A few years ago, green hydrogen was the talk of Gladstone.
A town built on coal was going to turn green, as the new zero-emissions fuel would become the backbone of its energy-hungry industry.
Chris Skerman, who runs a local civil construction and industrial maintenance firm, remembers the conversations.
“Very, very big projects were being discussed — billions and billions of dollars worth of construction in the area,” he said.
“It was pretty exciting.”
Some of the work did arrive, including Fortescue’s $150 million green hydrogen facility on the city’s outskirts that opened in April 2024.
Just over a year later, it is now sitting silent.
Fortescue has heavily scaled back its ambitions for the technology, while others have pulled out of hydrogen altogether.
Mr. Skerman said the hope — and hype — around hydrogen had left many around Gladstone dismayed.
“I don’t think too many people know what the future is for hydrogen at the moment,” he said.
Excitement around green hydrogen has faded in Gladstone, with an uncertain future facing business owners like Chris Skerman. (Adam Kennedy/ABC News)
A hard year for hydrogen
The news for advocates of Australian green hydrogen in the past year or so has been almost relentlessly bad.
The headline was the axing of a $14 billion project in Gladstone backed by the Queensland government-owned Stanwell Corporation.
Late last year, Origin Energy pulled out of a massive project in the Hunter and withdrew from hydrogen altogether, arguing the maths was not adding up.
Its partner in the Hunter project, explosives manufacturer Orica, is still pushing ahead — with the federal government committing more than $430 million for a scaled-back project near Newcastle.
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And Fortescue confirmed in July this year that it had dumped its Gladstone hydrogen project, along with another in Arizona.
The resources giant has been one of the technology’s biggest backers, with billionaire executive Andrew Forrest using a 2023 speech to label hydrogen’s doubters “muppets”.
Fortescue is not pulling out of hydrogen altogether, as it remains committed to using the technology to manufacture green iron at its Christmas Creek mine in the Pilbara.
The company’s metals and operations chief executive, Dino Otranto, said there were no regrets about the steps taken so far.
“I certainly don’t think that we’ve made judgement errors or huge mistakes in this space,” he said.
Resources company Fortescue insists it has not overcommitted on green hydrogen plans. (Adam Kennedy/ABC News)
“Any new energy will involve taking some risk on a number of different technologies. Some will pay off, and some won’t.
“That’s just the normal course of business. But just because it’s hard doesn’t mean that we shouldn’t do it.”
Fortescue was awarded more than $44 million in federal funding for its Gladstone plant, which it has said it intends to repay where it can.
High hopes meeting hard economics
The ‘renewable superpower’ idea for Australia is relatively simple.
Australia’s vast landscape provides enormous capacity to generate solar and wind energy, both of which have fallen sharply in price in recent decades.
That energy can be used to produce green hydrogen, which can then be used to make products like green iron and green ammonia for export across the globe.
On top of that, some sectors simply cannot be decarbonised without switching from gas to hydrogen.
Slow and steady wins the race: experts are urging government and energy companies to be realistic about how quickly a green hydrogen industry can flourish. (Adam Kennedy/ABC News)
Governments have put serious money on the table to help make hydrogen a reality.
The former Morrison government was the first to invest hundreds of millions of dollars in ‘hydrogen hubs’ around the country.
But the Albanese government has really stepped up the pace.
So far, $4 billion in taxpayer support has been earmarked for the sector, primarily available as ‘production credits’ — paid for each kilogram of hydrogen produced.
But energy analyst with MST Financial, Saul Kavonic, said there was little to show for it.
“All those hopes that we would see this big green hydrogen economy have pretty much come to nothing,” he said.
He said the key challenge yet to be overcome is simple — it is too costly.
“Ultimately, what it comes down to is green hydrogen is very expensive to produce,” he said.
“It starts with electricity, usually solar or wind, and then it creates hydrogen from that, which can then be used as a fuel which is completely green.
“The problem is the cost of this fuel is, at the moment, 300 to 700 per cent higher than, for example, a similar competing source of energy, which is gas.
“In order for green hydrogen to ever get competitive, we need to see significant cost reductions, not just in electrolyser equipment, but actually in the source of energy as well.”
The federal government insists green hydrogen has a future in Australia. (Adam Kennedy/ABC News)
Bowen argues government role is more important than ever
Despite the hydrogen headwinds, the Albanese government is maintaining its faith in the green fuel.
Energy Minister Chris Bowen compared the technology to solar and batteries, arguing that both started out unfeasibly expensive, but have fallen sharply in price over time.
“Yes, it’s taking longer than I would like to become commercial. It’s taking longer than some people predicted,” Mr Bowen said.
“But the work continues, and its opportunity and potential remains.
Energy Minister Chris Bowen looking over plans for a green hydrogen plant earlier this year. (ABC News: Ben Clifford)
“And in some ways, that makes it more important for governments to remain interested, not less important.”
The minister said the best argument for green hydrogen was that when it comes to decarbonising some sectors, there was simply no alternative.
“Things like cement making, and steel making, and fertiliser making, and plastics making,” he said.
“If you’re serious that that has to decarbonise, as basically anybody who’s serious about climate change is, then green hydrogen has to continue to be developed.
“When you think about decarbonising industry, show me what can replace natural gas around the world. And it’s only one thing — green hydrogen.”
Australia’s green hydrogen ambitions have not been constrained to Australia.
Germany has invested its own taxpayer funds in helping develop Australia’s hydrogen industry, and has joined with Australia to provide $660 million in backing to a global hydrogen auction — aimed at securing buyers for the industry.
That auction is planned to take place either late this year or early next year.
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Germany wants to use green hydrogen to decarbonise its massive energy-hungry industries, but has little capacity to produce the fuel domestically.
Germany’s ambassador to Australia, Beate Grzeski, said the country was still relying on Australia’s sector taking off.
“Germany remains committed to its decarbonisation goals and the importance of green hydrogen, especially for the industry. In the future, we will depend on hydrogen imports,” she said.
“Despite the withdrawal of projects, we still see a significant number of projects in the pipeline and the potential of Australia’s resources.
“This continues to make Australia one of Germany’s most important partners with regard to hydrogen.”
A smaller, less ambitious short-term
Many of those looking to the future for green hydrogen argue the best step is to limit ambition.
Energy program director at the Grattan Institute, Alison Reeve, helped shape Australia’s hydrogen strategy while working in the public service at the end of the past decade.
She said a lot has been learned about hydrogen in the past few years — including that the industry was going to have to start small, and build more slowly than many had hoped.
“A couple of years ago, a lot of the projects that were floating around were absolutely gigantic,” she said.
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“They would have required electricity infrastructure equivalent to the entire energy market that we have now. You would have had to build a second energy market to support them.
“We’re now in a phase where people are going, ‘actually, let’s just take the intermediate step’. Do the project that maybe replaces seven per cent of current hydrogen in an ammonia plant with green hydrogen.
“And it makes sense for us to do those intermediate projects. Actually take slow and steady steps, rather than trying to make this gigantic leap to projects the scale of which we would never have built in this country.”
Ms Reeve said the massive subsidies offered by the Albanese government were aimed at supporting a massive industry — and came partly due to an ‘arms race’ with the former Biden Administration in the US, which was offering much larger subsidies of its own.
She said it might be time for a rethink about how the industry was supported, moving away from tax credits that are only paid when companies make a profit, and being open to seeing projects fail.
“When you are dealing with an industry that is at a very early stage of its development, you should be worried if projects are not failing,” she said.
“That is actually kind of a necessary stage to go through for new industries.
“We should expect that there will be projects that fall over that have to pay back their grants to the government and that sort of thing.”
Chris Bowen said there was still life in the industry.
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“Reports of the death of green hydrogen are, in my view, exaggerated,” he said.
“I don’t discount the headwinds and the challenges, but nor do I discount the opportunities and the potential.”
For those pinning their hopes on the sector booming, there are still plenty of nerves.
The mayor of Gladstone (and former Labor candidate), Matt Burnett, said governments should have been open to developing a hydrogen industry with gas — so-called ‘blue hydrogen’ — before transitioning to renewable-fuelled green hydrogen.
“Some of these projects were probably scaling up too big, too fast,” he said.
“I’ve always supported all sorts of hydrogen, not just green hydrogen. Blue hydrogen was always a good option.”
Chris Skerman in Gladstone said the big money promised for green hydrogen investment was exactly the sort of thing his region needs.
“This is the industry town — we build those sorts of things all the time and run these plants quite regularly,” he said.
“So a lot of the area is built on the back of that sort of work. So our economy needs it.”