Australia offers industry A$2bn to scale up green hydrogen

AUSTRALIA’S government will give A$2bn ($US1.3bn) to industry to scale-up the production of green hydrogen as it seeks to become a global leader in the burgeoning sector.

The A$2bn Hydrogen Headstart initiative will cover the additional cost of producing green hydrogen from electrolysis powered by renewable energy compared to the current hydrogen market price. Green hydrogen production is significantly more costly than the conventional method of reforming natural gas, which produces emissions. The scheme aims to support two to three flagship projects that together would provide up to 1 GW of electrolyser capacity by 2030. The exact details of the scheme will be developed in the coming months, in consultation with industry. The Australian government said it will support both hydrogen production and the production of hydrogen derivates including ammonia. It wants to enable producers to offer hydrogen at a price that will encourage users to switch to using a cleaner fuel and feedstock.

Dan Miller, CEO of the Australian Renewable Energy Agency (ARENA), which will help develop and operate the initiative, said: “Hydrogen Headstart will catalyse Australia’s hydrogen industry and other clean energy industries, and help position Australia as a global hydrogen leader.

Governments around the world are keen to use hydrogen to help meet climate targets and take advantage of the opportunity to develop a large-scale, green industry. Clean-burning hydrogen can be combusted to produce industrial heat or as a fuel for heavy transport, and is used as an input for the chemicals industry. By converting it to ammonia it can be shipped around the world and transformed back again at point of use, meaning countries like Australia that have huge potential for renewable energy can produce green hydrogen and develop a hydrogen export industry.

Miller said: “Australia has an unparalleled opportunity to become a global green hydrogen leader, but we can’t afford to lose our momentum as other competing countries step up their ambitions and support.”

Industry response

The scheme has been welcomed by some in industry, though there have been calls for more support to keep the country from falling behind the US and Europe. This includes from Orica, an explosives manufacturer that has formed partnerships exploring the use of green hydrogen to produce ammonia for its production facilities in Queensland and Hunter Valley. Company CEO Sanjeev Gandhi told the Sydney Morning Herald: “We are competing here with the US who has the Inflation Reduction Act. The US has allocated $US350bn to support the hydrogen industry. We are starting with A$2bn. It’s a great start, but we need to scale that up quickly.”

Likewise, Andrew Forrest, the billionaire mining magnate who is executive chairman of green hydrogen firm Fortescue Future Industries, said the scheme was a “wonderful first step” but added it was important that the government match the US tax credit of US$3/kg.

BP, which has plans for three hydrogen projects in Western Australia, said the scheme should bolster confidence and attract investment. Lucy Nation, VP for hydrogen in Australia and Asia Pacific at BP, said: “The programme is exciting because it signals Australia’s intention to be a global leader in renewable hydrogen by attracting investment and giving potential customers assurance of Australia’s commitment to a new industry.”

Coal industry interests have criticized the initiative for focusing exclusively on renewable hydrogen production methods. Low Emission Technology Australia, which is funded by investors from Australia’s black coal producers, said Hydrogen Headstart “misses an opportunity to focus on all hydrogen production pathways, including clean hydrogen using coal, gas or biomass with carbon capture and storage.”

“The Inflation Reduction Act provides a deliberately technology neutral tax credit that aims to level the playing field between various low-carbon energy technologies such as solar, wind, nuclear, batteries, carbon capture, and others, by encouraging investments in the most impactful and commercially available technology,” it added.

Hydrogen Headstart is expected to open for expressions of interest in the first quarter of 2024. Following assessment, successful applicants will be awarded contracts and provided with ongoing payments over a 10-year period from 2026/27, said the government.

Miller said: “With this funding, we are looking to incentivise green hydrogen production in Australia by backing early projects that will be among the largest in the world.”

To date, ARENA has awarded A$236m to support the development of 43 renewable hydrogen projects including for use in alumina refining.

In March, IChemE joined a proposed Cooperative Research Centre (CRC) in Australia that would work to expand the production of green hydrogen, and help decarbonise industrial processes and energy systems.