The role of hydrogen in a decarbonised future – an interview with Woodside’s Shannon O’Rourke

Hydrogen is increasingly being looked at as a means of helping Australia navigate its decarbonised future and meet the prescribed targets of the 2016 Paris Agreement.

On the surface, it seems like a panacea. Hydrogen is the universe’s most abundant element and can power an electric vehicle 236 times more efficiently than a lithium-ion battery.

Given Australia’s access to world-class hydrogen technology and expertise, there is also significant export potential; particularly in the face of rising global demand, with countries like Japan declaring its intention to become a ‘hydrogen nation’.

However, exploring the production, storage and transportation processes of hydrogen reveals some economic challenges. Despite its abundance, hydrogen is not readily available and the process of extracting it in itself requires a great deal of energy.

Given its naturally low density, hydrogen must also undergo compression or liquefaction to increase its density and allow it to be cost-effectively stored and transported. The physical properties of the element mean that this too is an energy-intensive process.

Without industry scale, these inefficiencies can stack up and undermine its economic viability.

In light of these concerns, the Australian Hydrogen Energy Summit will be held on 26-27 March 2019 in Melbourne, providing a platform for industry discussion and debate.

Ahead of the Summit, we spoke with Shannon O’Rourke, General Manager of Hydrogen at Woodside Energy, to get his views on how hydrogen fits into the bigger picture of Australia’s decarbonised future.

The hydrogen industry has some economic challenges ahead. Where do you see the industry in five and ten years from now?

History tells us that change can happen at a surprising pace. Not just in manufacturing, but also in energy systems. The transition from town gas to natural gas occurred in the UK over a ten-year period. The LNG market moved from demonstration to export over a period of ten years. The shale gas revolution in the US has emerged over the last ten years. I think we’ll see Hydrogen export in approximately ten years also.

We view hydrogen as a natural evolution of our business model, post 2030. We are in an advantageous position in the Pilbara region of Western Australia, where we have access to solar power which means we can create hydrogen from a renewable source. It then needs to be chilled and transported in large quantities via ship, which is what we already do with LNG. Also, the countries that will use hydrogen – such as Japan and South Korea – are already our customers.

In the shorter term we see a lot of domestic market development in the mobility and power sectors. We expect a lot of diversity in how this plays out across markets, because each market is at a different maturity and has different ambitions. The wildcard for me is China. Energy security and air quality are such major issues for that market. It will be hard to ignore.

Tell us a little about your solutions and how do they fit into the bigger picture of Australia’s decarbonised future?

As you know, Woodside is a large energy export company, so we have been really been focused on how we can build that export business at low cost.
To get that right, we have thought hard about how the markets might develop, with an eye on our home in Australia.

The first vision we have is about Blue and Green hydrogen. Blue hydrogen is carbon neutral, from gas, and Green hydrogen is from renewable sources. Blue is much cheaper today. If we start with Blue, the market and infrastructure could be developed economically, then the production infrastructure can shift to Green once costs become competitive and when demand grows.

To grow demand, a second part of the vision is about choice. Buying hydrogen should be an experience and people should be able to choose where it comes from. Imagine turning up to the pump and seeing a video about where your green energy comes from, or seeing the eco-restoration project funded by the carbon offset.

When I buy petrol today, I look for the cheapest price, but when I buy hydrogen tomorrow, I’ll be looking to do the right thing. We hope people will buy more Green hydrogen because they know and value where it came from.

The third part of the vision is that fuel stations become Energy Hubs. Imagine your local station, modernized with Hydrogen and rapid EV chargers. They capture excess renewable energy from the grid to produce hydrogen, and return it at peak times. Hydrogen fuel cells power the EV chargers. Consumers can get a credit for energy from the solar on their grid-connected homes. This, by the way, is already happening in Japan in a partnership between Toyota and 7/11.

The Energy Hub solution is really important – it’s distributed, so it could avoid nodal constraints on the power grid; it could reduce the need for grid investment, keeping power costs down; and could keep people connected to the grid, lowering costs for all; it could enable low-cost convenience charging for EV, improving their uptake; and it would become an enabler for 100 percent renewable energy. People love convenience, so we think this is a great option.

What are your main pathways to market and what are you doing to maximise these opportunities?

When we first looked at the opportunity we used our normal engineering mindset. We wanted an optimised concept. We built cost stacks, efficiency stacks, and analysed the most technically and commercially efficient path to market. But as our thinking matured, we changed our perspective.

Ultimately, to be successful we need to deliver what the customer wants, and when you look at the various paths to (the export) market, each has its own benefits and drawbacks, so why not let the customer decide?

For instance, Ammonia suits large industry. It’s a hazardous product, not suited to urban storage and most safely handled by industrial customers. Hydrogen PEM fuel cells can be damaged by small concentrations of Ammonia, so you need good process control if you wish to reconstitute the hydrogen in the end market. Liquid hydrogen is highly pure, and that purity suits the transport market. It’s also very cold and boil off means it’s a perishable product, not really suited for long-term storage. Liquid hydrides, like MCH, are suited to seasonal storage. We think those markets will develop independently, and there will be synergies to deliver across those markets.

Woodside has fantastic technical capability. We believe that, with our NextGen and other proprietary technologies, we can reduce the cost of production and midstream transport. Ultimately, in the upstream, hydrogen will become another bulk chemical energy product like LNG so building a sustainable cost advantage will be important and is something we have sharp focus on.

What are some of the challenges you are currently facing in your quest to conquer these markets?

We’ve had fantastic support from both the foreign and local governments. Our potential customers are enthusiastic and engaged. My CEO is taking a lead role in the conversation. And, our employees are also super excited. So the support is there.

We do have challenges, like the cost of electrolysis, scale up risk, regulations, shipping technology, but none of them are insurmountable. That’s the benefit of working with a company that has experience pioneering a new industry (the LNG industry in Australia), and in building collaborative partnerships that accelerate innovation.
In a broader sense, how can industry overcome some of the broader challenges facing the hydrogen industry in terms of viability and scalability?

My personal view is that the fiscal environment very much reinforces the status quo. Contracting structures also reinforce the status quo – If bus companies compete only on price, they will choose the lowest cost diesel vehicle.

To succeed the industry needs to think innovatively about business cases. Like Walmart and Amazon did when they realized their equipment uptime could move from 70-100 percent when they moved away from BEV. It’s not always about fuel cost.

Shannon O’Rourke will present at the Australian Hydrogen Energy Summit – 26-27 March 2019, Melbourne, where he will share further thoughts onthe route to decarbonisation.

You may download the full agenda here.