It has been 20 years since John Howard's Renewable Energy Target kickstarted Australia's longest-lasting and most effective climate policy - replacing coal and gas with renewables. Howard's target was modest, mandating that electricity retailers procure an additional 2 per cent of their energy from renewable sources by 2010.
From around 8 per cent renewables in 2001, bolstered by Labor amendments, state schemes and voluntary programs, this month is the sixth in a row with renewable energy supplying above 30 per cent of the National Electricity Market. Turns out, Australians are very good at hitting bipartisan targets.
This month also marks the re-entry of the US into the Paris Agreement. President Biden's $US2 trillion climate plan and China's net-zero target mark an inflection point in the global moves towards decarbonisation. Between the US, UK, Europe, Japan, China and South Korea, our traditional allies and our trading partners are now moving in one direction. Australia must not allow itself to be marginalised, nor can we afford to miss this opportunity.
Last September Prime Minister Scott Morrison mentioned gas 55 times in a single speech. But with the changing of the guard in Washington, Morrison's so-called "gas-led recovery" looks like a relic from the dark days of 2020. It never made sense. All our cheap fossil gas has already been burnt or sent offshore, and the gas sector employs very few.
But there is another gas that could position us for great prosperity in a decarbonised global economy: "green" hydrogen made with Australian wind and solar energy.
Sometimes called the "God Molecule", hydrogen can be used as a fuel and also as feedstock for industry. When produced with renewable energy, so-called green hydrogen enables the production of low-carbon, high-value goods such as "green" steel, fertiliser and ammonia.
By committing to net-zero emissions, Japan, South Korea and China have signalled the beginning of the end for our carbon exports. Falling demand for our coal and fossil gas can be offset by growing demand for green hydrogen.
We already have all the technologies we need to be successful in this great transition. What's needed now is a sustained cycle of deployment and repeated refinement, a partnership of policy, manufacturing, engineering and finance to drive green hydrogen down the cost curve.
Most of the cost reductions we've seen in renewable energy over recent decades weren't the result of technology research, but of repeated deployment backed by regulatory targets. If we are to become serious players in global hydrogen markets, we need to replicate this bipartisan success.
Before the RET, wind turbines and solar panels were expensive and renewable energy cost significantly more than electricity from coal and fossil gas. In a highly competitive and innovative market, costs fell sharply, such that renewable energy is now the cheapest form of new energy. And it's been good for jobs; the renewables industry already employs more than our thermal coal sector.
Now is the time to apply that template to hydrogen. As with the dawn of renewables, green hydrogen is not yet competitive with hydrogen made from fossil fuels, however there is a clear path for the costs to tumble.
Much like the RET, let's start with a modest Green Hydrogen Target, requiring that 5 per cent of all gas used must be green hydrogen by 2030.
Most steel worldwide is produced in blast furnaces using metallurgical coal, much of which is sourced from Australia. Production of green steel involves a different type of furnace that uses hydrogen to strip off the oxygen molecules from the iron ore. The exhaust is water vapour rather than carbon dioxide. The world's first green steel plant was opened in Sweden last year. One of the next could be built in Australia, using hydrogen from our own Green Hydrogen Target.
Ammonia is an important industrial chemical, but can also be used as a fuel or as a carrier for hydrogen. Japan's Green Ammonia Consortium recently laid out a roadmap for using ammonia produced with green hydrogen to decarbonise a number of important sectors, including shipping.
The EU is spearheading this juggernaut and could cumulatively invest over 569 billion euros into green hydrogen with a corresponding 40 gigawatts of electrolyser capacity between 2025 and 2030. Germany itself recently released a 9 billion-euro National Hydrogen Strategy as part of its COVID-19 stimulus package. The industrial heavyweight is hyper-aware it doesn't have the local resources to satisfy hydrogen demand, and is looking for reliable suppliers of green hydrogen.
Once again Australia is the lucky country, with massive reserves of lithium and rare earth metals. Our boundless plains, windswept and sundrenched, are ready for the clean energy generators that will turn our vast renewable and mineral resources into zero-carbon, high-value commodities - including green hydrogen, green steel and green ammonia.
As our trading partners pivot towards net-zero economies, Australia mustn't waste the next 20 years bickering over climate and energy policy. A Green Hydrogen Target will spur massive investment, bringing the cost of the God Molecule down the cost curve, and helping to secure Australia's future in this decarbonising century.