Green bank hits hydrogen wall as investors go cold on latest tech
The nation’s green bank has spent just 5 per cent of a $300m fund aimed at boosting the green hydrogen industry.
The federal government’s green bank has spent just 5 per cent of a $300m war chest aimed at turbocharging Australia’s green hydrogen industry since 2020, underscoring caution among private investors in committing money to bankroll the hyped fuel source.
The $14bn Clean Energy Finance Corporation was handed a mandate in 2020 to make available up to $300m in concessional finance via its Advancing Hydrogen Fund, to help build a major new sector delivering green energy projects.
However, the CEFC said just two investments had been made in the past five years, totalling $15.7m of the $300m.
Some $12.5m was spent on Ark Energy’s SunHQ hydrogen hub in Townsville, where green hydrogen will be produced from a 1MW electrolyser.
The other $3.2m was invested in the Murray Valley hydrogen park in Victoria, a 10MW electrolyser developed by the Australian Gas Infrastructure Group.
More than 100 projects have been launched across Australia so far this decade, but dozens have been paused or cancelled due to high production costs, infrastructure bottlenecks and soft demand from would-be international buyers.
CEFC talks challenges
The CEFC, known as Australia’s green bank and chaired by Steven Skala, said it made no new investment commitments in the 2023-24 financial year, although several other commitments were made to hydrogen technology developers Siltrax and Hysata.
It pointed to the challenges of luring large-scale investors to the green technology.
“The private financing markets are inherently risk averse when it comes to new technologies such as large-scale hydrogen and low-carbon liquid-fuel projects,” the CEFC said in its annual report.
“The CEFC concessional finance can play an important role in corner-stoning the capital structure and crowding in additional private sector investment by taking longer-dated financing positions.”
The Australian revealed this week that the nation’s green hydrogen industry has failed to fire, with 99 per cent of a $100bn supply pipeline failing to progress beyond the concept stage, punching a hole in Anthony Albanese’s aim to develop a major export industry by 2030 and meet net-zero goals.
‘Long-term effort’
Australia’s biggest promoter of green hydrogen, Andrew Forrest, also axed an investment pact with US hydrogen giant Plug Power in the latest blow for the hyped clean energy power source, as developers pull back from projects following the election of Donald Trump.
Australian Hydrogen Council chief executive Fiona Simon writes in The Australian on Friday that negative reports on green hydrogen “have been discouraging”, while maintaining building the hydrogen industry was always a long-term effort and requires government support.
“Producing clean or green hydrogen is not yet commercial; it cannot compete with fossil fuels on price,” Dr Simon writes.
“This is why it is in the public interest for governments to invest in the industry – particularly in the absence of a carbon price – to then draw through private investment. And while we have seen major funding announcements, much of the money to close the commercial gap is still for future years.”
Still, Dr Simon said challenges remained for the industry.
The “commercial gap has been widening rather than closing. Equipment costs have not fallen as hoped, and other costs have skyrocketed. This includes the cost of electricity, a major input for green hydrogen” she writes.
“We are seeing a global slowdown in the energy transition, with many governments and corporations stepping back from climate undertakings. This is likely to be a result of both politics and cost.”
‘Significant potential’
However, she said Australia still needs hydrogen for the energy transition, with the nation holding “significant potential” to make and use renewable energy.
The CEFC said in a statement the Advancing Hydrogen Fund focuses on projects where there is state or territory government financial support or policy alignment with the National Hydrogen Strategy.
As part of its flagship Future Made in Australia plan, the Albanese government in 2024 provided a budget allocation of $6.7bn to provide a $2 incentive for every kilogram of green hydrogen produced from 2027-28. It also committed $2bn for new projects under the Hydrogen Headstart program.
The CEFC said the two subsidies create the momentum for larger-scale projects to progress to final investment decisions.
“Concessional financing through the AHF is an important policy initiative to catalyse investment into first-of-kind large-scale hydrogen projects. Policy support through production credits (such as Hydrogen Headstart) and tax incentives (such as the Hydrogen Production Tax Incentive) still require upfront capital expenditure to be financed and investors to take the technology, construction, operating and revenue risks,” the CEFC noted in its annual report.
More Coverage
Add your comment to this story
Grant for ‘endangered’ languages
The Albanese government has announced $11m in grants for 26 First Nations language projects in more than 40 communities. Some of the languages are “highly endangered” and spoken by none to fewer than 10 elderly speakers.
Waiting game leaves millions on tenterhooks
Cyclone Alfred confounded forecasters and frustrated just about everyone else by backing off, then powering on. The calm before the storm is wearing thin on anxious communities.
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout