What’s going on with the so-called hydrogen economy?

There is a lot of excitement about a future new industry in Queensland and the rest of Australia centred around hydrogen as an energy source. For example, the May 2019 Queensland Hydrogen Industry Strategy promotes the industry’s potential to create jobs for the future while propelling and diversifying Queensland’s economy. The Queensland Government, which has developed the strategy, expects the so-called hydrogen economy to have enormous benefits worth an estimated $1.7 billion in exports annually by 2030. A statement by the Minister for State Development, Cameron Dick, notes that expanding Queensland’s hydrogen economy holds great potential for employment, investment and overseas exports. Certainly, there is potential. A report produced for the Australian Renewable Energy Agency suggests that global demand for hydrogen exported from Australia could be over three million tonnes each year by 2040 and be worth up to $10 billion each year to the economy by that time. [1]

Hydrogen is one of the most efficient energy carriers and can be obtained from raw materials such as water. Among the many different hydrogen production methods, eco-friends and high purity of hydrogen can be obtained via water electrolysis.  Renewable Hydrogen is produced without the use of fossil fuels and is a way to store renewable energy for later use. Renewable energy such as wind and solar can be used to generate carbon-neutral hydrogen.  When used as a fuel, hydrogen is part of the process that generates electricity without combustion, with no greenhouse gases produced. Hydrogen produced from water electrolysis and renewable energy is referred to as green hydrogen.  Approximately 95 per cent of global production is brown Hydrogen produced from fossil fuels which is manufactured by steam methane reformation2. Hydrogen can be stored as gas and when converted to a liquid it can be exported overseas, making it a tradable energy commodity. It appears to have significant potential as almost anything that uses energy can be powered by hydrogen, including cars, industrial machinery, and power stations for electricity generation.

The Queensland Government has invested $19 million into a strategy to get the hydrogen industry moving. Queensland’s new hydrogen strategy focuses on supporting innovation, facilitating private investment, effective policy frameworks, building community awareness and facilitating skills development. The strategy is designed to help drive the development of an economically sustainable and competitive hydrogen industry, create more highly skilled jobs and export opportunities.

According to the Queensland Premier Anastacia Palaszczuk “attracting investment in renewables combined with our existing gas pipeline infrastructure and export facilities, makes us the ideal state to lead the future production and export of hydrogen.”[2] Major companies in both Japan and South Korea have ambitious plans for renewable hydrogen to meet their energy needs, and Queensland is believed to be well placed to support these trading partners.

Gladstone in Central Queensland has been earmarked as a key player in the state’s future hydrogen production and export industry. Gladstone has been highlighted as a key region for the hydrogen industry because existing industries, gas infrastructure, access to a deep-water export port, and skilled local workers make it an attractive location for the emerging industry.[3] Hydrogen is ideal for providing low emission options for regional and remote electricity generation.

Queensland Resources Council CEO Ian MacFarlane states that hydrogen is the energy of the future and “particularly in the area of transportation, it is where we go when we want to lower emissions to zero.2” Additionally, Dr Daniel Roberts the CSIRO hydrogen energy future science director states that “Australia needs to do what it can with large-scale demonstration projects … to make sure we take advantage of this important opportunity.2”

According to the Queensland Hydrogen Industry Strategy:

Some of Queensland’s and Australia’s largest companies, as well as major global companies, are pursuing hydrogen, indicating its future potential within the energy markets. The global hydrogen production market was valued at $US115.25 billion in 2017 and is expected to grow to over $US200 billion by 2026.

Queensland’s close proximity to key export markets arguably makes it ideally positioned as an international gateway to the Asia-Pacific region. According to page 11 of the Queensland Hydrogen Industry Strategy, “Queensland has the potential to meet the energy import needs of countries such as Japan, which currently imports 94 per cent of its energy and is investing heavily in the transition to hydrogen.” According to Trade & Investment Queensland, the state of Queensland has a lot to offer investors such as a stable government, Australia’s lowest payroll tax, highly skilled labour and a strong private investment sector.

Five major renewable hydrogen projects are already underway in the Central Queensland region (see Figure 1). Stanwell is investigating the feasibility of a 10MW hydrogen demonstration plant at Stanwell Power Station.  Hydrogen Utility have also proposed a $1.61 billion industrial complex for the large-scale production of green hydrogen. Furthermore, Austrom Hydrogen have announced plans to build a solar battery farm for renewable hydrogen which is expected to produce 200,000 tonnes of hydrogen for export. “A feasibility study into a green hydrogen plant would see Gladstone the first city in Australia to be powered on a 10 per cent blend of natural gas and renewable hydrogen.” Additionally, the H2Q Hydrogen Industry Cluster has been established and aims to build Queensland and Australia’s hydrogen capability through, scale, investment and export opportunities for local businesses.

Figure 1: Central Queensland Renewable Hydrogen Projects

While Central Queensland is a key area for Queensland’s emerging hydrogen economy, there are projects in other parts of the state, too. For example, Sun Metals will be the first major energy user to build its own large-scale solar farm in Australia to be built at Sun Metal’s zine refinery in Townsville. The Queensland Government have also commissioned a $300,000 feasibility study to investigate the suitability of Queensland’s central west for renewable, particularly solar, energy projects. Renewable energy company Sunshot will partner with the Remote Area Planning and Development Board to look at how various sources of energy available in the region can create new industries.

Despite all the optimism, there are still some challenges facing the hydrogen industry. Indeed, the projects we are seeing in Queensland tend to be in the planning, testing, or demonstration stages. CSIRO’s Dr Roberts suggests that a lack of the necessary infrastructure was a reason why large-scale hydrogen production had not been done before. He suggests that “we can compress it as a gas, which has applications, but if we’re talking about taking large amounts of hydrogen and sending it around the world, we need better ways, such as liquefaction”3. Furthermore, green hydrogen is still very expensive to produce and according to MacFarlane and “it needs to be brought down in cost and there needs to be technology used in terms of transportation.”3 Inland production potential is also dependent on existing pipelines, electricity networks, and groundwater availability.

Overall, there appears to be a lot that still needs to be done before Queensland has a thriving hydrogen industry, so we should not get too excited just yet. It will be interesting to see the potential economic benefits the hydrogen industry yields for both Queensland and Australia in the coming decades.


[1] https://arena.gov.au/knowledge-bank/opportunities-for-australia-from-hydrogen-exports/

[2] https://www.dsdmip.qld.gov.au/resources/strategy/queensland-hydrogen-strategy.pdf

[3] https://www.abc.net.au/news/2020-06-25/gladstone-to-become-hydrogen-energy-powerhouse/12373416


This article was prepared by Taylor Hull, Research Assistant and Gene Tunny, Director at Adept Economics. Please get in touch with Gene (gene.tunny@adepteconomics.com.au) with any questions.

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