CEDA - Developing the NSW hydrogen industry, Four Seasons Hotel Sydney

Anna Collyer, AEMC & ESB Chair

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Introduction

Thank you for your welcome and for the great conversations and speakers we’ve enjoyed over lunch.

I begin by acknowledging the Gadigal people of the Eora Nation, the traditional custodians of this land. I’d like to pay my respects to their Elders - past, present, and emerging - and extend those respects to all Aboriginal and Torres Strait Islander people present today.

I’d also like to note that NAIDOC Week begins this Sunday, with the theme, Get Up, Stand Up, Show Up – an invitation to us all to go beyond acknowledgements and good intentions.

First Nations people are affected in so many ways by the energy sector – land access, respect for cultural sites, hiring opportunities, remote connections and retail policies, to name just a few.

Next week AEMC staff and commissioners will be hearing from Marlee Silva, a young Gamilaroi/Dunghutti writer and podcaster. I hope your organisation, like ours, will use this NAIDOC prompt to get up, stand up, and show up – working out how we can turn thoughts into action.  

The difference a few weeks make

I see many familiar faces here, and I know some of you heard me speak about hydrogen not long ago at the Adelaide conference.

This – I can assure you – is not that speech: because what a difference a few weeks can make!

Before the market suspension, hydrogen was important. Now? I won’t hesitate to call it urgent.

And I say that to you as the chair of the AEMC and the ESB, with both bodies being technology-agnostic. At the AEMC, we often say we don’t back winners – our job is to create settings that allow the market to choose the winners.

This is still true, but with hydrogen’s potential to firm and strengthen so many aspects of the NEM, it’s hard to picture any ‘winning’ solution that will get us to net zero without it.

A worthy pursuit

That you’re gathered here suggests you already understand the reasons I’d say that. Felicity and Darren have also added to this discussion over lunch.

Permit me a few minutes for my own top four considerations for hydrogen, based on a safe, decarbonised future power system:

First, reliability - Hydrogen is set to become the largest industrial customer for electricity in the NEM’s history. It’s a very flexible customer, who is well-placed to provide demand response services to the grid. And, if you then use hydrogen-fired power stations to make energy and give it back to the grid on demand, it effectively works as a massive storage system.

Second, security - unlike most customers, hydrogen electrolysers can quickly turn on and off, helping to balance supply and demand and stabilise the frequency of the system.

Third is affordability – and this is the kicker today. Hydrogen needs power to create power – and it needs far more power than we currently have.

Making the leap to green hydrogen is expensive, and a challenge we all have to consider. The potential is recognised in AEMO’s ISP today, but so is the prohibitive cost. As a result, AEMO sees hydrogen as very much a long-term goal for domestic use, largely limited to transport fuels, and not until the 2040s.

And yet, there are economies of scale – the more we build the better we get at it, so we all hope the price will come down. NSW is aiming for close to $2 a kilogram by the end of this decade.

My fourth and final consideration is social licence. So far, hydrogen comes to us with less social and political baggage than almost any other power option.

Broadly speaking, most of us agree that developing green hydrogen is a worthy pursuit.

Big and bold

So, hydrogen presses a lot of buttons for the NEM – some of them are buttons we haven’t installed yet, although we are well on the way.

Nationally, we’re on a journey of a thousand miles for hydrogen, and while we’ve made some leaps, there are many small steps that will get us there.

The AEMC’s hydrogen review is one of these small steps, allowing hydrogen blends into the existing gas pipelines. What this means producers can run real-life pilots, which is what we need to help bring that cost down.

Elsewhere, big and bold plans are afoot and need to be:

• backed by research and innovation,
• driven by both government and private sector investment,
• and supported by regulatory frameworks.

I’m quite taken by Minister Kean’s NSW strategy foreword, where he calls the plan a

promise to embrace the future and harness human ingenuity and creativity, to do the right thing by our planet and leave no one behind.

Regulating for invention 

Ingenuity and creativity are things that, believe it or not, we can regulate for.

At the AEMC we can’t know exactly what shape a net zero power system will take, but we can define the problems we need to solve to get there. Then, we use market settings, or rules, to create rewards for people who find the solutions.

This is how we make space for innovation – by setting out the challenges as clearly as we can and delivering incentives for participation.

Hydrogen is no exception to this process. As AEMO reflects in its ISP predictions, hydrogen as we know it now is just too expensive – ingenuity and creativity are essential to make it a real player.

And there are new markets on the way that will cry out for the kinds of innovations we’re seeing in the development of hydrogen.

For example, a potential capacity market, new essential system services markets, or even a possible market for transmission congestion relief.

Electrolysers, or in some cases hydrogen power plants, could provide services in these new markets.

Thinking of the NSW strategy – like the hydrogen hubs beginning in the Hunter and Illawarra, or the new gas/green hydrogen-powered Tallawarra B power station – it’s easy to see how they could find applications in these new markets beyond the straightforward production of energy.

I’m pleased to say that across the NEM, and indeed Australia, other jurisdictions are also very active and committed to research, strategy, investment and construction.

South Australia’s $600m Whyalla project is another bold move.

While Western Australia and Queensland have significant hydrogen construction underway or imminent.

Show us your creativity

So, we’re making the frameworks that open up market opportunities – now we want to see your creativity and ingenuity deliver the solutions.

And one of the exciting things about setting up markets that reward innovation is when you see how invention begets invention.

The prospect of our markets rewarding innovation means this is happening all the time in hydrogen and other areas – the urgency of the energy transition is driving a new age of invention.

New products appear and in turn prompt other ingenious concepts – or a process emerges that exists only because someone saw possibility in an apparently unrelated innovation.

Innovation examples

I’ll give you a recent example, because I just found the process so interesting.

After the hydrogen conference I mentioned earlier, a Toshiba delegate got in touch, and asked if he could update our team on an unusual electrolyser project with the promise of very high efficiency.

The project is a bit like bringing together two Lego kits – say Harry Potter and Star Wars. Each kit works well alone, but when combined, you can build something amazing – like a Millennium Falcon full of Hogwarts classrooms.

In essence, this Toshiba project captures spilled renewables in long duration thermal energy storage, which produces heat to add steam to drive a highly efficient electrolyser.

This electrolyser has been in development for quite a while. The need for steam is what sets it apart. The question has been, how to get the heat without adding to the cost.

They’re testing a couple of options, including Miscibility Gap Alloys – MGAs – which were developed by Newcastle University right here in NSW.

MGAs are stackable blocks – which inspired my Lego analogy – that have many possible applications and I’m interested to see where else they might show up.  

It’s early days for this Toshiba project -- it’s early days still for hydrogen -- but every step takes us further on that journey of a thousand miles.

Conclusion

As I finish, I want to return to Minister Kean’s words from the NSW strategy.

Leave - no one - behind.

That really resonates with me.

The National Energy Objectives are all about seeking the long-term best interests of customers.

What we find, as we implement the P2025 reforms, is that placing consumer benefits at the front of our considerations helps everyone. I’d like all of us to bear that in mind on this journey towards hydrogen power.

Let’s take the chance, while we still can, to really focus on who – and where – we want our consumers to be, and how we can deliver to them reliably, securely, and affordably.

When consumers are our focus, we create stronger markets that naturally reward innovation and encourage investment because there are customers waiting for those solutions.

When consumers are our focus, our collaborations are more effective and deliver more meaningful and direct ideas to our work programs.

And when consumers are our focus, it’s of course easier to build social licence because we are always thinking about what will attract them and repay their trust.

Thank you.