Origin Energy pulls the plug on Hunter Valley Hydrogen Hub, says too expensive

Prime Minister Anthony Albanese’s hopes of kick-starting a hydrogen energy revolution to help fuel Australia’s shift to net zero have suffered another setback after Origin Energy revealed it had pulled the plug on a project in NSW.

Origin said developing the Hunter Valley Hydrogen Hub using existing technology and amid uncertainty surrounding the future potential market for the renewable energy would be too expensive.

The announcement comes just 15 months after the Federal Government gave the company $70 million to pursue the hub’s development in partnership with Orica.

The first stage would have included a 55 megawatt electrolyser producing up to 5500 tonnes of green hydrogen a year by using recycled water and grid-connected electricity. Some of the fuel would have been used for the transport industry.

Origin chief executive Frank Calabria said the energy provider had worked hard to shore up the investment case for hydrogen but the capital risks were too high.

“We continue to believe hydrogen could play a role in the future energy mix,” Mr Calabria said.

“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.”

The news will come as a blow to Mr Albanese’s hopes of shifting Australian consumer towards more renewable energy sources.

Origin abandoning the Hunter Valley hub follows Andrew Forrest’s decision to scale back his own green hydrogen energy ambitions.

The mining billionaire has been struggling to develop viable projects at strategic sites around the world and turn his company Fortescue from an iron ore miner into a green energy powerhouse.

In July, Fortescue walked back a goal of producing 15 million tonnes of green hydrogen by 2030 — a target Mr Forrest said would be achieved “eventually”. In a rare admission of the limits of the miner’s capital might, the company said electricity cost targets for projects in Australia were “not possible” right now.

Origin announced plans for a potential hydrogen hub in NSW in 2022 and had hoped it would progressively replace natural gas used in nearby ammonia manufacturing, along with other uses.

It had been shortlisted under the Federal Government’s Hydrogen Headstart program.

Along with the Hunter Valley hub, Origin said it was stopping work on all other hydrogen development opportunities.

“The decision to exit reflects the prioritisation of capital expenditure towards opportunities closely aligned to Origin’s strategy,” Mr Calabria said.

“Ultimately, we believe investments focused on renewables and storage can best support the decarbonisation of energy supply and underpin energy security over the near-term.”