Energy Minister Chris Bowen says he has been left “surprised and disappointed” by a Queensland government move to dump support for a major hydrogen project in the state.
The Queensland government on Monday announced it would not be committing funding to the Central Queensland Hydrogen Project (CQ-H2), backed by the state-owned Stanwell Corporation and a number of international companies.
The federal government has made support for green hydrogen a key plank of this term of government, and is trying to push new incentives for the industry through parliament in coming weeks.
But the Queensland government’s moves will further rattle the nascent sector after a string of high-profile recent withdrawals.
CQ-H2 describes itself as a “global scale renewable hydrogen project” based near Gladstone in Central Queensland.
It had expected to start operations from 2029, planning to ship green hydrogen and ammonia to Japan and Singapore.
It spruiked an expected $8.9 billion boost to Central Queensland’s economy.
The federal government had already offered some significant financial support, including $20 million from the Australian Renewable Energy Agency for a “front-end engineering design” project, and a commitment of nearly $69 million through the government’s Hydrogen Hubs program.
Of that $69 million, $14 million has already been paid out, and government sources suggest that if the project does not proceed, it may seek to recover any unspent funds.
Mr Bowen said the federal government remains supportive of the project
“The [Queensland Government’s] threat to withdraw funding is surprising and disappointing given this project creates nearly 9,000 jobs and was expected to generate $8.9bn for the local economy,” he said.
“The Albanese government is firmly committed to seeing Gladstone’s economy grow and creating new jobs for the region.
“Green hydrogen plays to Australia’s unique strengths and we’re unapologetic about pursuing an industry that is recognised as having an important role in the future of manufacturing and energy in Australia, and globally.
“Government support in developing hydrogen opportunities around the country provides additional certainty for projects, however how they progress ultimately remains a commercial decision for the parties involved.”
Queensland Treasurer David Janetzki said the financial demands of the CQH2 project were proving too great for the state to bear.
“The Queensland Government will not be committing the substantial equity and grant funding requested for Stanwell Corporation to progress the CQ-H2 project,” he said.
“It would have required significantly more than $1 billion in state government funding, including infrastructure for water, port, transmission and hydrogen production.
“We are focused on our energy generators providing affordable, reliable and sustainable power for Queenslanders.”
Stanwell Corporation has said it is considering the state government’s decision, and is reviewing its involvement in other hydrogen projects too.
The local mayor, Matt Burnett, has expressed confidence the project might survive even without the state government support.
Industry wobbles as tax credits hit parliament
The Queensland Government’s withdrawal is not the first significant blow for the nascent sector.
Last year energy giant Origin dropped out of the Hunter Valley Hydrogen Hub, arguing the fuel is simply too expensive to produce.
Mining giant Fortescue also mothballed its plans for a green hydrogen plant in the Hunter, but maintains an electrolyser plant in Gladstone, and executive chairman Andrew Forrest has remained strongly supportive of the sector.
Questioned on the Queensland Government’s moves, a Fortescue spokesperson said challenges in building a new industry are to be expected.
“While we remain steadfast in our commitment to green hydrogen, we acknowledge there are several challenges in transitioning to a decarbonised economy. Building new industries requires government and industry working collaboratively together,” they said.
The news of Queensland’s withdrawal of support for the project comes as federal parliament gets set to debate laws setting up ‘production tax credits’ for the green hydrogen and critical minerals sectors.
Under the plans, anyone producing green hydrogen would be paid a tax credit of $2 per kilogram for up to ten years.
A similar scheme would be set up to support the production of critical minerals, like lithium, nickel and cobalt.
Some major resources groups, including the Perth-based Association of Mining and Exploration Companies, have lobbied heavily for the critical minerals scheme.
The scheme is opposed by the Coalition, with the Opposition leader Peter Dutton labelling it ‘billions for billionaires’ when it was first announced.
The Greens have offered in-principle support for the legislation, and independent Senator David Pocock has indicated his support, putting the government some way down the path to securing support in the Senate.
Resources Minister Madeleine King told Sky News yesterday she maintains hope the Coalition might change its stance.
“In my view that’s an anti-West Australian and anti-Queensland position, to not support what is the biggest commitment to the resources sector that any government has ever made,” she said.
“So hopefully, the Liberals and Nationals come around.”
