Federal government commits $430 million to prop up Newcastle hydrogen hub
Climate Change and Energy Minister Chris Bowen made the funding announcement on Friday.
The proposed hub would include a 50-megawatt hydrogen electrolyser to be constructed at Kooragang Island, near the Port of Newcastle, which would split water into hydrogen and oxygen.
That could produce 4,700 tonnes of green hydrogen each year, much of which would be used by explosive manufacturing company Orica at its nearby site to help make its products emission-free.
"Green hydrogen does have a future in Australia," Mr Bowen said.
The announcement comes months after Origin Energy pulled out of the project citing high input costs and challenges regarding technological advancement.
The project was to be delivered by Origin Energy in partnership with Orica and in 2023 the government awarded the joint venture $70m to help with construction costs.
Orica managing director and chief executive officer Sanjeev Gandhi said the company remained committed to the project and was gauging interest from potential partners for the venture.
"We will continue to invest in this site," he said.
Mr Gandhi said the funding announced on Friday was an incentive to deliver the project.
"It's not easy to build these kind of projects," he said.
"We will need a lot of support from the local authorities, from the state government, from the federal government and, obviously, from the Orica workforce."
The ABC understands the the funding will be used to subsidise every tonne of hydrogen produced from the facility.
Mr Bowen's announcement comes days after the Central Queensland Hydrogen Project (CQH2) was scrapped.
State-government owned energy company Stanwell withdrew its support for Gladstone project on Monday.
Earlier this year the Queensland government withdrew its funding for the project on the grounds that the financial demands were too high.
In May billionaire Andrew Forrest's company Fortescue abandoned both stages of its hydrogen projects in the city.
Energy consultant Geoff Bongers told ABC Newcastle that the cost of production was the major barrier.
"There's a gap between what [industry] would like to do and what's available and economic," he said.
"Electrolysis is a relatively expensive capital project, so the the capital cost is reasonably high and the ongoing costs are relatively high.
But Dr Bongers said there was "relatively high" demand for hydrogen.
"[Japan and South Korea] have both expressed interest in using hydrogen as a fuel source," he said.
"Japan would be keen to take as much hydrogen as we could produce, almost."
Orica said it planned to scale the project in accordance with demand would consider exporting in the future.
The hydrogen hub was originally set to be built in 2025 and was to be operational by 2026.
It is now projected to be operational in 2028.
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