Definitive Feasibility Study confirms Bristol Springs as one of Australia's Green Hydrogen Producers

Source: www.gulfoilandgas.com 3/20/2023, Location: Not categorized

Frontier Energy Limited (Frontier or the Company) is pleased to announce the completion of the Definitive Feasibility Study for Stage One (DFS or Study) of the Company’s Bristol Springs Renewable Energy Project (the Project), located 120km from Perth.

The DFS reaffirmed the potential for the Project to be a leader in the Australian green (low carbon) hydrogen industry, benefiting significantly from proximity to existing infrastructure that drives annual production of green hydrogen to 4.9Mkg pa (Pre-Feasibility Study (PFS) 4.4Mkg pa) at a total cost of A$2.77/kg (inclusive of capital costs), which is one of the lowest reported costs1 for a green hydrogen project of this scale in Australia.

The Company continues to advance offtake and funding discussions prior to a final investment decision (FID) that is currently anticipated for later this year.

HIGHLIGHTS
• A DFS assessing Stage One green hydrogen production at the Project confirmed its potential to be a low-cost, early mover in the development of Australia’s green hydrogen industry
• Total initial capital cost for Stage One is estimated at $242.5 million (PFS $236.2m), inclusive of the 114MW solar farm and the 36MW alkaline electrolyser
• Forecast production increased to 4.9m kilograms per annum (Mkg pa) (PFS 4.4Mkg pa) due to increasing the load factor of the electrolyser to 84% (PFS 75%).
• The increased load factor is due to increased utilisation of the grid connection in off-peak electricity conditions
• Total unit cost2 (inclusive of capital) of $2.77 per kg of hydrogen produced (PFS $2.83 per kg). The low cost is driven by two major factors:
• Low capital costs due to the Projects ability to access surrounding existing infrastructure; and
• The Projects ability to utilise existing mechanisms for solar revenue (classified as a negative expense in the Study) that can only be accessed through the Project’s connection to the South West Interconnected System (SWIS)
• The DFS relates to Stage One only. The Company’s long-term plan to produce at least 1GW of renewable energy in the Waroona region. This energy would be sufficient to produce approximately 80 Mkg pa of green hydrogen
• Frontier is in the advanced stages of a process to secure a foundation offtake customer to commercialise Stage One. Following this major milestone, the Company anticipates commencing project financing to enable a Final Investment Decision.

Managing Director Sam Lee Mohan commented: “We are delighted with the outcome of the Study as it again highlighted the unique opportunity we have at Bristol Springs to be a first mover in the green hydrogen industry.”

“The infrastructure surrounding the Project not only allows for our forecast costs to be some of the lowest in Australia for green hydrogen production, but also provides an opportunity for early production as the industry continues to mature over time.”

“We believe the most likely pathways to early production will come from hard to abate sectors through accessing the nearby Dampier to Bunbury Natural Gas Pipeline, which can already take up to 9% hydrogen, as well as the potential for the development of a peaking plant, which uses hydrogen for flexible energy generation to meet high demand periods on the WA electricity grid.”

“Both of these potential early pathways to production are in line with the Western Australian Government’s strategy and targets for the production and consumption of green hydrogen within the State.”

Executive Summary
The Project is located in the South West region of Western Australia, approximately 120km from Perth and 8km from the town of Waroona. The Company engaged global engineering firm, GHD, to complete engineering and cost studies to provide a Class 3 CAPEX and OPEX estimate (10% - 15% accuracy) to assess the case for hydrogen production based on a 36 MW electrolyser. Incite Energy investigated maximum energy yield and costs for the 114MW solar plant. These pieces of work form the basis of the Study. The key inputs and outputs from the Study are highlighted in Table 1 below.

The Study forecasts annual green hydrogen production of approximately 4.9 Mkg pa. This is an increase of 11% compared to the PFS (4.4Mkg pa). The increase in production is a result of a higher efficiency/load factor for the electrolyser, which has increased from 75 % (PFS) to 84% (DFS).

The higher load factor is driven by increasing the amount of energy acquired from the grid during off-peak periods (ie: 9pm – 6am). This higher load factor assumption is still below the maximum load factor for the electrolyser of 91% stated in the Pre-FEED Study.

Based on revised assumptions and key inputs the Study results in a total production cost3 of approximately $2.77 per kilogram of hydrogen. The breakdown of the key inputs is illustrated in Table 2 below.

The highlight of the Study is the low cost of hydrogen production. This low cost is due to two major factors. The first is the low initial capital cost due to surrounding existing infrastructure.

This includes access to existing water pipeline, connection to the South West Interconnected System (SWIS) at the Landwehr Terminal as well as local skilled existing work force (meaning no camp and other related infrastructure). More remotely located projects are highly unlikely to have these benefits, therefore would have significantly increased capital costs.

The second driver for low costs is the Project’s ability to utilise existing mechanisms that can be enabled by the connection to the SWIS at the Landwehr Terminal. This provides additional solar related income (classified in the Study as a negative cost). This includes unused daytime solar energy sales, Reserve Capacity Credits and the sale of excess LGC credits.

There is limited publicly available information regarding other green hydrogen projects in Australia due to the infancy of the sector as well as the majority of other projects being privately owned. ARENA4 and other third-party reports have identified potentially significantly higher costs5.

Next Steps
Frontier’s main priority moving forward is to secure offtake with a foundation customer for the Project. The Company is in the advanced stages of a process for engaging with a number of parties to achieve this.

Following securing offtake, the Company will commence project financing discussions and negotiations. The transition to clean energy is expected to continue to accelerate and numerous banks and other financial institutions are playing a leading role in financing greenfield construction of renewable energy projects.

The Company has had a number of discussions with a range of Australian and International banks who are seeking renewable energy projects to finance. The Clean Energy Finance Corporation is also playing an active role in project financing to help deliver on Australia’s ambitions for a thriving, low emissions future.

There are also various grants and credits available at both a State and Federal level which can be accessed to support funding the development of the Project.

The Australian Federal Government recently announced it will review its National Hydrogen Strategy to ensure Australia remains on a path to be a global hydrogen leader by 2030 on both an export basis and for the decarbonization of Australian industries. This review is in direct response to the USA’s US$437 billion Inflation Reduction Act that will provide a tax credit of up to US$3 per kg of hydrogen for qualifying clean energy projects located in the USA. Similar incentives in other regions, including the EU, are also being progressed to support renewable energy project developments in those jurisdictions.

In addition to the Stage One development, the Company continues to assess expansion opportunities, as well as long-term downstream business opportunities.


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