By Nick Toscano and Mike Foley
Australia’s bid to become a global hydrogen superpower has been dealt a blow, with the nation’s biggest energy utility pulling out of building a large-scale green hydrogen hub despite the project being shortlisted for a share of $2 billion of funding from the Albanese government.
Power and gas giant Origin Energy on Thursday revealed it was walking away from its hydrogen ventures, including its proposed Hunter Valley Hydrogen Hub in Newcastle, one of just six projects to be shortlisted for the “hydrogen head start” scheme unveiled as part of last year’s federal budget.
The push to scale up a green hydrogen industry in Australia has faced setbacks due to the high cost and the vast amount of renewable energy required to split hydrogen from water.Credit: Getty
The Hunter Valley Hydrogen Hub, a joint venture between Origin and ASX-listed fertiliser maker Orica, is among the nation’s most advanced hydrogen developments and was intended to begin production in 2026.
Green hydrogen – the name for hydrogen made using renewable energy to ensure it is emissions-free – is considered a promising fuel to curb planet-warming emissions due to its ability to displace coal, gas and oil in parts of the economy that are difficult to decarbonise, such as manufacturing or heavy transport. However, it remains prohibitively expensive to make and is not yet viable at scale, with most of today’s hydrogen still made using fossil fuels that release emissions into the atmosphere.
Origin chief executive Frank Calabria said the company had worked hard to evaluate the investment case for green hydrogen, and was grateful to have received strong government support. However, it had become clear that the hydrogen market was “developing more slowly than anticipated”, and would “cease work on all hydrogen development opportunities”.
“Origin has been closely following the global development of hydrogen technology and markets over the past four years, and we have evaluated a range of options across several jurisdictions,” he said.
“We acknowledge there will be some disappointment at this decision and are grateful for the opportunity to evaluate the feasibility of this project in conjunction with Orica, and with the support of both federal and state governments, local representatives and the community.”
ASX-listed Origin, a diversified energy supplier whose business spans fossil fuels, renewables and battery storage, said the decision to exit hydrogen was so it could prioritise other clean energy opportunities more aligned with its strategic direction.
“Ultimately, we believe investments focused on renewables and storage can best support the decarbonisation of energy supply and underpin energy security over the near term,” Calabria said.
The news comes after Andrew “Twiggy” Forrest, the billionaire chairman of mining giant Fortescue, was forced to hit the brakes on the speed and scale of his plans to become a major green hydrogen producer, blaming the high cost and the vast amount of renewable energy required to split hydrogen from water.
Despite putting on hold the company’s ambitious target of producing 15 million tonnes of green hydrogen by 2030, Forrest said Fortescue remained “steadfast” in its commitment to scaling up and commercialising green hydrogen. Fortescue now plans to initially focus on four key green hydrogen projects in Australia, the United States, Norway and Brazil. Further projects in Morocco, Oman, Egypt and Jordan would follow, the company said.
Origin announced plans for a potential hydrogen hub on Kooragang Island in early 2022. It was intended that the hydrogen produced there would progressively displace natural gas as a feedstock in nearby ammonia manufacturing.
Orica boss Sanjeev Gandhi said the company is still committed to green hydrogen.Credit: Elke Meitzel
Orica chief executive Sanjeev Gandhi said the company was disappointed by Origin’s withdrawal, but respected its decision and was grateful for the progress made in advancing Australia’s hydrogen ambitions.
“We remain committed to exploring new opportunities in this promising sector,” Gandhi said.
“We remain open to discussions with interested parties who share our vision for a sustainable energy future and Australia’s hydrogen economy”.
Energy Minister Chris Bowen said Origin’s decision was disappointing, but the government remained optimistic about hydrogen, with a project pipeline worth $200 million – one-quarter of which are already operating or under construction.
“Green hydrogen plays to Australia’s unique strengths and remains important to the future of manufacturing and industry both in the Hunter and other regions, as well as globally,” Bowen said.
International partners are also investing in Australia. Bowen cut a $660 million deal with Germany last month, funded equally by the two nations, to guarantee European buyers for Australia’s green hydrogen.
Opposition energy spokesman Ted O’Brien criticised the government for restricting its support to green hydrogen, produced with renewable energy, and argued that funding should also be made available to other technologies.
“Labor’s over-reliance on green hydrogen was always going to be risky, and now that risk is being realised,” O’Brien said.
“If hydrogen is to succeed in Australia, we must be colour blind when it comes to low emissions technologies including blue hydrogen [gas] and pink hydrogen [nuclear].”
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