Pattrick Smellie: A hydrogen plan so cunning

COMMENT:

Some days, it's hard to decide whether the government is committed to action or simply to talking about action.

Examples from the last week: a massive public health system report that includes no recommendations; a draft food safety strategy so bland that it's unclear what the proposals are; a timid draft minerals strategy that confuses consultation with platitudes.

This week's hydrogen green paper wasn't quite that bad, although Massey University climate change science stalwart, Professor Ralph Sims, chirped at the launch that the original version had been a "C-minus" effort.

More to the point, if private sector investment in hydrogen economy experiments wasn't already starting to gain momentum without government help, this green paper would be a very small hill of beans.

The rationale is admirable enough. New Zealand needs to decarbonise and one way to help would be to build a lot more renewable electricity generation – basically windfarms and large-scale solar – and use it to make 'green' hydrogen.

That is, hydrogen made without carbon-emitting fossil fuels, which is how 95 per cent of the world's hydrogen is currently produced.

There are plenty of ways hydrogen could be used: for long-haul trucking, short-haul train movements, forklifts, industrial heat, and even eventually replacing natural gas in home heating and cooking. The beauty of green hydrogen is that its only emission is pure water and the hydrogen itself can become a store of energy – the chemical equivalent of a hydro lake.

Beyond that, the green paper puts up an "aspirational goal" of producing green hydrogen for export, where it could attract a premium over carbon-emitting 'brown', 'grey' and 'blue' hydrogen. A heroic timeline imagines such exports beginning in the 2030s.

Among various hurdles to that goal are these three.

Firstly, that's a lot of wind and solar farms carpeting large chunks of the New Zealand landscape. Climate change action will inevitably meet aesthetic objections.

Secondly, green hydrogen is far more expensive to produce than the other kinds. Whatever premium green hydrogen might attract would first be cancelling the price disadvantage of using only renewable electricity to make it.

This is not because renewable electricity is expensive. It's not. The problem is the inefficiency of the electrolysis production process.

The third big problem is that "the economics and preferred approach to large scale hydrogen storage … have yet to be solved in a practical and efficient manner". Not trivial.

However, those challenges should be resolved. Fast-rising global investment in hydrogen technology should bring the cost of green hydrogen down sharply, as has happened with wind and solar technology for electricity in the last decade.

One such investment is in Taupo. Obayashi, a Japanese conglomerate, is building a trial hydrogen plant using electricity from a new geothermal power station being built in a joint venture with Maori energy investors, the Tuaropaki Trust.

A briefing at Obayashi headquarters in Tokyo earlier this year suggests a production cost gap between green and brown hydrogen of between two and three times.

Where hydrogen made from natural gas or in petrol refining costs between 23 and 58 yen (34c-86c) per Nm3 (normal cubic metre), Obayashi estimates hydrogen produced from wind and solar power currently costs between 76 and 136 yen per Nm3.

However, Obayashi is targeting around 30 yen per Nm3 for green hydrogen.

For now, Obayashi's goal is simply to produce enough green hydrogen – geothermal electricity still counts even though it emits some carbon dioxide – at the Taupo plant to run some hydrogen buses at next year's Tokyo Olympics. This is early stage demonstration, a long way off a viable industry.

Also lacking is the large surplus of renewable electricity such a plan rests on.

Energy Minister Megan Woods suggests that surplus will eventuate because of the government's push for 100 per cent renewable electricity by 2035. That goal can only be achieved by substantially over-building wind and solar power production capacity, since neither is a constantly reliable energy source. A lot of back-up is required if there's to be no gas or goal in the electricity system.

In Woods's world, this is a perfect alignment – the country needs an excess of renewable electricity to meet the government's renewables goal, and green hydrogen could take up the slack.

That plays nicely into initiatives such as that spearheaded by the chief executive at Refining NZ, Mike Fuge, where major electricity consumers club together and accelerate the construction of new renewable generation to bring power prices down.

Fuge's play includes the Marsden Point refinery, already the country's largest hydrogen producer, spending up to $39 million on a solar plant on adjacent refinery land to meet around 10 per cent of the refinery's needs. (see artist's impression)

One day, in a post-oil future, Fuge envisages the refinery becoming solely a hydrogen manufacturer.

All of which is to say that hydrogen should and will be explored. It may be a big part of the New Zealand decarbonisation story. But there's a very long way to go.