Australian utility Origin Energy has backed out of AUD $207.6m ($142.6m) 55MW hydrogen hub project in New South Wales (NSW) and halted all hydrogen opportunities, blaming market development uncertainty.
The Hunter Valley Hydrogen Hub, in collaboration with chemicals and explosives firm Orica, was set to begin construction next year, ahead of hydrogen production starting in 2026.
Located near Newcastle, the project would have supplied 80% of the hydrogen produced to Orica’s 360,000 tonne per year ammonia facility on Kooragang Island.
Read more:Australia to build ‘huge hydrogen hub’ in Hunter Valley
With a final investment decision (FID) on the project due by the end of 2024, Origin has now said uncertainty around the pace and timing of hydrogen market development has made the project too risky.
Backed by AUD $115m ($79m) in state and federal funding, the project been had been earmarked for hydrogen production subsidies under Australia’s Hydrogen Headstart programme.
Origin CEO Frank Calabria said, “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 FID on the project.
“The decision to exit reflects the prioritisation of capital expenditure towards opportunities closely aligned to Origin’s strategy.
“Ultimately, we believe investments focussed on renewables and storage can best support the decarbonisation of energy supply and underpin energy security over the near-term.”
For now, the project’s future seems uncertain. Orica Managing Director and CEO, Sanjeev Gandhi, said the firm remains “committed to exploring new opportunities in this promising sector.”
He added, “We’ve been operating our Kooragang Island site for over 50 years and are committed to ensuring both our manufacturing facility and the Hunter Valley region remain competitive in a low carbon economy, while also strengthening Australia’s domestic manufacturing capability.
“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.”
Coming as another knock the Australia’s green hydrogen ambitions, it follows iron ore major Fortescue’s decision to push back its target of producing 15 million tonnes of green hydrogen per year by 2030.
Read more: Fortescue cuts jobs and kicks green hydrogen targets down the road
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