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Executive summary
The Australian Hydrogen Council (AHC) is extremely supportive of the Australian Government’s policy developments in support of the hydrogen industry and the energy transition as a whole.
We now urge the government to consider further initiatives in this Budget to fill some of the remaining commercial and policy gaps.
The demand side of the cost gap must now be better addressed, and in line with the direction set to date on priority use cases. The infrastructure requirements to move and store hydrogen have also been a lower priority until now, which needs to be rectified.
Recommendation 1: Policy to kickstart key markets
Consistent with its FMIA and NHS agenda, the Australian Government should prioritise and fund the following demand side policies for the 2025-26 Budget:
- Contracts for difference or production tax credits for future green metals supply and use, leading from DISR’s recent consultation.
- Public procurement of green metals; at least an initial assessment of options and mapping major opportunities against timelines for construction, facility development, and procurement.
- A mandate for low to zero carbon ammonia for miners to use in explosives (budget impacts here will be minimal because it will be borne by miners).
- A mandate or demand mechanism for low carbon liquid fuels, especially SAF (including blends), that is tailored to Australia’s market and national security interests.
Recommendation 2: Direct support for cornerstone industrial use and early adopters
To encourage domestic decarbonisation and support existing industry, in 2025-26 the Australian Government should:
- Assess the age and decarbonisation options for key Safeguard assets that overlap with FMIA and NHS criteria, and fund natural gas cost support mechanisms as required (or effect other gas industry policy) to keep manufacturing in the country.
- Target and fund direct government support packages for early adopters of hydrogen for industrial purposes who cannot reasonably access other support. This could be delivered via ARENA or another government funding and investment body.
Recommendation 3: Funding support for key infrastructure
To lay the groundwork for hydrogen in future road transport and shipping, the Australian Government should:
- Fund an assessment of key shipping corridors and Australian bunkering options for ammonia and methanol for 2025-26, and earmark longer term funds to support prospective common user infrastructure based on the assessment.
- Revise and progress the Hydrogen Highways initiative or reallocate funds to refuelling for other heavy transport applications for 2025-26.
Ideally, funding provided could be layered with other funding, such as for hubs, Hydrogen Headstart, and likely future HPTI recipients.
1 Introduction
We have an enormous opportunity in this country to create a vibrant hydrogen industry, both for domestic and export use. Australia has the renewable energy resources, the technical skills, and the track record with international partners to become a global hydrogen leader.
The AHC is the peak body for the hydrogen industry and our membership includes companies from across the hydrogen value chain. Our members are at the forefront of Australia’s hydrogen industry, developing the technology, skills and partnerships necessary to ensure that hydrogen and its derivatives (such as ammonia and methanol) play a meaningful role in decarbonising Australian industry.
We are extremely supportive of the Australian Government’s policy developments related to the hydrogen industry. These include the Future Made in Australia package, the Hydrogen Production Tax Incentive, Hydrogen Headstart, and the revised National Hydrogen Strategy. Other enabling initiatives relate to electricity investment (the Capacity Investment Scheme, Rewiring the Nation, Powering the Regions), the National Reconstruction Fund, progress on supporting sustainable finance, and the carbon leakage review. These are also fundamental to creating the right investment environment for Australian hydrogen projects.
Figure 1 below provides an overview of key policy from our perspective. We discuss most elements in some detail in the Appendix to this submission.
Figure 1: Australian federal policy environment – key elements for hydrogen
The work to this point across this complex array of issues has been comprehensive, and most welcome. However, more needs to be done to connect the different policy pieces and fill policy gaps if we are to gain and maintain our momentum in effecting the energy transition and support the Australian economy.
Further, the Hydrogen Production Tax Incentive (HPTI) is proposed to be AU$2/kg hydrogen, but this alone will not be enough to close the commercial gap for hydrogen projects. Hydrogen Headstart will help several projects reach commerciality, but it will still be difficult to close the gap entirely given rising input costs and a low customer willingness to pay a green premium.
We urge the government to consider further initiatives in this Budget to fill both the commercial and policy gaps.
2 The role for hydrogen
Globally, hydrogen is widely seen as an important means to reduce carbon emissions, with IRENA advising that as of May 2024, 46 national (and supra-national) strategies and 8 roadmaps on hydrogen had been drafted and published, and at least 20 more countries were in the process of producing such documents.[1]
Australia was one of the first countries to see the hydrogen opportunity, and we have developed an enviable pipeline of projects.
In the process of developing these projects and in working through the options, governments and industry have learned a great deal. Collectively, we are increasingly moving away from talking about hydrogen in the abstract – the thing we could make and should make – to its purpose to decarbonise specific sectors of the economy.
Views are converging on the role for hydrogen in the future, as follows:
- We will need hydrogen in the energy transition for its chemical uses:
- Clean and green hydrogen is required because we already need it to make ammonia for the nitrogen fertilisers that keep half the world alive, and for the ammonium nitrate that our miners require. Our existing ammonia industry needs to be decarbonised.
- Hydrogen will have a role to decarbonise steel – producing Direct Reduced Iron (DRI) with hydrogen will be a necessary means to decarbonise at least the first part of the steelmaking process.
- Hydrogen is required as a chemical feedstock for future fuels:
- Feedstock for future shipping fuels – hydrogen is needed for both the ammonia and methanol pathways.
- Feedstock for the aviation fuels of the future – the e-SAF when we need to scale beyond biogenic feedstocks, and right now as a supporting act to process biogenic feedstocks.
- Hydrogen as a direct fuel (essentially as a carrier for energy for long term/heavy uses that are challenging to electrify) is most likely for:
- Replacing diesel for remote power needs, which is particularly relevant for a large and less populated country like Australia, where connection to electricity grids can be infeasible.
- Decarbonising heavy road transport and smaller aircraft. Matters of efficiency, infrastructure needs, and viable alternatives are being worked through, as well as hybrids between batteries and hydrogen, and blended products.
- High temperature industrial heating, including a strong possibility it could be the best fuel for decarbonising the calcining process in producing alumina from bauxite.
- Electricity production, in place of natural gas in peaking generation facilities to support grid stability in the event of long-term renewable energy ‘drought’.
Producing the volumes of hydrogen required for these uses will need terawatts of new power and further hundreds of billions of dollars of investment in production capabilities, industrial facilities and associated infrastructure. These uses alone will require close attention to priorities, efficiencies, and sequencing to be feasible, and scaling up will take years.
Figure 2 shows the ecosystem that needs to be in place to get to commerciality in hydrogen. This submission addresses only some of these aspects, but we have provided extensive commentary on all of them in the past[2] and would be happy to have further conversations as might be useful to the Australian Government and the broader policy community.
Figure 2: Areas for government policy and support for the emerging hydrogen industry.
3 The current state of the emerging Australian hydrogen industry
Electrification is an integral element of Australia’s decarbonisation, and we support the logic of electrifying wherever this is possible and economic. However, this is already not an easy task, with almost 80 per cent of Australia’s domestic energy consumption in FY2022-2023 in the form of molecules rather than electrons.[3]
While many applications for molecules will shift to electrons as electrification emerges as the most efficient option for continued operations, there is still a significant portion of industrial activity that will not be covered. And hydrogen is the only large-scale option for decarbonising energy that requires molecules.
Further, Australia is a trusted energy partner across Asia and the export of molecules is critical to Australia’s prosperity. Our trade partners are confronting their own decarbonisation challenges within their national context, and Australia has an important role in remaining a source of clean energy, in whatever form is required.
The growth of Australia’s hydrogen industry therefore not only supports domestic decarbonisation but also provides Australia with an opportunity to add value to existing raw exports and create new export opportunities. This will improve Australia’s slide down Harvard’s globally recognised Atlas of Economic Complexity, where Australia was at 93rd place in 2021 (from 60th in 2000) with Uganda, Armenia and Honduras ranked directly ahead of us.[4]
It will also require a level of Australian local industry participation all along the value chain to support the production, storage, movement and use of hydrogen. The ambition of the AHC is to see the Australian industry become a global leader in aspects of the hydrogen supply chain through our universities, start-ups, and SMEs developing and commercialising innovative technologies.
However, this will all take time. Unlike the global LNG market, or the early solar industry – two often used examples of how new industries can develop over time – we need to create an entirely new market for clean and green hydrogen, with new forms of production, new ways to use hydrogen, and a new end-to-end supply chain that is supported with an appropriately resourced ecosystem. To compare, it took LNG and solar PV years to get to scale even though each produced energy that society could immediately use and value.
And while we build hydrogen capabilities, we must also enable the transition within the electricity system: we need to build out renewables capacity at an unprecedented rate for the sake of the electricity system, as well as for hydrogen, and in doing this costly exercise also bring prices down for renewable or green hydrogen to be competitive.
The complexity of the energy transition, and hydrogen’s role with it for decarbonise the hardest sectors to abate, can be overwhelming. We at the AHC have engaged with this complexity for some time and written about the many issues that need to be resolved. We have shared our writing through the Appendix to this submission and the various references. However, for the purpose of the 2025-26 Budget, there are three matters that are inhibiting hydrogen developments and must be addressed:
- Hydrogen demand signals are lacking
- Electricity prices are prohibitive
- Today’s high gas prices reduce future hydrogen users.
We discuss these matters below.
3.1 Hydrogen demand signals are lacking
IRENA has recently referred to the ‘green hydrogen deadlock’ where potential off-takers (consumers) and suppliers are unable to move forward without further information – such as about prices and commitments.[5] And potential suppliers are hesitant to build and deploy without firm offtake agreements. This seems an apt characterisation of much of the hydrogen conversation these days. First-of-a-kind projects are uncertain and risky, with a strong need for information for both supply and demand sides.
It is unhelpful that many places, including Australia, lack meaningful (economy-wide) carbon pricing. This is the key solution for a society that needs to transition and runs a market economy – price is the signal of value for all things. However, cost of living pressures make regulatory ‘sticks’ like broad carbon pricing unattractive politically.
To date, Australian Government support for the hydrogen industry has been in the form of project-specific grants and concessions, and has been weighted to the supply side. This appeared logical in the context of a pre-commercial – that is, pre-market – environment with a dynamic and flexible view on potential uses, but it was perhaps too optimistic given demand pressures are not present.
The proposed HPTI takes a different approach; while it is supply focussed, it is market wide. Now we need to pair this with market demand signals and infrastructure measures, and support early users to see their path forward in the meantime. The AHC’s proposals on these matters are outlined in section 4 of this paper.
3.2 Electricity prices are prohibitive
Electricity prices (hydrogen input costs) have also been a significant roadblock to progress. In 2019-2020 the common understanding was that electricity would need to be around AU$20MWh to get the cost of hydrogen production low enough to develop commercial renewable hydrogen projects. At the time, electricity prices were closer to AU$40MWh, with many assuming they would fall to the right level in the coming years.
However, with COVID affecting supply chains, the war in Ukraine affecting gas prices, and with pressure on renewables from coal generation plant retiring, we have seen electricity prices go the wrong way, with the gap to $20MWh now two to three times greater. And the inflationary pressures that affected renewable projects have similarly blown out construction costs for hydrogen projects.
We have not made electricity policy recommendations in this submission, because this is a well-known issue for Australia and we are not the lead association on this matter. We strongly endorse the ongoing programme to develop renewables and transmission infrastructure in Australia and the Australian Government’s steps to date.
3.3 Today’s high gas prices reduce future hydrogen users
Gas prices and access to gas are negatively affecting Australia’s heavy industry, threatening the viability of feedstock-reliant domestic manufacturers and are indirectly impeding Australia’s nascent hydrogen industry.
The experiences of ammonia producer Incitec Pivot must be viewed with some concern given that ammonia is the industry most favoured for nearer-term hydrogen domestic value and export growth potential. The company announced in November 2024 that it was selling its fertiliser business after it bore “big impairments” from “uncertainty about east coast gas prices”,[6] and it closed its facilities in Gibson Island[7] and Geelong.
In work for the CEFC in 2021, Advisian advised: “A large portion of Australia’s ammonia manufacturing capacity is beyond the initial design life of the facility and survives through judicious asset management and favourable domestic gas pricing”.[8]
From a pro-hydrogen economic competitiveness perspective, higher natural gas prices would usually be viewed favourably because this closes the competitive gap with hydrogen. However, by driving future hydrogen anchor industries away, very high gas prices will instead have strong chilling effects on Australia’s hydrogen prospects.
Further, steelmaker BlueScope has recently stated that in its shift from using coal in the ironmaking process the company “believes that the eventual end state will be DRI manufactured using green hydrogen” but its analysis indicates green hydrogen is not likely to be economically viable for some time. Instead, natural gas-based DRI will be an intermediate step. The good news is that even with natural gas, the emissions reduction potential of the DRI process is significant:
“BlueScope would be able to reduce its Scope 1 emissions intensity by up to 60% using natural gas and, assuming a green hydrogen pathway, 85% using green hydrogen (relative to FY23 levels). This would be equivalent to a reduction of more than 3.6Mtpa and 5.2Mtpa of CO2-e respectively.”[9]
However, accessing this gas at a competitive price is a problem. In October last year, BlueScope’s head of climate change was reported as saying that switching to DRI with natural gas would require 30 to 40 petajoules each year. She was reported as saying it was “hard to see where that volume of gas would come from without new east coast gas fields or the implementation of a domestic gas reservation policy by the federal government”. She also noted that “The other really important elements here are not just about volumes, it’s about pricing,” citing the Middle East and the United States where gas prices and energy prices “generally are very, very low”.[10]
Although we make the argument in Australia that future steelmakers will want to import iron from Australia because this will be cheaper for them than importing ore and processing it themselves, Australia may well be approaching the opposite situation – where we send ore overseas for others’ gas-driven DRI process – because our gas prices are too high. This seems an extraordinary situation given our gas production capacity and our plans to produce green iron here using the DRI process.
Finally, methanol is also a viable future market for hydrogen, but opportunities in this market have dwindled due to gas prices. Australia used to produce methanol at a site in Victoria, but the plant was “placed in care and maintenance mode” in March 2016 because of an inability to secure competitively priced natural gas at the time.[11] Methanol can also be used to produce ethylene and propylene, which in turn are processed into most plastics and synthetic polymers. This pathway has been in development in China for some time. Qenos, Australia’s major ethylene producer, might have used methanol to decarbonise in the future, but it went into administration this year, reportedly because of high natural gas prices.[12]
Again, the issue of the loss of industry is a much larger matter than hydrogen, but it is important to see the connection between these current gas users and achieving the goals of the Australian Government as set out in the FMIA package and revised National Hydrogen Strategy.
3.4 Conclusion
It appears that that the development of the hydrogen industry will happen in phases, over a longer period than initially expected, and with ongoing risk to be managed in new ways.
In the meantime, it is vital that we hold the line to keep our gas-dependent heavy industry afloat, and get the hard work done now so we are ready for scale later.
The energy transition is also about hybrid solutions, with pathways to ‘better’, so we do not let perfect get in the way of progress. The initiatives discussed in the next section support this approach, while working with and supporting existing government policy.
4 New initiatives to be supported through the next Budget
Clearly the 2024-25 Budget was supportive of hydrogen, and we welcomed the announcement of the AU$2/kgH2 HPTI, Hydrogen Headstart 2.0, and other associated initiatives. This has put Australia back in the running to attract international capital and build the industry.
The 2024 National Hydrogen Strategy (NHS) was also released in September 2024, where this was an important update to Australia’s ambition and priorities (see pages 266 to 35) in the Appendix for more information).
However, as discussed earlier in this submission, there is more to be done and significant detail yet to be fleshed out, and the annual Budget process provides an important opportunity to take the next steps.
The demand side of the cost gap must now be better addressed, and in line with the direction set to date on priority use cases. The infrastructure requirements to move and store hydrogen have also been a lower priority to date, which needs to be rectified.
4.1 The hydrogen demand side
At the time of the original NHS (in 2019) the hydrogen industry opportunity was seen as primarily about exporting hydrogen as an energy carrier. We have since seen a stronger focus on domestic use, whether for ultimate domestic purposes (such as high temperature industrial heating) or as a means to add value to export commodities (such as producing green iron from ore).
As noted by the Treasury:
It is in Australia’s interests to position adaptively for a range of hydrogen-adjacent opportunities besides hydrogen export – for example, using hydrogen as a feedstock in clean-energy embodied goods, such as green iron, as a practical way to embed hydrogen in energy-intensive goods. [13]
In line with this sentiment, the FMIA policy package proposes a new National Interest Framework for sectors to receive Australian Government support through its specialist investment groups, such as ARENA.
Five sectors have been stated to already fit within the framework: renewable hydrogen, critical minerals processing, green metals, low carbon liquid fuels, and clean energy manufacturing, including battery and solar panel supply chains.[14] Hydrogen plays a role in most of these sectors; obviously as renewable hydrogen itself, but also as a feedstock for green metals and low carbon liquid fuels. Clean energy manufacturing can also encompass the technology and equipment to make, store and use hydrogen.
The FMIA framing of priorities is then reinforced by Action 15 of the 2024 NHS, which is to “prioritise support for the development of Australian hydrogen for use in prospective export-facing industries, particularly green ammonia, iron and alumina”.[15]
Our recommendations below view further Budget support for hydrogen through this lens – we focus on the demand side of the emerging hydrogen market, and the already stated end use priorities for government policy on hydrogen. There are more policy and budget needs than this, but these are particularly relevant to the government achieving its stated ambitions.
Demand side measures are the missing pieces for the industry, and especially when we have not internalised the cost of carbon in the economy and fossil fuel prices remain the ones to beat. In the absence of an external force, such as a mandate to buy greener products, it is difficult for even the most climate-aware business to always choose a less known technology or more expensive product. Boards need to demonstrate their fiduciary duty to maximise profits has been met, within the law, and business decision-making is often risk averse.
It is therefore in the public interest for governments to depend less on soft ESG measures to see corporate change and to instead mandate the outcomes they want to see, or at least phased pathways to get there. Additional financial support can always be provided through policy measures to support businesses through the transition.
Market support
Using the priority areas of the FMIA and the NHS, the 2025-26 Budget should include measures for demand side market mechanisms for:
- Green metals, as discussed in a recent Australian Government consultation, and in more detail in page 44 of this document. In combination with HPTI, demand side support – such as public procurement of green metals, production incentives, and contracts for difference – will vastly improve the business case for decarbonising iron and alumina production. These are fundamental measures to pave the way for a new and lucrative export market for Australia.
Climate Energy Finance (CEF) recently undertook extensive analysis of the green iron and steel opportunity for Australia, recommending that, among other things, there should be a clear focus on demand-side policies and incentives including the fundamental measures above.[16] CEF also proposes a new Trilateral Clean Commodities Trading Company (Australia, South Korea and Japan), as well as an Australasian Green Iron Corporation JV between Australia and key trade partners. We note that implementing these initiatives would require the Australian Government to be far more proactive than it has been to date, and we strongly agree that these measures are worth pursuing. - Ammonia, which could cover all uses of ammonia, or only some uses. For example, we note that IEEFA has suggested that mining companies could shift to green explosives (which are made with ammonia) with the right incentives.[17] With miners consuming about half of Australia’s ammonia through explosives, they could be a driver for cleaner ammonia (and hydrogen as the input to ammonia), at minimal incremental cost: IEEFA found that a switch to 20 per cent green ammonia by 2025 would increase mining operating costs by less than 0.1 per cent, and a full switch to 100 per cent green ammonia would increase mining operating costs by up to 0.4 per cent.
This change is likely to require a government mandate, and we support further Australian Government consideration of the possibility, noting it would have little to no effect on the 2025-26 Budget. - Low carbon liquid fuels, also as discussed in recent Australian Government consultation, and in more detail on page 411 of this document. The government focus to date has been on renewable diesel and sustainable aviation fuel (SAF), with biogenic feedstock the clear preference. We are concerned that multiple transport modes have counted the same biogenic feedstock as being available and recommend more comprehensive planning to avoid unwelcome surprises. It seems likely that e-SAF will be required in the future.
In our view, the best approach for aviation would be mandates for future long-term use of SAF (such as in the EU), and incentives to help producers and users close the commercial gap. Incentives are best targeted where first-of-a-kind projects carry higher risk and cost, and can reduce as technology advances and efficiency improvements are made.
A mandate will need a grace period to enable capability so that Australian producers are not disadvantaged while industry scales up; we note that even using biogenic feedstock for SAF at scale requires new refineries to be developed. In the meantime, the Australian Government should work closely with international standard-setting entities to develop and expedite international standards.
We also recommend further exploration of government procurement policy targets to stimulate more local SAF production. Given its consumption of aviation fuels, the Australian Department of Defence would seem an obvious lead, as well as government travel.
Recommendation 1: Policy to kickstart key markets
Consistent with its FMIA and NHS agenda, the Australian Government should prioritise and fund the following demand side policies for the 2025-26 Budget:
- Contracts for difference or production tax credits for future green metals supply and use, leading from DISR’s recent consultation.
- Public procurement of green metals; at least an initial assessment of options and mapping major opportunities against timelines for construction, facility development, and procurement.
- A mandate for low to zero carbon ammonia for miners to use in explosives (budget impacts here will be minimal because it will be borne by miners).
- A mandate or demand mechanism for low carbon liquid fuels, especially SAF (including blends), that is tailored to Australia’s market and national security interests.
Direct support
Prior to the announcement of the HPTI, all hydrogen related government funding has been via grants or loans provided directly to project proponents.
This model of direct support will continue to play a vital role, and we note that the 2024-25 Budget provides significant funding to ARENA to continue its grants programme. Further, the FMIA states the priorities for Australian Government spending, which we assume will impact ARENA’s business-as-usual grants programme as well as more specialised initiatives.
The existing guidance may suffice in other sectors, but we recommend more support for early adopters of hydrogen. Beyond price, the barriers faced by parties seeking to integrate hydrogen into their operations include the significant cost required to convert assets, and the uncertainty about the total asset life costs of doing so given lack of current experience. With hydrogen industry development still in a nascent stage, end users are understandably cautious and need support to develop business cases for change and manage financial and/or technology risks.
The NHS was essentially silent on how existing businesses might take steps to use hydrogen to decarbonise, which we believe could be rectified through the 2025-26 Budget. These industrial purposes may coincide or be bolstered with transport use cases or broader precinct needs.
Given the issue with high domestic gas prices driving away the very industries the FMIA seeks to enable, there is an urgent need for government response. We note that this is better managed via market reform as a whole, so that natural gas prices are lower for everyone, but in the absence of this the Australian Government needs to provide reasonable direct support to affected facilities. This could commence with an assessment of key Safeguard assets that overlap with FMIA and NHS criteria and are at risk, and this analysis would have significant analysis in common with the recent carbon leakage review.
Recommendation 2: Direct support for cornerstone industrial use and early adopters
To encourage domestic decarbonisation and support existing industry, in 2025-26 the Australian Government should:
- Assess the age and decarbonisation options for key Safeguard assets that overlap with FMIA and NHS criteria, and fund natural gas cost support mechanisms as required (or effect other gas industry policy) to keep manufacturing in the country.
- Target and fund direct government support packages for early adopters of hydrogen for industrial purposes who cannot reasonably access other support. This could be delivered via ARENA or another government funding and investment body.
4.2 Common user hydrogen infrastructure
Government support is required for financing and constructing common user infrastructure, such as ports and pipelines. This need is significant; for example, last year the US stated that even after its production tax credit has been accounted for, US$85-$215 billion in cumulative investment is required to scale the domestic hydrogen economy through to 2030 (10 MMT pa), with as much as half of this funding required to develop the midstream or end-use infrastructure.[18]
The NHS has a clear infrastructure focus, with future work for the National Hydrogen Infrastructure Assessment featuring prominently. We also welcome the recognition in the NHS of hydrogen hubs and their integration into industrial precincts (Action 4).
Ports, corridors and bunkering opportunities
Action 19 of the NHS commits governments to “Consider the readiness and prospects of ports to store and export hydrogen, import renewable energy components, and to provide safe marine refuelling using low-carbon liquid fuels such as hydrogen, ammonia and methanol”. Each element of this rather crowded action item is important and requires further work, but a more immediate step would be to consider Australia’s appetite and capacity for bunkering future fuels; that is, providing refuelling for ships.
There is a global push to decarbonise the maritime sector, with the EU agreeing a mandate of at least 1 per cent of green hydrogen-based fuels in shipping by 2031. Methanol is technically a low carbon liquid fuel when made with low carbon inputs, such as clean and green hydrogen.It is the more advanced alternative to bunker fuel for shipping, with the other option being ammonia. Obviously, hydrogen is the key feedstock for both pathways.
The Australian Government has begun to explore green shipping corridors with some of our trading partners, most notably Singapore[19] and New Zealand, but also with the Netherlands and Port of Rotterdam. To date, these agreements have largely focused on the trade and movement of molecules or in the management of shipping traffic.
The establishment of shipping corridors for green products has not been as developed in Australia. While Australia is not a major hub or bunker port for our region given the size of our markets, there may be future opportunities for bunkering where these can be combined with regular and stable offtake, such as iron ore transportation (and ultimately iron ore processing and iron transportation). Green corridors, operating alongside other policies such as domestic production incentives for hydrogen and metals, carbon border adjustment mechanism and demand incentives, would act to establish a robust domestic hydrogen production industry that can supply the feedstock required for metals processing.
Examples of corridors and green products include:
- aluminium from Gladstone to the markets in North Asia
- zinc from Townsville to the markets in North Asia
- iron or steel from Port Kembla to the markets in North Asia
- methanol from Bell Bay to Singapore
- iron from Port Bonython to the markets in North Asia
- iron from Geraldton to the markets in North Asia.
One example of a green shipping corridor that explores the feasibility of both molecules and products is the work of the Chilean Green Corridors Network.[20] The Maersk Mc-Kinney Moller Centre for Zero Carbon Shipping is leading the work across a number of phases, in collaboration with the Chilean Ministries of Energy, Transportation & Foreign Affairs.
The first phase of the project considered map routes, vessel types, fuels, operators and cargo owners to determine potential domestic and international green corridors. Half of the corridors are related to shipping activities in Chile whereas the other half is related to activities internationally.
We recommend the Australian Government assess Australian bunkering options and shipping corridors, to then prioritise funding for port and related common user infrastructure developments that can layer with other funding, such as for hubs, Hydrogen Headstart, and likely future HPTI recipients. The Chilean Green Corridors Network is a good template for consideration.
Road transport refuelling
NHS Action 17 is for governments to “Support the targeted use of hydrogen for transport, either through direct use in hydrogen fuel cell vehicles or as a low-carbon feedstock for the production of low carbon liquid fuels, alongside support for other pathways like electrification and alternative fuels”. Similar to the port action, this is a crowded action that is reasonable but needs some unpacking. This need is reinforced when we look at Action 6, which is that the Australian Government “will work with the states and territories and other experts to improve understanding of future hydrogen transport needs to inform the next iteration of the National Hydrogen Infrastructure Assessment”.
There is a hydrogen road transport project with funding: the Hydrogen Highways initiative, which has been delayed, apparently indefinitely. We note that the 2024-25 federal budget allocated $75 million over four years to the Hydrogen Highways initiative;[21] however, the original application results were expected in early 2023, and the industry has no greater clarity on the proposed process. As discussed in the Appendix, we have argued for the need for pilots and trials of vehicles on Australian roads to be able to inform freight and logistics firms’ assessments of total cost of ownership, or TCO. The Hydrogen Highways project was supposed to provide this information.
We would like to see the project progress, and we seek clarity on next steps. If this needs more funding, then this is a better option than keeping the existing funding in limbo. We would welcome further engagement on options for progressing this matter, including any revision of the criteria.
If this project is to not go ahead at all, we ask that the money remains allocated to hydrogen refuelling station support in another form. This may be for more remote, precinct-based or logistics hub-based activities, or back-to-base operations. As with the port recommendation, this support could be layered with other funding, such as for hubs, Hydrogen Headstart, and likely future HPTI recipients.
Recommendation 3: Funding support for key infrastructure
To lay the groundwork for hydrogen in future road transport and shipping, the Australian Government should:
- Fund an assessment of key shipping corridors and Australian bunkering options for ammonia and methanol for 2025-26, and earmark longer term funds to support prospective common user infrastructure based on the assessment.
- Revise and progress the Hydrogen Highways initiative or reallocate funds to refuelling for other heavy transport applications for 2025-26.
Ideally, funding provided could be layered with other funding, such as for hubs, Hydrogen Headstart, and likely future HPTI recipients.
You can download the full PDF and Appendix here.
[1] IRENA (2024) Green hydrogen strategy: A guide to design, International Renewable Energy Agency, Abu Dhabi, see https://www.irena.org/Publications/2024/Jul/Green-hydrogen-strategy-A-guide-to-design.
[2] AHC (2023) A fit-for-purpose refreshed NHS: next steps for building Australia’s hydrogen industry, August, https://h2council.com.au/ahc-publications/.
[3] Calculated based on data found in Table H and Table R of Department of Climate Change, Energy, the Environment and Water (2024) Australian Energy Update, Australian Government, August, https://www.energy.gov.au/publications/australian-energy-update-2024.
[4] Harvard Growth Lab (n.d.) Atlas of Economic Complexity, 2021 data (current), Harvard Kennedy School, see https://atlas.cid.harvard.edu/countries/14.
[5] IRENA (2004) Green hydrogen strategy: A guide to design, International Renewable Energy Agency, Abu Dhabi, see https://www.irena.org/Publications/2024/Jul/Green-hydrogen-strategy-A-guide-to-design.
[6] Evans, E. (2024) ‘Incitec Pivot unwinds fertiliser business as write-offs spike to $1b’, Australian Financial Review, 11 November, see https://www.afr.com/companies/manufacturing/incitec-pivot-unwinds-fertiliser-business-as-write-offs-spike-to-1b-20241111-p5kphl.
[7] This was closed in 2022 but hydrogen proponents had hoped to establish Gibson Island as a hydrogen opportunity, with government support.
[8] Advisian (2021), page 77.
[9] BlueScope (2024) Submission re. Federal Government’s Electricity and Energy Sector Plan Discussion Paper, 26 April, see https://consult.dcceew.gov.au/electricity-and-energy-sector-plan-discussion-paper/new-survey-7563fd36/view/74.
[10] Mizern, R. (2024) ‘Bank ban on gas at odds with net zero transition: energy CEOs’, Australian Financial Review, 21 October, seehttps://www.afr.com/politics/federal/why-more-cheaper-gas-is-crucial-to-bluescope-s-greener-future-20241021-p5kjvi.
[11] Coogee (n.d.) ‘Manufacturing and supply’, business website accessed November 2024, https://www.coogee.com.au/capabilities/manufacturing-supply/.
[12] Potter, B. (2024) ‘Gas costs could sink more manufacturers after Qenos: AIG’, Australian Financial Review, 18 April , https://www.afr.com/policy/energy-and-climate/gas-costs-could-sink-more-manufacturers-after-qenos-aig-20240418-p5fl03.
[13] Treasury (2024) Future Made in Australia National Interest Framework: Supporting paper, 14 May, see https://treasury.gov.au/sites/default/files/2024-05/p2024-526942-fmia-nif.pdf, page 16.
[14] Ibid.
[15] Department of Climate Change, Energy, the Environment and Water (2024) National Hydrogen Strategy 2024, Australian Government, September, see https://www.dcceew.gov.au/sites/default/files/documents/national-hydrogen-strategy-2024.pdf, page 62.
[16] Pollard and Buckley (2024) Green Metal Statecraft: Forging Australia’s Green Iron Industry, Climate Energy Finance, 15 November, see https://climateenergyfinance.org/wp-content/uploads/2024/11/CEF_Green-Metal-Statecraft_FINAL.pdf.
[17] Butler and Denis-Ryan (2024) How mining could ignite Australia’s green hydrogen boom: The financial case for shifting to green explosives, Institute for Energy Economics and Financial Analysis, February, see https://ieefa.org/sites/default/files/2024-02/How%20mining%20could%20ignite%20Australia%27s%20green%20hydrogen%20boom_Feb24_0.pdf.
[18] US Department of Energy (2023) Pathways to Commercial Liftoff: Clean Hydrogen, March, page 42, see https://liftoff.energy.gov/wp-content/uploads/2023/05/20230523-Pathways-to-Commercial-Liftoff-Clean-Hydrogen.pdf.
[19] Singapore and Australia have signed a Memorandum of Understanding (MoU) to formally collaborate on establishing the Singapore-Australia Green and Digital Shipping Corridor (GDSC). See https://www.dfat.gov.au/trade-and-investment/singapore-and-australia-green-and-digital-shipping-corridor. Further, under Australia-Singapore Initiative on Low Emissions Technologies (ASLET), both Singapore and Australia will commit up to $10 million each in their respective currencies to deliver projects under the initiative.
[20] Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (2022) Chilean Green Corridors Network Project, 29 August, https://www.zerocarbonshipping.com/projects/chilean-green-corridors-network-project-2/.
[21] Treasury (2024) Budget 2024-25, Federal financial relations: budget paper no. 3, Australian Government, 14 May, see https://budget.gov.au/content/bp3/download/bp3_2024-25.pdf.