The future one of Australia’s most advanced renewable hydrogen production plants is under a cloud, after the Queensland LNP government nixed any further state funding for the $12.5 billion Central Queensland Hydrogen Project (CQ-H2) near Gladstone.
Queensland treasurer and energy minister David Janetzki earlier this week confirmed the LNP will not honour the previous government’s promise to match the $1.4 billion in federal funding for CQ-H2 – the state’s largest green hydrogen project, with plans to export to Japan and Singapore and supply large customers at home.
The huge project involves the development of a hydrogen production facility at Aldoga, a hydrogen gas pipeline to the Gladstone Port, a hydrogen liquefaction facility and ship loading facilities at the Gladstone Port, and the supply of hydrogen to an ammonia production facility also at Gladstone Port.
Stanwell’s website says a first stage of CQ-H2 is targeting a 720 MW electrolyser for hydrogen production of 200 tonnes a day, with future plans to expand electrolyser capacity to 2,880 MW, supporting production of 2,880 tonnes a day.
The initial phase has agreed to source power from Acciona Energía’s Aldoga Solar Farm, a 420 MW project that has been under construction since April last year, next door to the CQ-H2 production facility – regarded as the biggest solar farm, yet, to dedicate its entire output to green hydrogen production.
Source: Stanwell Corp
Janetzki said the “substantial equity and grant funding” required for the project, which is led by the state-owned energy giant Stanwell Corporation, did not align with the Crisafulli government’s focus on maximising value from Queensland’s existing generation assets.
“It would have required significantly more than $1bn in state government funding, including infrastructure for water, port, transmission and hydrogen production,” the minister said.
“We are focused on our energy generators providing affordable, reliable and sustainable power for Queenslanders.”
The decision, described on LinkedIn by one industry observer as “a surprise that everyone saw coming,” came within days of the Crisafulli government rushing through shock new wind farm planning laws that experts say could have a significant impact on renewables investment in the state.
Combined with the LNP government’s declared opposition to Queensland’s renewable energy targets, and the lack of any alternative plan for energy, the withdrawal of support for CQ-H2 fuels growing concerns that the state is now closed for business on renewables.
Certainly it is a blow to Gladstone, which has embarked on 10-year plan to shift its fossil fuel-based economy to renewable energy and green hydrogen production and export.
“Gladstone has all the right ingredients to secure a prosperous future in renewable hydrogen production and clean manufacturing, but the state government’s policy uncertainty is putting that at risk,” said the Queensland Conservation Council’s Stephanie Gray on Monday.
“New and existing industry are calling out for firmed renewable energy to underpin their operations. Rio Tinto has consistently said they need to repower their Gladstone aluminium operations with renewable energy backed by storage to be globally competitive.
“Companies are looking at producing green iron in Gladstone using renewable hydrogen. Those plans can’t feasibly proceed without a local supply of hydrogen.
“The state government’s continued attacks on renewable energy and clean industry are jeopardising regional jobs and derailing new industries setting up shop in Central Queensland.”
The withdrawal of state government support also delivers a major blow to CQ-H2 project’s international partners, Japan’s Iwatani and Marubeni Corporations and Singapore’s Keppel – although Gladstone mayor Matt Burnett has been quick to insist the project will “press ahead” using the $1.4 billion committed by federal Labor and “billions of dollars in international investment and private equity.”
“I am so pleased to see the Queensland government-owned corporation, Stanwell, is still a key player in the consortium as this, together with a significant federal investment gives the project’s [partners] … the confidence that the project has local, state and federal government support,” Burnett said on Monday.
“The consortium partners know Gladstone has the proven track record of delivering – we have provided energy to international markets for decades and that will continue well into the future.
“I met with Premier David Crisafulli on Friday (31 Jan) and I am meeting with the federal minister for energy Chris Bowen tomorrow with the clear message that this project is good for Gladstone, Queensland and Australia,” Burnett said.
So far, however, Stanwell has done little to reassure that it is on the same page as the Gladstone Mayor.
A statement published on Monday said only that the CQ-H2 consortium was “considering the state’s announcement,” and that Stanwell was “also reviewing its involvement in other hydrogen initiatives and will work with relevant stakeholders regarding future steps for these projects.”
A Stanwell spokesperson told Renew Economy on Wednesday that it had nothing to add to its initial statement.
For its part, federal Labor says it remains “firmly committed” to supporting Gladstone’s green transition, with $69.2 million in funding allocated to the hub, of which $14 million has been paid out.
“The threat to withdraw funding is surprising and disappointing given this project creates nearly 9,000 jobs and was expected to generate $8.9 billion for the local economy,” federal energy minister Chris Bowen said in a statement emailed to Renew Economy.
“Peter Dutton may want to cheer on job losses, but the Albanese government is firmly committed to seeing Gladstone’s economy grow and creating new jobs for the region.
“Green hydrogen plays to Australia’s unique strengths and we’re unapologetic about pursuing an industry that is recognised as having an important role in the future of manufacturing and energy in Australia, and globally.
“Government support in developing hydrogen opportunities around the country provides additional certainty for projects, however how they progress ultimately remains a commercial decision for the parties involved,” Bowen said.
Whatever the ultimate fate of the CQ-H2 project, it will be decided in a time of reckoning for global green hydrogen ambitions, including those of some of the biggest champions of the sector like Australian iron ore billionaire Andrew Forrest.
Forrest’s Fortescue announced in July last year that its ambitious green energy goal – to produce 15 million tonnes of renewable hydrogen annually by 2030 – was being placed on hold, with jobs across its mining and energy divisions to be slashed by 700.
But Forrest has also rejected claims that he has given up on his green hydrogen dreams, stressing that “we just have to work out now how to produce it cheaply enough.”
Cost – alongside the sheer scale of solar and wind projects needed to supply hydrogen electrolysers – remains a major hurdle, however, which explains why funding from governments at every level is crucial to future success.
Even deep-pocketed fossil fuel giants like BP have struggled to justify the spend, with the oil major late last year dumping 18 early stage hydrogen projects for a reported saving of $US200 million. Its new goal is to develop five to 10 hydrogen projects.
As for the fate of Acciona’s Aldoga solar farm – which is nearing completion – the company has not made any official comment, but it’s safe to assume that the PPA with Stanwell is on safe ground given the huge amount of industrial demand for green power the utility still needs to meet.
The bigger concern for the renewable energy industry is the gaping hole that will be left by the abandonment of stage two of CQ-H2, which has promised to drive investment in enough new solar and wind to support hydrogen production of 2,880 tonnes a day.
