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Export hydrogen an opportunity from 100% renewable generation - Woods

Monday 2nd September 2019

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Hydrogen will play an important role in de-carbonising the New Zealand economy, but the bigger gain could be from the development of a new export fuel industry, Energy and Resources Minister Megan Woods says.

Hydrogen is being investigated as a potential heavy trucking fuel, a low-carbon process heat option and a way of reducing emissions from natural gas use. It has also been touted as a means of storing surplus wind and solar energy.

Woods told journalists today the value of a domestic hydrogen economy is “potentially huge” and will be “incredibly important” to the country’s efforts goal of having a net-zero carbon economy by 2050.

“But what we want to do the work on, and talk further to industry around, is what it could be worth as an export industry,” she said after launching the government’s Vision for Hydrogen in New Zealand green paper.

“Everybody knows there will need to be some over-build in order to get to the 100 percent renewable target. What hydrogen provides is an exciting opportunity, is a way for us to make that over-build, that over-capacity, economic and to actually create a whole new export opportunity.”

In July, the Interim Climate Change Committee urged the government to drop its target to have 100 percent renewable generation by 2035 and instead accelerate its efforts to de-carbonise industry and transport – sectors that are much heavier emitters.

The committee believed the electricity system was on track to be 93-97 percent renewable by 2035 and warned that the spare generation capacity that would have to be built to achieve the government target would increase power costs to consumers for little reduction in emissions.

Today’s 92-page green paper acknowledges that the current cost of hydrogen made without hydrocarbons – so-called ‘green’ hydrogen - is “challenging”. But it also cited an estimate from the International Energy Agency that the cost of renewable hydrogen could fall 30 percent by 2030 due to falling wind and solar costs and increasing production capacity worldwide.

The paper looks at the complementary role that hydrogen could play alongside electricity, how it could be used in transport, industry, and to lower the emissions from natural gas. The paper also asks for feedback on the role government should play to facilitate those developments, or to help develop hydrogen in “sufficient volume” for export.  

Firms including Refining NZ, Ballance Agri-Nutrients, Ports of Auckland and Hiringa Energy are already working on studies and pilot projects to test the way forward on hydrogen.

Today’s paper draws on some of that work, and also advice from Concept Consulting and global advisory firm Arup.

Earlier this year, Concept estimated that making hydrogen using electricity was more than three-times the cost of product made from gas. Including storage, renewable hydrogen was about 10-times the cost of gas.

The firm estimated that by 2040, New Zealand could ship renewable hydrogen to Japan at a cost of about $44 a gigajoule, compared with a liquefied natural gas price of $14/GJ.

Woods said long-term economics favour renewable hydrogen, given its production cost will be falling at a time when carbon costs make hydrogen made from natural gas more expensive.

Countries like Japan and South Korea are both potential export markets and New Zealand has already agreed to work collaboratively with Japan on development of hydrogen technologies, she said.

But she was hard-pressed to explain how the country could develop sufficient renewable generation – over and above that already needed to electrify transport and industry – to support an export hydrogen industry.

Transpower last year estimated generation supply would have to roughly double to meet the country’s 2050 net-zero carbon target. Back-up supplies for peak winter loads or dry years would roughly triple.

While she acknowledged that a hydrogen industry may need to use gas-based product as it gets established, Woods said there would be no government support for those initiatives.

It is making changes to the Gas Act so that work with hydrogen blends can get started and the government is also looking at ways to make consenting of renewable generation easier, she said.

It also has a role in getting the mix right across wind, solar, hydro and geothermal and that would be part of the government’s work on a renewable energy strategy, she said. The government is hoping to complete that in the coming year.

“What our primary responsibility to do, as a government, is to make sure that we have solid plans for how it is we’re going to reach 100 percent renewable.”


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