Australian energy giant to cease all work on hydrogen, citing market uncertainty and high risks
Origin Energy — one of Australia’s “big three” utilities — has today announced that it “intends to cease work on all hydrogen development opportunities”, including the high-profile government-backed 1GW Hunter Valley Hydrogen Hub in New South Wales, which it had been co-developing with explosives company Orica.
In a market statement, the Sydney-based company said its decision to exit the green H2 project on Kooragang Island — which has been awarded A$70m ($47.9m) from the government’s A$526m Regional Hydrogen Hubs programme and been shortlisted for the A$2bn Hydrogen Headstart programme — “reflects uncertainty around the pace and timing of development of the hydrogen market, and the risks associated with developing capital-intensive projects of this nature”.
CEO Frank Calabria explained: “We have worked hard to evaluate the investment case for hydrogen and are grateful for the strong government support.
“However, it has become clear that the hydrogen market is developing more slowly than anticipated, and there remain risks and both input cost and technology advancements to overcome.
“The combination of these factors mean we are unable to see a current pathway to take a final investment decision on the project.”
Calabria added that Origin believes that “investments focussed on renewables and [energy] storage can best support the decarbonisation of energy supply and underpin energy security over the near-term”. “Origin has been closely following the global development of hydrogen technology and markets over the past four years and we have evaluated a range of options across several jurisdictions,” he said.
“We acknowledge there will be some disappointment at this decision and are grateful for the opportunity to evaluate the feasibility of this project in conjunction with Orica [which was due to be the offtaker], and with the support of both federal and state governments, local representatives and the community.”
The company says that it “remains open to exploring commercial options” for the Hunter Valley project, which received planning permission for its first 55MW phase in June and had been expected to be the first hydrogen hub in the country – one of eight to be allocated funding from the Regional Hydrogen Hubs programme.
But a front-end engineering and design study conducted by Origin and Orica seems to have concluded that the project is not currently commercially viable, raising questions as to whether Orica will continue to develop the project, perhaps with a new partner. The explosives company said it was “disappointed” by Origin’s decision and that it “remained committed to exploring new opportunities in this promising sector”.
“The support of both the Federal and the NSW governments for the Hunter Valley Hydrogen Hub project should also be acknowledged and Orica looks forward to continuing the collaboration with ministers and responsible agencies on the transition of Orica’s Kooragang Island manufacturing facility and the Hunter Valley region.
“We remain open to discussions with interested parties who share our vision for a sustainable energy future and Australia’s hydrogen economy”.
The announcement is another blow to the Australian green hydrogen industry’s, coming months after the sector’s biggest cheerleader, Andrew Forrest, postponed plans to produce 15 million tonnes of renewable H2 annually by 2030, declaring that high energy prices were making it hard to produce affordable green hydrogen.
Only a few weeks ago, the Australian government announced a target to produce 15 million tonnes of green hydrogen across the country by 2030, as well as a deal for Germany to buy $444m of renewable H2 from Australia through the H2Global scheme.
Source: Hydrogeninsight