Meanwhile, the nascent green hydrogen industry is moving apace globally and competition from better funded and subsidised markets, such as the US, the Middle East and Europe, is growing rapidly.

A range of time-critical issues surfaced when Westpac Institutional Bank teamed with AFRIntelligence to produce a new report, Under pressure: Can Australia’s great hydrogen dream become a reality?.

This report was commissioned to unpack some of the rhetoric around hydrogen and to pressure-test the opportunity for Australia and what’s happening globally.

Clarity on demand

Drawing on the views of policymakers, energy industry leaders and experts and data from energy research consultancy Wood Mackenzie, it highlights how uncertainty is currently holding back the hydrogen dream and the development of Australia’s green hydrogen industry.

One reason is the fixed focus to date on the supply side for hydrogen as an abundant energy source, while future demand remains loosely based on projections and leaps of faith by investors and developers.

The potential for future contracts for Australian green hydrogen exports, anticipated to materialise from government-mandated targets set by trusted trading partners such as South Korea and Japan or further afield in the EU, is unclear.

Drivers of demand from China, the world’s largest steelmaker, also have not been defined, although one certainty is transitioning its industrial processes to hydrogen would run to many trillions of dollars.

Lack of near-term demand can make clean hydrogen projects a risky investment, inhibiting the flow of private capital into production.

When the price is right

Ultimately, price will be the determinant of Australia’s success as a clean hydrogen exporter. Yet, we’re a long way off realising the estimated viable $2 per kilogram cost for green hydrogen, outside storage and shipping, which would allow it to compete with existing technologies like natural gas for use in ammonia production, transport fuel, and electricity.

High upfront capital expenditure combined with projected declining cost curves make it difficult for producers to secure long-term offtake contracts that provide revenue and cash flow certainty.

The mooted rapid declines in technology costs – with clean hydrogen production using renewables and electrolysers expected to fall by 50 per cent by 2030 – limit the willingness of private sector end users to seek out contracts with clean energy developers. There’s a reluctance to sign long-term contracts that would effectively lock them into paying higher prices than they otherwise might.

For sectors, such as household use and transport, renewables such as wind and solar will continue to be more efficient, making hydrogen’s domestic use case less clear.

A place in the race

According to Wood Mackenzie, Australia has the second least comprehensive hydrogen policy framework of the world’s 16 largest hydrogen jurisdictions. The time to adjust the focus to enablement and delivery is now.

An all-in societal, industrial and governmental commitment is required to make it happen.

Unlike the EU and US, Australia has not yet set production or demand targets. We’re still in the process of identifying which key sectors will drive the development of a domestic hydrogen industry. Such targets are vital to give the private sector confidence to invest and to kick-start demand.

To be competitive, Australia must establish a clear direction with meaningful targets, for both supply and domestic demand, and re-focus its efforts to lock in offtake agreements towards securing final investment decisions.

As a market leader in funding renewable energy projects, Westpac remains optimistic that Australia can still place in the global clean hydrogen superpower race and is ready to play its part, but there’s much to be done before 2030 to realise these ambitious targets.

David Scrivener is head of energy, infrastructure & resources at Westpac Institutional Bank.

Find out more in the Under Pressure report at westpaciq.com.au