Article by Perry Williams, courtesy of The Australian
24.03.2025
A major $750m green hydrogen plant has been axed in South Australia, a fresh setback for the fledgling industry just days after Anthony Albanese pledged the clean-energy source would help underpin its Future Made in Australia plan.
Global commodities company Trafigura, which owns the Nyrstar lead smelter at Port Pirie, had hoped to build the world’s largest hydrogen electrolyser facility as part of an ambitious scheme that included funding from the state government.
While the mooted 100-tonnes-a-day facility was set to open in 2025, the developers opted not to proceed after completing an engineering and design process last year.
Sources said the prohibitive cost of constructing the green hydrogen plant, and stunted interest from buyers for the green product, both played into the decision to walk away from the project.
The cancellation at Port Pirie underscores the tough environment to build a major new green hydrogen industry in Australia.
The Albanese government has an $8bn war chest aimed at creating incentives for the nascent commodity, and pledged more than $800m in production incentives last week to kickstart the 1500MW Murchison green hydrogen project in Western Australia.
The plant will use solar- and wind-powered hydrogen and convert it to green ammonia for export.
Energy Minister Chris Bowen said the WA deal pointed to Australia’s ambition to become a renewable energy superpower while also boosting its Future Made in Australia policy, with 3600 workers to be employed in construction.
The Australian reported earlier in March the nation’s green hydrogen industry had failed to fire, with 99 per cent of a $100bn supply pipeline failing to progress beyond the concept stage, punching a hole in Mr Albanese’s aim to develop a major export industry by 2030 and meet net-zero goals.
However, Mr Bowen said last week that investment so far was largely consistent with its national hydrogen plan, while conceding the “odd setback” and some delays were inevitable as the sector attempts to build momentum.
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 government, with Opposition Leader Peter Dutton stating there was no business case for green hydrogen after a $600m plant at Whyalla was axed.
Consultancy EnergyQuest said it may make more sense to use Australia’s huge renewable generation capacity for the power grid rather than green hydrogen.
“A key drawback of the existing green hydrogen production process is that a considerable portion of the renewable energy used to produce the hydrogen is lost in the production process,” EnergyQuest said.
“It takes around 45 kilowatt hours to produce one kilogram of green hydrogen, but that one kilogram can only be used to generate 30kWh of electricity, and production of green ammonia involves a further 13-25 per cent energy loss.”
EnergyQuest estimates the electricity required to generate 15 million tonnes of green hydrogen – the federal government’s target by 2050 – requires more than double Australia’s total annual electricity generation.
Mr Bowen said in September it was “no exaggeration” to say green hydrogen would be on the ballot paper.
Nyrstar in December wrote down the value of its smelters at Port Pirie and Hobart by more than $US500m ($794m) over the past two years, citing “continuing challenges” at the assets.
The Australian assets, which employ about 1300 people, include a zinc smelter at Hobart and a multi-metals recovery plant at Port Pirie, which are accounted for as a single business unit due to the integration of their operations.
Trafigura said both assets performed below expectations.
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 head of energy research Saul 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.
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.