By Sonali Paul and Victoria Klesty
MELBOURNE/OSLO (Reuters) -ENGIE said on Friday it will go ahead with plans to build a green hydrogen plant in Western Australia to feed an ammonia facility owned by Norway's Yara International, as the French firm looks to expand rapidly in green hydrogen.
The project will use energy from solar panels and a small battery energy storage system at Yara's site to power a 10 megawatt (MW) electrolyser and make 640 tonnes of hydrogen per year, the companies and the government said in separate statements.
Construction on the A$87 million ($58 million) Yuri project is due to start in November with first production expected in 2024, ENGIE said.
"This will help advance Australia towards becoming a world leader in hydrogen generation," Climate Change and Energy Minister Chris Bowen said in a statement.
So far, the biggest electrolyser in Australia is just 1.25 MW. ENGIE's project is on track to be the first 10 MW electrolyser to start producing in the country, but that is still considered small compared to projects in other countries.
"The next stage will be a multiple of this. We're looking at 20 times the size of this first project," ENGIE's Australia and New Zealand chief executive officer Andrew Hyland told Reuters.
The company has yet to pick a site in the Pilbara region of Western Australia for a larger green hydrogen plant, but Hyland said ideally ENGIE would be in a position to commit to that project over the next three years.
He did not put a cost estimate on a 200 MW to 250 MW electroloyser project, but said the company expects scale, more efficient electrolysers, improvements in integrating solar, wind and batteries into hydrogen production and other factors to drive down costs.
The Australian government last year announced it would provide about half the funding for the 10 MW project, which also received a grant from the Western Australian government two years ago.
Japan's Mitsui & Co has agreed to take a 28% stake in a joint venture company with ENGIE to build the Yuri project.
($1 = 1.4908 Australian dollars)
(Reporting by Victoria Klesty in Oslo and Sonali Paul in Melbourne; Editing by Terje Solsvik and Christopher Cushing)