Innovatia

are scalable, there are a number of funda- mental challenges impeding large-scale in- vestment. The first of these is the lack of immedi- ate demand. Australia’s National Hydrogen Strategy projects meaningful, exponential growth in demand for hydrogen from about 2035, challenging equity investors and finan- ciers to adopt a “build it and they will come” approach. Just so, new markets generally require support to create momentum – in this case, government participation through offtake agreements. Given there are at least seven industrialised nations with hydrogen strat- egies, it is a competitive landscape. There is, however, a successful Australian prec- edent to reference: government support underpinned the development of Western Australia’s LNG market (notably the North West Shelf) via domestic demand, providing confidence in the formative stages of export market development. The nature of the offtakes is also a poten- tial challenge. In new industries, infrastruc- ture is generally underwritten by long-term offtakes to enable amortisation of infra- structure capital – initially 20 years, in the case of LNG, before a more mature market formed. Hydrogen is different, and its usage has an impact. For example, vehicle fleets typically have a relatively short life of sev- en to 10 years, creating significant residual value risk. Governments may have a role to play in bridging different investment hori- zons between supply and demand. Finally, there are concerns about the safe

usage of hydrogen. While hydrogen has been in usage for more than a century, its wide flammability range and low ignition temperature create the perception of risk. Some very positive work has been done on risk management and standards, but it will be important that training for newer appli- cations is developed in line with specialist expertise. “Rising to the three key challenges pre- sented by the transition to hydrogen as an energy source will set us up for a fu- ture founded on energy security, stability and independence.” These challenges will require public and private sectors to work together to drive the maturation of this nascent industry. And while the challenges are fundamental, many countries are undeterred and investor confidence in the long-term opportunity is shaped by the global trend to decarbonisa- tion, accelerated by the need for activity to drive a post-COVID-19 economic recovery. COVID-19 has also prompted many coun- tries to review their approaches to sovereign capabilities, including energy security and independence. For Australia, domestically produced hydrogen can replace imported diesel in crucial industries such as mining, forestry and agriculture. This would have the added benefit of supply chain decarbonisa-

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