Killing Queensland hydrogen project is a spectacular own goal by LNP at the worst possible time

The destructive credentials of conservative governments in Australia have been newly reinforced by Monday’s announcement that Queensland’s “Newman-redux” Crisafulli government has cancelled funding for state-owned Stanwell Corporation’s CQ-H2 green hydrogen project at Gladstone.

Australia has been sliding inexorably towards ideocratic energy policy since September 2013, when Tony Abbott’s ruthless dethroning of Malcolm Turnbull as federal liberal leader delivered repeal of Australia’s carefully calibrated carbon pollution pricing scheme.  

That victory of brute over brain has ultimately led us to Peter Dutton’s nuclear nonsense, further illustration of the destruction conservatives are willing to wreak on Australia’s international energy reputation, for perceived political gain.   

The Crisafulli government’s decision to cut off CQ-H2 project funding, and its timing, demonstrate that this destructive virus has also infected the Sunshine State. 

Queensland’s largest energy exports are gas and thermal coal. Gas is growing, thermal coal contracting, in line with global market trends, in permanent structural decline.

Queensland’s largest energy customer is Japan. Twin competing imperatives govern Japan’s energy policies: energy security and decarbonisation.  This dilemma worsened following the Great Tohoku earthquake and Fukushima nuclear accident in 2011, as Japan was forced to fall back on coal and gas generation.

Nursing crippled nuclear capacity, with limited renewable generation capacity in its own territory, Japan has limited options to improve long-term energy security and achieve real carbon intensity reduction simultaneously.  

For over 20 years, Japanese government and industry have invested in hydrogen supply chain development as a key plank of the solution. Tens of billions of dollars have been invested in hydrogen R&D and technology commercialisation, especially in technologies for bulk shipping of hydrogen from efficient upstream supply points, like Queensland, to energy-intensive markets in Kawasaki, Yokohama, Osaka and Kyushu.

What has been missing from Japan’s policy mosaic has been concrete, market-based financial support for hydrogen supply and use. 

A major step was taken to close that gap in November 2024, with the implementation of a new two-pronged hydrogen support scheme, offering 15-year contracts-for-difference for hydrogen suppliers, and subsidies for industrial hydrogen consumers.

Critically for Queensland hydrogen development, these Japanese market supports can be partnered with the federal government’s Hydrogen Production Tax credit, significantly reducing the cost gap between fossil-derived hydrogen and green, zero-carbon hydrogen for delivery in Japan.

Alongside the November 2024 financial support measures, Japan released the most recent update of its Strategic Energy Plan in December.

Building on six previous three-year energy plans, the 7th Strategic Energy Plan recognises the limitations of nuclear, coal and gas-fired power in Japan, and formalises hydrogen as a key low-carbon energy source.  

Japanese heavyweights Iwatani Corporation and Marubeni, major investors in CQ-H2 alongside Singapore’s Keppel and Australia’s Incitec Pivot, must have been surprised to say the least when the Crisafulli government stuck its thumbs in their eyes, and pulled the rug out from under Stanwell. 

Why a parochial, pro-economy, pro-jobs LNP government would do this is a real head-scratcher.  

It’s certainly not needed to protect Queensland’s gas industry. That outcome was delivered via the Commonwealth’s Future Gas Strategy, which locks in gas exploration and development for Australia’s energy future to 2050 and beyond.   

Coal protection then? Long-term decline is already underway, with Queensland’s coal exports down $11.5 billion, or 16.7%, in the year to July 2024.  

But green ammonia – a key derivative of green hydrogen and the medium Stanwell’s project plans for transport of Queensland hydrogen to Japan – actually support coal exports to Japan, because it is to be used in co-firing with thermal coal to reduce emissions from ongoing coal generation.  

The extraordinary success of CSG and LNG development in Queensland provides the proof that the state can deliver an entire, new, globally significant energy export industry in little more than 10 years.  

With its gas industry secure, but coal declining, surely Queensland would be keen to replicate LNG’s success and develop a complementary, low-carbon energy export industry – one that its largest energy customers want, are investing in, and have locked into their long-term strategies.    

Instead, the LNP has bluntly illustrated to Japanese investors that they cannot rely on Queensland if they want green energy.   

To borrow from Henry Ford, Japan can have any colour energy it wants, as long as it’s black.  

Students of Japanese economics and energy understand that this is the most critical stage in Japan’s search for partners to build large-scale hydrogen supply chains.  The two-part hydrogen support system implemented in October is the rubber finally hitting the road; the first market-based incentives implemented to support industrial upscaling of Japan’s hydrogen supply chains.

At the worst possible time, Queensland’s LNP has chosen tantrum over trade, politics over partnership, ideology over economic sense.

One can only imagine the scrambling underway in Queensland’s Trade Commissions in Tokyo and Osaka, back-peddling on 10 years’ hard work to market Queensland as the right choice for long-term upstream hydrogen supply chain investment.  

South Korea too, wrestling with geographic, energy and emissions challenges very similar to Japan’s, is developing hydrogen industry plans and seeking reliable, stable, long-term hydrogen supply partners.  

Korean investors in Queensland like Korea Zinc’s ARC Energy and Korea Electric Power Co will be taking careful note, and returning their wallets to their pockets. 

For 12 long years since Abbott knee-capped Turnbull, energy culture wars have worn on. Conservative climate change denial, fed by lush pastures of mining and gas, grinds mercilessly backwards, impervious to the wealth of economic and environmental data pointing to Australia, of all nations, as one with more than most to gain from industrial scale clean energy.

The Crisafulli government’s decision to pull funding from the CG-H2 Project is a remarkable own goal, and like the Abbott CPRS repeal, will do regrettable, entirely avoidable, long-term self-harm.

Andrew Want is country manager of Solar Rig.