In Victoria’s Latrobe Valley, the heart of Australia’s brown coal mining industry, the backers of the $500mn Hydrogen Energy Supply Chain (HESC) pilot plant aim to show there is a viable carbon-neutral future for the fossil fuel.

The plant, which started up in mid-March, gasifies brown coal (lignite) to make hydrogen, which is transported to Victoria’s Hastings port for liquefaction at Australia's first hydrogen liquefaction facility before shipment to Japan.

Carbon dioxide (CO₂) generated during hydrogen production will be captured, condensed transported and stored in porous sandstone 1.5km beneath the Bass Strait as part of Australia’s CarbonNet­ project. Latrobe Valley has 65bn t of lignite reserves, of which half is considered “potentially economic”, according to the state government.

“We need all the supplies possible. We can get going a lot quicker. We're far more affordable than renewable hydrogen” Stone, J-Power

The HESC consortium members include Japanese utility J-Power, Kawasaki Heavy Industries, Iwatani Corporation, Marubeni Corporation, AGL and Sumitomo Corporation, and it has support from the governments of Victoria, Australia and Japan.

Using Australian coal to make hydrogen, even with carbon capture and storage (CCS), is controversial. Australia is the world’s 16^th-largest emitter of CO₂ and the third-biggest per capita, according to non-profit the Union of Concerned Scientists. Coal is the biggest contributor to the country’s CO₂ emissions, and environmentalists want it to quit mining the fuel.

There will be opposition to the plant, acknowledges J-Power non-executive director and senior adviser Jeremy Stone, but he highlights the cost advantages over green hydrogen.

“We have got such a big challenge. So, if this can come in now on a fairly small footprint, have it up and running quickly and is reducing CO₂ and is affordable then it becomes a pretty good transition,” he tells Hydrogen Economist.

“We need all the supplies possible. We can get going a lot quicker. We are far more affordable than renewable hydrogen,” says Stone.

HESC will produce hydrogen at one-third to one-half the cost of green hydrogen, which  costs up to €5.50/kg ($6.60/kg), according to a European Commission report that also estimates the cost of producing hydrogen from fossil fuels with CCS is around €2/kg.

Japan has set a target for hydrogen delivered to the country to cost no more than $3/kg, according to Stone.

“What Japan wants is competition between producers,” he says. “Price is absolutely important. It has got to be portable, clean and reliable. It is like a commodity, it needs to be produced 24/7.”

Big in Japan

The 2011 Fukushima nuclear disaster led Japan to scrap plans to expand its nuclear capacity. Now, the island nation sees hydrogen as a key means to reduce its reliance on imported fossil fuels, which provide around 93pc of its energy. Japan lacks renewable energy resources so will continue to rely on imports.

“Swapping out the importation of fossil fuels with something like hydrogen seems ideal,” says Stone. “Places like South Korea and Singapore are not too dissimilar.”

Hundreds of thousands of square kilometres of land would have to be dedicated to renewable electricity production to manufacture green hydrogen at sufficient scale to meet future demand, says Stone.

1.8mn/yr – CO2 the plant could abate

J-Power will gassify the coal and refine the hydrogen so it is pure. Once the project becomes commercially operational, the company will also conduct the carbon-capture process.

“We see this an enabler for transition,” says Stone. “Our hydrogen pipelines, liquefaction, ports, ammonia production—all these things can be used for any form of hydrogen production.”

At full scale, the plant will make 225,000t/yr of hydrogen, which will abate about 1.8mn t CO₂ per year—or the equivalent of emissions from 350,000 cars.

“We are not trying to prove we can produce hydrogen from coal—we are trying to prove everything else, which is the liquefaction and shipping: the complete supply chain, including regulatory approvals,” says Stone.

World first

Kawasaki Heavy Industries will build and operate the world’s first purpose-built liquefied hydrogen carrier, the Suiso Frontier, to transport the hydrogen HESC produces. The consortium decided against converting the gas into ammonia, which is cheaper and easier to transport, because of hydrogen’s greater versatility.

“If you want to use it as ammonia then no problem, but if you want pure hydrogen how can you cost-effectively get that? It will require significant energy to split the hydrogen from ammonia. For Japan, it does not make sense to ship it all that way and then use a lot of the energy just to split it again,” says Stone.

The HESC partnership does not constitute a special purpose vehicle (SPV) or standalone company, although the partners will likely create an SPV ahead of building a full-scale commercial plant, which could be operational the end of this decade.

Stone believes the pilot will run for a couple of years before the partners do the front-end engineering design. This will provide a cost estimate for the commercial project, based upon which they can approach banks for financing.

“The question we face is how big is stage one of the commercial plant?” adds Stone, noting the number of phases to build for the commercial plant has yet to be decided.

“No one is quite sure yet, because we do not know the offtake, so we are trying to balance out how big we make it and how economical we can make that versus the demand. The demand needs to come first to give us the size of our plant.”

J-Power owns 25.4GW of electricity capacity globally, of which 10.2GW is renewables.

“We want to do more, so we're investing in a whole range of clean energy projects around the world,” says Stone. “There is no one single source of energy. No one size does not fit all.”

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Author: Matt Smith