Meet Australia’s next low-cost, green hydrogen producer: Frontier Energy

There are two extremes when it comes to ASX-listed companies pursuing green hydrogen – it’s either the heavyweight Fortescue Metals (ASX: FMG) or small cap players you’ve probably never heard of.

Frontier Energy (ASX: FHE) falls into the latter for most investors, but it’s also one of the most advanced ASX-listed green hydrogen pure plays out there. The company operates the Bristol Springs Project (BSS) located 120km from Perth in WA and on track to hit production status in late 2025.

Frontier released the Definitive Feasibility Study on the Project on Monday, which reaffirmed its potential to become one of Australia’s lowest-cost “green” hydrogen producers. Green hydrogen is hydrogen gas that is produced through a process of electrolysis via electricity from renewable energy sources such as wind, solar or hydropower.

Bristol Springs: By the numbers

Higher production at lower costs

The DFS demonstrated further improved economics over the August 2020 Pre-Feasibility Study (PFS). 

• Water consumption was halved to reflect system optimisation and conservative PFS assumptions, lowering annual forecast water costs to $600,000 from $900,000 a year

• Hydrogen production up 11% to reflect an improved average annual utilisation for the electrolyser of 84% from 75% – achieved via purchasing additional power from the grid during off-peak periods

• Total production cost per kilogram of hydrogen down -2% to $2.77 (more on that later)

• Total capital costs up only 2.3% due to surrounding existing infrastructure and local skilled existing workforce (meaning no camp or other related infrastructure)

“One of Australia’s lowest cost, near-term green hydrogen producers”

Frontier expects to produce hydrogen at $2.77/kg, which is considered to be “one of the lowest reported costs for a green hydrogen project of this scale in Australia.”

To add some perspective, the International Energy Agency estimates the global cost curve to sit between US$2-6 per kg (A$3-9).

Why is Frontier hydrogen so low-cost? Two reasons given by the company are:

• Surrounding existing infrastructure: BSS is located approximately 4km from the Landwehr Terminal, a major connection point into the South West Interconnected System (SWIS) 

• Leveraging of existing mechanisms: Connection to SWIS opens up the opportunities for “energy arbitrage” – selling to the grid during periods of peak prices and drawing power during off-peak (the study classifies this as a negative cost)

Securing offtake

Securing offtake agreements to commercialise and fund Stage One is Frontier’s top priority from here on.

“The Company is confident that it will secure a preferred partner as foundation customer for Stage One offtake in the coming months,” Frontier said in a statement.

There are a few avenues to explore for hydrogen offtake, including: 

• Early adopters: The green hydrogen market is still in its infancy and Frontier is targeting earlier adopters in the domestic market.

• Natural gas: The Dampier to Bunbury Natural Gas Pipeline Pipeline is WA’s most significant gas transmission asset and Frontier is working with the government with the view that hydrogen could be used to increase the quantity of energy available to gas producers.

• Energy storage: Hydrogen can be used as a form of electricity storage and Frontier is currently assessing a peaking plant to dispatch power to the grid at key times.

• Replace diesel: The WA government identified green hydrogen as a potential substitute to reduce the reliance on diesel, most of which is imported. Frontier is in discussions with developing refuelling stations in central Perth.

In addition, excess solar energy can be sold to generate additional revenue via agreements with industrial users connected to the grid or via traditional sales through a market operator. The DFS expects excess energy sales to generate $3.3m per annum. 

Progressing towards development

Once a foundation offtake customer is secured, Frontier plans to advance ongoing financing discussions with a range of Australian and International banks who are seeking renewable energy projects to finance. 

Frontier has received strong support from the WA Government, with Deputy Premier and Hydrogen Industry Minister Roger Cook describing BSS as a “fantastic example of a WA firm leading the way to becoming one of the lowest cost producers of Australian-made renewable hydrogen.”

"The McGowan Government is committed to assisting such emerging hydrogen production projects, as we work to establish WA as a significant producer, exporter and user of renewable hydrogen,” he said.