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Australia plans to get a head start on hydrogen

17/5/2023

Hydrogen pipes in a field Photo: Adobe Stock
As of October 2022, there were more than 100 Australian clean hydrogen and hydrogen derivative projects, creating an A$230–300bn ($155–202bn) investment pipeline

Photo: Adobe Stock

The Australian government has announced as part of its 2023–2024 Federal Budget a new A$2bn (US$1.3bn) programme that aims to ‘capitalise on the country’s competitive advantages and scale up the development of Australia’s renewable hydrogen industry’.

The Hydrogen Headstart programme will provide revenue support for investment in large-scale Australian-based projects producing either hydrogen from renewable energy or derivative products made from hydrogen produced from renewables, such as ammonia, through competitive contracts. Successful projects will have the opportunity to receive funding as a production credit that will cover the current commercial gap between the cost of hydrogen produced from renewables and its market price. ‘This should enable producers to offer hydrogen to users at a price that will encourage them to switch to using this clean fuel,’ states the Australian government.

 

The programme aims to support two to three flagship projects which could provide up to 1 GW of hydrogen electrolyser capacity by 2030.

 

A further $2mn ($1.3mn) of funding over two years will be provided to help First Nations communities engage with hydrogen project developers.

 

An additional A$38.2mn ($25.8mn) will be provided for the creation of a guarantee of origin (GO) scheme to certify renewable energy and track and verify emissions from clean energy products. ‘Essential for the international trade of hydrogen, this low-cost enabling measure will help new projects secure finance and improve the effectiveness of other Commonwealth efforts to scale up renewables and the hydrogen industry,’ the government says.

 

The GO scheme will commence with hydrogen and be extended to other products over time. ‘It will offer transparency to end users in Australia and overseas with information about the carbon emissions of the products they are buying,’ adds the government.

 

The 2023–2024 Federal Budget funding also includes $5.6mn ($3.8mn) to analyse the implications for Australia of intensifying global competition in the clean energy industry; and to identify actions before the end of 2023 to further catalyse clean energy industries, ensure Australian manufacturing competitiveness and attract capital investment. ‘This will help us fully capitalise on our potential as a renewable energy superpower,’ says the government.

 

The Hydrogen Headstart programme is expected to be open for expressions of interest in 1Q2024. Following assessment, successful applicants will be awarded contracts and provided with ongoing payments over a 10-year period from 2026–2027.

 

Meanwhile, Australia’s National Hydrogen Strategy is currently under review by the Australian government to ensure the country ‘remains on a path to be a global hydrogen leader by 2030, on both an export basis and for the decarbonisation of Australian industries’.

 

As part of the review process, the government published a State of Hydrogen 2022 report in April. The report found that ‘Australia has the resources, technical skills and track record with international partners to seize the opportunity to become a global hydrogen powerhouse’.

 

As of October 2022, there were more than 100 Australian clean hydrogen and hydrogen derivative projects, creating an A$230–300bn ($155–202bn) investment pipeline. Of those projects, over 20 are operational or have passed final investment decision (FID), according to the report.

 

However, the report also found that progress in recent months has been slower on achieving FID, ‘due to hydrogen not being economically cost competitive with fossil fuels’. It also warns that: ‘Australia’s industry will be further challenged by generous policies like the US Inflation Reduction Act, which provide a highly attractive investment and operating environment. This is also affecting supply chains for hydrogen projects in Australia as supply chains prioritise the North American hydrogen markets.’