Government to fund hydrogen plant in Latrobe Valley

Loy Yang coalmine in Victoria's Latrobe Valley.

Climate and renewable energy activists are furious that the federal and Victorian governments are throwing $100 million into a dubious “clean energy” pilot project to produce hydrogen from brown coal in the Latrobe Valley.

The $500 million demonstration plant is at AGL’s Loy Yang power station and mine near Traralgon. It is being built to develop the technology to gassify brown coal and will produce up to three tonnes of hydrogen in its first year. It is expected to create about 400 jobs.  

In launching the $500 million plant on April 12, Prime Minister Malcolm Turnbull talked up the government’s support for hydrogen. “Our strategic support for this fuel of the future, hydrogen, opens up new possibilities for innovation and energy. It will see brown coal from here in the Latrobe Valley converted to hydrogen, liquefied, and then exported to Japan.”

However, critics say new technology is needed to prevent the huge amount of carbon emissions generated from escaping. They also say it would be more cost effective to finance extracting hydrogen from renewable sources.

The project is touted as a “world first” but that is because the cost and technical difficulties involved mean no other country has tried it.

The project has the full support of the state Labor government. Victoria’s Regional Development Minister Jaala Pulford said: “Hydrogen is a fuel of the future and we want to capitalise on that right here in the Latrobe Valley.”

Hydrogen is seen by many as critical to the shift to a low-carbon economy because it can replace fossil fuels and provide long-term energy storage for grids that are dependent on wind and solar.

Hydrogen could also have a variety of industrial uses and is already used in fuel cells to power a new generation of cars, trucks, ships and other forms of bulk transport.

However, the rest of the world, including some states in Australia, look to the much cheaper renewable fuels, such as wind and solar, for the creation of hydrogen.

Turnbull and federal funding were absent when wind and solar-fuelled hydrogen projects, which will create significantly more hydrogen at a fraction of the cost, were unveiled by the ACT and South Australian governments.

In the ACT, hydrogen projects will be built as part of the winning tenders for wind farms that will help meet its 100% renewable energy target for 2020.

The South Australian Labor government announced several hydrogen projects prior to losing the recent state election. Just one of them, a 50MW wind and solar-fuelled electrolyser at the new Hydrogen Hub to be built near Crystal Brook, will deliver 20 tonnes of hydrogen a day, at a fraction of the cost of the brown coal scheme. A wind-solar fuelled hydrogen electrolyser to be built in Port Lincoln will produce 10 tonnes a day from a plant that is expected to cost just $35 million.

None of these projects create carbon dioxide (CO2) emissions.

Making hydrogen from brown coal, however, generates huge amounts of CO2, and the project has acknowledged a carbon capture and storage (CCS) system for the emissions is essential to the success of the project.

The project is proposing to use dried-up oil wells off the Gippsland coast to store carbon piped from the Latrobe Valley. CCS has never been successfully achieved, despite the millions the government has devoted to it in recent years, as was highlighted in last year’s Auditor General’s report.

The project has horrified environmental groups, who have noted there have been no environmental or planning approvals.

Environment Victoria’s Nicholas Aberle said: “This is just another example of companies pretending the Latrobe Valley can’t produce anything other than coal. It distracts from the real task of planning a truly diverse economy.”

“Why is the government promoting a project which is at odds with its own policy?” asked Cam Walker from Friends of the Earth.

“Governments have squandered over $1.3 billion on carbon capture projects with no return on investment. This is money that could have been invested in healthcare, education, infrastructure and climate action.”

Or it could have funded hydrogen creation using renewable energy.

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