National low carbon energy transitions can become interdependent and affect industrial development pathways. Policies developed in one country or jurisdiction affect policy choices made elsewhere, and support the development of supply chains that cross national borders.
The cross-border dimensions in establishing new energy industries is illustrated by Australia’s liquefied natural gas (LNG) export industry, which was established on the basis of long term supply contracts with customers predominantly in Japan. Another canonical case is the decision by the German Government to subsidise deployment of renewable energy installations at large scale through a feed in tariff. Other countries have transferred the lessons of Germany’s policy to their own markets. Germany’s success also led to substantial investments within China in solar photovoltaic manufacturing capabilities by companies, and this has been a crucial factor contributing to falling costs of the technology, with global benefits (Meckling and Hughes 2018).
Australia, Germany and Japan are now taking the lead in a nascent international market for hydrogen. National hydrogen strategies released in each country are designed to spur the development of hydrogen and related infrastructure domestically. National strategies also directly reference policy choices being made elsewhere, and envision an important role for cross-border trade and investment through supply chain development.
A key question is what governance arrangements are appropriate to underpin the development of a global market, while ensuring the increased role for hydrogen to support rapid deep decarbonisation. The three country briefs attached herein offer perspectives on the shared interests of the three countries with regards to hydrogen market development.
Australia, Germany and Japan are natural partners in collaborating on developing governance arrangements for the hydrogen sector, notwithstanding competitive elements between them, because of the complementarities in their national hydrogen strategies. Most notably, Germany and Japan identify imports as playing an important role in the development of their hydrogen economies, while Australia identifies itself as a crucial exporter of hydrogen and associated vectors such as ammonia.
The three country briefs highlight a number of common themes that provide a platform for deepening discussion around collaboration in the development of a global market for hydrogen.
1. Early Stage Market Development
The briefs document how a feasibility study, and demonstration projects, are underway between Australia, Germany and Japan, with the aim of spurring the development of supply chains between hydrogen importers and exporters. Australia and Germany have launched a joint feasibility study to assess the costs and scalability of green hydrogen trade between those countries. Japan and Australia have a number of demonstration projects under development.
These developments help set the stage for testing different technologies and reducing production costs. Transport technologies are a key theme in the briefs. Japan, for example, notably identifies not only of ammonia, but also liquefied hydrogen and methylcyclohexane (MCH), as potential enablers of trade in hydrogen.
Given this, it is useful to enable information about the performance of different production technologies, transport options and associated costs as well as greenhouse gas emissions outcomes. Whilst some details are likely to be commercial in confidence, governments, and market participants, share an interest in enabling the scaling up of low emissions hydrogen so that it can compete with fossil fuels.
2. Hydrogen and Deep Decarbonisation
An important question highlighted across the briefs is what role hydrogen is likely to play in deep decarbonisation. Analysis such as that by the International Energy Agency (2021) suggest a potentially very large role especially in industry and transport. Direct electrification has been found to be a solution in a wide range of diverse industrial processes considered difficult to decarbonise (Madeddu et al, 2020). The scale of the role for hydrogen will thus depend on its cost competitiveness. In addition, the country briefs commonly identify the importance of ensuring that a developing hydrogen market supports decarbonisation.
The country briefs are unified on the importance of ensuring that the emissions associated with the provision of hydrogen is properly quantified and accounted for through an international certification framework. The briefs suggest there is substantial scope to engage on the question of certification collaboratively across the three countries, as well as the appropriate balance between ensuring hydrogen supports rapid decarbonisation, and the need to create an industry at scale.
In addition, the Japan country brief highlights that there remain substantial technical questions to be solved traversing hydrogen production, transportation, and end-use technologies. In addition, as is pointed out, there are fundamental questions about whether hydrogen and associated vectors, produced using fossil fuels coupled with carbon capture and sequestration is sufficiently low emissions, low cost and scalable to see it play a significant role in scaling up the industry. There is thus likely to be substantial scope for international collaboration not only in technology-related research and development, but also in techno-economic pathways that examine the feasibility of hydrogen as a core component in rapid decarbonisation.
Australia, Germany, and Japan are natural partners in leading the development of a market for hydrogen that supports rapid and deep decarbonisation globally. The issues identified through these country briefs offer a platform for beginning discussions about how to spur further collaboration.