South Australia’s Office for Hydrogen Power spent more than $280 million before the state government scrapped the agency amid the failure of its Whyalla hydrogen project.
But the government says it will be able to recoup much of the cost by selling the generators it purchased for the shelved hydrogen plant.
The Malinauskas government had allocated $593 million to build a hydrogen power plant in Whyalla, setting up an Office for Hydrogen Power in May 2022 to deliver on its pre-election hydrogen promises.
But the hydrogen project was effectively cancelled in February 2025 after months of speculation about a cost blowout as the private sector pulled out of green hydrogen projects across Australia.
The government said it diverted the money for the hydrogen project to support its takeover of the embattled Whyalla steelworks.
Money from the hydrogen project was diverted to the Whyalla steelworks. (ABC News: Che Chorley)
But an auditor-general report tabled in parliament on Tuesday found the hydrogen office — which was dissolved in May — has spent $285.2 million over three years.
This includes capital costs of $209.2 million, with the agency writing off $85.7 million of that because it related to early works on designing hydrogen production and storage in Whyalla.
“This accounting treatment recognises that there is insufficient certainty that economic benefits will flow to the state,” the auditor-general report states.
The office also incurred $53.4 million in operating expenses and $12.5 million for the purchase of land at Whyalla.
The hydrogen power plant had been proposed for Whyalla. (ABC News: Brant Cumming)
The state opposition said the report showed the “eye watering amount of money that Labor has gambled and lost on its hydrogen fantasy”.
“The Office of Hydrogen Power spent over $285 million in just three years in its existence on their hydrogen power plant that’s now destined for the scrap heap,” shadow energy spokesperson Stephen Patterson said.
Mr Patterson said the government could not argue that its $593 million allocated to the hydrogen plant was being transferred to the Whyalla steelworks.
“In fact, a big chunk of this money is not going to be recovered,” he said.
Stephen Patterson says a “big chunk” of the money will not be recovered. (ABC News)
But the government said it will recoup much of its spending by selling the four gas turbines it purchased for the hydrogen plant.
Energy and Mining Minister Tom Koutsantonis said the 200-megawatt generator will provide additional generation capacity for the state when it is in private hands.
“We’re buying generators, and those generators have a cost, and what you’re seeing reflected in the auditor-general’s report is the rough cost estimates of the generators,” he said.
“Without wanting to prejudice any potential sale process, obviously the generators have a value, they’re an asset that the government will hold.”
Asked if the sale of the generators would recoup the full $285 million spent by the hydrogen office, Mr Koutsantonis said: “I would suspect that we’ll do exceptionally well given the wait for generators and the demand for these generators globally”.
Tom Koutsantonis says the government will recoup much of its spending by selling gas turbines it purchased for the hydrogen plant. (ABC News: Ashlin Blieschke)
‘We have the intellectual property’
The Department for Energy and Mining, which took over responsibility for hydrogen in May, told the auditor-general the sales process for the turbines opened in early August.
It also advised the auditor-general that it intends to “recoup the original purchase price” in the sale.
Regarding the $85.7 million deemed to have “no immediate future economic benefit”, Mr Koutsantonis said this impairment was “an accounting standard for projects that have been cancelled”.
“When you buy infrastructure or you procure reports or you do engineering studies or you do works that might be used for other purposes — but not for the specific purpose — the auditor-general … requires that that become an impairment,” he said.
Tom Koutsantonis says infrastructure acquired for the hydrogen plant could still be used. (ABC News: Justin Hewitson)
He cited the Port Dock rail extension project as an example.
The $16.4 million rail extension project was started by the Weatherill government in 2017 and scrapped by the Marshall government in 2019.
The Malinauskas government restarted the project in 2022 for a cost of more than $50 million, and Mr Koutsantonis said the government was able to use sleepers and rail lines that were acquired before the project was shelved.
He said the infrastructure acquired for the hydrogen plant, including substations and transmission lines, could still be used.
“All the studies that we’ve done as part of the hydrogen jobs plan to get a generator operational can absolutely be used, we have the intellectual property over all that work,” he said.
“A lot of it is for infrastructure that can be used for other projects as well.”
