Australia was one of the first countries to commit to hydrogen, and it has followed up with initiatives including its A$2bn Hydrogen Headstart fund. But faced with stiff international competition for investment, it is at risk of squandering its early-mover advantage.
Australia was one of the first countries to go big on supporting the nascent green hydrogen sector when it published its National Hydrogen Strategy in 2019.
This committed Australia to be a major global player in hydrogen by 2030, with a long-term goal of exporting large quantities of the fuel to countries in Asia. In May 2023, the Australian government said that the policy clarity in this strategy has led to the emergence of a A$127bn ($85bn) pipeline of hydrogen investments in the country, including over 80 production projects of which 15 had reached a final investment decision.
But the announcement in May was not just an exercise in self-congratulation. The government kickstarted a review of the 2019 strategy, to ensure it is still fit for purpose in a world where competition for green hydrogen investment is now fierce. It also unveiled its A$2bn ($1.3bn) Hydrogen Headstart fund, through which it plans to offer green hydrogen production contracts to support utility-scale facilities.
However, the key question is whether these measures go far enough. Will a A$2bn ($1.3bn) programme do enough to excite companies that could pursue projects in the US and benefit from the vast support in the Inflation Reduction Act? And is Australia going to squander any early-mover advantage it gained from that 2019 strategy?
Australia’s early support for green hydrogen has resulted in a busy development market, where we see interest from both local and overseas investors.
Last month, a consortium of Australian, Japanese and Singaporean firms said they would invest A$117m ($78m) in the Central Queensland Hydrogen Project, which is set to produce 200 tonnes of hydrogen a day from 2028 rising to 800 tonnes a day from 2031. This would be liquefied and exported to Japan and Singapore.
Also last month, Australian Gas Infrastructure said it would start building its 10MW Hydrogen Park Murray Valley scheme in Wodonga, Victoria, after gaining A$36.1m ($24.2m) funding from the Australian Renewable Energy Agency, as well as support from the government’s Clean Energy Finance Corporation.
In addition, Line Hydrogen this month said it will start work on its 7.6MW George Town green hydrogen project in Tasmania; Samsung agreed to develop a green hydrogen project in Western Australia with Infinite Green Energy last month; and Amp Energy signed a deal with mining firm Iron Road in April to build green hydrogen at Cape Hardy Port precinct. No doubt this is just scratching the surface.
Developers will also be able to apply for financial support via the A$2bn ($1.3bn) Hydrogen Headstart fund from next year. The Australia Hydrogen Council said it welcomed the scheme as a “strong signal that [the government] is committed to the hydrogen industry’s development, particularly in light of fierce global market competition for investment dollars”.
However, there is concern in the industry about the lack of clarity about how much of the funding will go to green hydrogen projects, as opposed to those that use electricity from fossil fuels. Other critics have claimed the fund is too small, as it is only likely be able to support projects with total electrolyser capacity of 1GW.
Andrew Forrest, the billionaire founder of Fortescue Future Industries, which is developing green hydrogen projects, said it was a “start” that would help “catalyse the whole industry in Australia” but added that much more was needed. FFI is likely to build its first green hydrogen projects in the US because of the scale of financial support available under the IRA. In that context Hydrogen Headstart appears to be less a ‘headstart’, and more a ‘hurry up or you’ll fall even further behind’.
Australia has also been busy about signing international deals to cooperate on the growth of the hydrogen sector. It has agreed partnerships with China, Germany, India, Japan, the Netherlands, Singapore, South Korea, the UK and the US. This activity is backed by support for green hydrogen at state level, including with the use of mechanisms such as Western Australia’s plan for accelerated permitting.
The country faces other challenges for green hydrogen that go beyond the availability of public funding. It shares many of these with other countries.
For example, green hydrogen developers will need to know which customers they can sell their fuel to; which sectors the government is prioritising to grow hydrogen demand; how developers can access the water they need; whether there will be enough support to add the new wind and solar capacity needed to power green hydrogen factories; and whether states are collaborating enough on policies to support fast permitting and investments in the supply chain.
Private investors will hope the federal government can answer these questions in its revised National Hydrogen Strategy, which is due later this year. Without this, Australia will continue to be overtaken by other countries that are moving faster.
Australia has not yet squandered its early-mover advantage in hydrogen. The host of schemes we have seen this year show that the market is moving. But it needs to back up its ambitions with policies if it wants to keep attracting investors.
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