A recently published report from the Institute for Energy Economics and Financial Analysis has raised concerns about the economic viability of a proposed expansion of the Hydrogen Energy Supply Chain (HESC) project in Victoria.
The HESC project, a joint initiative between the Australian and Japanese governments, aims to convert brown coal from the Latrobe Valley into liquid hydrogen for export to Japan. However, the report suggests that the project, which relies on carbon capture and storage, may not be economically sustainable and faces challenges related to emissions and long-distance transportation.
The HESC project, currently in its pilot phase, aims to produce and export large quantities of hydrogen derived from brown coal. This process, known as coal-to-hydrogen conversion, is highly emissions-intensive and contributes significantly to greenhouse gas emissions. Despite being labeled as “clean” blue hydrogen due to the inclusion of carbon capture and storage, the effectiveness of this technology remains unproven. Additionally, the report highlights that coal-based hydrogen is currently cheaper than renewable hydrogen but may not remain so as the costs of renewable energy and electrolysers decrease over time.
The report emphasizes that the HESC project may struggle to remain commercially viable in the medium term. As the costs of renewable energy and hydrogen production technologies decrease, the HESC project, reliant on more expensive coal-based technology, may face competition from other hydrogen suppliers. The projected full-scale production by 2030 could coincide with a shift towards more cost-effective renewable hydrogen, undermining the economic feasibility of the HESC project.
Transporting hydrogen over long distances poses significant challenges. Hydrogen, being the smallest element, is prone to losses even in its liquid form. The liquification process itself consumes over 30% of the hydrogen’s energy, and the report highlights that the shipping journey from Victoria to Japan results in substantial hydrogen losses through “boil off.” The report estimates that up to 40% of the hydrogen cargo could be lost during transportation, with boil-off losses potentially nine times higher than those experienced in liquefied natural gas (LNG) shipping.
The concerns raised in the report coincide with recent efforts by the Victorian Greens to end coal mining and burning in Victoria by 2030. Such actions would have implications for projects like the HESC, while providing job security and a transition plan for coal workers in the Latrobe Valley. The report’s findings underscore the need to prioritize sustainable and cost-effective hydrogen production methods, such as renewable hydrogen, to achieve long-term environmental and economic goals.
The economic viability of the proposed expansion of the HESC project is being called into question by the recently published report. With concerns surrounding emissions, competition from renewable hydrogen, and the challenges of long-distance transportation, the future of the project remains uncertain. As the push for clean energy intensifies, it becomes increasingly crucial to focus on sustainable and economically viable hydrogen production methods to ensure a greener and more efficient energy transition.
