Green hydrogen: Why one-time darling of new energy still has work cut out

The opening months of 2025 have been rough for WA’s emerging hydrogen industry and there are two numbers that explain why the green fuel has struggled to get off the ground. Hydrogen hopes took a blow earlier this year when BP paused the Kwinana clean energy hub and were further deflated following the collapse of Infinite Green Energy in April. Yet it is a much smaller project in Jandakot which gives a clear indication as to how the industry measures up. Atco built a plant in 2022 to blend green hydrogen into the Perth gas network for about 3000 homes in a trial partly funded by the State Government. The company’s reporting shows the production cost at the time was about $24.56 per kilogram. But Australia’s target is to make hydrogen at $2/kg, which would make the fuel almost competitive. It is an enormous gap between those two numbers — roughly equivalent to producing a rack of BBQ pork ribs for the price of a litre of milk. There are plenty of businesses and politicians hoping to bridge the chasm as technology improves and scale grows. Refuelling stations and a move to green up fertiliser production in the Pilbara using hydrogen have moved ahead. Yet an export-size project has so far remained a distant prospect. Future Energy Exports Cooperative Research Centre chief executive Eric May said the production cost for hydrogen was coming down, but not as rapidly as many had hoped. Transport, storage and distribution costs were slower to drop, he said. Batteries, hydrogen’s key competitor, have fallen in cost much faster and are now dominant for electric passenger vehicles. Professor May — also the Chevron chair of gas process engineering at the University of Western Australia — said there had been a lot of ambition among entrepreneurs developing projects. But he pointed out the experience was similar across the resources sector. Many big iron or and gas developments touted in Western Australia’s mining boom of 2004 to 2014 never made it into construction. “There was a hype cycle, people understand that,” he said. “There’s still a material pipeline of projects. “Like all industry, actually (achieving) final investment decision is a big deal. It’s a pretty strict filter.” There are still multibillion-dollar proposals on the table as the world searches for ways to cut carbon emissions in manufacturing and power generation. The latest example was a consortium of big resources companies including Rio Tinto and BHP assessing hydrogen for a potential green iron plant near Kwinana. Professor May’s CRC is expected to pick a contractor for the first stage of a hydrogen and LNG research project in Kwinana this year. Money matters Industry has been optimistic about their ability to make it through the filter, including big names Woodside Energy and Fortescue. Almost 90 projects are registered on the CSIRO’s national hydrogen database. Andrew Forrest’s Fortescue was an early mover into hydrogen but has since taken its foot off the pedal. But the miner is producing green hydrogen to refuel buses at Christmas Creek in the Pilbara and still has ambitions for a local green iron industry. Woodside’s $1 billion-plus H2Perth development — using natural gas in stage one — was intended for construction in 2024. That was parked and the ASX-listed business instead started work on a small truck refueller at the site. The biggest problem has been finding buyers to sign long term deals for the fuel, which remains much more expensive than natural gas. Woodside would also be well-aware of the perils of acting as a first-mover in a very capital-intensive industry. The company inked Australia’s first LNG export deal to China in 2002. As the price of gas rose, that contract was soon underwater and years later Woodside boss Peter Coleman would dub the deal “the gift that keeps on taking”. It was an example of where being first — in that case opening a huge new market — is more of a burden than a booster. Forecasters have promised big reductions in the cost of electrolysers, which use electricity to turn water into green hydrogen. That gives developers reason to hold out before making the decision to build a project. At the smaller end of the scale, every month seems to bring new businesses jumping onto the scene promising a green power project or hydrogen development. These companies often lack the cash, the expertise and the standing to pursue large-scale builds. Unlike gas or a mineral resource, hydrogen production is not location-specific and the fuel can be created close to where it will be used. That means the competitive pressure will be intense, and Australia’s key trading partners may choose to develop the industry in their home countries instead of shipping fuel from DownUnder. Political power Environmental concerns have also weighed on aspirations. Intercontinental Energy’s $50b Australian Renewable Energy Hub in the Pilbara — now-backed by BP — hit a wall in 2021 when the Coalition Federal Government denied environmental approval amid concerns about wetlands. ICE has also come under fire for plans to build an even bigger development in the Nullarbor on a strip of land considered a potential World Heritage site. Politicians have backed hydrogen as an off-ramp in the climate wars that promises new industry, jobs and export earnings. Former Federal energy minister Angus Taylor set the $2/kg hydrogen target in 2020, then pledged at least $1.8b to fund the industry. The following year he said the Morrison Government had a “vision of making Australia a major global player in hydrogen production and exports by 2030”. More recently, the Coalition switched focus to nuclear. But his successor Chris Bowen has pumped in plenty more cash in the hopes of making the fledgling sector commercially viable. He chipped in $814m for Copenhagen Infrastructure Partners’s Murchison project in a pre-election splash, and promised up to $7b for the sector through production tax credits. Among the major criticisms of hydrogen is that energy is lost through production of the fuel — more power is required to produce hydrogen than what is released by the end-user. But energy loss is also an issue for other sources. About 10 per cent of feed gas is used to power liquefaction of LNG exports. The best coal power station will have energy efficiency of about 50 per cent. At the State level, Alannah MacTiernan was an early backer of hydrogen and, as minister, was on the front foot to attract investment into WA. Among her eye-catching proposals was a major green export hub near Geraldton at the long-awaited Oakajee port. That remains a long way off the horizon, more than two years after six companies were picked for land allocations. A State Government spokesman said a recent feasibility study showed Oakajee “remained well placed” to export hydrogen and ammonia to Europe. It would require using a loading mooring offshore, rather than a new port. He said the Mid West would be a good spot for large-scale power generation, with lots of land available.

Green hydrogen: Why one-time darling of new energy still has work cut out

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