A few days ago, Craig Parker of Ethical Advisers Funds Management in Brisbane, Queensland, Australia, reached out to me to get some input. He and his firm had been asked as a local ethical investment and ESG focused fund management organization to provide input on Queensland’s hydrogen strategy, which like so many such strategies today is heavy on hydrogen for energy.
He had some initial ideas, but knew that I was critical of a lot of the hydrogen economy hype which has seen a resurgence in recent years. I’d done the projection in the graph above in 2021 and refined it a couple of times since based on conversations and feedback from global experts, and think it’s closer to right than most. This is an expanded version of my quick email response to him to assist him to provide input to Queensland policy makers.
That said, I’m not critical of hydrogen, I’m critical of green hydrogen as a store of energy and synthetic fuels made from green hydrogen and other feedstocks. The efficiency is very low, the carbon footprint increases each time you transform it, and there are almost always cheaper, lower carbon, more effective alternatives. That’s true for green hydrogen and synthetic fuels for road transportation, aviation, and marine shipping as well.
Parker was wondering whether hydrogen energy storage was suitable for firming the grid. He was aware of significant renewables curtailment and asked whether that storage medium was appropriate. Curtailment globally occurs for multiple reasons, so it’s always worth disambiguating it. For example, in Ontario curtailment of renewables frequently occurs because that province has too much inflexible nuclear, so the regulatory and contractual agreements that have evolved allow the grid operators to shut down renewables when there’s too much supply instead. In China, there have been transmission shortfalls.
But Queensland has a different challenge: a lot of rooftop solar that has no price signal so it always runs, matched with a lack of grid storage. As in California, the duck curve quacks loudly in that Australian state. As a result the Australian Energy Market Operator (AEMO) frequently curtails generation for economic reasons. Grid storage would allow time shifting of solar to evenings or next day demand periods.
However, hydrogen as a medium of electricity storage for firming the grid is a poor choice. Green hydrogen will be costly, as industrial-scale electrolysis plants are capital intensive and require firmed electricity 24/7/365 to run at high capacity factors, and the round trip efficiency of electricity to hydrogen to electricity is below 30%.
By comparison, this is the ANU GIS Queensland view of all closed loop, off river, pumped hydro sites with more than 400 meters of head height, top and bottom reservoirs close together horizontally, close to transmission, and off of protected lands. It’s from a study they did a couple of years ago with lead researcher Matt Stocks, who I communicated with at the time. I use the GIS atlas regularly in my discussion with energy entrepreneurs, institutional energy managers, and investors to help them understand the scale of the opportunity. Per the study, there is 100 times the resource available with the restrictions noted as all global energy storage requirements.
Further, pumped hydro is 80%+ efficient from electricity to pumped water to electricity. That’s a big part of the reason it’s by far the largest form of grid storage globally today and why it’s still by far the largest form of grid storage under construction right now. Switzerland just turned on a pumped hydro facility with 900 MW / 20 GWh of capacity, larger than all global battery grid storage in existence by itself. Earlier in the year, China connected a single pumped hydro facility to its grid which dwarfs the Swiss site, with 3.6 GW and 40 GWh of capacity. China has another 50 GW under construction in China with likely over 500 GWh of energy storage, and is building pumped hydro facilities around the world under its Belt and Road Initiative, for example the 344-MW Kokhav Hayarden pumped storage facility in Israel and a 500 MW site in the Philippines. Alberta in Canada and the Faroe Islands are building smaller facilities. Ontario, mentioned earlier, balances its inflexible nuclear generation with a recently expanded pumped hydro facility at Niagara Falls, and the Michigan Ludington facility was built for the same reason, to give nearby nuclear plants something to do at night.
Pumped hydro isn’t a sexy technology, but it’s been built commercially since 1907, uses off-the-shelf industrial components and has an operational lifetime in excess of 100 years with basic maintenance and occasional turbine replacements. When I spoke with China Light and Power, Hong Kong’s utility, in 2021, it was operating its mainland Guangdong 2.4 GW / 25 GWh pumped hydro facility in hands-free, remotely operated mode, and had been for over a decade. This is industrial scale tech that just works, doesn’t sit on rivers, doesn’t block fish runs, doesn’t get in the way of recreational or commercial river uses, and due to the high head height has relatively small reservoirs and uses little water.
Queensland loves coal and coal seam gas, which is mostly methane and a replacement for natural gas. 50% of Queensland’s exports are thermal and metallurgical coal and gas. That revenue is disappearing in the coming couple of decades, which is understandably concerning to the government, and they are hoping green hydrogen will replace it. It won’t.
That said, coal country is pumped hydro country, and coal workers and engineers are excellent skilled resources for building pumped hydro and already live in coal country. As you can see, Queensland is rich in sites near Cairns and Brisbane, where the majority of the people and electrical demand are. A lot of those pumped hydro sites are where the coal mines are.
Queensland has an excellent opportunity to firm its renewables by pivoting coal workers to building pumped hydro sites instead with coal miners who don’t have jobs digging up black carbon rich dirt anymore. Green hydrogen for electricity storage is unfit for purpose, but pumped hydro isn’t.
Australia doesn’t refine much oil. The last two refineries, however, are being propped up through 2030 with the expectation that they’ll be producing very low sulfur fuel by the end of 2024. 42% of all hydrogen used globally is in oil refineries, as the demand projection above shows, mostly to desulfurize crude oil, so this is likely a major demand for a few years for green hydrogen.
Australia uses a lot of fertilizer, manufacturing much of the commodity itself. UAN, SOA, and anhydrous ammonia in the chart above are all ammonia products, and hence strong demand areas for green hydrogen. Currently Australia manufactures hydrogen from natural gas and coal with very high CO2e per ton. Incitec in Queensland manufactures a lot of fertilizer, including its Big N anhydrous ammonia product. Manufacturing green fertilizer in Queensland for domestic markets should be job one, and will persist economically.
Exporting green ammonia for fertilizer will be a good future market. The world needs to displace the massive fossil-fuel sourced ammonia-based fertilizers, and Australia’s wide open spaces, sunshine, wind, and accessible grid storage pumped hydro locations make it well suited to being a big player.
All ground transportation will be battery-electric, grid-tied, or hybrid battery-grid tied. Heavy vehicles won’t go hydrogen. Biodiesel will be a bridge fuel for more remote locations until full electrification occurs, and then biofuels will be reserved for long-haul aviation and shipping. Green hydrogen is vastly more expensive in every case than renewables to batteries, and every ton of CO2e from full lifecycle renewable electricity is multiplied in green transportation if it makes hydrogen and synthetic fuels.
Germany’s recent announcement that hydrogen trains are 3x as expensive to operate as grid-tied, battery, and hybrid grid-battery trains, and hence will not be implemented further after the one 79-km route is hydrogenated is a data point to consider from that hydrogen-centric country. China’s 500,000 electric buses, equivalent number of electric trucks, and 40,000 km of high-speed, grid-tied, electrified freight and passenger rail is another data point to consider.
So that was my guidance to Parker, and through him hopefully to attentive ears among Queensland’s policymakers. Green hydrogen for energy is an economic dead end, not a replacement for fossil fuel revenues, and the sooner Queensland policy makers internalize that, the sooner Queensland will be able to address its economic realities. And when it does, its hydrogen policy should look a lot more like what I’ve addressed above than its current strategies.
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