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Emerging industry set back by project cancellations and higher cost of production, says Wood Mackenzie Despite its early leadership ambitions, Australia is falling behind in the global hydrogen economy, with 80% of its low-carbon hydrogen projects still in early development and “multiple” cancellations, according to Wood Mackenzie. Released at the Australia Energy Producers Conference, the report, “How can Australia compete in the global hydrogen market (before it’s too late)?” highlights that while the country boasts world-class renewable energy potential and abundant land, it is struggling to convert those advantages into competitive hydrogen production. “Australias strategic proximity to Asian demand centres is a clear advantage,” said Joshua Ngu, vice chairman for Asia Pacific at Wood Mackenzie. He added: “But this is offset by a significantly higher Levelized Cost of Hydrogen (LCOH), driven by elevated engineering, procurement and construction (EPC) and power costs. “This leaves Australia trailing behind global hydrogen front-runners such as the Europe and the Middle East.” Globally, just six million tonnes per annum (Mtpa) of low-carbon hydrogen capacity is either operational or under construction. Of that, Australia contributes less than 5%. Even marquee domestic projects such as Fortescue’s PEM50 and the Yuri Green Ammonia project have capacities of under 10,000 tonnes per annum (ktpa). The recent cancellations including Grange Resource Renewable Hydrogen Study and Nyrstar Port Pyrie. These cancellations, once seen as key milestones in establishing Australia as a global leader in hydrogen, have raised concerns about the future of the industry, stated Wood Mackenzie. The report discusses a lack of domestic demand to pay the higher costs of green hydrogen as the primary barrier to scaling hydrogen production. Hydrogen offers “significant” potential to decarbonise hard-to-abate sectors such as steelmaking, long-haul transport, and power generation. “At current costs, hydrogen production in Australia is economically unviable without policy support,” said Ngu. “For instance, the displacement cost for hydrogen in power generation is around US$0.80 to 1.00/kg, while Australia’s LCOH exceeds US$10/kg.” The report suggests that Australia could draw inspiration from hydrogen market leaders like Germany, Japan, and South Korea, which have introduced Contracts for Difference to stimulate domestic demand. |
