Australia’s biggest electricity utility Origin Energy has pulled out of plans to develop a giga-scale renewable hydrogen production plant on Koorangang Island in New South Wales, that was to power the surrounding Hunter region industrial hub and wean it from fossil gas.
In a fresh blow to Australia’s green hydrogen ambitions, Origin said on Thursday that it was “unable to see a current pathway to take a final investment decision” on the Hunter Valley Hydrogen Hub (HVHH), which it is developing in collaboration with industrial major, Orica.
In a statement, Origin CEO Frank Calabria said the decision to exit the project – which has attracted both state and federal funding to the tune of $115 million – reflects uncertainty around the pace and timing of the renewable hydrogen market and the risks associated with such “capital-intensive” projects.
“We continue to believe hydrogen could play a role in the future energy mix,” Calabria said. “However, it has become clear that the hydrogen market is developing more slowly than anticipated, and there remain risks and both input cost and technology advancements to overcome.”
The news follows the July decision by Fortescue Metals to abandon the development of a green hydrogen and ammonia hub in the Northern Territory’s Middle Arm industrial hub near Darwin, and to put on hold out its Gibson Island green hydrogen and ammonia project, forcing Genex to find another customer for its solar project.
In August, gas giant Woodside pulled its Tasmania hydrogen project from the federal environment approval process, citing a lack of available renewables.
Calabria says that for Origin, the move away from green hydrogen aligns with its strategy to prioritise investments in solar, wind and battery storage.
“Ultimately, we believe investments focused on renewables and storage can best support the decarbonisation of energy supply and underpin energy security over the near-term,” he said.
Origin’s withdrawal from the Hunter project is a blow to co-developer Orica, whose Koorangang Island ammonia manufacturing plant is one of the state’s largest industrial users of gas – and was to be the green hydrogen hub’s primary customer.
But it also puts another dent in Australia’s renewable hydrogen ambitions, less than a month after federal Labor set out its new national strategy to produce at least 15 millions tonnes of the green fuel a year by 2050, and at least 0.5 million tonnes a year by 2030.
The 2024 National Hydrogen Strategy provides a framework to establish Australia as a world leader in the production and export of the green fuel, underpinned by the estimated $8 billion in funds allocated in this year’s federal budget.
“Industry called for long term production incentives. So we’ve put in place about $8 billion over the next decade for exactly that,” federal energy minister Chris Bowen said at the unveiling of the strategy.
“We expect this to unlock at least $50 billion in private investment. We anticipate it will help sustain 10 to 20 large projects – both export and for domestic manufacturing.
“And collectively this could support at least 5GW of electrolyser capacity by 2030, producing over 1 million tonnes of hydrogen annually.”
In a statement on Thursday, Bowen said Origin’s decision is disappointing for the workers and businesses developing Hunter hydrogen hub.
“Green hydrogen plays to Australia’s unique strengths and remains important to the future of manufacturing and industry both in the Hunter and other regions, as well as globally.
“The Albanese Government’s hydrogen incentives are estimated to unlock around $50 billion of private investment, with Australia’s announced pipeline for hydrogen already valued at over $200 billion from 100-plus projects, a quarter of which are already operating or under construction.”
He pointed out that Orica still intends to move forward with the project, and will be looking for a new partner.
For Origin, however, the promise of government support – alongside the funds already secured through the Clean Energy Finance Corporation and through the NSW government – has not been enough to keep it in the game.
Rather, in addition to its decision on the Hunter Valley Hub, the gentailer says it “intends to cease work on all hydrogen development opportunities.”
“Origin has been closely following the global development of hydrogen technology and markets over the past four years and we have evaluated a range of options across several jurisdictions,” Calabria said on Thursday.
“We acknowledge there will be some disappointment at this decision and are grateful for the opportunity to evaluate the feasibility of this project in conjunction with Orica, and with the support of both federal and state governments, local representatives and the community.”
In its own statement, Orica said it was grateful for the progress made with Origin on the HVHH and still wants to pursue the project, and is open to discussions with interested parties “who share our vision” for Australia’s hydrogen economy.
“We’ve been operating our Kooragang Island site for over 50 years and are committed to ensuring both our manufacturing facility and the Hunter Valley region remain competitive in a low carbon economy,” Orica managing director and CEO, Sanjeev Gandhi on Thursday.
“The support of both the federal and the NSW governments for the Hunter Valley Hydrogen Hub project should also be acknowledged and Orica looks forward to continuing the collaboration with ministers and responsible agencies on the transition of Orica’s Kooragang Island manufacturing facility and the Hunter Valley region.”
Origin entered into a joint development agreement with Orica in July 2023 to progress through front-end engineering and design, received NSW government planning approval and had been targeting a final investment decision.
The project was shortlisted under the Australian government’s Hydrogen Headstart program, having previously secured Commonwealth and New South Wales grant funding program commitments.
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