Article by Perry Williams, courtesy of The Australian
Australia’s clean hydrogen ambitions have been dealt another blow with an ambitious $15bn green hydrogen project in the Northern Territory put on ice, underlining the challenges attracting financing and willing buyers to the renewable energy source.
The Desert Bloom hydrogen project, backed by Aqua Aerem and Sanguine Impact Investment, was first handed major project status by the NT government in 2021 following an off-grid hydrogen project trial at Tennant Creek.
The project had secured $1bn in funding from Singapore-based Sanguine with plans to produce green hydrogen at less than $US2 ($3.10) a kilogram by 2027 and deliver 410,000 tonnes a year of the fuel for domestic and international export markets.
Japanese energy giant Osaka Gas then came on board in 2022 to assist with technology, identifying customers and steering project management. However, the development failed to take off and has been sidelined.
Access to funding and issues finding customers were named as the major constraints for the project proceeding, according to sources.
“Funding for hydrogen projects is difficult to attract,” Aqua Aerem chief executive Gerard Reiter told The Australian.
The Northern Territory government did not respond to a request for comment. Osaka Gas said it was unable to provide comment due to its confidentiality obligations.
The former Gunner government in the NT had high hopes to build a renewable hydrogen industry, and capitalise on surging interest in the energy supply source.
Australia’s green hydrogen industry has largely failed to fire, with 99 per cent of a $100bn supply pipeline failing to progress beyond the concept stage to date.
The vast bulk of the announced capacity of promised projects has stalled, with less than 30,000 tonnes a year reaching a final investment decision or starting construction, according to Rystad Energy.
Andrew Forrest’s Fortescue, Australia’s biggest promoter of green hydrogen, this week imposed a fresh round of job cuts in a further erosion of industry confidence around the clean fuel’s prospects.
Fortescue on Tuesday laid off about 90 staff working on its various hydrogen interests, spread across its Queensland electrolyser facility and a hydrogen unit in Western Australia.
High production costs, infrastructure bottlenecks and soft demand from would-be international buyers have combined to hobble the large-scale investment needed to kickstart green hydrogen as a major export industry.
New modelling produced for the Australian Energy Market Operator has also conceded the cost, timing and scale of a potential hydrogen economy in Australia is now “highly uncertain”.
An ACIL Allen report released in March said no green hydrogen exports are anticipated under two of its three planning scenarios.
As part of its flagship Future Made in Australia plan, the government in 2024 provided a budget allocation of $6.7bn to provide a $2 incentive for every kilogram of green hydrogen produced from 2027-28. It also committed $2bn for new projects under the Hydrogen Headstart program.
The Albanese government’s $2bn program has also come under attack, with none of the six short-listed projects now considered bankable after financial sponsors left or the developments were paused, Singapore-based HySights said.
Green hydrogen – produced by splitting water into hydrogen and oxygen through zero-emissions technologies – has proven to be marketing hype rather than a substantial new energy source, MST Marquee’s head of energy research, Saul Kavonic, said.
The International Energy Agency has previously named Australia as one of the key countries best placed to produce hydrogen from renewables but warned that a whopping $US1.2 trillion of investment is needed in the fuel globally to meet 2030 net zero emission goals.
Experts say current green hydrogen production costs are estimated between $5 and $6 per kilogram as the nascent industry struggles to build scale and battles high electrolyser charges.
Still, hydrogen promoters maintain it is too early to write off the sector given broad government support and point to the role of renewable-based hydrogen in developing more lucrative industries such as green steel.
Fortescue this week said it was relying on technology breakthroughs as it contemplates building a commercial scale green iron plant in the Pilbara with the aim of boosting low-grade hematite supplies to high grade green iron production to compete with purer iron ore from Guinea and Brazil.