“There is a political war” to attract renewable hydrogen investment – and Australia is losing

Australia is losing the “political war” to lead the world in green hydrogen, the head of bp Australia has warned, with capital flowing to countries that “do the best job” of de-risking the sort of ground-breaking – and hugely expensive – projects necessary to get the nascent industry off the ground.

Lucy Nation is the Australia country president and vice president of hydrogen, Australia and Asia Pacifc, of bp – the global oil giant that in February announced it would dramatically slash its spend on low carbon energy projects after going “too far, too fast” into nascent sectors like renewable hydrogen.

The major scale-back on renewables to focus on between just five and seven “prioritised projects” cast doubt over the progress of three bp-backed Western Australia hydrogen mega projects.

These include the massive $55 billion and 26 gigawatt Australian Renewable Energy Hub (AREH) near the Pilbara, seen by some as key to the decarbonisation of the north-west (although their partners are still hopeful of taking them forward).

“There is a political war on at the moment to really attract those very big industrial developments in those hubs,” Nation told the CEDA Climate and Energy Summit in Melbourne on Thursday.

“Where those hubs get set up now, I think will play out for decades to come, and Australia needs to realise that the capital won’t just necessarily come here.

“[bp was] assuming customers and governments would want [these projects] to go ahead, and we’ve had to slow down.

“It’s that pace, and it’s that collaboration, and it’s also understanding that capital is going to go to the countries that do the best job of de-risking these projects in a meaningful way. And those capital flows are really important.”

Nation says that there was a lot of capital flowing to renewable hydrogen projects in 2021 and 2022, including in Australia, with potentially big players like bp thinking that the industry – and the energy intensive tertiary industries that green hydrogen is expected to underpin – was really going to take off.

“But they don’t compete on their own,” she told the conference. “They will eventually, but they don’t today, and so therefore … [we need] innovative, stable policy that really de-risks the investment.

“Without customers, suppliers and governments working together to a common time-frame, these projects aren’t going to get built, and that’s why we’ve seen so many announcements in the press of companies going bankrupt because they can’t do the capital raising anymore, or projects being slowed right down,” Nation said.

“I’m particularly worried about it for Australia, with with some of what’s happening in terms of the tertiary industries, deal investment, reprocessing of critical minerals, etcetera.”

“Stay the course”

For the energy industry, the political status quo in Australia is on a knife-edge, with voters headed to the polls in less than two days to decide whether the Labor Albanese government is returned to power to continue the push to 82 per cent renewables by 2030, or whether the course changes entirely under the Coalition plan for nuclear, coal and gas.

Brett Wickham, the managing director of the Australian arm of Spanish renewables giant Acciona Energia, says the ongoing inability of Australia’s major political parties to find a common ground on energy policies continues to be one of the biggest challenges facing the industry.

“Stay the course, is what I would say,” Wickham told the conference. “I feel like, if we’re 20km into a marathon, the worst thing we can do is stop and then go back and … head off in a different direction.

“Just stay the course and politicians, get out our way,” Wickham said.

Wickham says that while solar and wind power are now the two cheapest forms of electricity generation, back when Acciona developed its first wind projects in Australia it relied on power purchase agreements underpinned by federal and state government policies.

The renewable hydrogen industry, he says, now needs to see the same level of support.

“The hydrogen party bus arrived four or five years ago, where there were so many projects wanting to get up. Everyone had a project, and the problem was, [while] everyone wanted to sell hydrogen, no one wanted to buy it. It was too expensive.

“What I would say … commenting on the role of government, is to pick a couple of projects and get them up and demonstrate that this will work, because I’m very confident that in 10 to 15 years time, we’re going to have a strong hydrogen industry. I’m just not quite sure what the pathway is to get there at the moment.

“And I think the government – instead of Hydrogen Head Start giving, you know, small amounts to lots of people – just pick a couple of projects. And I am not advocating what they are, because … I’m not in an industry.

“Pick them and get them built and demonstrated and get … the industry going that way, because the demand side is not going to drive the outcomes we want at this stage.”

Elizabeth Gaines, executive director and global green ambassador at iron ore giant and hydrogen hopeful Fortescue Metals says that – even if Labor is re-elected – there is much policy work to do to support heavy industrial sectors in the shift to zero emissions.

“Where we operate, we are in a very remote location, so those policies [like the Capacity Investment Scheme] don’t necessarily suit decarbonising the Pilbara.

“So that does present some challenges when it comes to investment and achieving [final investment decision] on a set of projects.

“But we are committed to decarbonising and, without a uniform price on carbon, I think we need policies to ensure that we have a positive return, because … we’re doing this for the right reasons, but we also have financial discipline, so we need to ensure that we can achieve our hurdle rates.

“At Fortescue, we’ve long called, regardless of who’s in government, for a more ambitious emissions reduction target to at least 75% by 2035 together with a legally binding carbon budget, and that priority is given to those projects that align with that budget,” Gaines told the conference.

“I agree that industry has a very important role to play, [but] we need to have the right mechanisms in place to support some of these emerging industries,” she said.

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