Australia’s renewable hydrogen sector is undergoing a brutal consolidation phase, marked by BP’s withdrawal from the 26-gigawatt Australian Renewable Energy Hub (AREH) project in July 2024 and Fortescue’s abandonment of three projects totaling 680 megawatts. These decisions come paradoxically as the Australian government has just unlocked 22.7 billion Australian dollars in its Future Made in Australia plan, including a tax incentive of 2 dollars per kilogram of hydrogen produced between 2027 and 2040. The gap between current production costs, ranging from 5 to 6 dollars per kilogram, and the profitability threshold set at 2 dollars, illustrates the sector’s persistent economic challenges.
InterContinental Energy takes the reins after BP’s departure
InterContinental Energy, now holding 26.39% of the AREH project, has confirmed the continuation of operations with CWP Global (10.04%) following BP’s withdrawal. The consortium maintains the goal of producing 1.6 million tonnes of hydrogen or 9 million tonnes of ammonia per year, targeting first green electron production by late 2027. Alexander Tancock, Chief Executive Officer of InterContinental Energy, emphasized that the project still benefits from major project status granted by the federal government in May 2024, guaranteeing priority administrative support.
The Western Green Energy Hub, another megaproject by InterContinental Energy and CWP Global, has even seen its capacity increased from 50 to 70 gigawatts, representing a potential investment of 100 billion Australian dollars. The project signed a collaboration agreement with Korea Electric Power Corporation (KEPCO) in September 2024 for the first phase feasibility study, with a final investment decision scheduled for 2029. The participation of Mirning Green Energy Limited, a wholly-owned subsidiary of the Mirning Traditional Lands Aboriginal Corporation, at 10% with a permanent seat on the board of directors, establishes a new partnership model with traditional land owners.
Fortescue abandons 150 million dollars in investments
Fortescue recorded a write-down of 150 million US dollars following the cancellation of its PEM50 projects in Gladstone (50 MW) and Arizona Hydrogen (80 MW). The company also permanently abandoned its 550-megawatt Gibson Island project in November 2024, after its partner Incitec Pivot announced the sale of the site. The company must repay 40 million Australian dollars in government subsidies granted for these developments. Mark Hutchinson, Chief Executive Officer of Fortescue Energy, nevertheless maintained the 2-gigawatt electrolyzer plant in Gladstone, operational since April 2024, positioning the company as an equipment manufacturer rather than hydrogen producer.
Fortescue’s strategy change reflects a broader sector trend. Woodside Energy canceled its 60-tonne-per-day H2OK project in Oklahoma in July 2024, citing cost escalation and lower-than-anticipated demand. These successive withdrawals occur in a context of political uncertainty in the United States, where the Trump administration has signaled a shift in priorities away from green energy, jeopardizing the 3 dollars per kilogram tax credits provided by the Inflation Reduction Act.
Government maintains objectives despite turbulence
The 2024 national hydrogen strategy maintains ambitious production targets of one million tonnes annually by 2030 and 15 million tonnes by 2050, with an export target of 200,000 tonnes per year from 2030. The Hydrogen Headstart program, endowed with 4 billion Australian dollars, shortlisted six projects representing 3.5 gigawatts of electrolyzer capacity in December 2023. The Australian Renewable Energy Agency (ARENA) also administers 1.7 billion Australian dollars via the Future Made in Australia Innovation Fund for deploying innovative technologies in priority sectors, including hydrogen derivatives such as low-carbon liquid fuels and green metals.
Seven regional hydrogen hubs receive more than 500 million Australian dollars in joint federal and state government investments. The Pilbara Hydrogen Hub, benefiting from 140 million Australian dollars, should be operational by mid-2028. The Port Bonython Hub in South Australia reached a major milestone in February 2024 with five companies signing development agreements to use the facility.
Employment and skills become the bottleneck
The sector should create 17,000 jobs and contribute 26 billion Australian dollars to gross domestic product by 2050 according to Commonwealth Scientific and Industrial Research Organisation (CSIRO) projections. However, PwC’s report on national hydrogen skills analysis identifies a critical shortage in all key occupations, from chemical engineers to specialized technicians. The analysis reveals that 33% of the workforce needed for the energy transition will need to be specifically trained for hydrogen by 2050, representing a major challenge for a sector already competing with other infrastructure projects for skilled workers.
Employment cycles show extreme variations, with fluctuations reaching 45,000 positions over two years in the hydrogen export economy scenario. This volatility complicates recruitment and talent retention, particularly in remote regions where most projects are located. Queensland has invested 10.6 million Australian dollars in a hydrogen and renewable energy training facility at Bohle TAFE in Townsville, while South Australia is developing its 2022-2032 hydrogen workforce strategy.
International competitiveness remains the major challenge
Comparative cost analysis reveals that green hydrogen requires an electricity price below 35 dollars per megawatt-hour to compete with blue hydrogen produced from natural gas with carbon capture and sequestration. In regions where natural gas remains below 15 euros per megawatt-hour, blue hydrogen retains a competitive advantage until at least 2040, provided CO2 capture rates exceed 90% and methane leakage remains below 1%. A carbon tax between 100 and 200 US dollars per tonne of CO2 would be necessary to make green hydrogen globally competitive according to recent sector studies.
Logistics costs add additional complexity. Liquefied hydrogen costs four to six times more to ship than liquefied natural gas, while conversion to ammonia for transport results in additional energy losses of 20 to 25% during synthesis, shipping, and cracking. Australia faces competition from massive projects in the Middle East, where Saudi Arabia and the United Arab Emirates are developing significant capacities with potentially lower production costs thanks to access to cheap natural gas and vast solar resources.
Australia nevertheless maintains the world’s largest pipeline of hydrogen projects with more than 100 initiatives representing 225 billion Australian dollars in potential investments, or 20% of all globally announced projects. The country signed a 660 million Australian dollar agreement with Germany for the H2Global program in September 2024, equally sharing costs to develop international supply chains. Sector analysts observe a necessary correction after excessive initial optimism, with remaining players like InterContinental Energy and CWP Global taking over viable projects while oil majors refocus on more modest initiatives aligned with their revised energy transition strategies.
