A few years ago, green hydrogen was hailed as Australia’s next great export industry. Many big projects have since been shelved. Here’s what green hydrogen is, and why it has proved so hard to make work.
Hydrogen is the most common element in the universe. When it’s burned or used in a fuel cell, it releases energy and produces only water.
Hydrogen is already widely used in industry, mainly to make ammonia for fertiliser and in oil refining. But most of it is made from natural gas or coal, which releases large amounts of carbon dioxide.
Colours of hydrogen
Hydrogen is often described by colours, depending on how it’s made.
Grey hydrogen is made from natural gas without capturing the emissions. Blue hydrogen is made from gas, with the carbon dioxide captured and stored. Green hydrogen is made by electrolysis: using electricity from renewable sources, such as wind and solar, to split water into hydrogen and oxygen.
Green hydrogen produces no carbon emissions, which is why it attracted so much interest.
Why Australia was excited
Australia has vast amounts of sun, wind and land, which could make it one of the cheapest places in the world to produce renewable energy, and therefore green hydrogen.
Governments and companies imagined exporting hydrogen, or ammonia made from it, to countries such as Japan and South Korea, and using it at home to make “green steel” from Australian iron ore.
Dozens of large projects were announced, and the Federal Government offered billions of dollars in support, including a production tax incentive of $2 for every kilogram of green hydrogen produced.
Why the hype faded
Since 2023, many major projects have been cancelled, scaled back or put on hold, including by Fortescue, Origin Energy and BP.
The main problem is cost. Making green hydrogen requires huge amounts of renewable electricity, and electrolysers remain expensive. Hydrogen is also difficult and costly to store and transport, because it’s so light and must be compressed, chilled to extremely low temperatures or converted into other chemicals.
Demand has also been weaker than expected. In many uses, such as cars and home heating, using electricity directly through batteries and heat pumps has proved cheaper and more efficient.
Where it might still work
Most experts now see a narrower but still important role for green hydrogen, in industries that are hard to power with electricity directly. They include making fertiliser and chemicals, producing steel, and making fuels for shipping and aviation.
Whether Australia becomes a major producer depends on how quickly costs fall, whether other countries pay a premium for low-emissions products, and how long governments continue to provide support.
