Australia’s Green Hydrogen Sector Faces Competition from US Inflation Reduction Act

Fortescue Future Industries (FFI) Director Guy Debelle has raised concerns about the impact of the United States’ $550 billion Inflation Reduction Act (IRA) on Australia’s renewable energy advantages and potential export markets.

Speaking at the Australian Hydrogen Conference, Debelle emphasized the need for Australia to act quickly to secure a share of the global green hydrogen market, as the IRA could potentially lock up markets in countries like Japan and South Korea.

Australia is well positioned to capitalize on the demand for green hydrogen, thanks to its renewable energy resources. The country has a history of exporting energy to nations like Japan and South Korea. However, Debelle believes that the massive scale of the IRA could overshadow Australia’s advantages and hinder its export opportunities.

Debelle stated that the U.S. gaining a head start through the IRA poses a material threat to Australia’s export markets. He expressed concerns that by the time Australia gets its act together, the market may already be captured by the U.S. He emphasized the need for Australia to recognize the potential risks and act swiftly to ensure it doesn’t miss out on this opportunity.

The Australian government has expressed its ambition to establish a green hydrogen sector, with Energy Minister Chris Bowen considering it a crucial component of the country’s renewable energy strategy. The federal Department of Climate Change, Energy, the Environment, and Water also recognizes Australia’s potential to become a global leader in green hydrogen, with over 100 announced projects representing a significant share of global clean hydrogen project announcements.

However, the department cautions that most projects in the pipeline are yet to reach final investment decisions, and Australia lags behind other global players in terms of large-scale projects moving from planning to implementation. Debelle highlights the need to address this bottleneck promptly to prevent further lagging in the green hydrogen sector.

Debelle emphasizes the urgency for Australia to act quickly, pointing out that the IRA was legislated last August, and project implementation will begin this year in the U.S. He stresses the importance of Australia’s government swiftly rolling out its $2 billion program to support development and providing a clear strategy for success.

The Hydrogen Headstart program, announced in the federal government’s budget, aims to provide revenue support for renewable hydrogen production through competitive production contracts. The funding will bridge the commercial gap for early projects and facilitate the development of gigawatt-scale electrolyser capacity by 2030.

Debelle acknowledges that Australia may not be able to match the IRA’s scale entirely but suggests a targeted response that focuses on investment in the future. He emphasizes the need to move quickly, ensure the details of the Headstart program are revealed, and start implementing the announced initiatives promptly.