A$14 billion in green hydrogen incentives subject to Australia election results

The Albanese government views green hydrogen as an essential component of Australia’s decarbonised future, and has proposed two key streams of investment and tax credits: 

• The recently legislated Hydrogen Production Tax Incentive, which provides a A$2 rebate per kilogram of renewable hydrogen produced between 2027 and 2040 for up to 10 years per a project, at an estimated value of A$14 billion; and The Hydrogen Headstart Program (HHP), announced in last year’s budget, which provides revenue support for large-scale renewable hydrogen projects.
• The Hydrogen Headstart Program (HHP), announced in last year’s budget, which provides revenue support for large-scale renewable hydrogen projects. 
  

The Albanese government announced more than A$800 million in production incentives for the development of a green hydrogen project in Western Australia in the lead up to the election, making it the first to receive funding from the HHP.

The project, based north of the remote WA town of Kalbarri, will use wind and solar-powered hydrogen to produce and export an estimated 900,000 tonnes of green ammonia every year once production starts, which the owners have suggested will be in early 2030.

Green ammonia is used in oil refining, chemicals, fertilisers, green steel and iron production and the tax credit will come into effect if the project gets off the ground and starts producing. 

That said, it might all be window dressing as the most recent budget delivered by the Albanese government cut A$75 million in uncommitted funding from the Hydrogen Highways program, which aimed to decarbonise the transport industry by encouraging the use of hydrogen-fuelled trucks. Nonetheless, there seems to be firm support for green hydrogen on the left of the political spectrum in Australia.

The Liberal-Nationals Coalition (LNP), however, seems to be less firm in their vision for green hydrogen’s future in Australia.

In his budget reply, opposition leader Peter Dutton vowed to “scrap Labor’s nearly $14 billion of production tax credits for green hydrogen because it is not going to work”. He didn’t explain why the plan was doomed to failure.

Angus Taylor, the shadow-treasurer, made no mention of the HHP or green hydrogen in his recent National Press Club speech.

Of course, when Taylor was Minister for Industry, Energy and Emissions Reduction the Morrison (LNP) government he called hydrogen a “clean fuel of the future” when announcing further investment in the Clean Hydrogen Industrial Hubs program.

This view aligned with the Morrison government’s policy leading into the last federal election in 2022, which consisted of a proposed A$1.4 billion National Hydrogen Strategy that included support for research, storage, transportation and the development of seven hydrogen hubs in regional Australia, a position that seems at odds with the current indications from Dutton.

What is clear is that demand for green hydrogen is growing globally, with 15% of global energy use expected to be from hydrogen by 2050 and Australia has several geographical and political advantages that make it well-suited to production, as flagged in the most recent State of Hydrogen report.

One major challenge that remains, however, is getting projects from proposals to production.

Only 4% of projects globally have reached a final investment decision or construction, with similar conditions in Australia, according to the State of Hydrogen report.

Several major green hydrogen projects that were previously shortlisted for HHP funding have hit considerable hurdles, delays or been cancelled completely. Experts have previously flagged a failure to seek out planning and regulatory advice early in the development of major projects as a source of delays. 

At a state level, the industry is also facing challenges. The recently elected LNP state government in Queensland has scrapped support for a major project in the state, while the South Australian government cancelled plans for a A$750 million hydrogen project in Port Pirie that was announced by the state’s former Liberal government in 2021. 
We will have to wait for the outcome of the election to see what it all means.  However, one thing is clear, whoever wins the election will be faced with a significant challenge to pilot Australia through the next phase of the energy transition.