Australia to review national hydrogen strategy: Update

Adds info on response from the Australian Hydrogen Council in paragraphs 4 and 5.

Australia will review its national hydrogen strategy, partly in response to the US' Inflation Reduction Act (IRA) and efforts by other countries to build up a hydrogen economy.

The government's Energy and Climate Change Ministerial Council agreed late last week that the strategy should be reviewed to support Australia "on a path to be a global hydrogen leader by 2030 on both an export basis and for the decarbonisation of Australian industries". The review is to factor in developments in Australia and elsewhere since the original strategy was drawn up in 2019, the council said. This will include "the impact of the Inflation Reduction Act… and policies by other countries to support a hydrogen industry".

The IRA will introduce tax credits of up to $3/kg for hydrogen production, with the exact amount of support to depend on lifecycle greenhouse gas (GHG) emissions. It has been widely regarded as a gamechanger for the low-carbon hydrogen industry and other countries have scrambled to follow suit. The EU earlier this month announced specific provisions for hydrogen as part of its Green Deal Industrial plan, including auctions through which it will grant fixed premiums on renewable hydrogen production, and said this would have "a similar impact as the production tax credit". India earlier this year also earmarked substantial funds for production-linked incentives to stimulate hydrogen production.

Industry body the Australian Hydrogen Council said it welcomes plans for reviewing the strategy and that more far-reaching support for the sector is crucial in order to keep up with other countries' efforts. "We are already hearing that Australian projects are being de-prioritised where there are choices", the association's chief executive Fiona Simon said. "Competition for hydrogen projects is fierce" and countries are "jostling for first mover advantage", she said. Simon called on the government to develop a new strategy that "will reconsider the best range and combination of long-term economic mechanisms to develop the hydrogen industry, including grants, debt and underwriting".

The industry body said that according to a report by consultancy Deloitte, failure to respond to the IRA could lead to significant hydrogen production in Australia being delayed into the 2030s. This would leave Australian exports 65pc lower in 2050 than if the US bill had not been introduced. Deloitte suggests that the Australian government should introduce a production credit of A$2/kg for 10 years for hydrogen projects, the Australian Hydrogen Council said.

Australian industry participants have previously warned that the country risks losing its edge unless there is more political support. The country has many of the key components for cost competitive renewable hydrogen production — especially ample solar and wind resources and a vast land mass — and many projects are planned across the country, including giant sites such as the BP-led Asian Renewable Energy Hub (AREH). But few projects have progressed to final investment decisions and there are concerns around issues such as electricity generation and transmission infrastructure and water supply.

Australia's hydrogen strategy from 2019 set out removal of market barriers, the effective build-out of supply and demand and a drive for global cost competitiveness as key aims. The government sees the creation of hydrogen hubs — which combine all aspects of the value chain — as crucial for achieving these goals.

By Stefan Krümpelmann