How to get Australia back in the global hydrogen race

By Dr Fiona Simon, CEO, Australian Hydrogen Council

As the world-wide discussion shifts towards clean energy and hydrogen, Fiona Simon, CEO of the Australian Hydrogen Council, explains how Australia can rejoin the hydrogen race and what it can do that will have an immediate impact on the Australian hydrogen industry.

Since the release of the National Hydrogen Strategy in November 2019, Australia and the world have changed. The pandemic, war in Ukraine, natural disasters, and rising inflation have highlighted the vulnerability of supply chains and resulted in a renewed focus on building domestic capabilities, sovereign manufacturing and energy and resource security.

We have also witnessed a shift in the global discussion towards clean energy and hydrogen. Significant financial incentives and policy approaches have been announced by various countries across the globe, demonstrating a shift in focus towards transitioning energy systems to be prepared for the future.

The introduction of the US Inflation Reduction Act (IRA) is already starting to increase US capacity and competitiveness in new and emerging industries, driving significant government and private investment in both large scale infrastructure projects and smaller, high-risk technology commercialisation.

The IRA has changed the game since it was signed in to law, just a few short months ago, and conversations in Australia are no longer about how we do not want to fall behind in the hydrogen race – we have already fallen behind other countries (Canada, India, the EU and others) who continue to announce new policies backed by significant financial incentives, with each pushing for first mover advantage.

Where companies and investors have choices among a range of projects, we are already hearing that Australian projects are being de-prioritised due to lack of policy certainty and financial support.

The speed and delivery of the global energy transition has obvious constraints such as available land and permitting times, accessible infrastructure (including transmission lines and ports), availability of technology, equipment and materials, and access to skilled technical and trades people.

While Australia is fortunate to have some of these vital elements onshore, we would also be reliant on other nations to develop a hydrogen industry at scale. The challenges and competition for global investment are unlikely to be met by Australia simply attempting to outspend the larger jurisdictions (if that were even possible or politically palatable).

The Australian response to the policy and funding challenges set by the IRA and other policies must be strategic and targeted, and policy needs to consider and support elements of project development that are not necessarily reliant on direct cash incentives.

There needs to be a further demonstration of seriousness from the Federal Government if we are not to fall further back in the queue for capital, equipment and the mobile workforce, and it should be signalled now, while a revised National Hydrogen Strategy is being developed.

Australia has an opportunity to shift the focus to job creation, retention of manufacturing capability, and assisting heavy industry to decarbonise. The hydrogen strategy can usefully shape the planning and regulatory environment and help in the development of investable propositions to attract a range of co-investors.

We hope that the revised strategy will provide a detailed plan for the transition that clearly outlines the targets, costs and timing for an effective transition and reconsiders the best range and combination of long-term economic mechanisms to develop the industry.

Specifically, it is pivotal that the revised strategy explicitly values and supports the development and commercialisation of new technologies and industries to ensure that there is a pipeline of technologies and researchers in Australia.

Additionally, the Federal Government should consider establishing a case manager approach within governments to assist project developers and funders in tying all potential sources of support together, as well as assist in the coordination of planning and approvals.

Where do we go now?

So, what can Australia do right now that will have an immediate impact on the Australian hydrogen industry? In the immediate term, there are low regrets policy actions that Australia can take.

Firstly, incentivise hydrogen production in areas where Australia has a competitive advantage, such as the production of chemicals (ammonia, urea, methanol). The Federal Government needs to underwrite demand for these strategically important and hydrogen-dependent industries.

Secondly, increase and expand ARENA funding for trials and demonstrations looking at decarbonisation of the production processes for carbon intensive, trade exposed industries, such as aluminium and iron ore refineries.

Finally, develop bespoke joint support packages between Australia and its trading partners that underwrite trade and support necessary infrastructure to assist the development of export supply chains.

Reform needs to be timely – and it needs to be implemented over the next 20 (or even better, 15) years if the country is to remain on track to achieve net zero and transform the economy for a carbon constrained future. This type and amount of investment and work requires centralised policy coordination in order to ensure that the needs of citizens and nation are being met.