The 3rd Mission Innovation Ministerial (MI3) meeting wrapped up in Malmö, Sweden last Wednesday (24th May).
In an encouraging step forward for development of clean hydrogen supply chains, the 23 Mission Innovation countries (including Australia, Japan and Korea) agreed on a new Hydrogen Innovation Challenge 'to accelerate the development of technologies needed for a global hydrogen market'.
Australia and Japan co-Chaired a Public-Private Hydrogen Roundtable at MI3 which was remarkable for the unequivocal views of the businesses represented, that adoption of zero-carbon hydrogen energy and fuel systems had now begun, and that the key constraint to its acceleration is now market scale rather than technology. This shared view covered all industry segments - power, transport, industrial processes and agriculture.
Could this international validation of the move towards clean hydrogen finally help Australia to shrug off doubts and disinterest about renewable hydrogen exports, and begin taking decisive steps with regional trading partners for collaboration on renewable hydrogen supply chain development?
If one strips away all the equivocation and looks at the big picture for energy, especially in the Asia-Pacific, Australian leadership to establish renewable energy export via hydrogen really is a no-brainer.
Imagine this business scenario: you have huge volumes of a product; so much indeed that you will never, ever, have a domestic need for more than a small portion of it.
At least two of your major customers in Asia, who buy other products from you at enormous scale, have plans for their markets that, in short, can only be achieved if they can source supplies of exactly this new type of product - the one you have in inexhaustible excess.
Plus, a host of potential new customers in developing Asia are right now grappling with the great dilemma of how to establish energy systems that will support their economic development targets while reversing the skyrocketing carbon emissions, air pollution and respiratory health issues that have been the by-products of their economic development so far. Their success in this will be critical to the challenge for the world to achieve Paris Agreement GHG trajectories.
Your product would fit this need like a glove. With active engagement from you as a seller, including advice on how markets, capital funding and distribution could be facilitated to mutual benefit, there is a better than even chance your product could become the main solution to their problem.
But wait ... there’s more. Your domestic customers would benefit too.
Supply of the huge volumes needed by your Asian customers - current and new - would generate production and distribution economies of scale far beyond that possible within the domestic economy, allowing lowest possible unit costs of supply domestically as well. (Iron ore, LNG, coal – Australia knows better than most countries how regional economies of scale work.)
This is the situation Australia finds itself in with renewable energy exports and low-carbon growth needs across Asia. This is an opportunity for long term national benefit – economic and strategic – the scale of which is unmatched today.
Australia has virtually unlimited renewable energy generation potential - more than Australia can ever use domestically. Stellar combinations of wind and solar are possible, producing capacity factors above 75% in many locations and up to 85% in some. Land is plentiful.
Asia needs industrial scale zero-carbon energy supply to reach Paris Agreement targets, and has none of those advantages.
In the case of the big economies Japan, Korea and Taiwan – zero-carbon energy is needed to reduce both oil reliance and nuclear, at the same time. In the case of the developing economies, of which Indonesia and Vietnam are leading examples, economic expansion and energy access must be built on zero-carbon power and fuel supply, if there is to be any hope of achieving Paris Agreement targets.
Renewable hydrogen energy storage and export (along with, in some situations, direct HVDC links) provides the means to marry supply side capacity in Australia with demand side markets across Asia and the Pacific.
What has Australia’s approach been thus far in response to this historic opportunity?
Proactive engagement for renewable energy supply chains? Bilateral and multi-lateral collaboration with our neighbouring economies to drive market development? Advocacy of renewable hydrogen energy exports as a solution to the challenges posed by the Paris targets?
Essentially, the Australian approach so far has been in two, rather dispiriting, parts.
First, there is a deep skepticism about hydrogen, along the lines ‘Not convinced. Hydrogen is expensive; we need more R&D.’ Ongoing R&D, sure. But surely we’ve ample evidence that energy costs are principally driven down by economies of scale? Why would renewable hydrogen be any different? Solve the market constraint, solve the cost constraint.
Second is the rather blithe dismissal of the scale of investment already made by countries like Japan and Korea in the move to clean hydrogen, characterised by comments along the lines ‘If they want it, let them pay to get it’.
Well, that’s one approach. Anyone in business who has ever sought to build demand for a new product in a nascent market, and to position to be the major supplier into that market, might question the logic of that approach, but it is one way to go.
How might the prospective customers view it?
Let’s see the situation from Japan’s perspective. For those not familiar, Japan has invested in a multi-decade, multi-billion dollar program ultimately aimed at converting the Japanese economy (No.3 in the world) to run on renewable energy stored in the form of hydrogen.
As recently as December last year (2017) Japan doubled down on this investment through adoption of an updated ‘Hydrogen Basic Plan’. Alongside government, every major trading company in Japan is involved. Japan’s automotive and power sectors have also invested billions to develop vehicles and devices that use clean hydrogen.
This is a big thing for Japan. With virtually no fossil resources of its own, a tiny, densely populated, seismic land-mass, poor solar and wind resources, and a population firmly opposed to more nuclear, what does Japan do for energy security and carbon reduction now? It’s ‘Rock and a hard place’ territory.
Japan needs industrial scale clean energy for electricity, transport and industry, and clean hydrogen is the way Japan has identified to meet the need.
Having put its money where its mouth is for decades, who could criticise Japan for thinking that its major upstream energy supply partner in the region, the supplier with the resource, standing to benefit most from Japan’s need, might take a proactive role and start working seriously to make it all happen?
So too Korea.
Billions invested to become arguably the global leader in hydrogen fuel cell electric transport, with plans to convert the entire transit bus system to clean hydrogen, and now looking to Korea’s energy ‘partner’ Australia to help solve the puzzle of where the carbon-free hydrogen fuel will come from.
The response from Australia? Ho-hum.
Proactivity, so far, hasn’t been Australia’s long suit in relation to clean hydrogen supply chains.
As an energy ‘partner’, Australia talks a good game, but if you’re looking for proactivity to implement a really significant change, other ‘partners’ like the UAE and Saudi currently look like better bets.
Across established Asian economies, energy, transport and industrial production systems are being disrupted. In developing Asian economies, the systems needed to underpin growth and development are being designed now.
Monumental change is afoot. The foundations for Asia’s 21st century energy systems are being laid. The central theme is ‘no more carbon’.
Australia sits in the box seat, awash with renewable energy resources for which there is no prospect of a domestic market. As the industry participants at the MI3 Hydrogen Roundtable all agreed, the technologies to commence clean hydrogen export and use are available now.
What are we waiting for precisely? If this is not an economic opportunity to grab with both hands, what is?
Perhaps Mission Innovation 3 will come to be reflected upon as a moment when Australia's disinterest and equivocation were cast off, and proactive engagement with our Asian neighbours to create renewable hydrogen energy export supply chains began.