Economic analysis of options for supplying water for green hydrogen and horticulture production in the Burdekin region
Solution
Robust cost-benefit analysis of shortlisted options, including quantification of economic benefits and costs
Benefits
Robust quantification of base case and analysis of shortlisted options to inform decision-making regarding identification of project options for the Detailed Business Case
The Port of Abbot Point and Townsville have both been identified as prospective hubs for the largescale production and export of green hydrogen by the Queensland and Commonwealth Governments. Acknowledging the significant technical hurdles that must be overcome for Australia to develop a commercially viable green hydrogen export industry, effective infrastructure planning is a critical requirement to facilitate the growth of the green hydrogen and other emerging energy industries.
The North Queensland Water for Hydrogen Options Analysis (NQWHOA) involved an investigation of the development of common user bilk water supply infrastructure to meet future water needs for green hydrogen and other emerging industries in North Queensland, primarily at the Port of Abbot Point. The project also involved an assessment of the opportunity to supply water to facilitate growth in high-value agricultural production in the Bowen-Gumlu district.
Synergies was engaged by Sunwater to undertake the economic analysis of the shortlisted options. This included the definition and quantification of a comprehensive base case in relation to agricultural and industrial water supply and demand in the relevant sub-regions and quantification of the economic benefits and costs of the shortlisted options relative to the defined base case. The analysis was conducted in accordance with the Queensland Government’s Business Case Development Framework and was subject to peer review.
The Issue
Sunwater required a robust economic analysis of several shortlisted options for supplying water for green hydrogen production at the Port of Abbot Point and for high-value agricultural use in the Bowen-Gumlu district. The options involved the transportation of supplemented entitlements from the Burdekin Haughton Water Supply Scheme to users via pipeline or open channel infrastructure.
One of the key issues encountered in the economic analysis was the definition of the base case in relation to the green hydrogen producers at Abbot Point. Specifically, the long-term green hydrogen production profile at Abbot Point in the absence of a common user water supply solution.
The Solution
Synergies conducted a robust and comprehensive cost-benefit analysis of the shortlisted options to inform the identification of reference project options to be assessed in a Detailed Business Case. This included the quantification of the base case, including the water supply-demand outlook for industrial and agricultural production and the implications in terms of water supply infrastructure costs and production profiles.
The quantification of the base case required analysis of the technical and commercial viability of green hydrogen production in the absence of the development of a common user water supply solution. This involved analysis of the alternative water supply options for hydrogen proponents and the impacts on profitability of green hydrogen production.
Noting the inherent uncertainty that exists in relation to emerging industries such as green hydrogen, the analysis concluded that in the absence of a common user water supply solution, proponents would most likely seek to pursue alternative supply solutions, either individually or in partnership (i.e. standalone desalination plants, other water pipeline infrastructure, etc.). On this basis, the base case was defined as including the development of largescale green hydrogen production and export facilities at Abbot Point.
Synergies drew upon water demand analysis undertaken as part of the Burdekin Regional Water Assessment to quantify the economic benefits to be derived from the supply of water under the project options to horticulture producers in the Bowen-Gumlu. These demand forecasts were underpinned by crop-specific market demand projections, having regard to the role played by the Bowen-Gumlu region in meeting national demand. Synergies’ in-house farm-level financial models were then applied to quantify the economic value derived from the additional horticulture production under the project options.
Consistent with the BCDF, extensive sensitivity and scenario analysis was conducted as part of the economic analysis. This included testing the economic feasibility of the shortlisted options under an alternative base case under which green hydrogen proponents did not proceed with projects in the absence of a common user water supply solution.
The Benefits
Synergies drafted an independent report and chapters for the base case and economic analysis sections of the OA report. The results of the cost-benefit analysis directly informed consideration of the shortlisted options in the Multi Criteria Analysis workshop that determined the options that should proceed to detailed analysis in a Detailed Business Case.
The detailed definition of a robust base case also assisted Sunwater in communicating the outcomes from the economic analysis, and implications for the OA, to key stakeholders. Our report highlighted key issues to be addressed by Sunwater in preparation for the Detailed Business Case, including a robust analysis of the and commercial viability of largescale green hydrogen production and export from Abbot Point.
Contact
To find out more about this project and how Synergies can assist you, send an email to: contactus@synergies.com.au