Green hydrogen hopes lift as “headstart” project reaches crucial financial milestone

Life has been breathed back into Australia’s green hydrogen dreams, with the first project funded under the federal government’s 2023 Hydrogen Headstart program revealing that it is ready to start being built this year. 

ASX-listed explosives and chemicals business Orica has reached final investment decision on its Hunter Valley Hydrogen Hub, a milestone amidst an industry that has so far been littered with disappointments. 

The project received $432 million in grant funding from the Australian Renewable Energy Agency (ARENA) in 2025.

Green hydrogen was one of the new federal Labor government’s big ideas in 2023, when it set up the $2 billion Hydrogen Headstart fund which offered a decade of production credits to bridge the gap between making green hydrogen and what the market is willing to pay.

But with only two projects funded, Orica’s in-house ammonia project and $812 million for Copenhagen Infrastructure Partners’ 1,500 megawatt (MW) Murchison project in Western Australia, the federal government cut the original budget in half.

Orica’s decision to get moving on its green hydrogen project at the Kooragang Island facility in Newcastle, however, means something has come out of the big ideas of 2023. 

The Hunter Valley Hydrogen Hub will use recycled water and renewable energy in a 50 MW electrolyser, to replace a small amount of gas feedstock used to make ammonia.

Construction is expected to start this year and first production in 2029 of what will ultimately be a 4,700 tonne-a-year facility. 

That is enough to make about 26,600 tonnes of low-carbon ammonia a year, and reduce fossil gas needs by 7.5 per cent. 

Orica estimates it will cost the company $245 million to $283 million to build, after factoring in government funding that also includes $70 million from the Commonwealth Hunter Hydrogen Hub and $45 million from the New South Wales Hydrogen Hub Initiative.

The news will be a relief for some in government after years of bad news around hydrogen.

Federal energy minister Chris Bowen said the Hydrogen Headstart program had always promised to turn projects into “real investment, real construction.”

“Orica is the first project to reach final investment decision under the program, showing Australia’s renewable hydrogen industry is moving from ambition to delivery,” Bowen said in a statement.

“This is good for jobs and investment in the Hunter, good for Australia’s energy security, and good for the farmers, miners and transport operators who depend on these products.” 

ARENA CEO Darren Miller said Orica’s decision shifts the conversation “from concept to deployment”. 

“This milestone is an important step in demonstrating industry commitment to renewable hydrogen, particularly as a pathway to decarbonise heavy industry and reduce emissions where alternatives are limited,” he said in a statement. 

“Hydrogen is a complex, capital-intensive industry, but it represents a significant economic and decarbonisation opportunity for Australia.

“This decision signals that renewable hydrogen production can be deployed at scale in Australia… particularly for hard‑to‑abate sectors where it can make the biggest impact.”

The other ARENA-funded project, the much larger Murchison, has updated its plans with the Environmental Protection Agency (EPA) this year, with a 3.2 gigawatt (GW) wind operation, a beefed up solar generator from 5.2 GW to 6.2 GW, and a now-2 million tonnes per annum hydrogen facility. 

Copenhagen Infrastructure Partners expects to reach final investment decision sometime in 2027, and start construction in 2028, according to the project website. 

Chastened expectations

Green hydrogen has suffered from over-hyped expectations around exports, and a misunderstanding of how long it takes to plan and then build these projects. 

Iron ore miner Fortescue has suffered what is probably the most famous of comedowns in the world of green hydrogen.

Founder Andrew Forrest boldly committed to a stretch target of producing 15 million tonnes of green hydrogen a year by 2030, promised to build out a large electrolyser factory in Queensland, and pressured Australian politicians to match benefits offered by the US.

The company has since cancelled all of those plans, including three green hydrogen sites in the US, and is in a fight with the Queensland government over paying back $80 million subsidies for the Gladstone electrolyser plant. 

Tasmania has also suffered a defeat, originally hoping its Green Hydrogen Hub would be up and running by 2028, but projects from Fortescue, Woodside and Origin all fizzled out.

It is, however, still limping forward with one state official calling it “the Steven Bradbury of hydrogen,” last year, in reference to the Australian speed ice skater who won a gold medal in the winter Olympics after all of his competitors crashed out on the final corner.

The last three years has seen a pivot from blue-sky export options to green industries at home, but there are still massive export projects underway in Australia. 

Intercontinental Energy continues to move ahead with the 70 GW wind, solar and hydrogen Western Green Energy Hub in the Nullabor, and the 26 GW 26 GW wind, solar and hydrogen Australian Renewable Energy Hub in the Pilbara.

In the Northern Territory, newcomer Energy North is scoping plans for a 4.7 million tonne a year green ammonia export facility out of Darwin.

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