Australian and Global Hydrogen Demand Growth Scenario Analysis COAG Energy Council – National Hydrogen Strategy Taskforce November 2019 Australian and Global Hydrogen Demand Growth Scenario Analysis November 2019 COAG Energy Council National Hydrogen Strategy Taskforce Australian and Global Hydrogen Demand Growth Scenario Analysis Deloitte Touche Tohmatsu (Deloitte) is pleased to provide the enclosed report detailing our analysis of hydrogen demand in Australia and globally. The Council of Australian Governments (COAG) Energy Council and the Department of Industry through the National Hydrogen Strategy Taskforce is developing a National Hydrogen Strategy. The COAG Energy Council has committed to a vision of making Australia a major player in the global hydrogen industry by 2030. The National Hydrogen Strategy Taskforce engaged Deloitte to undertake this work in May 2019. Under the terms of reference, Deloitte was to: • review and provide analysis of existing forecasts of international hydrogen industry development, supply cost reductions and expected hydrogen prices to understand expected demand growth globally and the share of this demand that Australia could potentially capture; and, • undertake scenario modelling to understand potential Australian hydrogen exports and domestic demand growth to 2050 and the scope and distribution of economic and environmental costs and benefits from Australian hydrogen industry development. The enclosed report provides information on the possible pathways for the development of the hydrogen industry in Australia. We are grateful to the assistance provided in the preparation of the report from the National Hydrogen Strategy Taskforce members and members of the steering group. Yours sincerely Matt Judkins John O’Brien Partner, Deloitte Partner, Deloitte Australian and Global Hydrogen Demand Growth Scenario Analysis Contents Executive summary vi 1 Introduction 14 1.1 Hydrogen value chain 16 1.2 Australian context 17 1.3 Scope of this report 18 1.4 This report 19 2 Policy Settings and Demand Forecasts 20 2.1 Policy settings 21 2.2 Demand forecasts 29 2.3 Challenges for market development 34 3 Global Supply Competition 36 4 Market Growth Scenarios 46 4.1 What are scenarios? 47 4.2 Scenario processes 47 4.3 What do we see? 47 5 Modelling inputs and assumptions 58 5.1 Overriding assumption inputs 59 5.2 Technology specific assumptions 59 5.3 Market specific assumptions 61 5.4 Economic impact modelling assumptions 65 COAG Energy Council – National Hydrogen Strategy Taskforce 6 Modelling outputs 68 6.1 Global market demand 69 6.2 Australian market demand 78 6.3 Economic Impact Analysis 87 6.4 Consolidated modelling outputs 94 7 Further analysis 106 7.1 Sector linkages 107 7.2 Policy options 109 7.3 Signals and signposts 110 7.4 Pathway development 111 7.5 Further work 112 8 Conclusion 114 Appendices 116 Appendix A: Detailed multi-criteria analysis 117 Appendix B: SSP scenarios 124 Appendix C: CGE modelling 126 Appendix D: Signals and signposts 129 Appendix E: Modelling input sources 142 Australian and Global Hydrogen Demand Growth Scenario Analysis Glossary Acronym Full name ACCU Australian carbon credit units AGE Applied general equilibrium AGM Annual general meeting ARENA Australian Renewable Energy Agency AUD Australian dollar BEV Battery electric vehicles CAGR Compound annual growth rate CCS Carbon capture and storage CCUS Carbon capture utilisation and storage CDE Constant differences of elasticities CES Constant elasticity of substitution CET Constant elasticity of transformation CGE Computable general equilibrium CO2 Carbon dioxide COAG Council of Australian Governments CRESH Constant ratios of elasticities substitution, homothetic CSIRO Commonwealth Scientific and Industrial Research Organisation DAE-RGEM Deloitte Access Economics regional general equilibrium model ETC Etcetera FCEV Fuel cell electric vehicle FTE Full time equivalent GDP Gross domestic product GJ Gigajoule vi COAG Energy Council – National Hydrogen Strategy Taskforce Acronym Full name GNI Gross national income GTAP Global trade and analysis project GW Gigawatt GWh Gigawatt hour HRS Hydrogen refuelling station IAM Integrated assessment model IPCC Intergovernmental panel on climate change kWh Kilowatt hour LNG Liquefied natural gas MCA Multi criteria analysis MEA Middle East and Africa Mt Million tonnes MW Megawatt MWh Megawatt hour NPV Net present value OEM Original equipment manufacturer PEM Proton exchange membrane R&D Research and development RET Renewable energy target SMR Steam methane reforming SSP Shared socio-economic pathways tCO2 Tonne of carbon dioxide UAE United Arab Emirates US United States USD United States dollar Yr Year vii Australian and Global Hydrogen Demand Growth Scenario Analysis Executive summary COAG Energy Council – National Hydrogen Strategy Taskforce Interest in hydrogen is growing both Hydrogen as a molecule (H2) is a colourless, • Export opportunity: there appears to internationally and domestically, as odourless, non-toxic gas. Hydrogen be significant potential relating to the industry and governments around bonds easily with other elements, making demand of hydrogen as a fuel source the world investigate and execute on it extremely rare in its free form, and by economies such as China, Japan, decarbonisation strategies. requiring transformation to produce and South Korea. This government- hydrogen that is useable for energy storage backed demand growth is driven In Australia, State, Territory and and transport. Hydrogen is an energy by decarbonisation policies, energy Commonwealth governments are agreed carrier with some of the energy required to security and reliability and presents significant opportunity exists for Australia produce hydrogen released subsequently opportunities for the development of to become a major producer of hydrogen at the point of use – usually as heat through major export facilities in Australia. For for domestic use and for export. To combustion or as electricity in a fuel cell. the purposes of the modelling we have move forward in creating a pathway for examined potential exports to these Australia to take advantage of this growing Hydrogen as a clean energy carrier three countries. However, it must be hydrogen industry, the Council of Australian and feedstock is the subject of growing recognised that there are other countries Governments (COAG) Energy Council international interest. This growing interest that also represent markets which formed the National Hydrogen Strategy in the hydrogen sector is underpinned by may provide future opportunities for Taskforce (the Taskforce) in December 2018. four long-term trends: Australian exports. For example, Taiwan • Cost of renewables: the significant decline is a major importer of energy resources, The aim of the Taskforce is to build in the cost of wind and solar photovoltaic including as a significant buyer of “a clean, innovative and competitive (PV) generation in recent years has opened Australian coal, and could be a potential hydrogen industry that benefits all the prospect of large-scale production future off-taker of hydrogen. Australians and for Australia to be a of ‘green’ hydrogen. This has prompted major global player by 2030.”1 In addition, Australia has world-class capabilities as an serious projects and feasibility studies in the COAG Energy Council has agreed to explorer, developer, producer and supplier countries where wind and solar PV can be investigate three domestic ‘kick start’ of energy. Australia can use these attributes produced at very low cost. projects to provide an initial boost to the to become and remain a dominant player Australia domestic hydrogen industry. • Industrial decarbonisation: there is in the emerging hydrogen value chain. These projects include the use of hydrogen fast-growing acknowledgement that However, numerous pathways exist that in gas networks, the potential for hydrogen energy systems cannot be decarbonised Australia can take in developing its hydrogen refuelling stations in each state and by greening electrons alone. There is a industry. The pathways are not mutually territory and to undertake co-ordinated need for industry, heavy transport and exclusive but rather provide alternatives international outreach to keep building hard to abate sectors to examine and and turning points as the hydrogen industry Australia’s profile as a potential supplier assess decarbonisation strategies. In develops towards maturity. to major trading partners. assessing these strategies, even where electrification gains pace, there are Australia is not alone in examining the role The opportunity identified by this analysis potential benefits to the use of hydrogen. of hydrogen going forward, with several suggests that, if Australia were to secure other countries exploring hydrogen the same global market share percentage • Gas infrastructure decarbonisation: strategies. Depending on the country, these as Australia has today for Liquefied Natural hydrogen can be transported using strategies may focus on implementing Gas (LNG), then the hydrogen sector could existing gas infrastructure with limited policies and reducing barriers to the import produce an increase to Australian Gross adaptation and costs. While there are of hydrogen, the export of hydrogen, Domestic Product (GDP) of up to $26 billion pipeline integrity issues to consider, domestic use or a combination. on a Net Present Value (NPV) basis and hydrogen can be blended into existing 16,900 jobs by 2050. gas infrastructure as a