Australia-Germany group seek fiscal support for early-mover hydrogen projects

A group of German companies and Australia's Fortescue Future Industries (FFI) have called for fiscal support for early-mover hydrogen projects that may otherwise risk becoming stranded assets, the companies said June 24.

The Green Hydrogen Taskforce, created in 2022, comprises FFI and German companies including Covestro, E.ON, Linde, Luthardt, SAP, Schaeffler, Thyssenkrupp Nucera and Thyssenkrupp Uhde.

The market needed first movers willing to take on "challenges to invest in infrastructure and technology buildup and mobilize the renewable hydrogen supply chain," the taskforce said in a report. "But first movers risk locking in assets at price points that might quickly render them uncompetitive."

Risk-sharing mechanisms would remove barriers to early investments and kick-start hydrogen trade between Australian producers and German consumers, it said.

This could involve combining public subsidies aimed at building demand with private-sector risk management

Combining public subsidies incentivizing demand sectors to invest in early deliveries of green hydrogen with private-sector risk management could effectively defray first-mover risk and directly benefit German and European industry.

Establishing the assets needed for the delivery of 15 million metric tons of hydrogen in Europe by 2030 would require between Euro200 billion ($210 billion) and Euro300 billion of investment, with most spending concentrated on new renewables and electrolyzers, the taskforce said.

Several ports in Australia and Europe are planning associated infrastructure, with the taskforce warning these plans would need to gather pace to avoid transport bottlenecks by around 2024.

The Port of Rotterdam has memoranda of understanding with Queensland, Western Australia and South Australia to explore hydrogen supply chains.

"Certain risk-taking infrastructure investors such as Macquarie can provide large amounts of capital at favorable rates and thereby are an important driver in scaling the industry and driving down cost provided a stable regulatory framework is in place," the report said.

Based on cost curves for renewable energy and electrolyzers, production costs for renewable hydrogen in Australia were expected to fall from Euro2.1/kg ($2.21/kg) in 2024 to Euro1.5/kg in 2030, at which point exporters aimed to have installed over 150 GW of electrolyzer capacity, the taskforce said.

"Accounting for transport, storage, and conversion costs, the total cost of landing green hydrogen in the EU is expected to fall from Euro3.8/kg in 2024 to Euro 2.5/kg in 2030," it said.

S&P Global Commodity Insights assessed Netherlands hydrogen produced via PEM electrolysis at Eur15.61/kg June 24, up 45% from a month ago.

Western Australia hydrogen produced via alkaline electrolysis was assessed at $2.95/kg June 23, up 70.5% from a month ago.