INDUSTRY NEEDS ENERGY SOLUTIONS AND ILLAWARRA CAN DELIVER

24 April 2021

There is no doubt that the world is coming to the Illawarra. For proof of this, look no further than the excitement building for the Wollongong 2022 cycling race, our packed beaches every weekend through summer and our region’s property prices, which increased at double the rate of Sydney’s last year.

The world is now also coming to us for solutions to the nation’s tormented and unresolved transition to clean energy. And we have the innovation, the skilled workforce and the infrastructure – not to mention the can-do attitude – to make it happen.

This month, industry representatives attended a roundtable with special guests from Squadron Energy, owned by billionaire resources magnate Andrew ‘Twiggy’ Forrest, to hear about their plan for a new, dual fuel power station.  Initially, the station will run on a mix of natural gas and some hydrogen, but can transition to burning clean hydrogen once adequate supplies become available around 2030. The $1.2 billion project could be up and running as soon as 2023 and provide up to five percent of the state’s electricity needs.

This significant investment is a huge win for our economy, and complements the liquified natural gas (LNG) import terminal also being built at Port Kembla - which will be supplying us with more affordable, imported gas from 2022. 

But why are we still talking about gas? After all, isn’t the federal government being taken to task for its reliance on gas as a transition fuel given that it is carbon-intensive and not even that cheap? 

Too many commentators are allowing the great to be the enemy of the good when it comes to renewables and ignore the question of utility. Fossil fuels are currently the only means of powering a number of industries, including steel manufacturing. While Bluescope must keep burning metallurgical coal in its blast furnaces to make steel until there is an alternative, so must fossil fuels remain the current means of delivering a reliable, 24/7 power supply besides nuclear.

For electricity production, gas is one of very few options for providing dispatchable power, meaning those times when renewables are offline (which is, as they say, at night-time or when the wind isn’t blowing). But electricity only accounts for around 10 percent of the gas used in NSW. Half of the rest in used by big industry and the other half is used in homes. 

For Australia to deliver on greenhouse gas emission reductions, all these uses will need to be cleaned up. One way is to replace gas use with electricity. But this means replacing all the existing equipment, as well as a major scaling-up of the electricity grid. The other is to swap natural gas for hydrogen; a clean fuel that when burned produces only water as a by-product, and can often be supplied along newer existing gas lines. 

Currently ‘fossil hydrogen’ production is carbon intensive, typically relying on burning large amounts of gas, and costs $2 per kilogram. ‘Clean hydrogen,’ produced using renewable energy, is expensive at between $6 and $9 per kilogram . The technology to bring the cost of renewable hydrogen down beyond the aspirational $2 mark may still be a decade or more away. But there is hope on the horizon. 

Both the Commonwealth and NSW Governments are pouring money into hydrogen research, trying to bring that timetable forward. And the rapid development of solar energy across Australia means there is a lot of electricity available during the day looking for a way to be used – turning it into hydrogen is one way to stop it going to waste. 

Port Kembla is the place to make this happen, as it benefits from the Illawarra’s consolidation of related industries, enabling infrastructure and technically-skilled workforce.

The Illawarra’s hydrogen future was overlooked in the Federal Government’s announcement on Thursday that it would invest more than half a billion in clean energy, including four new hydrogen hubs (notably the first of its pre-Budget announcements). But our potential hasn’t been missed by the state government, which has designated it a hydrogen hub in its plans, or by the private sector – as we can see in the massive investment by Squadron Energy.

We are still missing clear plans to transition the nation to a low carbon economy that carefully consider the needs of exposed industries, including our coal miners and steel manufacturers, and provides them with a long lead time to guide their investment decisions in the interim. Business needs certainty, and the government needs to telegraph its plan well in advance – and stick to it, no matter who is in power.