Research from Cornwall Insight Australia shows that if a hydrogen plant had been in operation in South Australia this summer, it could have made a profit of ~$2.3mn.
This is based on a 20% utilisation and includes the expected quarterly repayment on the $593 million of government debt with interest, operating costs, and the net cost of energy. If the plant was available last summer 2020, it could have made ~ $47mn in profit, opposed to a ~$2.3mn loss in summer Q1 2019.
For our model, we have assumed the hydrogen will be sold at $2/kg; this aligns with the Australian Government Technology Investment Road Map goal of enabling clean hydrogen under $2/kg.
Benjamin Macey, Senior Storage Consultant at Cornwall Insight Australia, said:
“The South Australian Labor party has committed to building a hydrogen production, storage and electricity generation facility if elected at the next SA State election. Their proposal includes a $220mn 250MWe electrolyser, $31mn for 3,600 tonnes of liquefied hydrogen storage and $342mn for a 200MW CCGT power station.
“Our research shows that if such a plant were in operation at the stated capital costs, it could be profitable. In addition at the 20% utilisation factor, approximately 1,517 tonnes of hydrogen would have been effectively produced. This also could have been stored in the proposed storage facility.
“It should be noted that the financing arrangements using government debt make the project viable and would be difficult to finance on a commercial basis without a clear offtake market and incentive to invest. Additionally, the SA government value from job creation, economic growth and supporting the transition to cleaner fuels would not be considered in the benefits of a commercial business case.
“If Australia is to compete globally in hydrogen exports, governments will need to assist the industry and be a first mover. Similarities can be made to the support government has given to battery storage. We estimate there is now over 1GW of battery projects proposed in South Australia with at least seven virtual power plants in operation.”
About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
