Priority: Reduce barriers for consenting hydrogen projects

Box 1: Case study – Consenting for the Kapuni green hydrogen project

There are at least 9 examples of consents granted for hydrogen projects in recent years. These projects typically received consent within three months of application. 

One project, the Hiringa/Ballance pilot green urea plant, faced appeal delays under the COVID-19 (Fast-Track Consenting) Act 2020. The appeals related specifically to the proposed wind farm attached to the plant and to the production of synthetic fertiliser (rather than the production of hydrogen), under clauses specific to the previous COVID-19 fast-track regime.

The Government’s Electrify NZ work programme, the Fast-track Approvals process and new legislation to replace the Resource Management Act 1991 will make it easier to get consent for such renewable electricity projects, as outlined above.

Box 2: Hydrogen’s impacts and the Government’s approach to managing them

Electricity

Green hydrogen production could help to integrate and underpin development of renewable electricity. But it also requires significant amounts of renewable electricity. Modelling for the Interim Hydrogen Roadmap indicated that 12.5GW of additional electricity capacity could be required by 2050 if green hydrogen demand reached 0.64 Mt, assuming a mix of wind and solar PV. This modelling was scenario-based and did not reflect the interaction between hydrogen demand and electricity prices.

MBIE signalled in the Interim Hydrogen Roadmap that it would undertake further work to understand hydrogen’s likely electricity market impacts. MBIE concluded that under a market-led approach to hydrogen sector development, hydrogen production is unlikely to significantly affect electricity prices. This is because new hydrogen production will compete for new renewable electricity generation with other uses of electricity. If electricity supply is unable to keep pace with demand, prices will rise, less hydrogen will be demanded, and prices will moderate. 

Hydrogen export appears unlikely to materially increase exposure of New Zealand’s electricity prices to global commodity pricing in the short or medium term. This is because hydrogen producers are likely to purchase long-term power agreements from dedicated renewable generation sources and sign offtake agreements with buyers, which limits the degree to which short-term commodity price movements can flow into the wholesale market.

Electricity use is regulated by the Electricity Authority. Hydrogen production has similar regulatory implications to other large-scale and potentially export-exposed uses of electricity such as aluminium export and data centres. The Government will continue to monitor the effectiveness of the electricity regulatory system, including for hydrogen production. No specific requirements for hydrogen (such as requiring it to be made from additional renewable electricity generation) are planned at this time, as it is expected producers will face natural incentives to secure low-cost renewable electricity generation that they can market to customers.

Water

MBIE received interest in hydrogen’s water use as part of consultation on the Interim Hydrogen Roadmap. Hydrogen production often uses water as an input. Electrolysis uses around 15-18L of water per kg of hydrogen, while steam reforming uses around 22L per kg.^[1]  A very large-scale 300MW hydrogen plant uses roughly the same water as a single dairy farm ^[2].  
Meeting New Zealand’s potential demand for hydrogen in 2050 as forecasted in the Interim Hydrogen Roadmap (640,000 to 1,380,000 tonnes) exclusively with green hydrogen could require between 9.6 and 24.8 million cubic metres of water per year (1.75%-4.5% of current national annual water withdrawal volumes of 550 million cubic metres),^[3]  assuming 15L-18L of water is required to produce 1kg of hydrogen. 

While this level of water use is manageable at a national level, there could be more trade-offs at local levels where there are already pressures on water use. The main mechanism for handling water management is resource management decision making. MBIE has not identified any reasons to treat hydrogen’s water use differently to other water uses. The Government will continue to use the resource management regulatory framework for hydrogen’s water use.  

Hydrogen leakage

MBIE received interest in potential indirect global warming associated with hydrogen leakage as part of consultation on the Interim Hydrogen Roadmap. 

Emerging science indicates hydrogen that leaks into the atmosphere could have an indirect global warming effect. Hydrogen leaks through steel, iron, and plastic polymers. More suitable methods and materials for storing hydrogen are being deployed, such as carbon composite tanks. However, there is still the potential for hydrogen leakage to occur across the supply chain through fittings, valves, and storage container leakage. Estimated leakage rates range from 0.2-20% according to a review of studies by the Environmental Defense Fund ^[4]. Hydrogen remains in the atmosphere for approximately 2 years, where it decreases the concentration of hydroxyl radicals (OH), which in turn increases the atmospheric lifetime of methane, leading to prolonged warming potential.  The European Union’s Joint Research Centre has found that estimates of indirect global warming potential range from 5(±1) and 11(±5) kg CO2e/kg H2 over a 100-year time horizon, and 12-33 kg CO2e/kg H2 over a 20-year horizon ^[5]. 

International evidence suggests that the global warming potential avoided from replacing fossil fuels with green hydrogen still significantly outweighs the added warming from leakage even at very high leakage rates (i.e. >10%), while blue hydrogen deployment may in some scenarios take longer to produce a beneficial warming impact ^[6].  Detecting and using adequate storage materials to control for leakage is a critical part of planned safety regulatory work. New Zealand will continue to monitor the science on hydrogen leakage and follow best practice emissions accounting as advised by the United Nations Framework Convention on Climate Change (UNFCCC).