Former government adviser labels party’s hydrogen power plant plan a ‘white elephant’

A former government adviser who helped deal with the fallout of the $3bn State Bank collapse has labelled Labor’s hydrogen power plant plan a “white elephant”.

A former assistant under-treasurer in the Labor Bannon government, who helped deal with the fallout of the $3bn State Bank collapse, says Labor’s hydrogen power plant plan could become another “white elephant” for South Australia.

Labor plans to build a $590m hydrogen plant and electricity generator near Whyalla if it wins Saturday’s election, but the state government argues it will cost $1.2bn.

Graeme Bethune was in treasury at the time of the State Bank collapse in 1991, advising then treasurer John Bannon. He gave evidence at the royal commission into the bank collapse and $3bn debts, and then left the public sector to set up the electricity and gas consultancy EnergyQuest.

“I have been having a close look at the hydrogen plan,” Mr Bethune said. “The cost is unknowable because it has never been done in Australia before. My view is that is may cost quite a bit more (than $590m) but nobody knows.

“The National Electricity Market (NEM) is private sector, and I’m in favour of hydrogen, but taxpayers would be exposed to something they have no idea what they are getting into. Costs can blow out and these things can become white elephants.”

Mr Bethune said the financial exposure from the hydrogen plant would not be at the same scale as the State Bank, but the process was untested and expensive.

He said Queensland’s publicly-owned electricity assets, which have to compete for price on the NEM, were now performing badly.

Treasurer Rob Lucas said the hydrogen plant was a “massive risk to the South Australian taxpayer and the state’s economic recovery”. He also raised comments by Opposition Treasurer Tom Koutsantonis on ABC radio that the plant would pay for itself over 5-10 years.

“I challenge Tom Koutsantonis to release publicly the advice he claims to have received from Frontier Economics that the plant will pay itself off in 10 years,” he said.

Graeme Bethune of EnergyQuest at petrol station in Adelaide.

In advice to Mr Koutsantonis – in which they defended their $590m costings – Frontier Economics suggested taxpayer funding of $170m would be needed to help the hydrogen plant become competitive.

Mr Koutsantonis did not explain the $170m cost, but rejected Mr Bethune’s criticism.

“Labor’s policy has been independently assessed by respected firm Frontier Economics,’’ he said. “Mr Bethune is making the same arguments opposing public ownership of electricity assets in the NEM as Rob Lucas made when he sold ETSA.

“It was a mistake then and has been proven so.”

Libs say hydrogen power scheme doesn’t add up

The Liberals have taken the extraordinary step of writing to the private company that costed Labor’s hydrogen electricity generation plant at $593m, believing the real cost is $1.2bn.

Consultancy Frontier Economics costed the Labor plan when it was released 12 months ago, but a detailed breakdown of how it calculated the figures was not released by either the party or the company.

At the centre of the political dispute is one estimate that only $31m would be needed to turn the hydrogen gas produced from water into a liquid for easy storage.

Deputy Premier Dan van Holst Pellekaan said the gagging of Frontier showed the project would cost taxpayers much more.

“Industry sources have privately ridiculed Labor’s plan, in particular the absurdly low $31m figure claimed as the cost of liquefying and storing the hydrogen,” he said.

“Just this one part of Labor’s plan is likely to cost more than $300m according to respected consultants WSP and KPMG – 10 times Labor’s estimate of $31m.”

“If Peter Malinauskas had nothing to hide he would not be gagging Frontier.”

Frontier has defended its modelling and last year justified the costings to Labor when asked for more detail.

When the government first complained that the cost of liquefaction was $310m not $31m, the company wrote to Opposition energy spokesman Tom Koutsantonis to deny the claim: “We have used the CSIRO’s costs estimates for 2025 and can confirm that accounting for the capital cost of $31m, as well as electricity costs and operating costs, the resulting cost of hydrogen is consistent with $1.59 – $1.94/kg reported by the CSIRO for 2025”.

A hydrogen storage and supply facility at the Fukushima hydrogen energy research field. The Liberals argue the liquefaction process would cost hundreds of millions, by Labor say $31m.

But the Liberals have seized on new independent advice that the cost would be far higher.

Independent expert with the Grattan Institute Tony Wood said there was no accurate estimate but the cost would be “in the low hundreds of millions of dollars”, not $31m.

He disputed Frontier’s reading of the CSIRO estimates, based on an eight-times larger liquid natural gas plant because there are no Australian hydrogen plants for comparison.

Mr Wood said Frontier had failed to factor in that economies of scale meant the much larger plant would be similar in cost to Labor’s.

Also, he said the cost of liquefaction and storage of hydrogen would be much higher than natural gas.

“There are none of these plants in Australia so there is nothing to compare it to. But just making a number up ($31m) does not seem like a good idea,’’ he said.

A Labor spokeswoman refused to release more detail of the costing; saying “the desperation is becoming palpable”.