Why has Australia not yet met expectations for organic production?

Energy Minister Chris Bowen’s $1 billion 2022 commitment to convert the Morrison government’s Kurri Kurri gas-fired power station into a green hydrogen generator, known as the Hunter Power Project, does not include any timeline for the delivery of the clean fuel. The plant, owned by Commonwealth corporation Snowy Hydro, will now burn diesel when it begins operations in December, with plans to switch to gas once the pipeline is connected in February next year.

A Bowen spokesman said the tax incentives are a pay-on-delivery mechanism that encourages investors to develop manufacturing facilities in Australia, given the guarantee of financial support for production. The government will work with industry to improve its support, but said its tax credits program is intended to broaden rather than improve the range of technologies available to investors.

“The strategy identifies crude iron, alumina and ammonia as promising areas of interest, but the strategy does not seek to exclude other possible commercial applications or emerging markets for hydrogen,” the spokesman said.

Electric vehicle charger maker Tritium was visited by Albanese during the election campaign and again in March 2023. He touted it as a shining example of green manufacturing, but the factory was moved to the US to revive its fortunes and ultimately went bankrupt in April.

The South Australian Government has sought advice on the future of Liberty Steel’s Whyalla plant, which ceased operations last week. The company, which has received more than $100 million in state and federal grants, plans to replace its coal-fired blast furnace with an electric arc furnace to become carbon neutral by 2030. South Australian Premier Peter Malinauskus said Australian his government was developing proposals to overcome “the challenges currently facing the steelworks.”

The federal government’s May budget included almost $23 billion for the Future Made in Australia Fund, including $9 billion for green hydrogen and $1 billion for solar panel manufacturing, and $523 million for battery manufacturing.

Bloomberg New Energy Finance Australia head Leonard Quong said the same challenges facing the next wave of green hydrogen technologies and green manufacturing also face renewable energy.

Wind and solar power were once considered risky and expensive, but they are now the cheapest form of electricity generation and supply 40 per cent of Australia’s electricity grid.

“We saw this with renewable energy in the early days, where there was a lot of noise about what could be done, but costs rose very quickly and some of the initial hype evaporated. But now we see that they are absolutely transformative.”

Deputy program director for energy and climate change at the Grattan Institute, Alison Reeve, said green hydrogen production could overcome the hype cycle in the same way as renewables.

“Hydrogen has a lot of stupid uses,” said Reeve, who previously worked as a government official and helped write the federal government’s first national hydrogen strategy, published in 2019 by then-chief scientist Alan Finkel.

“What worries me about the tax credit is that we’re going to swallow a lot of that tax credit on using products to produce hydrogen that we already know are likely to turn out to be dead ends, and we haven’t put the effort into getting the hydrogen production to happen in the right places. “

Reeve and Quong said Australia had enormous natural advantages in building a globally competitive industry, with abundant supplies of wind and solar, as well as resources such as iron ore and alumina.

They said the government should focus on initiatives that could reduce the cost of hydrogen production and boost local industries to produce iron, refine alumina and produce ammonia, which is used in the production of fertilizers and explosives and is currently made from gas.