15 May 2024
Insight
Australia
In Australia, the hydrogen industry has been abuzz with activity. With 101 hydrogen-related projects currently afoot, government, industry and investors have all been pushing robustly to deploy the fuel to decarbonise local industries and realise Australia’s export potential in an emerging global market. It is expected that hydrogen demand could reach more than 3 million tonnes annually by 2040 and generate revenue of up to A$10 billion for the Australian economy. In anticipation of this demand, the Australian Government has committed A$2 billion in its 2023/24 budget to funding two-to-three large green hydrogen production projects under the Australian Renewable Energy Agency’s Hydrogen Headstart Program. This comes on top of an existing A$315 million investment in 48 renewable hydrogen projects since 2017. The Government’s drive to develop the green hydrogen industry has been matched by project developers and investors, with applicants for the funding proposing some of the largest low emission hydrogen projects in the world. Among potential recipients of the funding are Origin Energy for the Hunter Valley Hydrogen Hub and KEPCO Australia for the Port of Newcastle Green Hydrogen Project. All but one of the shortlisted recipients intend to use hydrogen energy for producing ammonia.
Use of zero or low-emission hydrogen to produce ammonia is a dominant trend in the Australian market, where more than a fifth of active hydrogen projects are related to ammonia and production of ammonia drives around half of hydrogen demand. It is likely that Australia will continue to use low-emission hydrogen to drive local decarbonisation, not only in industry but as energy for transport and electricity. Clusters of large-scale demand (hydrogen hubs) across Australia, supported by both state and federal government funding, are expected to emerge and grow in scale as Australia builds its production capacity and develops associated supply chains. By 2030, hydrogen is projected to provide significant support to Australia, both in respect to its own domestic energy security and its emerging status as a global exporter of clean energy.
Germany
The German Government published its National Hydrogen Strategy in June 2020 (the NWS), envisaging investments totalling €9 billion for the promotion of hydrogen technologies and the development of international partnerships. Published in July 2023, an update to the strategy raised its ambitions and solidified its implementation. Since the NWS launch, Germany has focused mainly on the transport sector and energy-intensive industries reducing carbon dioxide emissions via hydrogen use, with a 10GW electrolysis target by 2030 and the long-term aim of climate neutrality by 2045. The latest update specified that a hydrogen start-up network with more than 1,800 converted and new-build hydrogen pipelines is to be established in Germany via funding from the Important Projects of Common European Interest scheme, an EU initiative to support strategic regional projects. In addition, the expansion of the legal framework – including modernised planning and authorisation procedures, uniform standards and certification systems – is intended to further promote the establishment of hydrogen installations.
As Germany cannot currently supply enough emission-free electricity to produce green hydrogen at scale, it is relying on international co-operation – especially with Australia and African countries – as part of its national hydrogen strategy, with only green hydrogen being promoted and used in the long term. The government expects around 95-130 billion kilowatt-hours (kWh) of carbon neutral electricity will be needed by 2030 to support green hydrogen production. On this basis, the German Government is currently working on an import strategy for hydrogen and related derivatives.
Funds from Germany's Federal Ministry for Education and Research also back several marquee projects to help accelerate the nation's establishment of a hydrogen economy, such as the H2Giga project, the H2Mare project and the TransHyDE project. These are in addition to the many significant privately-funded initiatives, such as Get H2 Nukleus, WESTKÜSTE 100, H2 Startnetz and H2morrow.
Asia
Asia is key to the development of the global hydrogen market. Many countries in the region have committed to ambitious decarbonisation goals and announced detailed policies and subsidy programs to support the development of the hydrogen value chain. Within the region and globally, China is leading the way with green hydrogen production utilising its expansive renewable energy capabilities. Since the release of China's Medium and Long-Term Strategy for the Development of the Hydrogen Energy Industry (2021-2035), there has been rapid development of the hydrogen supply chain nationally. China, which is targeting 100,000-200,000 metric tonnes of production by 2025, is already currently the largest producer of hydrogen in the world.
Japan and Korea also have ambitious hydrogen plans and are regional front-runners with regards to supporting the sector. The two countries are jointly promoting hydrogen production and have agreed to co-operate and collaborate on the establishment of the hydrogen economy. The Japanese Government has set targets of using 3 million tonnes annually by 2030, increasing to 20 million tonnes a year by 2050, in conjunction with a commitment to invest 20 trillion yen to attract private and public sector investments of up to 150 trillion yen or more. Japan has been actively making co-operation agreements globally, with over 20 memorandum of understanding signed with government and government agencies regarding hydrogen.
In addition, the Japanese Government has announced its ambitious contract for difference (CfD) subsidy programme – which helps de-risk and stabilise market prices for participating energy providers. The regime will provide up to 3 trillion yen (around US$20 billion) of direct financial support to ensure low-carbon hydrogen is price competitive compared to more carbon-intensive alternatives.
Korea announced an ambitious hydrogen policy in 2022 aimed at establishing the hydrogen supply chain and nurturing a world-leading hydrogen industry, including policies to support technology innovation to become a world leader in hydrogen. One target is to have hydrogen become 7.1% of the nation's energy mix by 2036 underpinned by subsidies for the industry. Korea has developed an innovative hydrogen power auction, which will help build the market and will transition over time towards low-carbon hydrogen.
Malaysia is emerging as a key production market and leader in Southeast Asia. Malaysia's National Energy Transition Roadmap 2023 identifies hydrogen as necessary to its energy transition and outlines the policy requirements needed to support the market, particularly in the transportation sector. Despite this recent publication, there are already large projects underway in Malaysia with international private and public sector partnerships. For example, Sumitomo and Eneos recently announced a hydrogen project in Malaysia and a 150,000-tonne facility in Borneo with SEDC Energy (owned by the Malaysia state of Sarawak) working with a Korean consortium of Samsung Engineering, Lotte Chemical and Posco.
In other parts of the region, Singapore has begun investing in hydrogen capabilities and research with investments of S$129 million for the development of low carbon technologies. Additionally, given its geographical limitations, Singapore is forming partnerships with other governments to develop the hydrogen end-to-end market.
Given the momentum in the region, and burgeoning regional demand, governments in Asia will be looking to support all elements of the supply chain in collaboration with other key hydrogen-producing countries and will contribute to the rapid global development of the specialist ecosystem.
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© Herbert Smith Freehills 2024
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