There is an “immense opportunity” for hydrogen development in Australia, but how and where can UK companies capitalise?
Xodus Group was commissioned by the UK government to answer that exact question, carrying out a high-level assessment of existing domestic capabilities in Australia that can support the low carbon hydrogen sector, potential gaps where UK supply chain companies could provide support, and any barriers to potential UK industry participation.
With the second-highest production capacity in development, a multitude of potential projects and development opportunities, Australia stands out as a major player in the global hydrogen market and is set for substantial growth past 2030, with an annual market revenue of £13 billion forecast.
Key strengths include its proximity to key importing regions, very low sovereign risk, abundant renewable energy resources and vast availability of low-intensity land. Taken together, these all help create a favourable landscape for hydrogen investment, presenting opportunities for those operating domestically, as well as those from mature international supply chains such as the UK.
Especially when considering some of the challenges facing Australia in terms of hydrogen development – not least limited manufacturing capabilities, driven in part by the high cost of domestic labour, and a fiscal regime that is positioned more towards early innovation. Having a small domestic market only compounds this challenge.
UK developers, meanwhile, face challenges in the form of regulatory and policy uncertainty, especially with regards to the absence of a clear position on topics such as the minimum requirement for renewable energy to support hydrogen production and the certification process, as well as revenue certainty and carbon policy – a meaningful carbon policy establishing a higher tax or price on carbon emissions is needed for hydrogen projects to be self-sustaining. Australia is behind Europe when it comes to this right now.
The domestic fiscal regime in Australia is another challenge, with it having one of the highest corporate tax rates, a slowly evolving hydrogen regulatory framework with compliance with local regulations and standards potentially making things challenging for companies seeking to enter the market.
There is also the challenge posed by Australia’s geographical distance with a lack of existing infrastructure and unique environmental conditions, presenting logistical and operational barriers that have to be faced.
Realising Australia’s potential will take collaboration between the UK government, its supply chain and Australian counterparts, with Xodus stressing that through working together, both nations can drive innovation, investment and sustainable growth in the hydrogen sector. Particular areas where UK companies should look to target include hydrogen electrolysis manufacturing units, worth a project £100 billion, along with hydrogen fuelled gas turbines, hydrogen fuel cells and transportation.
Other areas include refuelling stations for hydrogen vehicles, detailed component design, conversion of existing gas infrastructure for hydrogen use and transportation, and hydrogen storage.
