The ACCC currently calculates the LNG netback price as the price a gas exporter could receive for gas exports excluding the costs to convert and ship the gas. Asian cold weather and supply bottlenecks have driven the February LNG netback price to nearly $20 a gigajoule, more than double the previous month, which in itself is higher than any netback price we have seen since March 2019. If higher prices persist this could drive domestic gas prices higher and provide a catalyst for the development of hydrogen as an alternative cleaner fuel sooner than previously anticipated.
Renewable hydrogen can be created by an electrolyser using electricity to split water into hydrogen and oxygen, making electricity the major input cost. Electrolysers can be designed to respond dynamically to turn off during high electricity prices and to sell frequency control ancillary services (FCAS). On this basis the dynamic hydrogen cost (average wholesale electricity price, excluding peak prices and minus FCAS revenues) dropped by an average of 60% across the NEM from CY19 to CY20.
