Origin Energy Withdraws From Australia's Green Hydrogen Project, Citing High Production Costs

In a major blow to the Labor government's decarbonization strategy, Australia's biggest energy company, Origin Energy, has announced its exit from the country's ambitious green hydrogen project, citing high production cost of fuel.

Announcing the company's decision in a statement to the Australian Stock Exchange, Origin chief executive Frank Calabria said since the numbers did not add up, the company would not be joining the Hunter Valley Hydrogen Hub, the planned project near Newcastle in New South Wales.

Origin, Australia's biggest energy generator and retailer, with more than four million customers, had planned to start production of green hydrogen by 2026.

"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," Calabria said, Australian Financial Review reported.

The Hunter Valley Hydrogen Hub was touted to produce 5,500 tonnes a year of hydrogen using renewable energy, and was a part of the AU$2 billion Hydrogen Headstart program. The government had declared a AU$2-a-kilogram subsidy for hydrogen producers and AU$6.7 billion in production tax credits, under its Hydrogen Headstart program.

Origin had shown interest in the project in 2022, with the aim to replace gas in its ammonia manufacturing units, among other uses. It had also announced a joint venture with Orica, the Australian explosives' maker, to supply hydrogen to the Newcastle industrial area.

"Ultimately, we believe investments focused on renewables and storage can best support the decarbonization of energy supply and underpin energy security over the near term," Calabria said.

Climate Change and Energy Minister Chris Bowen said he was disappointed with Origin's decision, adding that the incentive could unlock AU$50 billion in private investment, ABC News reported.

"Origin's decision is disappointing for the workers and businesses developing Hunter hydrogen hub," the minister said. "Australia's announced pipeline for hydrogen already valued at over $200 billion from 100-plus projects, a quarter of which are already operating or under construction."

Calabria said Origin will stay focused on decarbonization, investing in renewable energy projects like wind and solar farms, as well as battery storage.