By Andrew Horvath, Global Group Chairman of Star Scientific
We Australians have a curious, oft-used phrase of “fair dinkum” – a phrase which we think originated on the goldfields during our gold rush of the mid-nineteenth century. Depending on the context it is used in, it can mean a lot of things, but loosely translated it means “get real” or “be honest” or “be genuine”. Others might translate it as “stop mucking about”.
It is time for the world to get “fair dinkum” about the energy step-change. It is time for us to get “fair-dinkum” about doing it right, doing it once. In hydrogen we have the energy source to do it now, we have the technology to do it now, we have the expertise, we have the will, and we have the capital. We need to lift our aspirations, our urgency and our investment in hydrogen and just get on with it.
There has been much attention paid to hydrogen in the past 18 months – an extraordinary amount, and rightly so. The penny is starting to drop that for great swathes of industry and other forms of human endeavour that require process heat, the “electrify everything” prescription is just not going to work. Intermittent sustainable energy sources and lithium batteries just cannot keep the wheels of industry turning 24/7/365.
Nevertheless, the energy revolution is not going to happen as quickly as we need it to unless we are honest with ourselves, and there are a few matters we need to get “fair dinkum” about, fast.
The first thing is we must stop seeing the hydrogen roll-out through the prism of legacy fossil-fuel companies. Barely a week goes by without another fossil giant proudly announcing a commitment to hydrogen. And why wouldn’t they? Facing trillions of dollars of stranded assets, they need to give their investors and customers some hope that they will still be able to add to shareholder value in the new world of net-zero energy.
Understandably it is in the interest of these legacy companies for the transition to happen in as orderly and convenient matter as possible – and by rolling out pilot projects they appear to be doing their bit– and again, why wouldn’t they? Governments seem to love dropping taxpayer dollars into these projects. They make good copy.
Nowhere is the stalling tactic of legacy fossil-fuel companies more evident than in the carbon capture and storage push. Only last month, a chairman of a large Australian gas company said that CCS was vital for the continued investment in the Australian resources sector, including hydrogen. I do not know which customers, or indeed countries he was talking to, but the ones we are talking to, including some of the most heavily industrialised countries in the world, say “you can send us any colour of hydrogen you like, so long as its green”.
A number of people are starting to question why governments are funding the side-projects of multi-billion dollar publicly listed companies who have the capacity to raise the funds themselves, and that is a fair question. There are literally dozens and dozens of innovators and entrepreneurs beavering away in small factories, labs and garages who promise to produce step-changes in the hydrogen revolution – at Star Scientific we know, we have found many of them. They typically share one thing in common, they do not have the connections, or time, or resources or expertise to invest in the incredibly complex requirements that come with government funding applications.
To that end the Biden administration’s “Earthshot” invitation, to all-comers, regardless of size, for ideas to quickly advance the hydrogen economy looks very promising, very promising indeed. It appears the US is not going to be held back by those who want to slow the transition down.
There are more important things governments can do. If they must spend money, then spend it on creating demand rather than obsessing with supply. It’s basic economics – create the demand then the innovators and investors will step in. So, fund the potential users of the hydrogen, like food and beverage manufactures, to help them transition their production processes across.
If governments wish to fund supply, then do so with wide-ranging incentives open to everyone rather than projects directed at individual companies and their pet projects, the benefits of which will be captured by their shareholders. In Australia we went through a revolution in PV solar and wind because governments set targets and broad incentives, and the markets looked after the rest. The same should be done for green hydrogen – the government should set incentivised production targets and let the market step in.
The far more important role for governments is the area of regulation – the closer we can get to universal standards, regulation, and certification on green hydrogen, the faster we will progress.
The other area where we must get “fair dinkum” about is in the rush to export. In Australia, if you flicked through the industry media or government publications you would be forgiven for thinking that the only reason for developing the hydrogen industry is exclusively for export. This overlooks the many, many potential domestic industrial users, who are desperate for an alternate for coal, gas and for whom batteries will not work.
History is thus at risk of repeating itself – we are the world’s largest gas exporter, but domestic supply is about to fall off a cliff, versus demand, and it is way too expensive – we are at the point where, I kid you not, we are going to be importing gas.
I hope we do not make the same mistake again with hydrogen, or the “social licence” we often talk about will be a moot point if potential domestic customers either cannot access green hydrogen or it is too expensive.
Yes, there is an export play for green hydrogen, and it will be good for driving demand. However, the bigger picture is that green hydrogen, in the longer term, will be produced closer to its end market. Indeed, for net energy importers like industrialised Japan or the developing Philippines, green hydrogen produced by offshore wind gives them the hope of energy sovereignty for the first time.
It certainly is an exciting time to be involved in the Universe’s most abundant molecule – but just now we need to step back and cast a critical eye at what is perceived as “progress” and what are our genuinely real issues.
This article first appeared in H2 View on 10 August. Click here to view online.