Informing a “Hydrogen Roadmap” for New Zealand

By comparison to other developed countries, New Zealand’s hydrogen policy is not as advanced and yet to be discussed among respective industries. But, it certainly remains a hot talking point and if implemented in the right way, hydrogen’s use could be a game-changer. With hydrogen projects appearing throughout the world, particularly in the transport sector, the New Zealand Government is keen to learn potential uses for hydrogen right here in our backyard – turning to independent experts for further advice.

The Ministry of Business, Employment and Innovation engaged Andreas Heuser and his team to determine some detailed modelling and analysis for the supply-demand, and distribution of hydrogen – including potential export markets.

Following the development of the 2019 Hydrogen Green Paper A vision for hydrogen in New Zealand and a hydrogen demand, supply and international trade model built by Castalia in 2020, the scenarios are helping to inform a “Hydrogen Roadmap” for New Zealand.

In his report to the Ministry of Business, Innovation and Employment (MBIE), Mr Heuser identified four sectors where hydrogen technology and application of hydrogen as an energy carrier could be used: transport, energy and electricity system services, industry, and exports.

“The report explores possible use cases of green hydrogen under a business-as-usual (BAU) in 2050 pathway, and also looks at New Zealand’s possible hydrogen economy in 2050 under specific intervention scenarios,” Mr Heuser explains.

“Key use cases for hydrogen could be in heavy vehicle transport, and depending on how aircraft evolve, in aviation. If we are to decarbonise the commodities derived from natural gas feedstock like methanol and fertiliser, then green hydrogen will be needed. At this stage, the economic viability is not fully established. However, hydrogen “wins” in key sectors, then our BAU scenario modelling suggests that around 8 per cent of New Zealand’s energy needs could be met by green hydrogen in 2050.

Under a BAU pathway, it is expected there will be a good hydrogen uptake in heavy vehicles and depending on global competitiveness, to produce hydrogen for export in future.

Within the transport sector, hydrogen use is most likely to be utilised in heavy-duty vehicles like trucks, some buses and in speciality vehicles. It is also likely to be used in aviation applications, marine applications and in some cases, rail.

Commenting on the likelihood of green hydrogen becoming an economic alternative to fossil fuels, Mr Heuser suggests there is potential (down the line), but says it is important to remain realistic.

“Green hydrogen production costs need to fall significantly for this to happen,” he says.

“In saying that, New Zealand is a useful test case to consider the economic viability. New Zealand has a high level of development and good quality road infrastructure, high urbanisation, but low population density with large distances between towns. There’s good hydro, wind, geothermal renewable sources and moderate solar resources - coupled with good electricity infrastructure, this means New Zealand could be a low-cost production centre.”

However, in all cases, the future viability of green hydrogen use depends on hydrogen production costs and the costs of transporting hydrogen to the point of use.

Modelling by Castalia suggests that loading and shipping costs comprise at least 15 per cent to 20 per cent of the total landed cost of hydrogen, provided both scale volumes are imported and existing port infrastructure is converted. Therefore, domestic production costs need to be at least within this percentage band of the world price in the long term to justify domestic production.

“Transporting hydrogen is complex and global trade is in its infancy. Significant technical challenges to regular compression or liquefication remain and new infrastructure investment at ports is required,” Mr Heuser explains.

“New Zealand production costs will probably fall within the band, provided excess renewable power is available. In some locations, exports may even be possible. If New Zealand is ultimately not costcompetitive, then it could accept imports at the existing large ports that can be easily converted.

“These are also located in or adjacent to major cities where the hydrogen will be used. For instance, major ports are all hubs for heavy transport vehicles, so imported hydrogen could immediately be consumed at the port.

“However, we need to also be realistic about global trade. Hydrogen suffers from significant energy losses in its production and will always struggle to match the efficiency of transmitting electrical energy by traditional transmission lines.”