Renewables Are Our Future

As you may know I’m a great believer in renewables and shifting our economy completely out of carbon – whether as electricity for our houses or fuel for our transport. The climate crisis requires urgent action and shifting out of coal and oil is a necessary step in giving us a chance in the race to slow global warming.

As our Chief Scientist, Dr Alan Finkel, told a National Press Club audience in February, at the start of the industrial revolution levels of carbon dioxide in the atmosphere were 280 million parts per million. Today it is 409 million parts per million. Global carbon dioxide emissions were 24 billion tonnes in 1998 but by 2018 they were 37 billion tonnes. No wonder global warming is now already over 1 degree, despite international commitment to keep warming at or below 2 degrees. Record temperatures, species extinction, drought, bushfires and other volatile weather events are the harbingers of that change.

The arguments against moving to 100 per cent renewables in the medium term future are rapidly running out of steam. Labor has committed to a target of zero net emissions by 2050 – which is what our commitment to the Paris Climate Agreement implies - and I’m hopeful that we can get there earlier. The Coalition Government has made no such commitment, even though their Tory counterparts in the UK legislated for zero net emissions in 2019.

We need and require energy. Thinking we will use less energy globally, especially as the developing world lifts its living standards, is naïve and dangerous.  What we need to do is find non-carbon forms of energy.

Estimates about what we thought would be possible or what the cost of renewables might be in a decade are being smashed as the technology learning curve takes on an ever steeper trajectory. A learning curve describes technological progress (measured generally in terms of decreasing costs for a specific technology) as a function of accumulating experience with that technology. The learning curve on renewables is just beginning, while the learning curve on coal and nuclear is well and truly over.

Only a few short years ago the cost of a solar panel was many times what it is today. That is because the combination of technological advances, combined with mass uptake, has brought the price down. The same is happening with battery technologies.

The end result of that is a mix of new build solar and wind is now at about  $50-60 per megawatt hour (Mwh) without storage and around $130-$140 per Mwh with battery storage, although that price will continue to fall as battery technology improves.

Meanwhile, building new coal power plants is increasingly expensive because coal power is at the end of its learning curve and now there is an increased ‘risk premium’ as investors, banks and insurers give the industry an increasingly wide berth. Building costs for coal range from $140-$150 per Mwh for black coal and around $180 per Mwh for brown coal (including a 5% risk premium). Coal will only get more expensive.

So renewables already have coal beaten on price and risk, with the additional benefit of being ‘clean’.

The cost of new build nuclear power is double that of coal, at around $290 per Mwh. Plus, there is the problem of the toxicity of the spent fuel and the risks that nuclear materials will find their way into weapons. Even if we could solve those problems, the recent panacea proposed by the nuclear industry is the small modular reactor (SMR). Yet SMRs don’t actually exist right now – they are simply designs on paper. The first prototype isn’t scheduled to be finished until the late 2020s and, even if the design worked in the real world, it wouldn’t be commercialised until well into the 2030s or even 2040s. So nuclear power is too toxic, too expensive and too slow.

Already power prices are beginning to fall as we see a flood of renewable power entering the national electricity market. The national market regulator, AEMO, has indicated that contracts that will be bought this year and in 2021 are down in price by between 13% and 17% - and that estimate was before the fall in demand caused by COVID-19. As Victorian Energy Policy Centre director Bruce Mountain told the ABC’s The Business, “The private sector would not touch it [new coal fired power plants] with a barge pole.”

So even if I was technology neutral, which I’m not, it is a no-brainer to believe that renewables are our energy future. Sure, at this stage of the learning curve, there are problems with system balance as we replace a single source of base-load power with multiple sources of renewable energy that may come and go in the system.

Clearly, until that issue is resolved over the next decade or so, there will be a need for some base load power in the system for peaks as the system transitions to 100% renewables. That will largely be the role of natural gas (but not fracked gas).  We also need to spend billions on renewing an aging energy grid that is no longer fit for purpose as both large-scale solar and wind are built and households increasingly want to feed energy into the system.

We have a long way to go. Only around 18% of power in NSW and Victoria is derived from renewables and just under 9% in Queensland and WA. Only South Australia and Tasmania with around 52% and 95% respectively produce most of their electricity from renewable sources.

But renewable energy salvation may take a form other than solar, wind and waves.

In his National Press Club address Dr Alan Finkel lauded the emerging ‘hero’ – hydrogen. Now hydrogen was given a bad wrap by the explosion of the airship Hindenburg in 1937. Thankfully it is making a comeback.

There are two ways of producing hydrogen by splitting water – either by using coal or natural gas (which produces dirty hydrogen because carbon dioxide is emitted as a by-product) or by electrolysis using renewable energy (clean hydrogen with no dirty by-product). Clearly I support clean hydrogen using renewables because I am cynical about ‘carbon capture and storage’ which has not been proved commercially or environmentally viable.

I, for one, am really excited about the prospects of hydrogen. Labor committed $1 billion towards the development of a hydrogen industry at the 2019 election.

Hydrogen has now been placed at the centre of the energy strategic plans of both Japan and Korea. It could be a huge export industry for us, replacing natural gas which at $50b a year is our third largest export after coal and iron ore. Of hydrogen, Dr Finkel said:

Hydrogen can store energy, not only for a rainy day, but also to ship sunshine from our shores, where it is abundant, to countries where it is needed.

Let me illustrate this point. In December last year, I was privileged to witness the launch of the world’s first liquefied hydrogen carrier ship in Japan. As the vessel slipped into the water I saw it not only as the launch of the first ship of its type to ever be built, but as the launch of a new era in which clean energy will be routinely transported between the continents. Shipping sunshine.

And, finally, because hydrogen operates in a similar way to natural gas, our natural gas generators can be re-configured in the future to run on hydrogen — neatly turning a potential legacy into an added bonus.

We truly are at the dawn of a new, thriving industry. There’s a nearly A$2 trillion global market for hydrogen come 2050, assuming that we can drive the price of producing hydrogen to substantially lower than A$2 per kilogram.

We have an abundance of renewable power and, in the right parts of Australia, we have an abundance of water.

The value of hydrogen as a fuel to complement solar and wind is inestimable. There are so many uses - from fuelling our road transport, as a piped replacement for natural gas in homes to powering industry.

A recent example is the work being done to replace coal with hydrogen in the making of steel. We will always need steel – to make everything from electric cars to wind turbines. Here is Dr Finkel again:

The use of coal in steel manufacturing is responsible for a staggering 7% of carbon dioxide emissions. Persisting with this form of steel production will result in this percentage growing frustratingly higher as we make progress decarbonising other sectors of the economy.

Fortunately, clean hydrogen can not only provide the energy that is needed to heat the blast furnaces, it can also replace the carbon in coal used to reduce iron oxide to the pure iron from which steel is made. And with hydrogen as the reducing agent the only by-product is water vapour.

A May 2020 report by the Grattan Institute Start with Steel predicts that Australia has an historic opportunity to produce green steel with our abundant solar and wind resources by using green hydrogen to replace metallurgical coal. According to Grattan, capturing 6.5% of the world steel market would mean about $65 billion in export revenue and 25,000 jobs in NSW and Queensland. More than enough to replace those jobs lost in coal.

And if you think this is all fantasy, think again! Last November German steel giant Thyssenkrupp, one  of the largest steel producers in the world  at 12 million tonnes annually, completed a successful first ever demonstration of a steel furnace completely run on hydrogen. Thyssenkrupp say they will be running three furnaces completely on hydrogen by 2023 on the way to their commitment to a 30% reduction in carbon emissions by 2030 and net zero emissions by 2050.

Thyssenkrupp intend by the mid 2020s to use hydrogen fuelled furnaces to make ‘sponge-iron’ and then use renewable power to turn that iron into crude steel. Swedish steel manufacturer SSAB is also working with mining company LKAB and energy company Vattenhall on a similar process (using decarbonised hydrogen to replace coking coal) which will reduce Sweden’s emissions by 10% and Finland’s by 7%. (See here for more)

Further cause to reflect is that German furnaces use high grade Australian coking coal. Political parties, including Labor, have made the case that high-quality metallurgical and coking coal is different to thermal coal (coal burned to produce electricity). We’ve argued that the world will need that coal for decades to come to make steel in particular.

As Labor leader Anthony Albanese told a CEDA conference last year “It takes more than 200 tonnes of metallurgical coal to produce one wind turbine. According to forecasts of global growth in wind power capacity to 2030, Australia could be exporting 15.5 million tonnes of coking coal to build these turbines.”

But will we? Germany is phasing out of coal production by 2036 and it is likely, once hydrogen becomes widely available as a technology, that European countries will put tariffs on polluting energy imports like Australian coal, providing an even bigger incentive for manufacturers like Thyssenkrupp and SSAB to accelerate their move out of coal. But our coal exports and how to transition out of them is a subject for another day.

At a local level, the idea that hydrogen will replace electricity and natural gas is on the cusp of implementation.

For example, in Western Australia the Shire of Shark Bay is working with Horizon Energy to build a hydrogen power plant, to provide electricity to a small town. To produce the hydrogen, water will be split using a 500 kilowatt solar farm. The hydrogen will then be stored in fuel cells and be available to up to 100 houses and businesses. Excess solar energy will be fed directly into the grid and this will work in conjunction with the town’s four wind turbines. They are hoping it will be a model for other regional towns as Horizon Energy has committed to provide no new diesel power generators from 2025.

There are dozens of projects around the country – from Tasmania to Queensland - featuring hydrogen. Some are about making natural gas more effective and go further by mixing it with hydrogen. At the Tonsley technology hub in Adelaide’s south, a hydrogen electrolyser has been built, powered by renewables. The $11.4m demonstration model will produce up to 480kg of hydrogen a day which will supply 700 homes in the suburb of Mitchell Park with a blend of up to 5% renewable hydrogen through the natural gas network.

Gladstone in Queensland is about to start a feasibility study into a green hydrogen plant which would see the town being powered on a 10% blend of hydrogen and natural gas, helped by a $19m grant from the Queensland Government. Gladstone also has three other proposals to develop large volume hydrogen plants – in the case of Austrom Hydrogen a plant to produce 200,000 tonnes of green hydrogen a year for export. Northern Oils biofuels pilot plant at Gladstone is also experimenting with hydrogen production.

And only a few weeks ago (SMH 3 July, 2020) we heard about the breakthrough by University of NSW Hydrogen Energy Research Centre researchers who have developed metal alloys capable of storing surplus electricity (derived from solar panels) in the form of hydrogen much more cheaply than lithium batteries.

This means that rather than wasting excess renewable power it can be used to produce hydrogen in a mini-electrolyser and then stored in solid fuel cells ready for use when there is no sun or wind. They aim to produce the first hydrogen batteries, holding up to 60 kilowatt hours compared to the biggest 10kw lithium batteries, commercially by 2021. The cost could be as low as 2 cents per kwh compared to around 20 cents per kwh using lithium storage or buying from the grid.

Of course, many of these developments are just at the beginning. Many won’t make it from the lab to mass markets. And there are still big challenges with large scale storage and transport of hydrogen to overcome.

However, I’m excited about the array of projects and the potential that hydrogen has to be an alternative renewable energy pathway, complementing other renewables.

Just as the technology learning curve on solar and wind is ramping up, so too will it accelerate for hydrogen.

To their credit, and with the guidance of the Chief Scientist, the federal government with all states and territories (the COAG Energy Council) signed off on the National Hydrogen Strategy in late 2019.

The Strategy, identifying 57 joint actions grouped around eight themes aims to position the Australian hydrogen industry as a major player in global terms by 2030. The strategy establishes a “set of nationally coordinated actions involving governments, industry, and the community.” In launching  the Strategy Coalition Ministers Cormann and Taylor indicated that the Clean Energy Finance Corporation (CEFC) will reserve $300m (in an Advancing Hydrogen Fund) for hydrogen projects and the  Australian Renewable Energy Agency (ARENA) will reserve $70m to kickstart electrolyser projects. The Ministers’ press release said it takes the Coalition’s commitment to hydrogen to over $500m.

This investment pool is welcome. However, I would urge the Commonwealth and the states to invest more. The CEFC and ARENA money isn’t new or additional – it is simply reserved specifically for hydrogen from funds that already go to renewable projects, including hydrogen projects. If hydrogen is to be developed quickly as both a domestic fuel and an export industry, especially in the context of post-COVID recovery, then we need double and triple that investment.

I will certainly be urging Labor to take robust commitments on investment in hydrogen to the next election. Hydrogen as a fuel isn’t just a fanciful idea. It is here and it is real, and it can be a major step forward in tackling climate change and creating jobs.

We have nothing to lose and everything to gain.

This story was originally published in Libby's July Newsletter. Please click here to subscribe to the email newsletter.