The federal government has established a new $300 million fund to invest in Australia’s emerging hydrogen industry, which it hopes will kick start jobs and exports from the sector.
The $300 million fund will provide finance, through direct investment and loans, to projects looking to grow Australia’s renewable hydrogen sector, including the development of new domestic supply chains, export infrastructure and investing in projects that help grow local demand for hydrogen.
The fund, to be named the Advancing Hydrogen Fund, will be administered by the Clean Energy Finance Corporation (CEFC), which will be issued a new investment mandate to direct the funds towards clean hydrogen projects.
“This new fund will be a catalyst for the future growth of Australia’s hydrogen industry, which has the potential to boost Australia’s energy security, while creating more new jobs across the country and becoming a major new export industry,” finance minister Mathias Cormann said.
“There are many innovative Australian organisations working to advance the hydrogen industry and this fund will support that work. Our government is very committed to backing technological advances in the hydrogen industry.”
The commitment follows the recent launch of a $70 million grant funding round for emerging hydrogen technologies to be run by the Australian Renewable Energy Agency (ARENA), with a focus on supporting the deployment of large-scale electrolysers which produce hydrogen using renewable electricity.
The new $300 million investment fund will likely be used to help provide finance support for projects also receiving ARENA funds.
The CEFC expects to provide either debt or equity finance to larger-scale projects, generally requiring at least $10 million in finance, combined with additional private sector funding.
“The Australian Government has a strong commitment to building a hydrogen industry which will create jobs, many in regional areas, and billions of dollars in economic growth between now and 2050,” federal energy minister Angus Taylor said.
“Our hydrogen industry has the ability to make a tremendous positive impact both at home and overseas. From cheaper energy bills and job creation in regional Australia, to playing a role in reducing global emissions both at home and in countries that buy Australian produced hydrogen, the industry’s potential cannot be ignored.”
Following the endorsement of the National Hydrogen Strategy, Taylor said that the government had adopted an “H2 under $2” target, that would allow hydrogen to become cost competitive with many alternative energy sources.
The combined $370 million in funding split between ARENA and the CEFC was announced at the time, with the government saying at the time that it recognised the need to support the hydrogen industry to grow and potentially establish a new multi-billion dollar export opportunity for Australia.
Taylor said that this target will become one of the formal goals set within the Technology Investment Roadmap being developed by the government, and which is expected to be released soon for public consultation.
There has, however, been speculation that the technology roadmap will also include measures to support the development of hydrogen production using coal and gas supplies combined with carbon capture and storage.
It is highly unlikely the $300m fund would be used to support such projects, as the legislation establishing the CEFC directly prohibits it from investing in carbon capture and storage technologies.
The CEFC will be issued with a new investment mandate from the government to facilitate the investments in hydrogen projects and will see the investment body draw the $300 million from its existing $10 billion allocation for clean investments.
“Hydrogen has the potential to make a substantial contribution to our clean energy transition, reducing emissions across the economy while underpinning the development of an important domestic and export industry,” CEFC CEO Ian Learmonth said.
“Renewable hydrogen can enable the deep decarbonisation of notoriously difficult-to-abate sectors, particularly in transport and manufacturing, while accelerating the contribution of renewable energy across the economy.”
The establishment of a new government investment fund for the hydrogen sector was a suggested action under the National Hydrogen Strategy developed by chief scientist Dr Alan Finkel, and subsequently adopted by the COAG Energy Council late last year.
A 2019 report from Deloitte forecast that a hydrogen industry could contribute as much as $26 billion to Australian GDP and support almost 17,000 new Australian jobs by 2050.
The CEFC hopes that by boosting the supply of hydrogen in Australia, it also provides an opportunity for the zero-emissions fuel to be used to help cut emissions in a range of industrial sectors were success has so far been elusive.
“We see green hydrogen as offering the most credible pathway to decarbonisation for high emitting sectors and those which lack scalable electrification options. Together, these sectors are responsible for driving some 30 per cent of Australia’s greenhouse gas emissions,” Learmonth added.
A recent analysis commissioned by ARENA, found that while global demand for renewable hydrogen is expected to be considerable, the current local demand remains low. It was recommended that support be provided to projects that would help grow the usage of renewable hydrogen within Australia, suggesting that it may be used in the production of ammonia based fertilisers as an interim step.
The report also found that the key to achieving significant cost reductions in the production of renewable hydrogen was the integration of production facilities with on-site renewable supplies, such as wind and solar. Such an arrangement can deliver renewable hydrogen at half the cost compared to the use of grid sourced electricity.
Both Japan and South Korea have invested heavily in hydrogen technologies, including hydrogen vehicles. The 2020 Tokyo Olympics was set to serve as a showcase for a range of hydrogen technologies before being postponed due to the outbreak of Covid-19.
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