless indicated a potentially achievable level of costs over the longer term.

So if capital costs are unlikely to be biggest contributor to the costs of generating green hydrogen, then what will be?

The answer to keep the chaser off your back is the cost of electricity and with renewables now running right smack at the lowest end of the electricity generation cost curve, it is not too much of a stretch to forecast that hydrogen production costs will come down in the not too distant future.

Lower costs = greater adoption?

That of course begs the $1 question, would lower cost green hydrogen translate to greater adoption of the gas? Would it replace methane (natural gas) at some future time?

The answer to the first is almost certainly.

Lowering the cost of green hydrogen production will undoubtedly lead to greater adoption, especially in markets that are difficult to decarbonise such as steelmaking and other heavy industries.

Use of hydrogen in transport – particularly heavy transport – is also likely to increase.

But will it replace natural gas? Will it be Australia’s new export product replacing liquefied natural gas?

Maybe, maybe not.

There are too many variables up in the air, a successful export industry would require demand in Australia’s traditional gas markets – Japan and South Korea.

Both have at one time or another voiced their intention to increase the use of hydrogen with Japan’s government recently passing a law to provide 15-year subsidies for locally produced and imported hydrogen.

Concrete demand will still be needed but for now, the Japanese law at least shows that there is progress towards achieving this objective.