The Hunter's clean energy transition has been dealt a massive blow with Origin Energy announcing that it is walking away from the Hunter Hydrogen Hub.
Origin, which was a joint partner in the project with Orica, said on Thursday its decision to exit the $207 million project reflected the uncertainty around the pace and timing of hydrogen market's development and the risks associated with developing capital-intensive projects of this nature.
"We have worked hard to evaluate the investment case for hydrogen and are grateful for the strong government support," Origin chief executive Frank Calabria said.
He said the company continued to believe that hydrogen would play a role in Australia's future energy mix. However, it had become clear that the hydrogen market was developing more slowly than anticipated.
There were also significant risks and input costs 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," Mr Calabria said.
"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."
Origin's announcement follows a similar decision by billionaire Andrew Forrest's company Fortescue to abandon green hydrogen project's including one at the site of the former Liddell Power Station.
Hub was due to start production in 2026
Plans for the Hunter Hydrogen Hub on Kooragang Island were announced in early 2022.
It was estimated the project, one of the most advanced in Australia, would produce up to 5500 tonnes of green hydrogen a year and employ about 100 people.
Origin entered into a joint development agreement with Orica in July 2023 to progress front-end engineering and design with the aim of starting production in 2026.
It was intended that the hub's hydrogen would progressively displace natural gas as a feedstock in the nearby ammonia manufacturing plant as well as in transport and other uses.
The project had recently received NSW government planning approval and was targeting a final investment decision.
The Hunter Hydrogen Hub was shortlisted under the Australian Government's Hydrogen Headstart program, having previously secured Commonwealth and NSW grant funding program commitments.
Orica exploring new opportunities
Orica managing director and chief executive Sanjeev Gandhi said Orica respected Origin Energy's decision and was grateful for the progress the partners had made together in advancing Australia's hydrogen initiatives.
"We remain committed to exploring new opportunities in this promising sector," he said.
"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."
Mr Gandhi said Orica remained open to discussions with interested parties who share its vision for a sustainable energy future and Australia's hydrogen economy.
"Disappointed": Minister Bowen responds
A spokeswoman for Climate Change and Energy Minister Chris Bowen said Origin's decision was disappointing for the workers and businesses developing Hunter Hydrogen Hub.
"Green hydrogen plays to Australia's unique strengths and remains important to the future of manufacturing and industry both in the Hunter and other regions, as well as globally," he said.
"Orica remains committed to Kooragang Island, the Hunter Region and to manufacturing solutions for a low carbon economy."
She said it was estimated that the federal government's hydrogen incentives would unlock about $50 billion of private investment, with 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.
"Government support in developing Australia's hydrogen opportunity provides additional certainty for projects, however, how they progress remains a commercial decision for the parties involved," she said.
Opposition energy spokesman Ted O'Brien said the Origin's decision to walk away from the project was not only a blow to the government's renewable energy goals but it also jeopardised Australia's energy security. "With green hydrogen off the table in the near-term and looming gas shortfalls, Labor's inability to secure reliable 24/7 baseload energy puts Australia in a vulnerable position," Mr O'Brien said.
"The Coalition has consistently taken a sensible, technology-neutral approach to energy and that includes hydrogen. If hydrogen is to succeed in Australia, we must be colour blind when it comes to low emissions technologies including blue hydrogen (gas) and pink hydrogen (nuclear)."
