Australia is at the forefront of a global transformation towards sustainable energy solutions, driven by the necessity to decarbonise. Hydrogen stands out as a crucial player in this transition, capable of reducing emissions in hard-to-abate sectors through the production of green ammonia, replacing natural gas for industrial process heat, green iron and steel production, and fuelling sustainable aviation, maritime shipping and long-haul trucking.
In this article we canvas Australia’s ambitious agenda, underscored by a combination of Federal Budget commitments and state-level policies that aim, among other things, to harness the nation’s abundant renewable resources for a clean energy-powered future. As the world shifts its focus towards greener energy, Australia’s strategic initiatives are seeking to set the foundation for a new energy production and export era.
However, a critical challenge lies in making green hydrogen more cost-effective, as its affordability remains a key factor in demand materialising and achieving commercial viability. In considering Australia’s agenda, we ask the question if our focus and commitments will go far enough to capture the opportunity.
Federal Budget Initiatives: Pioneering the Hydrogen Pathway
The 2024 Federal Budget shed light on how the government views hydrogen's role in Australia's energy transition, marking a notable but moderate commitment compared to initiatives in the United States and Europe. At the forefront of this commitment stands the A$2 billion Hydrogen Headstart Program. This program, still under development, is expected to offer revenue support through competitive production contracts, creating a “demand pull” strategy focusing on supporting the scaling up of hydrogen production in Australia. Additionally, the Federal Budget earmarked A$5.6 million over 2023-2024 to further analyse implications for Australia of intensifying global competition for the clean energy industry, with actionable outcomes expected by the close of 2023. Further, A$2 million was committed over 2024-2025 to establish a fund to support First Nations communities to engage with hydrogen project proponents and planning processes. For more information on Australia’s budget support for decarbonisation sectors, see G+T’s article on specific decarbonisation budget support “Budget support for Australia’s Decarbonisation Sectors”.
However, the Australian Government funding is significantly less than our allies in the United States, who committed $369 billion in direct subsidies and tradable tax credits for hydrogen production that can be combined with tax credits for related renewable energy production and end use cases. Furthermore, this allocation falls substantially short of the expected $300 billion project pipeline of Australian domestic hydrogen initiatives. As of the close of 2022, only a single Australian project, with a minimum capacity of 10 MW, had progressed to a Final Investment Decision (FID), a stark contrast to the 1400 MW of capacity in the European Union and 300 MW in the United States that achieved FID status. While Australia's clean energy future holds promise and we are trusted by our trading partners, the nation must evolve its action and strive to bolster its commitments to remain competitive on the global stage and ensure that Australia reaches its hydrogen potential.
Global Leadership in Green Hydrogen
Australia's strategic initiatives align with global demand for sustainable energy sources, especially green hydrogen. Notably, Deloitte estimated in 2019 for projected global green hydrogen generation to be between 90 and 304 million metric tons by 2050. Furthermore, the International Renewable Energy Agency's prediction that up to one-third of green hydrogen production will be traded internationally underscores the potential for Australia to become a key global exporter.
The Australian Government also announced its commitment to establish a Guarantee of Origin Certificate scheme to track and verify emissions associated with hydrogen and other low emissions products. The development of this scheme has been a result of extensive collaboration with international energy partners. This collaboration gains added significance in the wake of the European Union's adoption of the Delegated Acts on Renewable Hydrogen, which sets out specific conditions for categorising hydrogen, hydrogen-based fuels, or other synthetic fuels as renewable fuels of non-biological origin. Ultimately, though, classification drives investment decisions where so many of the funding mechanisms are directed towards green products.
Additionally, the Energy and Climate Change Ministerial Council agreed to do a Review of the National Hydrogen Strategy to ensure it appropriately positions Australia on a path to be a global hydrogen leader by 2030. This comprehensive review is anticipated to encompass a critical update, emphasising the prospects for green product manufacturing and industrial decarbonisation and therefore making use of hydrogen near its place of manufacture in an apparent recognition of the challenges of scaling up hydrogen transport and storage. This includes the potential establishment of an onshore green iron ore and steel processing industry, powered by renewable energy sources and hydrogen. Currently, Australia exports nearly 900 million tonnes of iron ore annually, while domestic steel production stands at a mere 5.5 million tonnes. Additionally, the review also recognises the utilisation of hydrogen-powered trucks and mining vehicles to facilitate the decarbonisation of the long haul travel and freight transport sector, responsible for approximately 40% of the Australian transport sector’s greenhouse gas emissions, and which is also the subject of the recent CSIRO hydrogen vehicle refuelling infrastructure report.
Western Australia’s Role in Australia's Hydrogen Ambitions
Western Australia (WA) is a pivotal player in the nation's hydrogen ambitions. The WA Government is well advanced in evolving WA’s renewable hydrogen law and policy and the WA investment environment more broadly to facilitate the development of large-scale renewable hydrogen projects. Broadly, these developments have arisen from the following pillars:
The introduction of "diversification leases" in 2023 reflects the state's proactive approach to land tenure and its commitment to sustainable development. To facilitate the complex interplay of renewable hydrogen projects and land tenure, the WA Government has also introduced the "Renewable Hydrogen Guidance: Land Tenure for Large Scale Renewable Hydrogen Projects”. From initial feasibility studies to full-scale infrastructure, the guidance provides a roadmap for project proponents, ensuring transparent and efficient processes. The "Renewable Hydrogen Policy" further introduces a "Highest and Best Use Assessment" to evaluate competing projects for Crown land and recommend its optimal use.
As part of its approach, the WA Government has instituted a new Green Energy Assessment Unit, tasked with streamlining assessment pathways, alongside a newly established Green Energy Major Projects Group, designed to provide comprehensive support to individual projects as they navigate the intricacies of government processes. Furthermore, significant reforms are anticipated through the Petroleum Legislation Amendment Bill (No.2 2022), which recently underwent a period of consultation. These reforms extend WA’s existing approach to petroleum and address various pressing issues including greenhouse gas transport and storage and the exploration and production of naturally occurring hydrogen. For more, see G+T’s article “New policy and guidance for renewable hydrogen projects” and the WA Government’s Renewable Hydrogen Strategy WA Government’s Renewable Hydrogen Strategy documents.
Hydrogen hubs – Evolution of Strategic Industrial Areas
The WA Government has commenced land allocation for multiple projects in different strategic industrial areas (SIAs) across the region, including the Maitland, Boodarie, Ashburton North, and Oakajee SIAs. These projects will focus on producing hydrogen, ammonia, renewable power, and other green industrial products while aiming to decarbonise existing industries.
While land allocation is a significant step, a number of challenges remain to successfully evolve the hydrogen hub model envisaged for the SIAs. These includes the role of government and industry in infrastructure development (including port, water and hydrogen transport and storage infrastructure), developing a future hydrogen-ready workforce and creating supply chain solutions that reduce costs and bottlenecks.
The provision of up to $3 billion through concessional loans and equity investments through the Clean Energy Finance Corporation, which will facilitate major upgrades in the state’s major electricity grid, is an important example of the collaboration required between governments and industry to unlock the necessary developments.
The unlocking of the SIA’s, including the development of all of the interconnected infrastructure corridors in the regions, will also require agreements with the Traditional Owners of the land where the projects will be developed.
Traditional Owner Engagement
Successful project development in the Pilbara and other regions of Western Australia depends on early and extensive government and stakeholder engagement, with a particular emphasis on fostering robust relationships with Traditional Owners. Industry efforts in WA are presently geared towards crafting transformative agreements with Traditional Owners, marking a significant departure from the historic engagement model that relied on royalties in exchange for facilitating development on Native Title land. Australian corporate culture is in the midst of a paradigm shift, reimagining best practices and expanding the purview of its social licence to operate.
Best practice centres around international guidelines such as the United Nations Declaration on the Rights of Indigenous Peoples and the Organisation for Economic Cooperation and Development guidelines, embracing the core tenet of the right of self-determination and key principles such as benefit-sharing, Free, Prior and Informed Consent and capacity building in our First Nations people. Best practice also recognises engagement with the local community, including Indigenous communities, to ensure that they are fully informed of the project, and are able to formulate reasonable and articulate positions in relation to it. While the development of clean energy projects holds the key to steering the nation towards a cleaner future, it must not come at the expense of nurturing and safeguarding relationships with First Nations peoples and caring for Country. Striking the right balance between embracing the green revolution with enthusiasm and adopting a learning approach from best practices remains paramount in this journey.
Australia's Commitment to a Cleaner Future
Australia's journey towards a cleaner future reflects its commitment to sustainability, innovation and global leadership. The nation's collaborative efforts, spanning from Federal Budget initiatives to state-level policies, are laying the groundwork for a greener energy landscape. As WA takes proactive steps, Australia is hopeful of becoming a trailblazer in the global race towards decarbonisation.
While these strides are commendable, the road ahead necessitates a continued escalation of efforts through increased funding, strategic incentives and progressive legislative reforms. This will be pivotal in reinforcing Australia's position at the forefront of sustainable energy innovation and shaping a future where hydrogen plays a central role in redefining the global energy paradigm.