Japan commits $1.58 billion to HESC clean hydrogen project in Australia

Japan has committed about A$2.35 billion ($1.58 billion) to the Hydrogen Energy Supply Chain project in Australia's southeastern state of Victoria, which progresses the project to commercial demonstration phase, HESC said March 7.

HESC, one of the most advanced clean hydrogen projects in Australia, transported the world's first liquified hydrogen from the country to Japan in February 2022 in the demonstration tanker Suiso Frontier.

"This major injection of capital enables Japan Suiso Energy [JSE] to design and build commercial-scale facilities to liquefy and ship the hydrogen from the Port of Hastings to the Port of Kawasaki in Japan," HESC said in a statement.

JSE is a partnership between Kawasaki Heavy Industries and Iwatani Corporation, which will own and operate a liquefaction and shipping facility at the industrial Port of Hastings in Victoria, it said.

"The clean hydrogen gas will be produced in Gippsland, Victoria, and JSE will liquify the hydrogen for export to Japan," HESC added.

A newly formed J-POWER and Sumitomo Corporation joint venture called JPSC JV will supply 30,000 metric mt/year of clean hydrogen gas to JSE facilities as "the preferred hydrogen provider," it said.

JPSC JV will initially produce between 30,000-40,000 mt/year of gaseous clean hydrogen with a future potential production of 225,000 mt/year, it said.

"Subject to commercial agreements and meeting the required environmental permits and approvals, it is expected hydrogen production will commence in the late 2020s," it added.

Platts, a part of S&P Global Commodity Insights, assessed hydrogen produced in Victoria via lignite gasification (including capex) at $2.64/kg March 3, up 3% month on month.

It assessed Japan hydrogen produced via alkaline electrolysis (including capex) at $5.10/kg March 6, down 33% month on month.

C02 capture

The HESC project will produce clean hydrogen extracted from Latrobe Valley coal in the Gippsland region with CO2 capture, utilization and storage (CCUS).

"The project will take advantage of one of several long-term CO2 storage solutions, including using the depleted oil and gas reservoirs in Bass Strait for the CO2 emissions that cannot be utilized," said Jeremy Stone, Non-Executive Director of J-Power Latrobe Valley.

With countries establishing the definition of clean hydrogen based on carbon intensity, there is an opening for trade based on credible and transparent CO2 reduction numbers, at various price points, according to Stone.

"We are expecting further offtake agreements for hydrogen that can be used by a wide range of businesses and industrial processes, including the production of ammonia, fertilizer and methanol," he said.

The funding will be sourced from the Japanese government's Green Innovation Fund.

The committed funds give all participants in the hydrogen supply chain "the confidence to progress to the next stage of commercialization," said Eiichi Harada, CEO of JSE.

"This is a complex project and there is still some way to go in terms of approvals, design, construction and commissioning but this is a major boost for the Victorian economy on its journey towards a clean energy future," Harada said.

The carbon intensity of the hydrogen produced will be verified using the Guarantee of Origin scheme being developed by the Australian government in line with global hydrogen markets.

This will facilitate the accurate assessment and determination of the carbon intensity (kgCO2/kgH2) of the hydrogen produced to meet customers' carbon dioxide emission reduction requirements.

Some of the joint venture partners for the upstream JPSC JV and downstream JSE are also the project proponents of the HESC.

HESC's main project proponents are Japan's Kawasaki Heavy Industries, Electric Power Development Co. (J-Power), Iwatani Corporation, Marubeni Corporation, Sumitomo Corporation and Australia's AGL.

The governments of Australia and Victoria have contributed a combined A$100 million to the A$500 million project, with the rest contributed by the Japanese government and project partners, according to the statement.