Article by Perry Williams, courtesy of The Australian
04.03.2025
Australia’s green hydrogen industry has failed to fire, with 99 per cent of a $100bn supply pipeline failing to progress beyond the concept stage, punching a hole in Anthony Albanese’s aim to develop a major export industry by 2030 and meet net-zero goals.
Some 99 per cent of the announced capacity of projects has not progressed beyond the concept or approval stage, with less than 30,000 tonnes a year reaching a final investment decision or starting construction, according to Rystad Energy.
Nearly 100 hydrogen projects have been proposed in Australia, with the vast majority based on green or renewable sources.
However, 61 individual projects have been quietly “archived”, with work on the developments either scrapped, on hold due to market conditions or failing to move beyond feasibility studies, an industry list compiled by Australian research agency CSIRO reveals.
The shelved projects include major developments from green investors including the nation’s largest electricity generator, AGL Energy, banking major Macquarie Group and France’s Neoen, one of Australia’s biggest clean energy owners.
All archived developments have contributed to “lessons learnt and stakeholder connectivity”, the CSIRO noted on its project database.
High production costs, infrastructure bottlenecks and soft demand from would-be international buyers have combined to hobble the large-scale investments needed to kickstart green hydrogen as a major export industry. “If we look back we probably reached peak hydrogen hype in 2022 with so many projects announced left and right,” Rystad analyst Nigel Rambhujun said. “A lot of them have since quietly been abandoned.”
New modelling produced for the Australian Energy Market Operator has also conceded the cost, timing and scale of a potential hydrogen economy in Australia is now “highly uncertain”.
An ACIL Allen report released last week said no green hydrogen exports are now anticipated under two of its three planning scenarios.
The focus has instead shifted to using green ammonia as a feedstock though it cautions demand in one scenario may barely budge from current levels. Hydrogen as an energy source to develop industries such as green steel has also emerged as a new category as developers look to tap into the nation’s vast mineral resources.
The battle to build a hydrogen export industry from scratch also looms as a major political divide ahead of the federal election. Labor has included green hydrogen as a central plank in its plan for Australia to become a renewable energy superpower.
As part of its flagship Future Made in Australia plan, the government in 2024 provided a budget allocation of $6.7bn to provide a $2 incentive for every kilogram of green hydrogen produced from 2027-28. It also committed $2bn for new projects under the Hydrogen Headstart program. However, the Coalition has vowed to repeal the incentives should it win office, with Opposition Leader Peter Dutton stating last week there was no business case for green hydrogen after a $600m plant at Whyalla was axed.
Energy Minister Chris Bowen said in September it was “no exaggeration” to say green hydrogen would be on the ballot paper.
The Albanese government’s $2bn program to develop the hydrogen sector has also come under attack, with none of the six shortlisted projects now considered bankable after financial sponsors left or the developments were paused, Singapore-based HySights said.
The Albanese government had planned to announce the winners of the funding package by late 2024, but the collapse of two projects run by BP and Origin Energy appears to have hobbled plans for progressing the scheme. It aims to support competitively tendered hydrogen production contracts with the target of one gigawatt of electrolysers by 2030.
Mr Bowen said the Albanese government remained committed “to working alongside commercial interests” to deliver on green hydrogen’s potential.
“Hydrogen for export, particularly in the form of ammonia, is still set to be part of Australia’s green hydrogen industry,” Mr Bowen’s spokeswoman said.
Projects for the government’s Hydrogen Headstart program will be announced imminently to capitalise on the green technology, she added.
The architect of Australia’s first hydrogen strategy in 2018, former chief scientist Alan Finkel, said rapid advances in battery technology had sunk some of the initial hopes for Australia’s hydrogen industry.
“There’s not a lot of likelihood of demand for hydrogen in transport or energy storage because of the extraordinary improvement in batteries,” Mr Finkel told The Australian. However, he expects the fuel source will play a critical role as a feedstock for steelmaking and chemicals as heavy industry faces pressure to cut high levels of carbon emissions.
“The challenge for green hydrogen is the extent to which end users are prepared to pay the premium that is necessary to build the scale that will ultimately lead to costs coming down. The early adoption is the biggest problem and that’s where governments can step in through subsidies and mandates.”
Green hydrogen – produced by splitting water into hydrogen and oxygen through zero-emissions technologies – has proven to be marketing hype rather than a substantial new energy source, MST Marquee’s head of energy research, Saul Kavonic, said.
“Many, including state and federal governments, fell for the green hydrogen hype espoused by Fortescue. An election cycle worth of industrial and energy policy development has been lost as a result,” Mr Kavonic said.
Andrew Forrest’s Fortescue abandoned ambitious green hydrogen targets in July 2024. More recently, the newly elected Queensland LNP government last month scrapped the Central Queensland Hydrogen Project by rejecting a $1bn funding request from state-owned generator Stanwell Corporation.
Experts say current green hydrogen production costs are estimated between $5 and $6 per kilogram as the nascent industry struggles to build scale and battles high electrolyser charges. “The economics of green hydrogen are terrible. It is over several times the cost of gas, so is not remotely competitive,” Mr Kavonic added. “The green hydrogen hype has now faded. Perhaps it will be revisited in 10 years.”
Less than half of Australia’s total announced clean hydrogen pipeline will likely be delivered to the market by 2035, Rystad said, equating to 3.8 million tonnes.
Hydrogen promoters maintain it is too early to write off the sector given broad government support and point to the role of renewable-based hydrogen in developing more lucrative industries such as green steel.
Transforming hydrogen into ammonia may also provide an alternate path for exports with lower transport costs. The same ACIL Allen modelling provided to AEMO forecasts a huge range of 2.5 million tonnes to 53.2 million tonnes of green ammonia could be produced by 2030 under a green export scenario.