GIPPSLAND politicians have strongly criticised the federal government’s emphasis on ‘green hydrogen’ in the federal budget at the expense of the Latrobe Valley’s ability to produce ‘blue hydrogen’ based on brown coal and carbon capture and storage.

Federal Member for Gippsland, Darren Chester, said disappointingly, the Japanese government and industry leaders were demonstrating more support for a Latrobe Valley-based hydrogen energy sector than Australia’s own Prime Minister.

“Despite the success of the Hydrogen Energy Supply Chain (HESC) pilot program, which attracted funding from the former Coalition government, the Labor Party is openly hostile to any alternative uses for brown coal,” he said.

The federal Liberal candidate for Monash, Mary Aldred, said the support for green hydrogen projects was welcome.

“However, it is just as important that gas and coal hydrogen projects secure ongoing support as well. These projects can produce greater volumes at lower prices and are low or net zero emissions capable,” she said.

“Most importantly, they represent real jobs and investment opportunities for our region which is absolutely critical right now. The Latrobe Valley is a national energy and manufacturing capital and I will fight hard to see it continue to provide highly skilled, highly paid jobs into the future.”

Mr Chester said brown coal was an incredible natural resource.

“We should be open-minded to alternative uses in the future as technology develops. Producing hydrogen for transport needs can help reduce global emissions, and Japan is taking the HESC project to the next stage,” he said.

“Instead of supporting this innovative approach, the Prime Minister has buckled to demands from the Greens and turned his back on families looking for energy and job security in the Latrobe Valley.”

In a deal with the Greens, Mr Chester said the Albanese government had specifically ruled out coal, gas and native timber projects from receiving any funding support under the $15 billion National Reconstruction Fund.

“The fund was meant to help diversify regional economies and was designed to attract private investment to make it easier to commercialise innovation and technology, but Labor has ruled out projects involving coal,” he said.

The federal budget allocated about $8 billion over 10 years from 2024–25 (and an average of $1.2 billion per year from 2034–35 to 2040–41) to support the production of renewable hydrogen. This includes a hydrogen production tax incentive from 2027–28 to 2040–41 to producers of renewable hydrogen to support the growth of a competitive hydrogen industry and Australia’s decarbonisation. This will cost about $6.7 billion over 10 years from 2024–25 (and an average of $1.1 billion per year from 2034–35 to 2040–41).

The hydrogen production tax incentive will provide a $2 incentive per kilogram of renewable hydrogen produced for up to 10 years per project, between 2027–28 and 2039–40 for projects that reach final investment decisions by 2030.

Backing for the Valley’s potential to produce blue hydrogen from brown coal has been increasing. Latrobe City Council has thrown its support behind the HESC project as a driver of future economic growth in the region. A council delegation last year visited the operations in Japan of the companies behind the HESC project.

Federation University at Churchill has a specialist hydrogen section set up in late 2022. It is headed by Associate Professor Surbhi Sharma, who is the leader of Future Fuels and Hydrogen Technologies, one of the four streams of Fed Uni’s Centre for New Transition Energy Research.

Gippsland has been introduced to hydrogen through Japan’s HESC coal-to-hydrogen project, which has been proven at the pilot plant scale and is now gearing up towards a commercial plant by the end of the decade.

The Latrobe Valley’s brown coal is gasified at a plant next to Loy Yang A power station and split into carbon dioxide and hydrogen. The CO2 is to be stored under Bass Strait; the hydrogen is transported to Western Port where it is liquefied and transported in bulk to Japan.

Dr Sharma’s research experience is in hydrogen fuel cells and low temperature fuel systems. She has a background in green hydrogen (produced from renewables), but the coal and carbon capture and storage research in Gippsland is a new frontier for her.

“It’s new for me here, too. I see the relevance of that in the region. It’s a resource for the region and the fact that coming from an academic perspective, I understand the importance of both blue (fossil-fuel-based hydrogen) and green at this stage for the energy transition,” Dr Sharma told the Express in an interview in February.

The Committee for Gippsland last year released a report, produced with the Gippsland Hydrogen Cluster, that backed both blue and green hydrogen for Gippsland, with blue having the early running and in the long run, each complementing the other.

‘Blue’ hydrogen can be extracted from brown coal through gasification and carbon capture, utilisation and storage (CCUS), while ‘green’ hydrogen is made by electrolysing water using renewable electricity.

Gippsland can produce both ‘blue’ and ‘green’ hydrogen, creating a long-term advantage to the region in an expanding clean hydrogen industry that can be up and running before 2030, according to the report.

“I don’t disagree with that at all. Energy transition is seen internationally – no academic in the field will disagree that blue will cover a lot of ground in the intermediate phase, we cannot go into complete energy transition with renewables without the blue hydrogen,” Dr Sharma said.

“Green will eventually take over, now it’s not there. We need the infrastructure, the investment – that will not happen overnight. We need that time for transition and blue hydrogen will help us. Carbon capture balances the footprint – it’s needed for the current transition phase.”

The CSIRO maintains that using fossil fuels to produce hydrogen is still much cheaper than using renewable energy.

Dr Vicki Au, from the CSIRO’s hydrogen industry mission, who has 20 years’ experience in research and development, told last year’s Gippsland New Energy Conference in Sale that the barrier to use renewable energy to produce the hydrogen was the cost.

“The cost of renewable hydrogen is prohibitively high. We would require a substantial subsidy from government for the transition phase,” she said.

“Using fossil fuel is the lowest (cost) at the moment,” she said, with renewables probably becoming economic by about 2035-40 with the advances in electrolysers.

Also taking part in the discussion was Jeremy Stone, non-executive director and adviser for J-Power Latrobe Valley, which is part of the Japanese consortium that is developing the HESC coal-to-hydrogen project.

After a successful $500 million pilot plant phase, the group is now moving to the commercial stage of the project with $2.5 billion from the Japanese Green innovation Fund.

Mr Stone said HESC, which had been going for 10 years, had already produced 99.99 per cent hydrogen in the Latrobe Valley.

“We would like to take that to the next stage,” he said.

HESC commercial production would eventually be 40,000 tonnes per year of hydrogen – 30,000 tonnes to Japan and 10,000 tonnes to help carbon reduction in Victoria and Australia.

“We need to be in operation by 2030,” he said.