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NSW energy minister announces funding for hydrogen hubs

NSW’s energy minister and treasurer Matt Kean will use his final morning as caretaker rules kick in to provide as much as $64m to support two green hydrogen hubs while opening applications for $1.5bn in concessions for large-scale green hydrogen producers.

As we saw last month, there’s a hydrogen race that’s underway globally thanks to the open-ended US Inflation Reduction Act (which is mostly about decarbonisation).

Anyway, NSW’s spending will go to hubs in the Illawarra near Wollongong and Moree all the way up near the Queensland border.

Kean said that the world-class incentives were part of the NSW hydrogen strategy to expand the state’s economy by an estimated $600m each year from 2030 and attract an estimated $80bn in private investment by 2050.

Big bickies if it can be pulled off – but, as mentioned above, the challenge for Australia is to get to scale fast enough to be competitive given our relatively meagre funds and talent pool. In our favour, we have some of the best renewable energy resources in the world.

“These globally competitive incentives will attract investors and industry to establish their operations in NSW, driving decarbonisation in heavy industry and pushing down green hydrogen costs to reach our target of under $2.80 per kilo by 2030,” Kean said.

A Deloitte study released about a week ago put the competitive gap between green hydrogen (from renewables) and grey/blue hydrogen (from fossil fuels … and should really be ‘black hydrogen’) at about $5 a kg v $3 a kg. Hence there’s some challenge to get down to $2.80.

“This funding will see the first green hydrogen produced in the Illawarra, with at least four refuelling stations set to be developed in and around the Illawarra which can power up to 40 trucks and buses in the region,” Kean said, hinting at the small initial size (but you have to start somewhere).

The Moree plant would convert green hydrogen into green ammonia used to fertilise cotton and other farms across the region, which is an interesting twist.

“At the same time, green hydrogen producers across NSW are now able to access $1.5bn in concessions to reduce costs for large scale investment, including up to a 90% reduction in their electricity network charges if they connect to parts of the grid with spare network capacity,” Kean said, detailing how those concessions are supposed to work.

“These incentives will set us up for success as we compete with the high-profile US Inflation Reduction Act hydrogen incentives, because the NSW concessions can apply to projects finishing well beyond 2030, while the US program finishes in 2032,” he says. (The IRA may, of course, be extended and some commentators have noted it is so far not capped in funds.)

Still, hydrogen will need to play a role including replacing fossil fuels in the hard to electrify parts of the economy in industry and heavy transport.

Guardian Australia will have more on the state’s decarbonisation efforts soon. Stay tuned for that.