Australia has finally kicked off tenders for its $2bn Hydrogen Headstart program that seeks to turn the country into a global hydrogen leader with the Australian Renewable Energy Agency (ARENA) now taking applications.

The program, which was announced in the 2023-24 budget, represents a massive uptick over the previous government expenditure on renewable hydrogen, which totalled some $808m – $500m for the creation of hydrogen hubs and another $308m from ARENA to support 46 projects since 2017.

Make no mistake, that’s a good thing as it really underscores the Labor government’s commitment towards not only meeting the goal of net zero emissions by 2050 but also potentially playing a role in helping our traditional gas customers decarbonise as well.

Admirable goals indeed but there are two key problems with the program.
 

Only big boys need apply

The first issue (and one that ARENA makes no effort to hide) is that the program is aimed at projects looking to produce renewable hydrogen or derivatives (like ammonia) at scale.

It’s not hard to see why the government might choose to go this route.

After all, big projects means big backers who are far more likely to see it through, though even here this is not an absolute guarantee – as evidenced by GM’s decision to kill the iconic Holden car brand in 2020 despite receiving $2bn in bailout funds in the previous years.

What it does mean is that the small players – including a number of ASX-listed companies – looking to develop smaller but no less important projects will miss out on being able to benefit from the program, though funding could still be available through the Advancing Renewables Program and other routes.

This oversight is regrettable as small companies are often responsible for driving innovation and helping drive adoption of new technologies – or as the case might be, a new fuel.

Given the scarcity of its use in Australia, having multiple smaller projects spread out over the country that will build the hydrogen economy from the ground up might make more sense.
 

Boost for hydrogen but more’s needed

The second problem with the Hydrogen Headstart is quite simply that while it represents a substantial investment, it just isn’t enough.

According to the Clean Energy Council, the $2bn program is enough to support at least two large-scale projects of at least 50MW of capacity over a 10-year period, which it said was enough to get at least some large-scale projects over the line.

This is valuable as while Australia has the largest project pipeline of any single country in the world, proponents have found it challenging to convert them into commercially viable projects.

A sound start, but simply not quite enough if we want to stay competitive.

It might be foolhardy to compare ourselves with the US but as the American Clean Power Association noted, over US$270bn worth of private capital has been committed to clean economy investments in the year since the Inflation Reduction Act was passed in August 2022.

That might be a broader picture of just how much the US is investing into decarbonisation and not focused on hydrogen, but it does highlight how much more needs to be done.

Of course, it is likely that the Australian government would make further funding available in the future, but this would need to be open not just to major companies but also smaller, more nimble companies that could collectively play an equally big role.

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