The South Australian Government has warned that the AUD 600m ($374m) earmarked for the Whyalla project may not be guaranteed if GFG Alliance does not follow through on its investment.
The project, which gained environmental approval last November (2024), will build 250MW of electrolysers to provide hydrogen to a 200MW power generation unit. It will include a storage pipeline for up to 100 tonnes of hydrogen.
Read more: South Australia’s 200MW Whyalla hydrogen power plant gains environmental approval
In February 2024, GFG Alliance signed an agreement with the South Australian Government to explore offtaking green hydrogen from the plant to help decarbonise the Whyalla steelworks.
However, speaking to ABC Radio Adelaide, Peter Malinauskas, Premier of South Australia, stressed the need to confirm the hydrogen offtake deal.
“We’ve got to keep an eye on what’s going on in the steelworks,” he said. “Because if we produced a hydrogen facility without the steelworks being a customer of the hydrogen – [if] GFG doesn’t invest or found itself in even more challenging financial circumstances than it is currently in – then we put ourselves in a precarious position.”
H2 View understands that GFG Alliance is currently facing significant financial challenges, including debts of over $587m to Greensill’s Capital, legal disputes over unpaid obligations, and operational issues at the Whyalla steelworks – which only recently resumed production at half capacity after a four-month outage.
Reportedly, Malinauskas told state parliament that the government is owed “tens of millions of dollars” by GFG Alliance, saying mining royalties account for most of the debt.
The South Australian Government has previously committed to hydrogen, claiming it’s the right thing to do for both Whyalla and the economic prosperity of the state.
Last year, Malinauskas said, “We want to produce hydrogen so that it gets used domestically for green iron production or, in the first instance, electricity generation.”
The Whyalla project will use excess renewable energy generation from wind and solar farms to primarily provide hydrogen power to homes and businesses across the state.
The Office of Hydrogen Power SA (OHPSA), ATCO Australia, and BOC will develop the project. It has received over AUD $402m ($263.8m) in funding, with plant operations expected to begin in 2026.
Read more: ATCO and BOC to develop large-scale hydrogen project in Australia
The concerns over hydrogen offtake at Whyalla come amid a broader shake-up in Australia’s green hydrogen sector. Reports suggest that the Queensland Government has withdrawn support for a AUD $12.5bn ($7.68bn) green hydrogen project in the Port of Gladstone.
Read more:Updated: Queensland Govt. pulls support for 2.2GW green hydrogen project: reports
Meanwhile, bp has reportedly scrapped its $600m green hydrogen and renewable fuels project in Western Australia, located at its former Kwinana refinery.
The move, driven by cost-cutting measures and a wait-and-see approach to government subsidies, highlights the financial and policy uncertainties that continue to challenge Australia’s hydrogen ambitions.
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