May 2021
Purpose. To suggest a realistic view on the prospects for “green hydrogen.”

There is a worldwide push to achieve large-scale commercial industries based on so-called ‘green’ hydrogen produced by splitting water (electrolysis powered by wind and solar) instead of the usual method (steam reforming using natural gas) that generates CO2 as a by-product.
The Commonwealth government has nominated green hydrogen as one of the five lanes in the “Technological Highway” towards a green energy transition. Some $300Million has been allocated for grants to private enterprises to pursue research and development.
State governments are contributing on a smaller scale.

Critical Issues.
Despite the media hype for green hydrogen around the world, there is still virtually no significant volume of green hydrogen produced. Almost all the hydrogen in use comes from the traditional hydrogen extraction method relying on steam and natural gas. And for good reason – this is the cheapest way of extracting hydrogen.

It is currently used as a feedstock for many industrial processes and the hope is to use it as a “green” energy carrier to replace fossil fuels for many purposes including creating steel, generating electricity, fuel cell electric vehicles, shipping and aviation.
Huge amounts of electricity are required for the electrolytic process and states that are struggling to keep the lights on will have to upgrade their nuclear capacity and/or expand RE exponentially.
Most of the energy is lost in the chain from production, storage and transport to final use.
“As a chemical feedstock, of course, hydrogen is irreplaceable. However, as an energy storage medium, it has only a 50% round-trip efficiency – far worse than batteries. As a source of work, fuel cells, turbines and engines are only 60% efficient – far worse than electric motors – and far more complex. As a source of heat, hydrogen costs four times as much as natural gas. As a way of transporting energy, hydrogen pipelines cost three times as much as power lines, and ships and trucks are even worse.” [] It depends on vast quantities of very cheap electricity and other developments to drastically reduce the cost. According to the latest edition of the JP Morgan Energy Review this is most unlikely to happen in the foreseeable future.
The US Department of Energy released a study on the potential for green hydrogen production based (a) varying the price of electricity, which is by far the largest component of electrolysis costs, and (b) assuming 30%-60% declines in upfront capital costs as production scales up.

The study concluded that without a substantial carbon tax, further electricity and capital cost reductions are required for green hydrogen costs to converge with fossil-fuel hydrogen costs. In addition, for green hydrogen to penetrate the market, existing turbines, engines, heating systems and other industrial equipment that now uses natural gas would need to be replaced or upgraded. [See item 2 in the extract from the JP Morgan report in the references.

Another factor that is particularly significant in Australia is the need for large quantities of very clean water for the process. This may not be an issue for the small pilot projects that will be funded by these grants but it will probably preclude large-scale commercial production.
Positive recommendation on green hydrogen are based on projections of the production cost falling substantially many years in the future. This relies on significant technology breakthroughs, and the big public spending is primed to occur now, when there is no possibility of recouping costs.
The subsidies are not recoverable like the WA gas industry, which invested $8b over 30yrs, and has seen economic returns in the many tens of billions of dollars since.
Conclusion. The decision to allocate substantial funds to such a “long shot” would appear to be based on a combination of wishful thinking among green advisors in the bureaucracy and the electoral imperative to be seen to be doing something to keep up with the rest of the world in the quest for “net zero.”

Grants for developing green hydrogen should be subjected to cost-benefit analysis over short to medium terms in the light of experience around the world.

Bloomberg Outlook. BNEF-Hydrogen-Economy-Outlook-Key-Messages-30-Mar-2020
Australia’s National Hydrogen Strategy (COAG and Finkel).
National Hydrogen Roadmap (CSIRO and Finkel).
Grattan Institute – Start with Steel (green steel made using hydrogen).