Investors See Green As Australia’s Big Hydrogen Opportunity – New Report

Investors want Australia to prioritise the development of a low emissions, high integrity hydrogen industry – therefore favouring green hydrogen over blue.

Green hydrogen, which is produced with renewable energy, appears more economically viable and avoids serious investment risks associated with blue hydrogen, which uses gas as the main input, according to new research commissioned by the Investor Group on Climate Change.

The new report highlights a series of investment risks associated with blue hydrogen, including high gas prices, the volatility of gas supply, and its reliance on carbon capture and storage (CCS).

There is significant uncertainty as to whether carbon capture and storage will be able to capture high levels of emissions created in the production of blue hydrogen and the processes are likely to remain very expensive, according to management consultancy firm Baringa who produced the modelling in the report.

Accelerating Australian and global policies for action on climate change, including carbon pricing and developing emissions standards for hydrogen, are also likely to favour green over blue, according to the report.

IGCC CEO Rebecca Mikula-Wright said: “Australia’s hydrogen industry is at a critical juncture. We have the opportunity to set the course now for a low emissions and high integrity hydrogen industry, and one that must be aligned to the Paris based temperature goals of limiting warming to 1.5c.

“Billions of dollars are going to flow into the industry over the next decade and it’s crucial those investment decisions are made with foresight about the different opportunities and risks of green versus blue hydrogen.

“Decision makers need to be clear about the financial and environmental risks associated with carbon capture technology in the hydrogen value chain, and mindful of our trading partners’ policy directions.”

The report identifies that investors have a key role to play in:

• generating demand from hydrogen users for low-emissions hydrogen, which will probably be green,
• advocating for the creation of robust standards for certifying low-emissions hydrogen,
• supporting market enablers of the industry including increasing renewable energy investment and shared asset access arrangements such as hydrogen hubs,
• supporting policy settings that will accelerate the transition away from fossil fuels to low emissions fuels like green hydrogen.

Australia’s reputation for credible governance provides the local industry with an opportunity to define the standards for low-carbon hydrogen.

Establishing a hydrogen certification scheme that measures lifecycle emissions will help Australia take advantage of the green premium as it arises.

With many sectors poised to seek alternatives to higher emissions fuels, investors see a strong opportunity for Australia to be positioned as a key hydrogen producer and user, and will look for ways to accelerate the transition.

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