Energy company ATCO says WA gas reservation a factor in hydrogen project cancellation
ATCO had hoped green hydrogen produced at Warradarge wind farm would be blended with natural gas. (Flickr/ Daniele Civello)
A major green hydrogen project will not go ahead in WA, with proponents saying the state's domestic gas reservation and cheaper prices have been factors in their decision to walk away.
Key points:
- ATCO Australia has cancelled plans to build a 10-megawatt electrolyser to produce renewable hydrogen
- It says the cost difference between produced hydrogen and natural gas is too large to secure customers
- A $28.7-million funding allocation will be used for other Australian Renewable Energy Agency projects
ATCO Australia has cancelled its plans to build a 10-megawatt electrolyser designed to produce renewable, or green, hydrogen at the established Warradarge Wind Farm, 250 kilometres north of Perth.
The Perth-based arm of the Canadian energy company secured $28.7 million in public funding in 2021 from the Australian Renewable Energy Agency (ARENA) for the project.
It was to be one of the world's largest green hydrogen electrolyser projects.
ATCO planned to truck green hydrogen to Perth where it would be injected into the domestic gas network and blended with natural gas for local consumption.
Russell James, an ATCO spokesperson, said the cost of compression and transportation of hydrogen, together with the cost of renewable energy, meant green hydrogen could not compete with gas.
"In WA, we are very fortunate we have a domestic gas reservation policy," Mr James said.
"We have a very low natural gas price, which does just mean the gap between a produced hydrogen price and natural gas is quite significant at this stage.
"We are still very active in the hydrogen space. It is just unfortunate at this time, we are unable to get the off-take arranged in time in line with ARENA's requirements."
ATCO Australia has cancelled plans to build a 10-megawatt electrolyser to produce green hydrogen.
Push and pull to create an industry
Both the federal and WA governments have a commitment to achieve net-zero emissions by 2050.
The state government is currently developing a policy requiring electricity users on the south-west interconnected grid to source 1 per cent of energy via renewable hydrogen.
The target is expected to be in place by 2025.
Last year Energy Policy WA modelled green hydrogen cost at up to $78.02 per gigajoule when converted to electricity.At the time, the spot price for natural gas in WA was $5.60/GJ.
Coordinator of Energy at Energy Policy of WA Jai Thomas said prior to recent global pressures the gas price had been relatively stable and it was the hydrogen price that needed to come down.
"That will take time," Mr Thomas said.
"Hydrogen isn't going to leap to commerciality in one single step.
"It is going to take a number of years for hydrogen to become commercially equivalent with other technologies that exist today or other fuel sources."
Energy consultant with Cornwall Insight Ben Cerini said there was a long way to go before hydrogen could compete directly on price with gas.
He said the federal government was trying to create frameworks that would allow the development of green hydrogen.
Principal energy consultant with analyst group Cornwall Insight Ben Cerini. (Supplied)
"I think what we have done so far is work really well on the push side, in terms of throwing money at projects to try to drive down the capital costs so that we can get somewhere that is close to or close enough to parity with equivalent fuel like natural gas," Mr Cerini said.
"Other countries have already created that demand, they have created that pull mechanism for hydrogen and its derivatives, so they're now waiting for the production and they don't have the same resources that we do here.
"So even with the cost of moving the hydrogen, we still have a competitive advantage."
An ARENA spokesperson said funding allocated to ATCO would be returned to the organisation's Advancing Renewables Program where it would be used to achieve the aims of net zero by 2050.