Hydrogen development can unlock new industries for Australia but only with urgent action

The development of hydrogen as a fuel source could be a catalyst to new industries emerging in Australia, according to Australian Industry Group boss Innes Willox.

The development of hydrogen as a fuel source could be a catalyst to new industries emerging in Australia, but only if the government seizes the opportunities, warns the boss of Australian Industry Group.

Global interest in hydrogen is rapidly growing as countries desperately seek alternative fuel sources to meet net-zero emissions by 2050, and the US is moving quickly to establish itself as a market leader after flagship legislation was passed to offer producers significant incentives to expand.

In a speech that underscores growing concern within Australia’s business community that the country is at risk of losing out in the race to be a hydrogen leader, Ai Group chief executive Innes Willox said the development of hydrogen could be a catalyst for new industries to develop in Australia.

“The same physics problems that make seaborne hydrogen trade unattractive for cost-sensitive industrial customers could make it much more attractive for those industries to relocate to where the hydrogen they need is made,” Mr Willox said at the Hydrogen Connect Summit in Brisbane.

“Shipping iron ore and coking coal to China for processing is cheap today. When China wants green steel – as their emissions commitments eventually require – it may make more economic sense for both nations to process the ore to iron here, rather than bearing the much higher costs and investments needed to ship the hydrogen for processing there.”

Australia is widely seen as having natural advantages in the production of so-called green hydrogen, with its abundant land mass and plentiful amounts of sunlight to develop renewable energy that could be used to power the splitting of water into core elements.

Mr Willox said the development of hydrogen will be extremely lucrative but for the industry to develop, Australia must act quickly and turnaround a languishing energy transition.

“We have to deliver major projects fast and reasonably cheaply. The cost of renewables is in building and financing, not operations. Exporting hydrogen doesn’t pay, unless electricity here costs half what it does there. We’ll fail that test without social licence, timely planning, supply chains and skills,” he said.

Australia is paying some of the world’s largest electricity prices as ambitious plans to rapidly transition its power grid struggle to materialise. Australia wants renewable energy to generate more than 80 per cent of its electricity by 2030, but new developments are not being built quickly enough to compensate for the retirement of coal.

Coal is under mounting social and economic pressures, and many of Australia’s coal power generators are reaching the end of their lifespan - though many are being retired early.

Intensifying Australia’s energy transition is paramount for the Albanese government, but it has set aside $2bn to offer seed capital to hydrogen flagship funds, though critics insists the government is not acting urgently enough.

Much of the seemingly tentative support is being driven by uncertainty within the government about the future of hydrogen.

Hydrogen remains some way from commercial viability, and there are widespread views on the end uses.

Some see hydrogen as a fuel source that could replace LNG, while others think it will be a much smaller market, though still an extremely lucrative one.

Mr Willox accepted that a so-called “wait and see approach” has merits, as illustrated by history, but said supporting hydrogen will hasten the country’s energy transition and secure Australia’s place in the next low carbon global economy.

“Our interest lies in accelerating that future, not reclining in a hammock while others build it.”

Originally published as Hydrogen development can unlock new industries for Australia but only with urgent action