Economic modeling reveals that larger tax benefits on green hydrogen offered in the United States are endangering Australia’s budding renewable hydrogen industry.
Deloitte Access Economics, a consulting firm, produced a paper that makes the case for immediate action to assist domestic production because aggressive US industrial policies are undermining Australia’s advantages.
Australia’s global competitiveness is slipping despite its goals for sustainable energy, according to Pradeep Philip, head of Deloitte Access Economics, on Friday.
Proponents of the alternative fuel claim that hydrogen might act as a catalyst for the production of green fertilizers, green steel, and green aluminum.
Nevertheless, it won’t be economically viable until the early 2030s, and even then, it relies on whether or not the Alban government succeeds in passing hotly contentious legislation to restrict industrial emissions.
In order to lock in funding for development, long-term contracts for the supply of renewable hydrogen are likely to become a race over the coming ten years.
However, the research cautions that recently passed US legislation offers significant subsidies for North American production of low-emission hydrogen and lessens the unattractiveness of Australian projects.
According to the analysis, a $2 per kilogram hydrogen production credit for local producers would allow them to compete with American producers without going overboard on the public budget.
The production of over 16 million tonnes of renewable liquid hydrogen annually by 2050 would require an investment from taxpayers of $15.5 billion over a ten-year period, putting Australia on course for a close to $50 billion export business.
If not, Australian hydrogen production might be ten years behind schedule and may never reach levels equivalent to those of current fossil fuels.
Moreover, promoting hydrogen would encourage the development of new clean sectors to counteract the decrease of coal, gas, and oil, the paper states.
Without it, Dr. Philip warned that Australia would experience energy shortages and higher-than-expected manufacturing costs.
Australia will also be in a fight for a skilled hydrogen workforce, with early adopters having the best chances of luring and keeping talent.
With Australia competing against the Middle East, Europe, Chile, and the US, proximity to Asia should naturally give rise to a competitive advantage in terms of lower shipping costs.
Yet, the analysis contends that Australia’s export market share in Japan and South Korea may be purposefully reduced by the economics of President Joe Biden’s Inflation Reduction Act.
The US action is luring money and people to the country, and governments in Europe, the Gulf states, Canada, and other places are already reacting.
According to Dr. Philip, “the US Inflation Reduction Act appears destined to cut Australia’s renewable hydrogen lunch.”
