Hydrogen gas (‘hydrogen’) is a versatile energy carrier and feedstock, derived primarily by splitting water or by reacting fossil fuels with steam or controlled amounts of oxygen. While hydrogen has served mostly as an input into a range of industrial processes, it has the potential to be used across a number of applications as shown below. Further, if produced using low or zero emissions sources, (‘clean’) hydrogen can enable deep decarbonisation across the energy and industrial sectors. Clean hydrogen is the focus of this report.

In 2016, Australia ratified the Paris Agreement, committing to achieve a 26-28% reduction in greenhouse gas emissions below 2005 levels by 2030. While use of hydrogen across the energy and industrial sectors is one of a suite of technology options that can play a role in helping Australia meet the prescribed decarbonisation targets, there are a number of other domestic trends and characteristics that favour its widespread use. These include:

• Natural gas supply: Particularly on the east coast of Australia, gas prices currently remain high ($8-10/GJ) compared to some overseas markets, with some uncertainty regarding future cost trajectories. Hydrogen could replace natural gas as a low emissions source of heat as well as a potentially cost competitive low emissions feedstock for a number of industrial processes
• Changing electricity sector: Hydrogen can help manage the transition to a higher proportion of variable renewable electricity (VRE) in the electricity network by overcoming challenges associated with energy intermittency. Hydrogen also offers an opportunity for optimisation of renewable energy use between the electricity, gas and transport sectors (i.e. ‘sector coupling’).
• Skilled workforce: Australia has a technically skilled workforce with deep expertise across the energy sector as well as in high value or advanced manufacturing production processes. There is a strong need for these skills across the hydrogen value chain and so this represents an opportunity to transition the workforce to a growth market.

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