March 22, 2023 - Japan is putting $2.35bn into a project to turn coal from Victoria’s Latrobe Valley into “clean hydrogen” using carbon capture and storage technology.

The investment marks the start of the “commercial demonstration phase” of the Hydrogen Energy Supply Chain (HESC) project which last year delivered a world-first cargo of liquefied hydrogen to Japan on a purpose-built ship.

Funds from the Japanese government’s Green Innovation Fund will go to the project through one of its partners, Japan Suiso Energy, that will own and operate a liquefaction and shipping facility at the Port of Hastings.

Last year the Hydrogen Energy Supply Chain project delivered a world-first cargo of liquefied hydrogen to Japan on a purpose-built ship, seen here.

Photograph: HySTRA/Reuters

Eiichi Harada, the chief executive of Japan Suiso Energy, said: “After a decade of working together with the Japanese, Australian and Victorian governments, our efforts to establish a world-first clean hydrogen energy supply chain have been rewarded. This is truly a watershed moment for our combined efforts to decarbonise global energy production.” 

A joint venture between J-Power and Sumitomo Corporation will supply 30,000 tonnes of clean hydrogen a year to JSE’s Port of Hastings facility, an announcement said.

Critics have previously described the project as “just a new fossil fuel industry” that would see Australia generating greenhouse gas emissions onshore while exporting a cleaner fuel.

Neither of the two carbon storage sites identified by the project are close to being operational, yet are key to the project’s goals of producing cleaner hydrogen.

Jeremy Stone, non-executive director of J-Power Latrobe Valley, said they were “moving from start-up to scale-up phase” and commercial scale hydrogen could be a “catalyst for growth” in the Gippsland region.

 

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As the traditional coal industry shuttered, with the Loy Yang power station set to close in 2035, Stone said the HESC project could give new options for jobs in the region.

HESC completed a pilot phase last year, producing one tonne of hydrogen at a plant next to the Loy Yang coal power station, and then trucking it to Port of Hastings where it was condensed and loaded on to the world’s first purpose-built hydrogen container ship.

Stone said the project would bring coal gasification technology from J-Power’s Osaki CoolGen facility to Australia which, he said, was able to capture 90% of CO2 emissions from the process of turning the coal into synthetic gas and then extracting the hydrogen.

Stone said there were still investment decisions and government approvals to be gained, but the project was looking to produce its first hydrogen before the end of the decade.

Capturing and storing the CO2 “has to be part of the project” because without it “we can’t reach the carbon intensities that countries want” from clean hydrogen, Stone said.

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The project’s target was to produce hydrogen clean enough to meet emerging benchmarks, he said, such as those of the US government which is providing tax breaks for hydrogen that emits less than 4kg of CO2 for every kilogram of the gas produced.

“We’re doing everything possible to make this as clean as possible. We’re trying to minimise CO2 in all elements of the project. Right now there’s 90 million tonnes of hydrogen being made every year with no abatement at all. That’s about 11.5kg of CO2 for every kilo of hydrogen.”

Captured CO2 would be sent by pipeline, Stone said, with two potential offshore storage facilities in the Bass Strait – Exxon’s Bream field project using depleted oil reservoirs or the Victorian and federal government-backed CarbonNet project. Neither project has been given the go-ahead.

Harada said: “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.”

Dr Fiona Beck, an ANU expert on hydrogen’s role in the low carbon energy transition, said investment in infrastructure to liquefy, store, load and transport hydrogen was “really welcome”.

But she said investment in producing hydrogen from fossil fuels “risks locking us in to using fossil fuels for longer” when costs of producing hydrogen from renewable energy were falling fast.

“There’s a risk of stranded assets in this area,” she said.