"The proposed Latrobe Valley blue hydrogen industry has moved one big step closer to commercial reality with the finance announced by the Japanese Government. This project is a promising opportunity to both reinforce the economic future of the Valley and contribute to the net zero emissions transition of industries in Japan and Victoria," Innes Willox, Chief Executive of the national employer association Ai Group said today.
"At the same time, there are some important issues to be addressed before arrangements are finalised.
"Underwriting domestic demand for hydrogen is essential if production is to be investable. The initial costs of this underwriting will be reduced to some degree by Japanese finance, but need to be better understood. It will be very important to understand where and how any costs will be borne.
"The local uses of hydrogen also need fleshing out as part of the plans of the State, the Commonwealth and industry for long-term decarbonisation. Hydrogen can play important local roles, for instance in process heat, chemical feedstock and backup power. Making that happen requires potential users to make investments in new and adapted capital equipment. The policy and investment framework for this will be crucial to success.
"The emissions implications of this project will also require close attention and rigour. Hydrogen can enable deep emissions reductions when it is cleanly made and substitutes for high-emissions fuels. Maintenance of an average of at least 90% carbon capture and permanent sequestration is central to the environmental case for hydrogen made from brown coal. The national Safeguard Mechanism may have an important role in establishing confidence that capture will be sustained. And given that Australia will account internationally for all uncaptured emissions, while three quarters of the potential emissions reductions enabled will take place in Japan, there is scope for an agreement between the jurisdictions to align the transfer of hydrogen with the transfer of emissions for international accounting purposes.
"Victoria needs investment, employment, exports and emissions reductions. With care and attention we are hopeful that this project can contribute to that," Mr Willox said.
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