South Australian hydrogen could be... profitable?

Barely a day after Prime Minister Scott Morrison unveiled a $1bn energy deal with South Australia that includes funding for emissions reduction projects such as hydrogen, modelling has shown that hydrogen plants in the state could be profitable.

Research from Cornwall Insight Australia indicates that a hydrogen plant operating in the state this summer would have made a profit of about $2.3m.

This is based on a 20% utilisation and includes the expected quarterly repayment on the $593 million of government debt with interest, operating costs, and the net cost of energy as well as a price of $2 per kg of hydrogen.

The assumed hydrogen price aligns with the Australian Government Technology Investment Road Map goal of enabling clean hydrogen under $2/kg.

“The South Australian Labor party has committed to building a hydrogen production, storage and electricity generation facility if elected at the next SA State election,” Cornwall senior storage consultant Benjamin Macey noted.

“Their proposal includes a $220m 250MWe electrolyser, $31m for 3,600 tonnes of liquefied hydrogen storage and $342mn for a 200MW CCGT power station.

“Our research shows that if such a plant were in operation at the stated capital costs, it could be profitable.”

South Australian energy plan

The modelling that a hydrogen plant could be profitable even at the $2 per kg, the price point at which green hydrogen is competitive against hydrogen produced from fossil fuels, is a positive takeaway for South Australia.

While the agreement with the federal government is focused primarily on natural gas – a move that has been panned by renewable energy pundits – it does include $400m for carbon capture and storage, electric vehicles, hydrogen and other emissions reduction projects in the state.

Three hydrogen hubs at Port Bonython, Port Adelaide and Cape Hardy/Port Spencer had previously been identified as having the potential to be enhanced with further backing.

Both Port Bonython and Port Spencer could support green electrolysers of up to 2.5GW, which in turn would support wind and solar additions of between 6GW and 6.5GW at each facility.

Port Adelaide is seen as a ‘localised’ green energy facility supporting up to about 800MW of contracted wind and solar.