Australia is back in the global race for green hydrogen with game-changing production credit

Politics was once famously described as the “art of the possible, the attainable or the next best”. It’s a field of constant and enormous compromise. 

But not today, in terms of hydrogen support, the clean energy sector has received exactly what we advocated for.

Over a year ago when the Inflation Reduction Act was signed into law in the United States, the Clean Energy Council recognised that there was an enormous changing of the landscape on industry policy and green hydrogen. 

Australia risked missing out unless there some dramatic steps taken by the Australian Government to respond to the IRA and a global move to incentivise green hydrogen production.

One year ago, the Government announced Hydrogen Headstart, which at the time was recognised as a major downpayment. It was a solid start and one that saw a wave of green hydrogen projects coming forward to apply for the $2 billion support package, which has since been shortlisted to six projects across Australia. 

However, it became apparent that a lot more was needed to support domestic production of green hydrogen on our shores and leverage our true competitive advantage.

In early 2023, a Deloitte report and the CEC spoke about the need for further upfront capital support, but also a production incentive. Specifically, a $2 per kilogram production incentive was going to be needed to fully realise this opportunity before us.

Last night, the Albanese Government well and truly delivered, with both an additional $2 billion for Hydrogen Headstart and an innovative, ground-breaking production tax scheme that will fundamentally place Australia back in the highly competitive global race for green hydrogen and its derivative products, including green metals.

It is clear that Government has listened, engaged meaningfully with industry and closely observed global trends and developments, not least with regard to the IRA. 

I and my colleague, Clean Energy Council Policy Director of Decarbonisation, Anna Freeman, have also recently returned from the US, having had the opportunity to observe first-hand how the IRA is having a major impact and raising the stakes in a more competitive global clean energy transformation.

It is clear that this announcement is a game changer and a major new opportunity in front of Australia.

Green hydrogen production on our shores means creating tens of thousands of new jobs, many of these in rural areas and often near traditional heavy industry and fossil fuel-based regions in transition across Australia.

If we truly capitalise on this opportunity and get it right, the benefits of a strong domestic green hydrogen sector will flow on to many other industries of vital importance to our nation.

This includes a timely decarbonisation of our manufacturing and heavy industrial sectors to replace more costly gas and fossil fuels, maintain our competitive edge against the rest of the world and set ourselves up to succeed for decades to come.

Expanded support for green hydrogen complements historic commitments for renewable energy and critical minerals in this Budget, which delivers on so much of what has been advocated for by our industry over many years.

It is clear that Budget 2024-25 has fundamentally changed the rules of the game and set Australia up for future economic success and environmental prosperity in the 21^st Century. We look forward to working closely with Government in travelling the journey ahead.

Kane Thornton is the chief executive officer of the Clean Energy Council.