Australia’s relentless pursuit of a clean and sustainable future powered by green hydrogen has garnered global attention, but as the nation races towards its ambitious goals, significant challenges are emerging that threaten to slow its progress.
Billions of dollars of investments are at stake, riding on the belief that green hydrogen holds the key to decarbonizing challenging sectors and fostering new industries, including green steel production.
In 2019, Australia unveiled its National Hydrogen Strategy, positioning the nation as a major global supplier of green hydrogen by 2030. The strategy capitalized on Australia’s abundant resources—pristine water sources, vast expanses of land, and ample sunshine. Yet, as the clock ticks, and with limited infrastructure in place, the economic feasibility of green hydrogen as an affordable renewable energy source remains uncertain. The technology is not yet profitable at scale.
Australia’s path towards a domestic and export-focused green hydrogen industry is facing challenges in planning and policy alignment. The federal government recently acknowledged the disconnect between policy aspirations and commercial realities. Meanwhile, the global green hydrogen industry is rapidly advancing, with fierce competition from regions like the US, the Middle East, and Europe.
Westpac Institutional Bank collaborated with AFRIntelligence to produce a report titled “Under Pressure: Can Australia’s Great Hydrogen Dream Become a Reality?”. The report aimed to dispel some of the rhetoric surrounding hydrogen and critically assess Australia’s position in the global context.
One of the key issues highlighted in the report is the uncertainty surrounding future demand for Australian green hydrogen. While government-mandated targets from trusted trading partners such as South Korea, Japan, and the EU are anticipated to drive demand, the specifics of future contracts remain unclear. Additionally, demand drivers from China, the world’s largest steelmaker, are undefined, despite the significant potential for transitioning industrial processes to hydrogen.
Price is the linchpin in Australia’s success as a green hydrogen exporter. However, the estimated viable cost of $2 per kilogram for green hydrogen, which would make it competitive with existing technologies like natural gas, is still a distant goal. High upfront capital expenditures and the lack of long-term offtake contracts hinder private capital investment.
Australia lags in terms of its hydrogen policy framework compared to many other nations. Clear targets for supply and domestic demand need to be established to instill confidence in the private sector. A coordinated effort from society, industry, and government is essential to make Australia’s green hydrogen ambitions a reality.
While Australia’s hydrogen pipeline projects are the largest in the world, global competition is intensifying. Major investments from the US and other nations threaten to overshadow Australia’s efforts. The AFR Intelligence report points out that despite $127 billion in investment announcements since 2019, the technology behind green hydrogen is still in its early stages.
The challenges notwithstanding, there is optimism surrounding Australia’s green hydrogen potential. Experts believe Australia can meet the demand in the Asia-Pacific region, but it must accelerate its efforts. For Australia to remain competitive, it needs to reduce production costs through subsidies in the short term and improved technology and scale in the long term.
Australia’s green hydrogen journey is at a crossroads. While the investment cycle is substantial and the benefits may not be immediately apparent, the nation must seize this opportunity to secure a sustainable future. The upcoming review of the hydrogen strategy could be a pivotal moment for Australia’s green hydrogen ambitions.
