Lucy has worked for bp since 1998 in Australia, the US, UK, Europe and Singapore. In July 2022, Lucy was appointed vice president Hydrogen, Australia and Asia Pacific and the Project Director of the Australian Renewable Energy Hub. Lucy’s portfolio also includes Project GERI in Geraldton, and the Kwinana Energy Hub near Perth. This speech was delivered at the AsPac Hydrogen Summit in Sydney.
Please let me start by acknowledging the traditional owners of the land on where we meet. This has been a difficult fortnight for First Nations people, so recognising their contribution to this country is more important than ever.
I am humbled to acknowledge the Gadigal People of the Eora Nation, and pay my respects to Elders, both past and present. I also acknowledge the Traditional Custodians of the various lands on which our employees live and work, and pay my respects to all First Nations people here today.
I’m Lucy Nation, and I lead bp’s hydrogen business in Australia and Asia Pacific.
For companies like bp, which are deeply involved in renewable hydrogen development, it’s approaching crunch time. We are in a global race, and first movers will be rewarded in future decades, as we saw with the development of the LNG industry 40 years ago.
We are also at a critical juncture for our region and the world, as the window is closing for us to do our part for the Paris Climate Agreement and keep global temperature rise below 1.5 or even 2 degrees Celsius.
bp is aiming to be a global leader in renewable hydrogen, with a target to produce between 0.5 and 0.7 million tonnes per annum by 2030. We will participate across the full hydrogen value chain:
- building solar and wind resources to produce power for both our customers and hydrogen facilities
- integrating our hydrogen business with our refineries and biofuels to build capabilities in industrial heartlands
- leveraging our existing in-house expertise whilst also working closely with research and development organisations to promote innovation
- applying our skills and experience in building big and complex projects, and
- using our shipping, logistics and HSSE experience to move product safely around the globe and deliver to our customers
While everyone can see the need for the energy transition, developing large-scale supply solutions is challenging:
- First, an industry rule of thumb is that it costs over a billion dollars to build a GW of renewable power generation and another billion dollars (plus) to convert it to hydrogen and vectors. Scale is critical to be price competitive.
- There is clear demand for renewable hydrogen, but it can be difficult for customers to make binding commitments for products that are not made today and by projects that are still in the early stages of development. This is just one element that makes project financing challenging.
- To have these projects up and running in the timeframe that we feel is needed, significant long lead item procurement commitments need to be made before they reach FID and has been de-risked. These commitments require development companies to have a strong balance sheet and appetite for risk.
- These projects depend on large-scale public infrastructure, like transmission lines, ports and access to water. These need to be developed on a timeline that matches the hydrogen projects’ timelines and often become additional costs for the project to bear if they are not state-funded or already in place.
- There are complexities in permitting, access to skilled labour, constrained supply chains, evolving technology, and customers having different requirements on the form in which they would like their hydrogen delivered.
- Finally, in most cases, without Government support low carbon hydrogen cannot be produced at a price that can compete with fossil fuel alternatives until well into the next decade. Therefore, securing sufficient government support is important before taking FID and investing billions of dollars into the projects.
Putting all the pieces of the puzzle together so these projects can make FID is an incredibly complex undertaking. But it is not impossible. If the entire industry works together to tackle these issues, we can begin bringing multiple projects online.
At bp, we’re applying a common strategy to our projects: local, regional, and global. Local means anchoring each of our projects with renewable energy supply to nearby industrial demand. This helps to de-risk the projects, contributes to Australia’s decarbonization targets, energy security and economic diversification goals.
When we think regionally and globally, scale is important for long-term competitiveness. Each of our projects are also progressing plans for export to international markets as technology advancement, supporting infrastructure, and the development of international certification schemes develop.
bp are focusing on developing the projects in our pipeline that we believe are advantaged. Advantaged means, they already have the components needed to be investible or they have a clear path to securing them. This is a mix of low-cost power supply, offtake demand, access to critical infrastructure, access to land, government support and a path to scale.
We have three renewable hydrogen projects we’re developing in Western Australia that we believe have the ingredients for success:
H2Kwinana, located south of Perth, is in Front End Engineering Design (FEED). Kwinana is an example of our vision of an integrated energy hub. It makes use of former refinery infrastructure, tanks, transmission lines, jetties and pipelines to efficiently and quickly bring online multiple renewable energy solutions that are symbiotic. Re-purposing the former refinery infrastructure helps to lower the overall capital investment.
H2Kwinana will be co-located with our planned Kwinana Renewable Fuels plant, which is also in FEED and pending a final investment decision. When operational, KRF will be Australia’s largest bio-refinery, producing more than 10,000 barrels per day of sustainable aviation fuel and renewable diesel.
Renewable fuel processing requires hydrogen, so we’ll start with up to 100 MW of electrolysis to supply the bio-refinery, as well as displacing some grey hydrogen used by local industrial neighbours today.
Global supply chains for electrolysers are tight, so bp has already made the commitment to purchase electrolysers to ensure that they’re available for the planned 2026 start-up date. The initial size of up to 100MW is Phase 1, after this, we plan to scale the project up to 1.5 GW of production to support future domestic decarbonisation and export opportunities.
We’re very proud and grateful to receive funding from the federal government’s hydrogen hub scheme and are excited to continue to see the site transform.
The Australian Renewable Energy Hub
The Australian Renewable Energy Hub, or AREH, is a joint venture with CWP Global, Intercontinental Energy, and Macquarie Capital. A proposed 26 GW of capacity, when fully executed, it could be one of the largest renewables projects in the world. bp is the Operator and lead marketer for the project, and we are working closely with both our JV partners and the Traditional Owners and custodians of the land, the Nyangumarta People.
Located in the Pilbara, AREH has many advantages. It has secured 6,500 square km of land in Nyangumarta country, as well as land in the Boodarie Strategic Industrial Area near Port Hedland. The complementary diurnal wind and solar resources in the area are world-class, and will enable predictable renewable electricity output, which we plan to produce at huge scale. We will use this to provide renewable power and hydrogen to mining customers, to power new critical minerals processing facilities and to export renewable energy to our trading partners in Asia and Europe.
AREH already has its environmental permits and is well placed to take first FID. Being underpinned by the strong domestic demand in the Pilbara will allow it to scale to be one of the world’s most competitive green hydrogen projects – we are working hard to deliver the first green electrons to the Pilbara by late 2027 and begin export in 2029.
We’re really excited about AREH’s unique opportunity to contribute to the decarbonization of Australia and the world. The Pilbara is one of the world’s largest iron ore exporting regions, and contributes to around 23% of Australia’s Safeguard Facility emissions. The potential of decarbonizing this region is enormous, but won’t be easy, and we can’t do it without support. The announcement of up to $3b of the rewiring the nation program dedicated to WA is an example of the scale of Government support needed to achieve our collective decarbonization goals- it’s a great start.
And then we have, Project GERI; located in the Mid-West near Geraldton and the Oakajee Strategic Industrial Area. It’s one of the windiest regions in Australia, with horizontal trees to prove it; we plan to utilize those unrivalled wind and solar resources to produce more than 14 GW of renewable energy. We see GERI playing a key role in supplying competitive renewable power and hydrogen for the processing of critical minerals, green steel production and export. With access to the SWIS and existing pipeline corridors, Project GERI could scale and help decarbonize not only the Mid-West mining areas but also the South-West of WA, including Perth.
This year, we have boosted our aspirations for GERI. We have worked with the local community to secure access to over 90,000 hectares of land for wind and solar development and have increased our generation targets from 10GW to 14GW and beyond. We have weather monitoring underway on the land and are progressing well with our plans.
Despite the many companies staking a claim in hydrogen production, there are few with the bandwidth, balance sheet, appetite and capability to deliver projects of this scale in a nascent industry.
I am proud to say, bp is making significant progress in Australia. Across these three projects we are planning to build over 40GWs of solar and wind which is a staggering number when you consider that Australia’s current total electricity generation is around 90GW.
I said earlier that we are approaching crunch time with our projects. If we are to achieve start-up dates this side of 2030, pre-FID commitments need to be made now.
While we may not have the massive chequebook of the US, Australia is chipping away at its lead thanks to policies like Hydrogen Headstart. Helping to de-risk selected first-mover projects is a welcome commitment from the feferal government, and is already giving producers, customers and investors confidence in getting the industry off the ground.
As is being demonstrated around the world, collaboration between industry and governments is vital. Great work has been done, but there is still more we need to do.
We need governments, both locally and internationally, to continue to match industry’s ambitions. For example;
- developing market mechanisms such as hydrogen-specific incentives and pricing structures
- fast-tracking critical infrastructure upgrades, especially in areas like transmission and ports, and
- spurring demand through stricter environmental regulations and emissions targets that can drive industries to adopt hydrogen as a clean alternative, sooner.
While Production Subsidies and Contract for Difference schemes are very welcome – it’s important they take into account timeframes prior to FID and the huge commercial risks of these projects. For example, METI in Japan has first round funding aligned with the timeframes needed for projects to take FID and meet first export dates before 2030.
Australia’s hydrogen industry has immense potential, domestically and on the global stage. It sounds like a huge underaking, and there is certainly a challenging road ahead, but the upsides for Australia and the world are certainly enough to keep us in the game.
bp has been here before.
These opportunities are comparable to our experience in LNG. The projects are big, the financial commitments are loaded, the demand is (at first) hard to quantify and the shipping and port infrastructure is challenged until the industry matures.
It’s time to fully realise the potential of hydrogen in Australia and to lead the way toward a lower carbon future. The planet needs us to grasp the opportunities that are before us. We need to focus our resources on getting the viable projects through FID and into production as quickly as possible, particularly those that are needed to decarbonize Australia’s critical minerals that will be needed the world over to build the equipment needed to deliver energy transition. The clock is ticking. We need a lot of collaboration to get this done.
Extracted in full from: bp.com/en_au/australia/home/media/speeches-articles/accelerating-Australias-hydrogen-industry.html