Another $2 billion is being offered by federal government agencies in a second round of the Hydrogen Headstart program, will will now target difficult-to-decarbonise sectors and and focus bringing down production costs.
The second round of the funding is expected to give priority to projects that are working on green ammonia, green iron and steel, alumina, and long-distance heavy transport such as aviation and shipping.
The new focus comes after a realisation that, as one Renew Economy writer put it, major organisations “fluffed” their assumptions on what the green hydrogen industry could do and would become.
“The Albanese government, to its credit, has been refining this vision, shifting away from the idea that hydrogen will be piped into homes or used to fuel passenger cars and instead focusing more on where it might actually make sense: industrial feedstocks,” wrote Michael Barnard in March.
A key issue has been severe underestimations of what it costs to make green hydrogen, overestimates of how fast those costs would come down, and a refusal by companies to buy more expensive green versions of hydrogen-based fuels.
Last years’ National Hydrogen Strategy estimated the cost of making green hydrogen at around $5 to $10 per kilogram, much higher than the $2 it needs to be to compete with gas.
For this reason, the Australian Renewable Energy Agency (ARENA) expects the next round of applicants to also focus on how to make hydrogen production cheaper.
It wants to see innovative construction and design, more efficient electrolysers, de-risking end use infrastructure, and a vague but ambitious wish for “reducing the cost of renewable electricity”.
“We know that renewable hydrogen will play a critical role in decarbonising heavy industry, particularly in sectors where electrification is not feasible or alternatives are limited,” ARENA CEO Darren Miller said in a statement.
“Getting renewable hydrogen to commercial scale will take time, innovation and ongoing support. By backing industry first-movers, ARENA is providing the certainty to invest, innovate and develop the next wave of projects and learnings.”
Still hard going even with government help
ARENA paid out $1.24 billion from the original fund to only two of the originally shortlisted six projects. The funding is paid out as a production credit only once hydrogen actually starts being made.
The first recipient was the Murchison Green Hydrogen project, owned by Danish giant Copenhagen Infrastructure Partners, in March this year.
It received $814 million in production incentives for the first 1,500 megawatt (MW) stage of the 6 gigawatt (GW) energy and 2 million tonne per annum green ammonia project near Kalbarri in Western Australia.
And in July Orica landed $432 million for its proposed 50 MW green hydrogen electrolyser facility at the Kooragan Island ammonia production facilities near Newcastle.
But it’s dropped plans to export anything from that site, and has struggled with support after Origin Energy backed out of the project last year.
Among the other four projects were two key disappointments, Stanwell’s promising CQ-H2 green hydrogen project in central Queensland and BP’s H2Kwinana Hydrogen Hub in Western Australia.
The $12.5 billion CQ-H2 project was a casualty of the state LNP government’s adherence to coal and gas ideology, which state-owned Stanwell finally killed in June.
After claiming an “initial milestone” by starting early design work, BP put the H2Kwinana project on ice in February after dumping 18 global hydrogen projects months earlier. The project was to include a 100 MW electrolyser.
Both HIF Asia Pacific and Japanese giant Kepco failed to secure ARENA funding for their projects, but they’re still pushing ahead.
HIF Asia Pacific finally picked a site in Burnie last month for its HIF Tasmania eFuel facility, and is running two community sessions later in October.
Kepco is moving ahead with its Port of Newcastle hydrogen project, but starting with a gas-made fuel and hoping to move to green hydrogen in future.
The whole green hydrogen sector has been under pressure in Australia, despite the offer of the separate $2/kg production credit.
Tasmania’s dreams of being the country’s green hydrogen powerhouse have been culled back as proposals from Fortescue, Woodside and Origin fizzled out.
Fortescue has ended visions of making its own electrolysers in Australia, and big talker Infinite Green finally pulled the plug on its own big promises over debt disputes.
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