Discussion Paper

Recent developments in selected countries

Australia

Whilst energy resources in Australia are dominated by coal and gas, there has been a recent shift to invest more in hydrogen and synthetic products. From an economic standpoint, it is estimated that hydrogen, in conjunction with the $23 billion AUD LNG export industry can add an additional 2,800 jobs by 2030, and increase the value of the export chain by $1.7 billion AUD (Hydrogen Strategy Group, 2018, p. 2). Increasingly, projects in this area are given the approval by council, state and national governments. In the Latrobe Valley, Victoria, a blue hydrogen supply project valued at $500 million AUD has been approved in early 2019. ARENA announced of $22.1 million AUD in funding across 16 hydrogen projects (Palmer, 2018). Furthermore, electrolysis pilot projects are awaiting approval in the Port Lincoln region of South Australia and Pilbara region of Western Australia with a central focus on producing ammonia for fertilisers (Hydrogen Strategy Group, 2018, p. 3).

From an international perspective, the large technical potentials for powerfuels (as well as carbon-neutral blue hydrogen from fossil sources and CCS) have led many neighbouring countries to foster cooperation in this area. For example, Japan and South Korea have demonstrated interest. Australia has and will continue to play a major through the global energy transition. In particular, because it has:

  1. an abundant and secure supply of renewable energy for powerfuel production
  2. a willingness to test and develop further technologies such as hydrogen
  3. the existing infrastructure and value chain to be able to distribute all means of powerfuels both domestically and globally

Despite all these positive aspects there have been barriers from a political standpoint. Australian energy policy has recently reflected uncertainty and instability. Several changes in governments and a weak desire to accomplish global emissions targets allow conventional coal and gas to continue as the primary energy source in the power sector. With no carbon tax or Emissions Trading Scheme’s in place, the Australian government also rejected Dr. Alan Finkel’s recommendations for a clean energy target (CET) in favour of lowering electricity prices.

Germany

Germany has been a front-runner in establishing ambitious climate targets, which is backed by strong commitment in both policy and general population. It has also strong track record of increasing the share of renewables in power sector. However, this has not led to strong emission reduction overall due to exit from nuclear power and an exit from coal recently proposed by a government commission on Growth, Structural Change and Employment.

Beyond the power sector, there are several specific challenges on the way to reaching climate targets. Around half of German final energy demand is used for heating and cooling in buildings and processes. While heat pumps constitute a solution for low-temperature residential heating in renovated buildings, renovation rates remain low, despite strong political efforts. Further, overall emissions in the transport sector, which accounts for another third of final energy demand, have not declined in recent years. Increases in efficiency have been consumed by increase in transport volumes, both in commercial and private applications.

To address these challenges in light of ambitious climate targets, powerfuels are increasingly seen as a necessary group of energy carriers in many sectors. Several major studies on the energy system backed by German industry and research in 2018 (Energiesysteme der Zukunft, Bundesverband der deutschen Industrie e. V., Deutsche Energie-Agentur, 2019) have determined that powerfuels are needed in large quantities for reaching 95% emissions reduction target in 2050, and addressed the need to start market development immediately. Therefore, there is strong and increasing awareness amongst policy makers to take action.

Germany’s situation as a large and densely-populated country with limited space for renewable energy generation in the long run will mean that it will continue importing primary energy from abroad, but needs to switch to renewable energy at the same time. As a current net exporter of goods and services it is well equipped to do so in the future. With large engineering expertise along the entire supply chain of powerfuels, it currently boasts the largest number of powerfuels pilot projects (more than 30) (Strategieplattform Power-to-Gas, 2019). Nonetheless, there does not exist a national strategy on powerfuels yet, and there are no measures undertaken to make the necessary step from pilot projects to industrial scale.

Japan

As a potential demand market, Japan possesses several distinct characteristics which make it a likely first adopter of powerfuels. First, it imports around 95% of primary energy demand from overseas. This translates into a strong dependence on a few exporting countries. Due to geographical conditions and high population density there is also limited potential for significantly expanding domestic renewable power generation. Secondly, as an island it does not have strong pipeline infrastructure in place, as is typical for similarly industrialized countries in Europe or Northern America. Thirdly, Japanese companies possess strong expertise in energy engineering. Fourth, since the earthquakes are frequent, there is a strong preference for decentralised and more resilient energy solutions.

These factors have led Japanese policy to focus on the import of climate-friendly energy. Hydrogen has been identified as powerfuel of choice, because there is little need for overland transport, less use for waste heat and high interest in using imported fuels as efficiently as possible. Becoming a “hydrogen society” is now at the centre of Japanese energy policy (Agency for Natural Resources and Energy, 2019). Hydrogen initiatives in Japan are characterized by strong government-industry cooperation in a number of large-scale pilot projects. Notable successes on industrial scale have been decentralized fuel cell cogeneration systems (with on-site reforming from natural gas) ENE-Farms, of which more than 270.000 have been deployed in the country, while retail prices reduced to a third and subsidies by around 95% (Shimizu, 2017). Further, Japanese car manufacturers lead the way in hydrogen passenger cars, next to their Korean counterparts.

Middle East and North Africa

2030 climate targets for selected countries versus 2010 Picture: Adapted from (Ross, Rich, & Ge, 2016)

As evident in the figure (right), the Maghreb region offers excellent RES potentials and is also in close proximity to European demand markets. Some of the countries in this region are oil and gas exporters today. For those countries, powerfuels can be an opportunity to hedge against the risk of not being able to sell their reserves, as importing countries increasingly strive to become climate-neutral. Powerfuels produced from these countries could be used to target these import countries which also have high willingness to pay for green energy carriers.
Some countries in this region are dependent on fossil fuel imports to meet their energy demands. In these countries, the development of powerfuels could also benefit the local population. For example, Morocco imports over 90% of its energy supply primarily in the form of fossil fuels - mainly coal, oil and gas. Through its National Energy Strategy of 2009, Morocco plans to accelerate the development of renewable electricity generation (2 GW of wind power, 2 GW of solar power by 2020). Since Morocco also has abundant renewable electricity production potential, it could be used to produce powerfuels which could reduce their import dependency and since the capital is invested within the country it could lead to additional social benefits. Irrespective of whether the powerfuels produced are used for local consumption or for exports which may fetch higher profits, power fuel production would be beneficial for Morocco.

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