Subsea cables or hydrogen shipping: the mystery of exporting Australian power
Awash in seas of opportunities, Australian power companies need to take a leap to develop further. Matt Farmer investigates.
ustralians enjoy some of the most direct access to power in the world. Adjusted for purchasing power, energy in Australia ranks the 10th cheapest among countries within the Organisation for Economic Co-operation and Development (OECD), according to the Australian Energy Council.
Yet much of this energy comes from coal. Government figures report that between 2019 and 2020, domestically-produced coal accounted for 54% of Australia’s domestic energy production. Australia is also the second-largest coal exporter in the world, and this overseas demand helps drive domestic production.
In continental south-east Asia, Malaysia, Thailand and Vietnam all seek to nurture populations rapidly growing beyond their infrastructure. According to the Australian government, coal export volumes grew at an average annual growth rate of 2.5% between 2010-11 and 2020-21, despite a 4.3% decrease in exports between 2020 and 2021 due to the Covid-19 pandemic.
Many of the countries around Australia in the OECD rankings possess massive internal energy reserves, such as the US, but others are renewable heavyweights, such as Iceland and Norway, and this could be the future of Australian energy.
Yet as renewable developments progress and expand, they slowly erode their price incentive, decreasing the profit margin on power sold, and posing questions for the future of Australian energy. Within Australia, developers seem content to wrestle with this, especially as regional governments set ambitious goals and subsidise projects. But in an international context, this model of development seems wildly short-sighted, and international trade and collaboration are likely to be integral parts of Australia’s energy future.
Establishing local partners
The most obvious question regarding Australian energy exports is, simply, why does Australia not export more to its immediate neighbours? While Papua New Guinea lies less than 200km off the Australian mainland at its closest, the country regularly struggles with its own continuity of supply.
The World Bank has funded a project to improve the management and infrastructure in the country’s largest cities, but completion of this work and possibly further reform would be needed before the country can represent a reliable consumer of electricity.
Similarly, New Zealand might seem like a natural ally for Australia, with the country’s industries paying an average of $107 (NZD$171) per MWh for electricity in 2022. However, the Tasman Sea is not so hospitable. Quite apart from the 2,000km between the countries, large areas of the sea descend more than 4km below the surface. While not totally unfeasible, creating a link would present a massive engineering challenge likely to outweigh any possible benefits.
These challenges are compounded by issues within Australia’s domestic grid, where a lack of internal interconnectors has diverted attention towards tackling grid issues in Australia, not overseas. Two of the country’s states lie far beyond the reach of the main interconnected grid, which already has one of the widest reaches of any grid on the planet. For this reason, vast internal grid connectivity projects, such as Project EnergyConnect, absorb attention and funds, in this case more than $1.35bn (A$2bn).
"According to the country’s Energy Market Authority, Singapore’s energy demand is set to increase at a combined annual growth rate of between 2.8% and 3.2% between 2022 and 2032."
The need for internal development and the various problems with connecting grids in south-east Asia seems to have led Australian developers to look even further afield.
Although small, Singapore has a sizable economy and a growing need for power. According to the country’s Energy Market Authority, Singapore’s energy demand is set to increase at a combined annual growth rate (CAGR) of between 2.8% and 3.2% between 2022 and 2032, an increase on the energy CAGR of 2.2% reported between 2009 and 2020.
Given recent fluctuations in global energy prices, even in south-east Asia, measuring the markets against each other is difficult. Australian wholesale energy retailed for between $47 (A$70) per MWh and $166 (A$128) per MWh in the fourth quarter of 2022. This marked its second-highest price ever, behind the previous quarter.
However, in the same period, wholesale electricity in Singapore sold for an average price of $183 (SGD$247) per MWh. Enabling Australia to sate some of Singapore’s demand would prove lucrative for both partners and give further incentive for renewable development in the country.
The promise of Sun Cable
This is the pitch for the Australia-Asia Power Link, the premier project of Australian transmission developer Sun Cable. The planned interconnector would link Darwin in Australia’s Northern Territory with Singapore, 4,200km away, via a vast undersea cable. On its way, the cable would pass through Indonesian waters without making landfall, as approved by the Indonesian government in September 2021.
With a planned capacity of 3.2GW, the cable would stand out above existing subsea interconnectors. For context, the two interconnectors between France and the UK together transmit up to 3GW over much shorter distances.
Previously, Sun Cable said that the project would aim to start feeding electricity into Darwin in 2027, with full commissioning in 2029. Australian business heavyweights Andrew Forrest and Mike Cannon-Brookes came aboard the project, which raised $141.9m (A$210m) in early 2022.
This sizeable plan has a sizeable price tag: at least $20.2bn (A$30bn). Raising capital cannot be easy, but still Sun Cable has done its best to make the business case for funding. In October 2022, a company statement said it had received letters of intent accounting for 2.5GW of offtake in the country. At the other end of the line, the following month, the company said it had identified up to 30GW of renewable projects that could potentially feed into the cable.
"In January this year, the company entered administration."
Then, in January this year, the company entered administration. Despite this, Sun Cable has announced “voluntary administration”, promised the cable’s commissioning “late this decade”, and continued to insist upon the fundamentals of its plan.
Reports from ABC said that this sudden decline in fortunes came about as a result of a dispute between Forrest and Cannon-Brookes. As chair of the board, Cannon-Brookes disagreed with Forrest over the company’s spending and progress, and eventually the disagreement saw the company’s venture capital agreement fall through.
In the administration announcement, Cannon-Brookes said he still has faith in the goal of the project. Meanwhile, Forrest says he now believes Singapore seeks green hydrogen, and if he were to purchase the company, this would form its new focus. Regardless, the future of the company, and its flagship project, may rest on the decisions of its billionaire backers.
Shifting focus to hydrogen
Massive projects have previously sought greater export capacity to justify their size, and struggled at the planning stage for lack of it. One of these, the Australian Renewable Energy Hub (AREH), would see 26GW of photovoltaic solar and wind development in the Pilbara region. “Megaproject” barely covers the scale of this plan. The development would spread across an area about half the size of metropolitan Tokyo. Not only would this be visible from space, it would likely be difficult to ignore.
This project comes with an even more incomprehensible cost, of $36bn (A$52.3bn). Ultimately, this planned to serve the same business case as Sun Cable, powering Singapore using Australian energy, and in its original plans, this would have left the country via an undersea cable. Then in November 2020 plans changed, and all exports would now feed electrolysers, turning water into usable green hydrogen.
If the future of Australian power exports is to rely on both Singapore and hydrogen, the answers to many of these questions might be found on a much smaller scale. Industrial electrolysers are currently small-scale tools, with capacities of 100MW at the upper end. The science of the process is well understood, but using them at larger scales is mostly unproven, with the only known quantity being its inefficiency. Iberdrola has plans to build a 1GW electrolyser in Germany, but these remain their early stages.
"If the future of Australian power exports is to rely on both Singapore and hydrogen, the answers to many of these questions might be found on a much smaller scale."
Beyond this, there is currently no reliable supply chain for hydrogen. Given the volatility of raw hydrogen, parts of the industry have focussed on converting it into ammonia. An important fertiliser and reagent, ammonia already has a supply chain, and an attached industry. Test shipments from Saudi Arabia to Japan have explored the viability of long-distance hydrogen transport as ammonia, but most of the weight of ammonia comes from nitrogen, making it a much less efficient method of transport.
These logistical challenges remain some of the most pressing. Hydrogen can be shipped like other chemicals, and developers said they develop port terminals for this purpose. Yet the construction of specialised hydrogen ports caused its own difficulties, with environmental concerns encouraging the government to not approve the project.
Since then, little has been heard, with one notable exception. In June 2022, oil and gas titan BP announced it would take a 40.5% share in the project. The company has made few announcements since, suggesting that development may have been paused or shelved. Developments at Sun Cable will likely not have helped the situation. Right now, projects such as these are asking questions about the future of Australian power exports, but neither project has answers.
// Main image: Barnacles on a structure. Credit: jantenthousand via Shutterstock
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