By Jarrod Leak
CEO, Australian Alliance for Energy Productivity (A2EP)
21 January 2025
Recently the energy conversation in Australia has centred around nuclear. But anyone with any expertise or actual experience in delivering energy services in Australia will tell you that for a system as complex as energy, with the range of infrastructure and stakeholders, there is no single answer to all our challenges. It needs a multifaceted approach which looks to both the supply and demand sides of the equation.
We need to resist the hype around any technology and look at the real numbers.
Over the last few years there has also been excitement about green hydrogen as a major part of Australia’s decarbonisation pathway across sectors, including transportation and industry. However, as demonstration projects roll out and the numbers come in, we are seeing a certain amount of pushback on that. BloombergNEF's latest forecast more than triples its previous 2050 cost estimate for green hydrogen, mostly driven by higher future costs for electrolysers, while a study from Harvard University has stated that green hydrogen costs will remain high due to storage and distribution costs nullifying any cheaper production costs.
While A2EP’s work for the Australia Hydrogen Council identified an important role for hydrogen providing heat at high temperatures, it also identified limitations and technical challenges in such a transition and that it is far from a ‘drop-in’ fuel, unlike biomethane for example. Our boiler mapping work from 2024 reinforced this message with very few industrial players considering hydrogen for heating in their decarbonisation plans.
As hydrogen will likely be part of the energy mix in some way, I appreciate the need to ‘test the water’ and get more experience with producing and handling hydrogen, as will been done with the Hydrogen Park Murray Valley project in Wodonga, Victoria, (and another involving AGIG in Wagga Wagga, NSW). These projects will blend 10% to 20% hydrogen into the fossil gas network but likely no great amount more than that – that is, they can’t enable full decarbonisation without dramatic augmentation of the network and the end user appliances/processes.
The cost to ‘test the water’ is staggering. With the support of more than $48 million in public funds, the $65.4 million Hydrogen Park Murray Valley project in Wodonga project will deliver around 60,000 GJ of hydrogen for heating each year.
Let’s take a look at the outcomes we could have seen from a similar level of support for other far more economical renewable heat solutions, such as electrification (heat pumps), biogas and biomass to decarbonise heat for manufacturing in the Wodonga-Albury region:
Alternative scenario 1 – electrification
More than half of the gas demand in the area needs heat below 250° C, which is easily supplied by commercially available heat pumps and electrode boilers. Firstly, most boilers are 80% efficient, so the 60,000 GJ of hydrogen will only deliver 48,000 GJ of heating. If we assume 25% of this 48,000 GJ is done using heat pumps with a COP of 4 and the remainder using electrode boilers or electric thermal energy storage (eTES) with a COP of 1, then the 48,000 GJ/year of heating could be achieved with around 39,000 GJ or 10,800 MWh of electricity. CAPEX for such electrification is typically around $1,500/kW or around $3 million to do the heat job thus giving an equivalent levelised cost of heating (LCOH) of around $30/GJ (assuming a very conservative n electricity price of $100 per MWh) – that’s about 5 times less than the hydrogen solution.
‘What about electrical upgrades?’ I hear you ask. If this heating was done at a single site, worst case scenario would be a $2 million upgrade, giving a total CAPEX of $5 million to do the same as the $65 million hydrogen option.
Alternative scenario 2 – biogas
Waste from the local wastewater treatment plant, meat processing plant and food manufacturers would create sufficient waste stream to deliver at least 60,000 GJ/year of biogas. A new anaerobic digestion facility to produce this gas would cost approximately $10-15 million and provide a LCOH of around $25-35/GJ (depending on certificates secured). Assuming the biogas is used directly at an industrial facility then no additional upgrading or network costs are incurred.
Alternative scenario 3 – biomass
A new biomass boiler to provide 60,000 GJ/year would cost around $4 million and supply heat at around $10-15/GJ.
For the bargain price of $48 million, all local industries could have been decarbonised: with $14m for a biogas hub, $5m for a biogas pipeline from the local landfill, $6m for biomass boilers, $8m for electrical upgrades, $4m for heat pumps, $6m for eTES or electrode boilers $4.5m for solar thermal plus $500,000 for knowledge sharing, On top of this, waste challenges would be addressed, more new energy employment opportunities would be created and Albury-Wodonga would be on the global map as a renewable heat showcase destination, ready to teach other communities how to do it.
An all-in approach for any technology is risky. Surely the level of public support and investment should be commensurate to the potential outcomes and deliver best value for taxpayers? At the moment it feels as if a disproportionate amount of funding is going to large hydrogen projects while other far more economical renewable heat solutions that can deliver the heavy lifting of industrial decarbonisation – and soon – receive a fraction of that support. The technologies are proven. The services to build them are here already. We just need a more balanced approach to support and funding so we can build a competitive marketplace for them to thrive and deliver lower cost energy.