New Energy Expert Insights: Developments in the Australian Hydrogen market – Jean-Louis Salinas (Siemens Energy)

 

In this New Energy Expert Insights, we sat down with Jean-Louis Salinas, Hydrogen & Decarbonisation Solutions Lead at Siemens Energy, to discuss his views on developments in the Australian hydrogen market.

1.What does Siemens Energy see as the opportunities for hydrogen in Australia?

Australia has two complementary advantages in the hydrogen race, one being access to inexpensive green power and the second being its abundance of natural resources. Other countries typically only have one of these advantages. Given that energy makes up 60% of the cost of producing hydrogen, the winner of the green hydrogen race will be the country with low‑cost, clean and reliable electricity. 

Other advantages include Australia’s stable political environment and its status as an established trade partner – you can bank on Australia. Finally, the people have an innovative and entrepreneurial mindset, which coupled with business ambition and technological advancement makes the outlook for Australia very positive.

2.Where do you see Siemens Energy’s involvement in the hydrogen market?

Our smallest PEM electrolyser size currently stands at 17.5MW. While there are manufacturers with smaller electrolysers, we see the opportunity geared towards utility-scale facilities. With Siemens Energy’s wide-ranging portfolio (from electrolysers, clean generation, compression and transmission), we have the ability to provide integrated offerings which many others are unable to. Our presence on the ground also puts us ahead when it comes to being able to service and maintain our Australian customers’ assets.

3.Why has Siemens Energy been successful in the energy market?

Our 150-year legacy is a testament in itself – its longevity is a vote of confidence echoed by financiers who see our technology as bankable. It is interesting to note that currently there are around 40 companies manufacturing electrolysers, many of which are new market entrants.  They would therefore need significant investment to be successful. However, such investment is often difficult to come by when a company is only a few years old. 

Another plus factor is Siemens Energy’s proven scalability of production. We understand the need to scale up hydrogen infrastructure and equipment as soon as possible. At the moment, we are building a multi-gigawatt factory in Berlin that will eventually manufacture 3GW of electrolysers per year.

With Siemens Energy’s broad market offerings, we can also bring together different parts of the value chain to provide flexible solutions to our customers. Our internal tools help us to create a “digital twin” of a plant and optimise the sizing and technology mix to meet our customers’ needs.

4.Australia started out ahead in the hydrogen export race but seems to be falling behind.  Why do you think this is and how can we speed up our hydrogen ambitions?

Australia was one of the first countries to establish a national hydrogen strategy. There was a clear plan, and various states expanded on this with their own strategies.  It however took some time for Australia to implement these strategies.

Important requirements for a hydrogen market include sufficient port and water infrastructure, transmission infrastructure, and access to overseas consumers (such as in Asia and Europe).  For hydrogen to truly take off as a global commodity, trade and policy frameworks (e.g., offtake agreements) need to be developed concurrently as well.   

From an energy perspective, an important focus should be the construction of low-cost renewable generation facilities. As there is no pool value for hydrogen at this point, both the demand and supply side need to be built together.

5.What factors are important in the successful deployment of hydrogen equipment? 

A crucial consideration is the availability of service capability in the country where the equipment is being deployed. There also needs to be a stock of components onshore. In long run we may even see some manufacturers move more components of the value chain onshore.

Given that the industry is still in its infancy, the equipment used to build a facility today will not look the same in 20 years. Investment in research and development remains important and will determine the ultimate winners.

6. What do you see happening in the hydrogen equipment supply chain in the short to medium term?

The market has moved past the point of demonstration projects (of which there has been quite a few in Australia). Players now want to build commercial projects according to technical specifications and safety requirements.

Currently there are a lot of players in the market, and it is likely that not all will be successful. While some developers may secure land access for premium facility locations, many entities will not be able to secure financing to develop projects. We therefore expect to see a consolidation of market participants in the medium term.

We are also seeing a lot of traditional IPPs and oil and gas companies expanding into green hydrogen production, and there will consequently be a merger of energy and hydrogen generation projects.

7.What would you like to see in terms of policy developments for hydrogen in the NEM?

The certification of hydrogen is crucial to get the market off the ground. Policy intervention to ensure the blending of gas is also important, as gas pipelines can absorb up to 10% hydrogen.  This will help unlock a large market for hydrogen and help build a competitive export supply chain.

Policy intervention to create hydrogen hubs (similar to the current REZ) will help bring down connection costs and allow Australian projects to be globally competitive. 

8.Do you see consumers willing to pay a premium for green hydrogen?

Honestly, renewables don’t come for free. The path to net zero will involve higher prices and consumers will have to face new paradigms that come with conscious consumption.

While the end goal is green hydrogen, the development of projects producing all the colours of the hydrogen rainbow should be pursued in parallel, as any colour that reduces emissions is a step in the right direction.     

Australia’s efforts to certify green hydrogen is being watched intently by the international community. In comparison, Europe and the US are more advanced in putting certification systems in place, and we are seeing that consumers in these jurisdictions are willing to pay a green premium. Asia is not far behind.

9.Did the Ukraine crises contribute to the renewed hydrogen acceleration?

The Ukraine crises is showing the importance of a stable and secure supply chain for resources and energy. This is the same realisation that consumers came to during COVID when supply was restricted. Now, more than ever, consumers are placing continuity and certainty as the top priority.

10.Where do you think the people that will build the hydrogen infrastructure will come from? Are the skills gained in other parts of the energy sector transferrable?

There are many parallels between hydrogen and the existing energy sector such as LNG. Skills relating to pressurisation, pipelines, general energy sector experience and coupling between electricity generation and hydrogen production is crucial. Siemens Energy is working with the Australian Hydrogen Council to ensure the necessary local skillsets are being developed and jobs are being created.


The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.


 

KEY CONTACTS