Special feature: The outlook for hydrogen fuel in NZ
Deals on Wheels asked international equity research firm Kalkine to give us their opinion on how hydrogen fuel will affect transportation in NZ
Worldwide, nations are struggling to combat climate change and are applying different strategies to reach net-zero carbon emissions. One tool that’s increasingly gaining awareness to tackle climate change is green hydrogen.
New Zealand is exploring the possibilities of using green hydrogen as an alternate fuel. The Government is spending millions on its research to help the country achieve a clean energy future, recognising the need to look at hydrogen possibilities to fulfil its climate change commitments of the 2015 Paris Agreement and net-zero emissions by 2050.
The transport sector has a considerable contribution in greenhouse gas (GHG) emissions of New Zealand. Almost 20% of New Zealand’s domestic GHG emissions come from the transport sector, as per the Ministry of Transport Te Manatu Waka.
Transport policymakers are increasingly devising hydrogen-powered trains, trucks, ships while exploring its usage as a fuel in the heavy vehicle fleet. But can hydrogen decarbonise transport? Could shifting towards green fuel reduce emissions?
Hydrogen for transport
Hydrogen is an abundant resource that gives out no emissions when burnt and has long been identified as a substitute for fossil fuels. Hydrogen emits water when it’s burned and can be made without releasing carbon dioxide.
It’s produced using a process called electrolysis, where a compound, most often water, is split into its component elements by using an electric current. Hydrogen is called green if the used electricity comes from renewable sources (wind, solar, etc).
Green hydrogen can be used to fuel cells and help in lowering GHG emissions, as hydrogen fuel cell vehicles generate zero GHG tailpipe emissions with water vapour as the by-product.
Industrial processes in New Zealand and worldwide majorly use steam and a catalyst to process natural gas split into hydrogen and carbon dioxide, but CO2 is captured and stored. The hydrogen produced using this method is blue hydrogen.
However, the cost of absorbing, reusing, or storing carbon emissions drives the price of blue hydrogen, a technology that’s still not fully developed and requires adequate CO2 neutral applications or storage.
Road transport a significant contributor
New Zealand’s transport sector is a significant contributor to the country’s GHG emissions, of which the majority comes from road transport. Road is the most common form of freight transportation in the country and is dominated by heavy trucks categorised as goods vehicles that weigh more than 12 tonnes.
As per the Ministry of Transport’s Annual Fleet Statistics 2018, the heavy truck fleet accounted for more than 25% of all transport emissions; that’s only seven percent of total yearly travel. While light fleet accounted for 90% of annual travel on New Zealand roadways, they accounted for 73% of road transport emissions.
Heavy trucks add the most to overall GHG emissions because they travel the longest distance and carry the most freight by weight. Subsequently, converting big trucks to low or zero-emissions vehicles will significantly affect the overall GHG emissions.
Hydrogen can be utilised as a transportation fuel by storing hydrogen under pressure in cylinders in the car and turning it into electricity to operate an electric motor. By mixing hydrogen that’s collected in the tank of the vehicle with oxygen from the air, fuel cell electric vehicles (FCEVs) turn hydrogen into electricity.
The electricity is then utilised to power an electric motor and charge the car’s electric battery continually. FCEVs can be a possible solution to decarbonise heavy long-haul freight, as they can provide travel range and a faster rate of fuelling. However, FCEVs have been sluggish to gain traction in the market because of technological hurdles and high costs involved in hydrogen production and storage.
However, as per International Energy Association (IEA), long-haul freight indicates a promising potential for hydrogen fuel cell vehicles, particularly with ranges of more than 600km, depending on the cost of hydrogen.
Challenges ahead
There’s no single approach to decarbonising the whole transport sector. Currently overseas, hydrogen plants are being built, and a hydrogen refuelling network is being developed in the private sector.
However, the cost of hydrogen production remains high compared to existing fossil fuel options, owing to the high capital expenditures of supporting infrastructure and the inefficiencies in the hydrogen production process.
To enable a shift to FCEVs, New Zealand would need to create a commercial scale source of green hydrogen. Further, a limited supply of green hydrogen makes it challenging to switch trucks to the hydrogen alternative.
Though the country has a high level of renewable electricity, which implies possibility of early electrification of heavy transport, electrification of the fleet could substantially affect New Zealand’s electricity network if demand goes unchecked.
The question remains: Can New Zealand handle these challenges strategically by developing the required infrastructure to create a hydrogen refuelling network? How can the costs related to them be kept lower?
With a Master of Business Administration degree from University of Technology, Sydney, Kunal Sawhney is an entrepreneur with revolutionary ideas who established one of the fastest-growing equity market research firms across Australia in 2014.
His business Kalkine now has a presence across Australia, New Zealand, Canada, and the UK. Further plans for the US launch in 2021 will extend client reach for Kalkine’s subscription and media operations.
Kunal is featured regularly on CNBC, Sky Business, Biz News, Daily Mail, Yahoo Finance, KCBS Radio (Audacy), Bloomberg, Sydney Morning Herald, Global Banking, Financial Review, and more.
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