Green light for green hydrogen investment

According to the national science agency, Australia has the green light to lead the hydrogen revolution - but there are some roadblocks to navigate along the way.

CSIRO’s draft GenCost 2024-25 report, released in December, identified hydrogen as an essential cornerstone of the country’s energy roadmap.

It found that renewable energy offers the lowest cost range for new-build electricity generation technologies for the seventh year running.

It has utility in ammonia production, as a chemical reductant and source of heat to reduce coal use in iron and steel plants, as a feedstock to produce methanol, and to firm electricity networks.

Renewable hydrogen burners could replace natural gas burners in heavy industry, and could replace fossil fuels in vehicles.

Complementing these findings, CSIRO’s Hydrogen Electrolyser Manufacturing report predicts that by 2050, Australia’s hydrogen electrolyser manufacturing sector could generate A$1.7 billion in revenue and create nearly 4,000 jobs.

Big year for renewable hydrogen

2025 is an important year for the industry, Australian Hydrogen Council (AHC) CEO Dr Fiona Simon told Energy Insights. The outcome of the federal election - to be held on or before 17 May 2025 - will play a big role in what happens next.

AHC represents roughly 100 organisations across the hydrogen supply chain, advocating for “green and clean hydrogen” and derivatives industries in Australia.

Two federal initiatives are particularly critical:

• The Hydrogen Production Tax Incentive will provide a $2 incentive per kilogram of renewable hydrogen produced for up to ten years.
• The $4 billion Hydrogen Headstart Program will support large-scale renewable hydrogen production projects.

“These government initiatives are part of the current government’s policy shift toward supporting Australia’s capabilities in hydrogen, green metals, critical minerals, and manufacturing,” Simon said.

A global race

Globally, the competition to scale hydrogen production is intensifying.

The US is targeting clean hydrogen production costs of US$1 per kilogram.

In Saudi Arabia, the NEOM Green Hydrogen Company is building the world's largest green hydrogen production facility. With a total investment value of US$8.4 billion, it’s scheduled to commence operations in 2026.

Back on home soil, Australian company Hysata has developed a 'capillary-fed electrolysis cell' achieving 98 per cent cell energy efficiency, surpassing the International Renewable Energy Agency's (IRENA) 2050 target. This brings costs down to A$2 per kilogram, but still remains above the US target.

A successful trial at BlueScope’s Port Kembla Steelworks demonstrated cost-effective renewable hydrogen production using less than 36 kWh per kilogram, a 30 per cent electricity reduction compared to conventional methods.

International collaborations are strengthening Australia’s position in the global market. In October 2024, Australia and the UK agreed to enhance renewable technologies, including green hydrogen, to achieve net zero by 2050.

Challenges and opportunities

Despite progress, the GenCost report highlights a mixed bag of challenges and opportunities.

In 2024, proton-exchange membrane electrolysers (the flexibility of which is more suitable for variable renewables) costs fell, while alkaline electrolyser costs rose but remained cheaper overall. By 2055, PEM costs are projected at A$816–A$1613/kW and alkaline at A$435–A$1138/kW. Subsidised global deployments are driving economies of scale and cost reductions.

However, the GenCost report identified some major roadblocks for the Aussie hydrogen industry: hydrogen production and utilisation is currently limited, and the cost has increased rapidly driven by increased freight and raw materials costs.

Hydrogen peaking plants currently face high costs, including 100 per cent hydrogen fuel. These costs are expected to fall over time, although hydrogen readiness incurs additional upfront costs, particularly in the gas sector. New gas turbines are designed to blend and eventually convert to full hydrogen use as supply improves.

In July 2024, Fortescue Future Industries announced a scale-back of its investment in green hydrogen, citing difficulties in achieving necessary cost reductions and recognising that industry scaling would take longer than anticipated.

Supply must quadruple to meet demand

Simon said there is still more to be done to support the industry.

Achieving net zero by 2050 would require hydrogen production to quadruple from 100 Mt to 450 Mt.

“When we look at the large-scale first mover projects in Australia, we expect demand to align closely with national hydrogen strategy priorities – such as green metals and ammonia – but while we will see projects progress this year, there is still a way to go,” Simon said.

“It works well when there is the right blend of government support, regional ambition and offtake opportunities, and the South Australian Government’s large scale hydrogen project is a good example of this.”

CSIRO’s director of energy Dr Dietmar Tourbier said the feedback received from the GenCost report will be essential to ensuring that data and projections are relevant and impactful.

“GenCost’s annual update delivers data-based forecasts that support informed decision-making across the energy sector,” said Tourbier.

“Australia is rapidly increasing renewable energy production, and researchers around the world are working to make electrolysers that are cheaper and more efficient, so that they need less electricity.

CSIRO hydrogen industry mission leader Dr Patrick Hartley said: “As global competition intensifies, the challenge now is for Australia to focus on the most prospective applications and effectively scale its hydrogen industry investments and policies.”