Australia commits $284 mil for Orica’s renewable hydrogen project

Australia committed A$432 million ($284 million) for Orica's renewable hydrogen project in New South Wales under its Hydrogen Headstart subsidy plan, and opened consultation for the second round of the plan July 4, in a move that signals the government's continued support for renewable hydrogen.

The award for Orica's Hunter Valley Hydrogen hub, which plans to produce approximately 4,700 mt/year renewable hydrogen based on a 50 MW electrolyzer, comes in the wake of several project cancellations or restructures owing to a lack of investment and offtake deals for the new fuel.

"Regional communities like the Hunter will lead the way in Australia's transformation into a renewable energy superpower -- and this project is a great example of what that looks like in practice," said Chris Bowen, Minister for Climate Change and Energy.

"This investment shows we can secure existing industries such as ammonia and fertilizer production by transforming how they're powered -- creating new clean-tech jobs and future-proofing the Hunter's economic base."

Bowen said the announcement, which follows the A$814 million awarded to Copenhagen Infrastructure Partners' Murchison Green Hydrogen Project in Western Australia in March, marks the conclusion of Hydrogen Headstart Round One.

Before funding is released, Orica will work closely with the Australian Renewable Energy Agency to meet a number of conditions and demonstrate progress toward key milestones, Bowen said.

Following this, leveraging its success, Round Two is now open for consultation, Bowen added, providing details of the plan, which seeks to secure Australia's dominance in energy and resources exports amid a global energy transition.

The Hydrogen Headstart program was initially announced in Australia's fiscal 2023-24 (July-June) budget with an A$2 billion fund. In the following year's budget, the government doubled the allocation to A$4 billion.

Hydrogen Headstart works by bridging the commercial gap between the cost of producing renewable hydrogen and the current market price. As such, it aims to bring down costs and accelerate the uptake of renewable hydrogen.

Ammonia, explosives industry

Located on Kooragang Island in the heart of the Hunter Region, the project will cater to ammonia and explosives manufacturing in the same region by reducing its reliance on gas with the goal to keep local manufacturing competitive and sustainable, Bowen said. It would also cater to exports.

"By switching from gas to green hydrogen, the project will also significantly cut emissions from Orica's ammonia production facility and help produce green ammonia for domestic use across mining, agriculture, and manufacturing sectors," the minister said.

Australia's hydrogen projects have seen a series of cancellations or changes owing to a lack of investments and offtake agreements, as the cost of producing renewable hydrogen stays high.

Australia's electricity generator Stanwell withdrew from the Central Queensland Hydrogen Project (CQ-H2), and other hydrogen development efforts after the Queensland government declined funding support.

Platts, part of S&P Global Commodity Insights, assessed New South Wales hydrogen produced via alkaline electrolysis at $4.49/kg on July 2, down 11% from a month earlier.

Platts assessed Japan's hydrogen produced via alkaline electrolysis (including capital expenditures) at $6.46/kg on July 3, up 9% month over month.