Hydrogen market study:

SIMS Queensland Australia

Global context

Hydrogen has been associated with energy for a long time. As far as the 1800s the first
demonstrations of water electrolysis were carried away and many engineers saw the potential
they had. However, even now, the main uses of hydrogen lie in the production of ammonia
fertilizer and crude oil refining operations. Moreover, more than 94% of total hydrogen is
produced from non-renewable sources, such as natural gas and coal. In fact, by 2019, 6% and 2%
of the worldwide production of natural gas and coal, respectively, were employed to generate
hydrogen (IEA, 2019). By 2021, hydrogen demand reached over 94 million tonnes though it is
possible for hydrogen demand to grow to 115 million tonnes by 2030, mainly due to the policies
and measures taken by various governments around the world. However, the demand should by
around 200 million tonnes by the same year and mainly driven by renewable and low emissions
sources if the objectives of net zero emissions for 2050 are to be met (IEA, 2022).

A number of countries have identified the economic and reputational opportunity of using
hydrogen to complement and catalyze decarbonisation activity. Japan, Korea, China and the
European Union have all announced ambitious decarbonisation policies which target the
development of “green” hydrogen production and import as a key element of emissions
reductions strategies (Future Fuels CRC, 2019). Governments have offered policy support across
many areas; sometimes in the form of incentives, sometimes with specific targets and sometimes
integrating both. The transportation sector is the one that has received most of the support with:
15 policies supporting passenger cars, 10 policies for refueling stations, 10 policies for buses, 5
policies for trucks, etc. (IEA, 2019). Overall, it is expected that the multiple commitments from
governments to key companies and even entire industries to reach net zero emissions combined
with the role of hydrogen as an energy carrier will propel this market in the coming years.
Australian context

Hydrogen plays a small but important role in Australia’s industrial processes, though virtually all
hydrogen production is closely coupled with end-use consumption. Australia’s current hydrogen
consumption follows global trends, with three main branches: feedstock to ammonia plants (
65%), feedstock to crude oil refineries processes ( 35%) and other
applications (almost negligible). Australia’s hydrogen production by 2021 was around 0.65
million tonnes, and was almost exclusively generated from natural gas through steam reforming.
The Federal government is committed to advancing hydrogen based economic growth as proven
by the National Hydrogen Strategy and Low Emission Technology statements, released in 2019
and 2020 respectively. Additionally, all Australian states and territories have released green
hydrogen strategies which signal further support for hydrogen developments (Advisian, 2021).

To compound on the legal and government support, a recent review of the existing State and
Commonwealth legislation and regulations identified 1255 pieces of Australian law potentially
relevant to the development of the hydrogen industry (Utz, (2019). Moreover, close to 70
Australian Standards relevant to the hydrogen industry already exist to enable the safe and
streamlined introduction of hydrogen technologies and around 50 international standards can be
identified as relevant, although no international standards relevant to hydrogen production have
been adopted as an Australian Standard (Standards Australia, (2018).

The recent advancements in clean energy production are represented by the fact that the world’s
first shipment of liquefied hydrogen from Australia to Japan took place in February 2022,
representing a key milestone in the development of an international hydrogen market (IEA,
2022).
SIMS Resource Renewal context

Sims RR is a division of Sims Limited, which in turn is a company founded in 1917 in Sydney,
Australia, that has become a leader in metal recycling, circular economy solutions and renewable
energy. Sims Limited is present in 15 countries and has over 200 facilities with over 4000
employees (SIMS Limited, 2022). Sims RR is tasked with closing Sims Limited operating loop,
by taking the material left over following the recycling of cars and other end of life consumer
goods (called collectively, “automotive shredder residue” or ASR). This residue is too
heterogeneous (plastics, wiring, seat fillings, etc.) to recycle using conventional means, thus
Sims RR employs a novel advanced plasma gasification technology with a specially designed
treatment process (SIMS RR, (2022). Figure 1 explains succinctly the process and all the
possible products that can be obtained from it. It is important to notice that, at the moment,
hydrogen is the main product analyzed on this brief and it is expected a production of around
4400 tpa from Sims RR.

Fig 1. Resource renewal pathways (SIMS RR, 2022)

Competition

There are at least 106 projects that can be counted to claim a share in the hydrogen market with a
variety of end user segments as targets.
 22 of these projects are either under construction or are already operational (with some
working from as far as 2013 while the majority has been working from 2021 or 2022),
 1 project (the Hydrogen Energy Supply Chain – Pilot Project) is ready to start the
construction phase.
 The rest of the projects are in different stages of development with starting operation
dates between 2024 and 2030, although some are not defined at the moment (CSIRO,
2022).
 Of note is to mention that the most targeted sectors are: mobility, power, natural gas
blending, gas networks, ammonia production, fuel use, electricity, local – regional
applications and export potential

In particular, there are three projects that have received government approval and support (from
the Renewable Hydrogen Development Funding Round) in order to construct commercial-scale
renewable hydrogen facilities:

 Engie Renewables. Its project will receive up to $42.5 million to produce renewable
hydrogen in a partnership with Yara Fertilisers at their existing ammonia facility in
Karratha, Western Australia. This project is focused on hydrogen in gas networks, though
it has potential for industry and mobility uses. It is expected a production of about 640
tpa (CSIRO, 2022), (ARENA, 2021), (ARENA, 2022)
 ATCO. Its project will receive up to $28.7 million to produce hydrogen for gas blending
at their Clean Energy Innovation Park in Warradarge, Western Australia. Its focus is
hydrogen in gas networks, with potential for use in mobility applications. A total
production of 1460 tpa is expected (CSIRO, 2022), (ARENA, 2021).
 Australian gas networks (AGIG). Its project will be provided with up to $32.1 million,
also for a gas blending project, at their Murray Valley Hydrogen Park in Wodonga,
 Victoria. A total production of about 1550 tpa is expected (ARENA, 2021), (Australian
Gas Infrastructure Group, 2022).
Overall, the renewable hydrogen market is in its infancy right now, with some pilot plants being
operated, many more planned and various commercial projects underway, with a demand created
by the necessity to make the transition to a decarbonized economy. Moreover, the Australian
government aims to turn Australia into a major green hydrogen (obtained from electrolysis
powered by renewables) exporter, reaching 3 million tpa by 2040.

Finally, for any hydrogen development to succeed it is key to prove its zero or low carbon
footprint, as green hydrogen is the one with the momentum at the moment, a tendency that is
expected to increase in the coming years. A non-green hydrogen would have to compete with:
 Grey hydrogen (obtained from natural gas) which supplies the majority of hydrogen in
the market and it is difficult to topple based solely in economics due to many factors on
its favor (lower operating costs, economics of scale, use of existing infrastructure, etc.)
 And, blue hydrogen (obtained from natural gas, crude oil or even coal but with Carbon-
Capture-Storage, CCS, technology), an option favored by almost all crude oil and
refining companies, as it would allow them to repurpose their installations and continue
its operation mostly as usual.
Situational analysis

This analysis was carried away using a SWOT matrix which is presented in the table 1.

Table 1. SWOT Analysis of the SIMS RR hydrogen initiative

Positioning map
As commented before, hydrogen market has a number of players with many different targets,
advantages and disadvantages. As such, there are many ways in which a positioning map could
be created. However, in the end the two dimensions selected for comparison were:
 Future potential. This is directly connected to the carbon footprint of the alternative. The
less the carbon footprint, the more sustainable would be and the bigger the growth and
support will have towards the future.
 Capacity. This is connected to the total installed capacity or production, both at present
and in the near future (2023 – 2025). It is expected that traditional production methods
(grey and even blue hydrogen) will have an edge in this section.
The positioning map is shown in Figure 2, where it can be seen that although closer to green
hydrogen, its higher capacity and (presumably) higher carbon footprint make SIMS RR initiative
sufficiently different.

Fig 2. Positioning map of SIMS RR initiative in the hydrogen market

Company strategy

Hydrogen market can be divided into two broad sectors: traditional applications and renewable
hydrogen. The first sector is dominated by grey hydrogen at present and could be dominated by
blue hydrogen in the future. SIMS RR project could complement grey hydrogen in times of
increased demand, but doing so would be a waste of potential. The best option would be to focus
on renewable hydrogen.

However, it is imperative that the company has some kind of certification of Green House Gases
(GHG) emissions, something that has been noted to be critical in other market studies (Advisian,
2021). Results from the pilot facility as well as other research material could be presented and
revealed to possible clients in order to enter the renewable hydrogen market on equal footing.
This should be easily doable as there are already other advanced plasma gasification
technologies that already claim to obtain hydrogen with a carbon footprint even lower than that
from renewables powered electrolysis hydrogen, such as SPEG (SG H2 Energy, 2022).
Once the position of the company as a provider of truly green energy is acknowledged, then it is
only a matter of riding the wave of support that renewable energy is enjoying and will enjoy in
the coming years. Increased private and public investment, favorable policies, novel
technological applications, amongst other factors are the main drivers behind the aggressive
grow rate reported for the worldwide green hydrogen market (11.11% CAGR to 2022 – 2027)
(Global News, 2022).

Finally, SIMS RR should not be limited to the local market. Australia is aiming and preparing
itself to be a hub for hydrogen export in the coming years with Japan, Korea, Singapore and
China as main trade partners. This markets represent major importing countries that have several
factors that make Australian hydrogen initiatives competitive, such as: existing supply chain
relationships,
investment and trading relationships, macroeconomic frameworks and institutional linkages, etc.
A demand between 213 – 2560 ktpa could be expected from these four countries by 2025, with
increasing values over 2030 and 2040 (Acil, 2018).
Target market

As commented before, the target marked would be renewable energy, particularly the use of
hydrogen as a clean fuel using hydrogen cells in various sectors. Table 2 contains a summary of
all the possible uses of renewable hydrogen, including some of the markets currently supplied
solely by grey or even black and brown hydrogen (obtained from coal and crude oil
respectively). Said table also proposes two qualities for each segment: size and potential,
projecting for 2030, with the two being independent of each other (we have cases of big size
markets with high potential, small markets with high potential, big markets with low potential
and even small markets with low potential). The table was extracted without alterations from
(IEA, 2019).

Table 2. Applications for low-carbon hydrogen classified by the theoretical size of the 2030
opportunity and the long-term potential (IEA, 2019)
Of the markets cited above, three are the ones that should receive attention from SIMS RR:
transport, space heating & cooling and power sector. A study was carried out by (Advisian,
2021) listing the economic attractiveness and other parameters for the mentioned sectors:

 Light Vehicles (Transport). Fuel cell vehicles (0.77 kg H 2 /100 km). It seeks to replace
internal combustion engines (10.8 L/100 km). It must compete against battery electric
vehicles (15 kWh/100 km). Overall: it is a transition from highly negative to moderately
positive economic gap; it is more attractive for long range applications; home based
charging is possible long term and low emissions can be certified.
 Heavy vehicles – Line haul (Transport). Fuel cell vehicle (8.28 kg H2 /100 km). It seeks
to replace internal combustion engines (35 L/100 km) 200,000 km/y. It must compete
against battery electric vehicles (124 kWh/100 km). Overall: it has a comparable to
positive economic gap; it is more attractive for long range applications; it offers possible
liquid hydrogen fueling advantages and low emissions can be certified.
 Aviation – regional & international (Transport). Fuel cell based turbo props (Liquid
hydrogen storage density is ~25% volumetric density of Jet-A, hence aircraft design and
speeds are heavily modified). It seeks to replace Jet-A fired turbines. It has no direct
alternatives to compete with, though synfuel turbines remain a possibility. Overall: it
shows a negative economic gap along with significant changes to infrastructure and speed
expectations, though GHG impact is reduced by 60 to 80%.
 Remote power (Power Sector). "Green" hydrogen generation, storage and H2 fuel cell +
diesel support. It seeks to replace diesel. It must compete against renewable electricity
generation with battery storage. Overall: it offers comparable to positive economic gap; it
supports self-resilience and effectively reduces handling of diesel, along with showing a
clear GHG advantage.
 Combined heat and power (CHP) – Residential & Industrial. CHP using H2 fuel cell. It
seeks to replace CHP using natural gas. It must compete with transmission of renewable
electricity and solar based heat. Overall: it offers negative to comparable economic gap; it
becomes economic with lower heat demand; water delivery could be a benefit and it
shows a clear GHG advantage.
  Other high grade heat. Direct combustion of hydrogen. It seeks to replace direct
combustion of natural gas. It must compete against electrification. Overall: it offers
negative economic gap until approaching natural gas parity, though it shows a clear GHG
advantage.

In summary, SIMS RR should allocate the following percentages of its production in the way
shown below:
 60% to transport sector (covering mainly light and heavy duty vehicles) for the
moment (2025 – 2030) and 45% towards the future (2040 – 2050).
 10% to heat and cooling applications (with emphasis on the industrial sector over the
residential one) now (2025 – 2030) and 5% towards the future (2040 – 2050).
 30% to power sector (particularly when storage for more than 72 hours is needed and
pumped hydro is not available) and 50% towards the future (2040 – 2050).

Export data estimations support the allocation mentioned above (Acil, 2018).
References

 Acil, A. (2018). Opportunities for Australia from hydrogen exports. ARENA. Extracted
from: https://cutt.ly/nBsizfb
 Advisian, Worley Group (2021). Australian hydrogen market study. Extracted from:
https://cutt.ly/7Bax2MG
 ARENA Wire (2021). Three hydrogen projects share in $103 million of funding.
Extracted from: https://cutt.ly/bBaCg1d
 ARENA Wire (2022). Australia’s first large scale renewable hydrogen plant to be built
in Pilbara. Extracted from: https://cutt.ly/9BaC3Iu
 Australian Gas Infrastructure Group (2022). Hydrogen Park Murray Valley. Extracted
from: https://cutt.ly/OBaCLaA
 CSIRO – HyResource (2022). Hydrogen large-scale, demonstration and pilot projects.
Extracted from: https://cutt.ly/MBaLOkt
 Future Fuels CRC. (2019). RP1.1-03 Learning from 19 plans to advance hydrogen from
across the globe - Report summary. Extracted from: https://cutt.ly/nBalhOj
 Global News (2022). Absolute Reports: Green Hydrogen Market. Extracted from:
https://cutt.ly/rBsulom
 IEA (2019). The Future of Hydrogen. Extracted from: https://cutt.ly/XBaiERx
 IRENA (2020). Renewable Power Generation Costs in 2020. Extracted from:
https://cutt.ly/kBa27la
 SG H2 Energy (2022). SPEG Technology Explained. Extracted from:
https://www.sgh2energy.com/technology
 SIMS Limited (2022). About us. Extracted from: https://www.simsltd.com/
 SIMS RR (2022). About us. Extracted from: https://simsrr.com/about-us/
 Standards Australia. (2018). Hydrogen Technologies Standards: Discussion Paper.
Extracted from: https://cutt.ly/ABav45W
 Utz, C. (2019). Hydrogen Industry Legislation. COAG Energy Council. Extracted from:
https://cutt.ly/JBavG8B