Hydrogen hype meets hard realities for Tasmania's global ambitions

(Reuters) - Hydrogen has been hyped as offering perhaps the greatest hope of a renewable energy to replace fossil fuels, and Australia's island state of Tasmania is lauded as one of the best places to develop the new industry.

Both statements are still valid, but it is becoming increasingly obvious that the scale, and cost, of building a new renewable industry largely from scratch is immense and will take longer than initially hoped.

This creeping realism was the main theme at last week's Tasmanian Energy Development Conference, held in the coastal city of Devonport, near the hydropower, wind farm and electrolyzer projects planned for the new hydrogen industry.

Several of the planned projects are progressing towards final investment decisions (FIDs), including what would be Australia's largest offshore wind farm, a new transmission line linking Tasmania to the mainland and a 300,000-metric-tons-a-year hydrogen-to-methanol plant.

Tasmania is viewed as an ideal location for large-scale green hydrogen production, given the availability of clean hydropower, the potential for major offshore wind power, and a deepwater port and industrial land at Bell Bay on its north coast.

The problem for developing the industry is lining up all the dominoes needed for success, and then getting them to fall into place in order.

Another factor that several conference participants identified as vital is that the projects must have customers signed up before FIDs are made.

It is also becoming clear that hydrogen only really works as a gas if used locally, and for it to be viable as an export fuel, it has to be transformed into methanol or ammonia.

Green methanol

Methanol is shaping up as having the best potential for Tasmanian hydrogen projects, since it can be used to decarbonize shipping, one of the sectors deemed hardest to shift away from fossil fuels.

Methanol in Tasmania would be made from combining green hydrogen with wood waste or wood chips.

Since the wood would be from plantations, it would still be deemed renewable as new trees are grown to replace those used to make the methanol.

Spanish major utility Iberdrola has joined a hydrogen/methanol project with local company ABEL Energy to develop a $810-MM, 300,000-metric-tonnes-a- year methanol plant.

Iberdrola is funding the development costs for what would be one of the world's largest green methanol facilities.

But before any FID on the project is likely, several other dominoes have to fall into place.

State-owned Hydro Tasmania needs to advance its projects to revamp some of its long-established power stations and further plans to build a 750-megawatt pumped storage facility.

The state-owned grid operator, TasNetworks, needs to build some new transmission lines and refurbish others to meet the additional electricity requirements.

The Marinus Link project, which aims to build two 750-MW cables linking Tasmania to mainland Victoria, has to reach FID and commence construction.

And finally, some wind power projects need also to get to FID, with the 1,000-MW Bass Offshore Wind Energy project now looking set to be the first cab off the rank.

Getting all these projects off the ground and in the order needed is the major challenge, especially in a country like Australia, which has rigorous and extensive approval processes at both federal and state levels.

That it can be achieved is not at issue, it's how long and by how much will costs escalate.

Australia is not alone in facing the challenges of building up a new hydrogen industry.

But the issues facing the projects in Tasmania show it is going to be extremely difficult to deliver an industry of the size and scale needed to make a meaningful shift away from fossil fuels, especially within the relatively tight timeline climate scientists say is necessary.

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