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Interview with Gippsland FM Radio

17 April 2018

Subject: Latrobe Valley brown coal to hydrogen project announcement.

E&OE

COMPERE:

… and we’re delighted now to be joined on the line all the way from Western Australia, Senator Michaelia Cash, who’s the Minister for Jobs and Innovation with the federal government. Good morning, Michaelia.

MINISTER CASH:

Good morning. Good morning to your listeners and thanks for having me on the show.

COMPERE:

And thanks for- yeah, probably an early morning for you over there.

MINISTER CASH:

It’s a two-hour time difference now, not three, so it’s fantastic.

COMPERE:

First of all, you were recently in the Latrobe Valley this week for a major announcement.

MINISTER CASH:

Yeah, I was.

COMPERE:

What was announced?

MINISTER CASH:

Okay. Look, it was really, really exciting. It’s a pilot in terms of brown coal in the Latrobe Valley being converted into hydrogen, transported by sea all the way over to Japan and used as a power source in Japan. So, really, really great news, in particular because during the pilot phase it will create around 400 jobs in the Latrobe Valley.

COMPERE:

Michaelia, can I just get my head around some of the details? Because there’s been some reaction within the community - and I think it'd be fair to say mainly by people who weren't at the launch - to try and understand what this means. Now, you talked about brown coal conversion into hydrogen through this pilot plant, which is budgeted, as I understand it, to cost something like $500 million.

MINISTER CASH:

Yes, that’s right.

COMPERE:

Over the next three years, is that right?

MINISTER CASH:

Correct. That's right. Yes. With a decision being made in the 2020s as to whether or not it actually is a realistic proposition, correct.

COMPERE:

Okay. So, it’s a $500 million experiment.

MINISTER CASH:

Well, I wouldn’t call it an experiment, because obviously a lot of work is being done to actually get to this stage …

COMPERE:

I would have been surprised if you didn’t react to that. I would’ve been surprised.

MINISTER CASH:

Yes, you would have been worried. No, look, a lot of work has obviously been done to get to this stage. In terms of the $0.5 billion, approximately $200 million of that is capital investment in Victoria, and what we announced during the week was $50 million of that is being provided by the Commonwealth Government and $50 billion of that is being provided by …

COMPERE:

Fifty million.

MINISTER CASH:

Fifty million. [Indistinct] if we’ve got $50 billion I need to know about it.

COMPERE:

Yeah. I think- me too, yeah.

COMPERE:

Probably the Treasurer.

MINISTER CASH:

And $50 million by the Victorian Government. So, it’s $100 million via Australia and $200 million of the total $0.5 billion will be invested in Victoria. So, one of the questions I was asked was: well, hey, hold on Michaelia, why the Gippsland region? And it’s a really good question. So, in terms of the Gippsland region itself, you actually uniquely bring together the three critical elements for what we want to be: successful international hydrogen supply chain.

So, what do you have? Well, as you know, you have an abundant and [indistinct] source, which is able to produce hydrogen, and that is of course, your brown coal. You have easy access to port; you need to be able to get basically the hydrogen gas transported to a port – we’re able to do that. And then you also have ultimately- and this is a really important part of the project, okay? You have got to ensure that we have carbon capture and storage, and you also have world-class storage sites for carbon storage. So, in the Gippsland region, you are uniquely placed to really be – if we can get this to the commercialisation phase – a world-first in terms of the creation of a new industry.

COMPERE:

Okay, there’s about 67 different points in there. But can I just come back to my understanding, and it’s only been this week, of the pilot plant? It’s expected that the pilot plant will use 160 tonnes of brown coal to produce three tonnes of hydrogen. Is that right?

MINISTER CASH:

Well obviously, this is something that it will also clearly be worked through because the first thing they need to do is actually construct the pilot facility.

COMPERE:

Yes.

MINISTER CASH:

And that’s expected to begin around 2019. They’ve obviously got to get the relevant planning approvals as well. So, they’ve got a little way to go yet. And then once we kick off with construction, you then get obviously the 400 local jobs, which is absolutely sensational. But then they actually look at exactly what they’re going to need by way of the coal and how to create it into the hydrogen. Remembering at this stage, it is a pilot. So, it’s piloting hydrogen gas production. Can we do it? It’s piloting hydrogen gas transport by road, and then the liquefication of transport by sea. If they can get that supply chain right – and that’s why it’s called hydrogen energy supply chain – the exciting part is we could actually proceed to commercialisation, and that’s the decision we’re looking for in the 2020s.

COMPERE:

Now, I don’t have any problems with commercialisation and the point of it. But I guess I do have a problem in my head with 160 tonnes of coal to produce three tonnes of hydrogen, and I don’t know whether three tonnes of hydrogen is a lot of hydrogen or not and whether it needs big ships to transport it, but it doesn’t seem terribly much in terms of output to warrant $0.5 billion worth of pilot plant construction. Is …

MINISTER CASH:

And remember, though, it’s $50 million Australian Government; $50 million Victorian Government.

COMPERE:

Right.

MINISTER CASH:

So that is what the Australian contribution is. And then obviously, there is funding then coming in from the Japanese government, and obviously funding from Kawasaki to the industry. So, very much this is a joint project. And look [indistinct], this is the exciting thing, Les. If we can get this to the commercialisation phase and it becomes a viable industry, you’re actually now looking at thousands of jobs in a thriving hydrogen industry. And what we’re actually looking at, and why the investment is so important, a future commercial sale – it’s called a HESC, but let’s call it a hydrogen energy supply chain. In terms of what we’re looking at and the creation of a new industry in Australia, it could be worth more than, it is anticipated or approximated, $8 billion per year to Australia, depending on the Japanese demand for hydrogen.

But as you know, with Japan, they are looking at diversifying their energy supply. As I said, Kawasaki Heavy Industries have probably been looking at this now for a decade, so to actually even get to this stage of the project, they really do believe it can be done. And the other important point is this, because this is what I’ve also been asked by people: talk to me, Michaelia, about emissions. So ultimately, the pilot project, and then what would actually happen if we do create a new industry in Australia. Really good question.

So, to put everybody on the same page, in terms of the initial small volume of carbon dioxide emissions that will come from the pilot project, they are fully offset with Australian carbon credit units. Okay? So, fully offset. Part of the pilot phase is the commercial scale hydrogen energy supply chain project will require carbon capture and storage for the- so we need [indistinct]- so this is all what they’re now working to, and all of the project partners agree this is essential for a commercial scale hydrogen energy supply chain project and this is also what part of the pilot is: ensuring we can do that.

COMPERE:
And that’s an interesting point and the funding part is too, because the majority of the funding is coming from private enterprise. So, they’re not going to spend that without thinking they’re going to get a return.

MINISTER CASH:

[Talks over] That is correct, absolutely.  No, and that is exactly right.

COMPERE:

And I suppose where the- this is what we need to differentiate if this project’s different, is in the Latrobe Valley for many years, we’ve had these projects of, you know,  magnesium smelters and this, and they’ve all been at that feasibility stage. This one’s one step further along, isn’t it? It’s actually at the: we’re building something.

MINISTER CASH:

Correct, that is exactly right. And that’s a really important point to make. In terms of the total expenditure, it’s around $0.5 billion – just under. It is exactly- it’s multiple components in Japan and Victoria, because obviously Japan has a role in this as well, and it’s been provided by, as you said: Commonwealth Government, state government, Japanese Government. But then, of course, a lot of it’s being provided by private enterprise. And you’re right, private enterprise don’t necessarily put up their money unless they’re really sure. So, in this case what you’re finding is it’s all coming together. Multiple parties are saying we want a stake in this because ultimately this- hydrogen is a source of fuel, as we know. It is a source of clean fuel, as we know. The world needs clean fuel. It can be extracted from brown coal, converted into liquefied hydrogen, put on a ship and transported by sea, and we know that that is all possible. It’s not getting to the stage where it’s legally viable. And I have to say I was going to get a coffee- I’m going to give a plug here, I’m going to be really naughty, okay, on your show. Three Little Birds Café: absolutely outstanding. Having a chat with a few people as I was walking into it in- I’m going to get this wrong: Traralgon.

COMPERE:

Traralgon, yeah.

MINISTER CASH:

Traralgon, Traralgon. Being a Western Australian, I have trouble.

COMPERE:

I think you better quit while you’re behind.

MINISTER CASH: 

Thank you for correcting me. The Three Little Birds Café, having a bit of a chat with some locals outside, who were like: why are you in town? And people are really excited at the prospect of, for Latrobe Valley, a new industry, but been doing it tough, we know it’s been doing it tough. To be able to think that, yes, you could say part of the creation of what will ultimately be a global industry; the fact that a Japanese government, the Australian Government, Victorian Government and a multiple of private players have come on board and said yes, this is a really exciting time. So, 400 jobs in the pilot phase. But you know, let’s get it right and let’s create those thousands of jobs for a thriving hydrogen industry in the Latrobe Valley.

COMPERE:

Okay, can we just go back a little bit and touch on some of the specifics of what you just said?

MINISTER CASH:

Okay.

COMPERE:

You talked about the pilot plant and emissions and carbon offsets. Now, there's lots of talk about carbon capture and storage, and the fact that it might be stored in Bass Strait in the expired gas wells or oil wells. As I understand, what you've just said, from a pilot plant perspective, there will be no carbon capture and storage.

MINISTER CASH:

No. Okay …

COMPERE:

Is that right?

MINISTER CASH:

Yeah, no, that is exactly right. So, it was considered, okay? So it certainly was considered, because obviously they go through a number of options to get to this stage, but given that it's a pilot, it was not feasible or economically viable at this particular point in time.

COMPERE:

That’s enough. That’s a really important point, because people are saying, you know, we don't want to do that, we haven't had the debate, we haven't had the discussion. What you're saying is that, in addition to the pilot plant exploring the technology and proving that the technology will work et cetera, et cetera, we've got these other things to get through, not the least of which is public acceptance or public involvement in the way it's going to go.

MINISTER CASH:

That’s exactly right. So yeah, as I said, to put everybody on the same page, there's only going to be a small volume of carbon dioxide emissions in the pilot project and they will be fully offset –you are right. The commercial scale tech project, yep, it’s going to require carbon capture and storage, and that has also got to be worked through as part of the pilot project, because obviously the commercial scale, you know, economies of scale make carbon capture and storage- it becomes viable.

COMPERE:

Okay, can I get a bit sharper? As Minister for Jobs, when are you expecting the first of these 400 and how long is it going to take to appoint the first and then the 400th of these jobs?

MINISTER CASH:

Yes, so in terms of the pilot phase, construction of the pilot facility is expected to begin from 2019. So we've got about six, seven, eight, nine months away. At the moment, what they will go through now is the planning approvals that they require. So once they literally getting those, you know, planning approvals on the way, basically in terms of jobs for Australians, within reason, create immediate jobs for Latrobe Valley and the Port of Hastings during construction and the operation of the pilot phase. So now that we’ve announced it, we’ve given it a tick off in terms of the financial investment, within the next six, seven, eight, nine months, we’d like to see beginning of 2019, quite literally, construction commencing.

COMPERE: 

And jobs are advertised and people actually on the ground working? Yeah.

MINISTER CASH:

Absolutely, that is exactly right. So as I said, there'll be some immediate jobs resulting from the development, planning, construction and operation of the pilot project, and then obviously, as you move through, there are the indirect jobs that come on board. You know, the mere fact that I was in the Latrobe Valley the other day, I went and spent some money at a local café, and it’s all of those other opportunities that obviously people become excited about.

COMPERE:

Yeah, we’ll be expecting rather large sponsorships from the Three Little Birds Café as a result of this.

MINISTER CASH:

I gave you the opportunity to press some new [indistinct].

COMPERE:

No, it’s alright. We’ll just send them an invoice.

COMPERE:

And also, because there’s state and federal government money involved in this, does that mean state and federal governments will be able to enforce some of the local procurements that they have with major contracts, so there’ll be a high level of local jobs?

MINISTER CASH:

Yeah, that is exactly right. All rules become operational. That is exactly right. It has been undertaken in Victoria. So obviously the Victorian Government have a say in this and I was delighted that we were joined by the Victorian minister. So that is exactly right: at the end of the day it all needs to be done in accordance with the rules and regulations that we set out in Australia.

COMPERE:

So, very strong local procurement. So we're talking local jobs here aren’t we, that's what we’re [indistinct]?

MINISTER CASH:

Well, we are talking local jobs. You know, that’s exactly right. As I said, the project’s going to create, in the first instance, approximately 400 jobs, and the jobs we want to see are obviously in Latrobe Valley. And you know, when I talk to, in particular, AGL, everybody is conscious of the fact that the Latrobe has been doing it tough, and that is why being able to create this potentially new industry in Gippsland region is just so exciting on so many levels. Obviously, wow, Australia, world first, hydrogen energy supply chain. But even more so, from the perspective of creation of new industry, potentially creation of thousands of long term jobs [indistinct] and that is what is exciting.

COMPERE:

We won’t go down the path of discussions between AGL and the Federal Government. That's another topic.

COMPERE:

That’s someone else’s portfolio I think, isn’t it?

COMPERE:

Well, we might pick that up next week. But can I ask you – and you may not know and I’m not trying to be smart - who will these people be working for?

MINISTER CASH:

Again, across the board, depending on what part of the project is being undertaken [indistinct].

COMPERE:

So we could have a contractor – sorry to interrupt – but we could have a contractor that’s charged with building a shed or a thing or a whatever, whatever on the site, and that contractor will be employing people to do that job. Is that how it’s going to work?

MINISTER CASH:

Basically yes, yeah, basically yes.

COMPERE:

Okay. Are you able to tell me: is three tonnes of hydrogen a lot of hydrogen?

MINISTER CASH:

You are now getting into some very, very technical detail …

COMPERE:

Yeah, and I was conscious of that. But like I said, I’m trying to reconcile in my head $500 million worth of infrastructure associated with an output of three tonnes, which is what I heard yesterday …

MINISTER CASH:

It is. So basically- and you’re right. So basically the process, as I understand, is up to about 160 tonnes of brown coal - and again, this is a pilot phase. You’re right: it produces up to three tonnes of gaseous hydrogen over one year. So that is over one year …

COMPERE:

Yes, one year.

MINISTER CASH: 

… and then what it involves is one truck delivery of gaseous hydrogen to the Port of Hastings per month. So then you can actually test the whole hydrogen supply energy chain [indistinct] because then you’ll need to get it on to the ship and carry it over. So it very much becomes a real pilot in terms of what would ultimately become an industry be completely ramped up, but this gives us the capacity to really test what a supply chain would look like.

COMPERE:

Yeah, sure, sure. We're not saying that it's going to cost every time $500 million to make three tonnes of hydrogen …

MINISTER CASH: 

Oh, no, no, no …

COMPERE:

It’s a set up process isn’t it?

MINISTER CASH: 

It’s exactly right.  This is where you're testing the commercial viability. Exactly.

COMPERE:

And I think that’s the argument people are running: why does it cost so much to get so little? It’s actually setting the system up.

MINISTER CASH:

[Indistinct] And again though [indistinct] remember: the good news is $50 million, $50 million, money from the Japanese government and money from private industry. So it is- but you get to this size of a project and you’re actually very serious. As you know, you want to be sure you have the right investment from all of the players, because the ultimate potential is we go back to, okay, if this all goes the way we all want it to go, what are we looking at? And as I said, a [indistinct] commercial sale hydrogen energy supply chain could be worth more $8 billion per year. So a half a billion dollar investment [indistinct] amongst a number of players; ultimately $8 billion per year to Australia depending on the Japanese demand for hydrogen, which we expect is only going to grow because of Japan’s need; and the thousands of jobs, then you start- then the half a billion is very reasonable.

COMPERE: 

Can I just quickly add: how important is- I mean, the project’s important for the hydrogen and the jobs, but how important is the project of showing another use for brown coal as well though, in the communities …

MINISTER CASH:

Absolutely. Yeah really- that’s exactly right. You had an abundance of brown coal. What do we ultimately want to use brown coal for? Well, in this instance, very much a clean source of energy. This really does give life, quite literally, over decades looking forward, to the abundance of brown coal that you have in the Gippsland region, but in particular, obviously, the Latrobe Valley. It also means, obviously, brown coal is able to be developed into something that we all want globally, which is a clean source of reliable energy. So from that perspective, it’s a very positive use of brown coal.

COMPERE:

When I first learned of this meeting or forum that was on on Thursday – and I have to say to you that that was at 8 o’clock on the Wednesday night that I learned that – I was asked then: what is my reaction to it? And I had to say: this is really great, this is really something to be super optimistic about it at one end of the scale; at the other end of the scale, my thought was: here we go again. For the last 20 years we’ve been promised projects that look at the utilisation of brown coal in a socially acceptable way, and for whatever reason, they’ve all fallen over. Why is this different?

MINISTER CASH:

Because- and it’s a really, really good question. So, in terms of energy and energy security, globally, 2018, as we know, countries now all over the world face huge challenges to address energy security, at the same time, though, as reducing their emissions, okay? In terms of hydrogen, we know it is a safe- at source, it’s clean and it’s plentiful. We also know that it has been identified as the clean energy and commodity of the future, okay? It’s a credible solution now in 2018 to the world’s energy problems, and they are problems and we need to solve them together, but I think to really answer your question’s specifics, what is the difference between two decades ago – even, quite frankly, two years ago – [indistinct] …

COMPERE:

Six months ago, mate.

MINISTER CASH:

The difference is now its technology. It really is now- the work has been done, all of the groundwork has been done. Technology is now enabling us to do so more, and in particular, in relation to carbon capture and storage, it is becoming more commercially viable, and I think that’s sort of where we’re all now coming together. It’s a bit like when you [indistinct] universe actually comes together to deliver a solution. You couldn’t have done this 20 years ago, you couldn’t have done this 10 years ago, but our government, the Japanese government, the Victorian government, but most importantly, Kawasaki Heavy Industries and all of the other commercial players in this, the multiple components across this project, all believe that we can now get it to the next stage. And that’s why, yes, we’ve been talking about brown coal for a long time and what you could do with it. This will potentially now give it that next industry.

COMPERE:

And is that why this project has only suddenly come on the radar publicly? Was there a sensitivity about the scepticism in Latrobe Valley for previous early announcements, that it’s deliberately got to this stage before anyone’s really talked publicly about it?

MINISTER CASH:

Look, I think it’s something that both Prime Minister Abe and Prime Minister Turnbull had talked about in 2017 together. I think it’s something that they certainly had both indicated they were keen to see this go ahead. There has been, obviously, a lot happening behind the scenes, though, to actually get it to this stage. So basically, the front-end engineering and design needed to be undertaken, et cetera, so there was a lot of work that was being done behind the scenes. Then, obviously, the commercial partners, the Kawasaki Heavy Industries, and then there’s a number of other commercial partners who are working behind the scenes in terms of the different agreements they needed to get across the line, and I think what you saw then the other day in the Latrobe Valley is literally the announcement of, yes, everything’s come together, we now move to the next phase.

COMPERE:

You may not be able to answer this question, Michaelia, but I’ll pose it anyway, if something as a thought bubble. Do you think there’s been an impact- Latrobe city has a strong relationship with Japan through sister city relationships and the like. Do you think some of those relationships have finally started to pay off on this because they know of the relationship and there’s some comfort with that cultural acceptance and knowing each other? Do you think that plays a part?

MINISTER CASH:

Well, I think it’s a great question, and I think one of the reasons – that’s exactly right – that we were able to announce this is because Japan and Australia do have such a strong relationship. We are very good friends. We obviously have both countries’ best interests at heart, and then you distil that further down and you have relationships on a state-by-state basis. All of that absolutely assists in ultimately working through issues – in particular, issues behind the scenes – to get to this stage, so I think that is exactly right. This is a really exciting opportunity for Victoria and for Japan now to partner for mutual benefit, and to work towards creating an environmentally sustainable energy solution. And obviously, those relationships are just so important every step of the way.

COMPERE:

Yeah, I think that’s absolutely right. Sorry, go on.

COMPERE:             

I was just going to say, we’ve probably got some people listening that are looking for the- will local authorities know about it when the jobs are being advertised, or is that going to go through like ICN and the likes of those?

MINISTER CASH:

No, we will make sure we are working- this is a really good question. We will ensure that, as a government, we are working, obviously, with the Victorian government [indistinct] that we are maximising benefits locally [indistinct]. That is the whole point of this: creating as many local jobs in the pilot stage as we can. So, very much, this will now be a joint effort – Commonwealth Government and Victorian Government – to ensure that we are doing just that.

COMPERE:

I don’t want to go too technical but I’d just a comment that, as I understand it, the hydrogen production process requires a lot of heat, which means it requires a lot of energy. Is there any energy – to use a pun – for the brown coal utilisation of electricity production, as we’ve heard about through the Monash Forum and other, dare I say, political drivers? Are we looking at the potential for more brown coal electricity production as a result of the hydrogen project?

MINISTER CASH:

If, ultimately, you’ve got to the stage where you have a hydrogen energy supply chain – so you’re talking now in the 2020s, okay? That’s when that decision would be made. If this is successful, if we are creating a new industry – so with quarries and everything – this will obviously be transported to Japan, but suddenly, there are other exciting opportunities in terms of we now have a source of clean energy. We know that it is the clean energy and commodity of the future, so certainly, opportunities then open up, hence the impact of potentially $8 billion per year to Australia in terms of Japanese demand and potentially global demand; and then, obviously, opportunities for Australia. But that’s something that’s still, obviously, something to be thought of, but in terms of is hydrogen a clean energy source? Absolutely.

COMPERE:

Can I make the observation- we’re about to run into the news, so we’re going to have to cut it short, so I’ll just make a couple of comments in terms of how much we really appreciate your time. I know that politicians get bombarded with media, and we don’t regard ourselves as media – we’re communicating with our community – but I really do appreciate you taking the time to talk to us. I know we might have asked some harder questions in relation …

MINISTER CASH:

But you were all over [indistinct].

COMPERE:

Yeah, well, it’s not malicious in any way, and I think …

MINISTER CASH:

No, not at all, but really good questions. And can I just say, Les, I really appreciate that comment. I love talking to locals. I love talking to local people. You might be from the Federal Government, but it’s always great to get out there and talk to the people that are ultimately really going to be impacted by decisions. So I have to say, I thank you for the opportunity to be able to explain to your listeners what I hope is a really positive story for the Latrobe Valley.

COMPERE:

Well, I don’t think we’ve finished it. I think it will be a bit of an ongoing discussion and we’ll undertake to try and get technicians or technical people to answer some of the technical questions, but from a political point of view, it’s really good to know that we’ve got access and we’ve got people that are prepared to talk to us. So, Michaelia Cash, Minister for Jobs and Innovation, can I just say again: thank you very much for making your time available, and I look forward to speaking to you again in the future when we get our hydrogen mobile.

MINISTER CASH:

Yes, that’s exactly right. No, again, thanks for the opportunity, and it really was – I really appreciate – a really, I hope, productive conversation.

COMPERE:

Good on you.

MINISTER CASH:

Good on you. Have a great day, guys.

COMPERE:

Thanks. That’s Michaelia Cash, the federal Minister for Jobs and Innovation, casting a little bit of light.