Can government investment make green hydrogen a reality in Australia?

In the budget last week, the government emphasized its efforts to turn Australia into a renewable superpower under the Future Made in Australia policies. This framework aims to target green subsidies to drive investment in solar energy, critical minerals, and green hydrogen. As the world races towards a green economy with initiatives like America’s Inflation Reduction Act, the European Union’s Green Deal, and China’s advancements in green technologies, the government seeks to leverage Australia’s comparative advantage. Over 50 countries now have similar policies.

Future Made includes $1.9 billion in new funding for the Australian Renewable Energy Agency, $7 billion in tax incentives for critical mineral producers, and $1.5 billion for solar panel and battery manufacturing. These investments build on Australia’s established strengths: the renewable agency funded the first large-scale solar farms, critical minerals like lithium and cobalt are in high demand for electric vehicle batteries, and Australia leads the world in rooftop solar, though it manufactures few panels.

For green hydrogen, an industry still in its infancy, Future Made offers about $8 billion to help kickstart the sector. Subsidies will cover the initial production cost gap until economies of scale reduce prices, phasing out the subsidy. Renewable hydrogen is crucial for producing green iron, green steel, and green ammonia, which can be used domestically or exported.