Australia’s green hydrogen strategy is economically unviable

Australia’s green hydrogen strategy is not economically viable and represents an expensive bet on technological breakthroughs that may never arrive, a new Centre for Independent Studies paper outlines.

In Dead and Buried: Why our green hydrogen hope is gone for good, authors Jude Blik and Aidan Morrison point out that since 2024, more than 25 gigawatts of green hydrogen projects have been cancelled globally, representing an estimated $95 billion in project value.

Green hydrogen production costs remain above $10 per kilogram, compared with roughly $2 per kilogram for conventional hydrogen. These higher costs are driven by unavoidable energy losses, high capital requirements, and the intermittency of renewable power. The research finds no credible pathway to cost competitiveness without massive and ongoing public subsidies.

Yet Australia’s net zero strategy remains heavily dependent on green hydrogen. Official government projections indicate that more than 20% of planned emissions reductions rely on hydrogen deployment, both for industrial decarbonisation and for electricity grid stability.

The paper estimates that making green hydrogen competitive would require subsidies of approximately $8 per kilogram. Nationally, this would amount to tens of billions of dollars. For export-scale ambitions, the required support would run into the trillions.

The paper cites the recent Orica subsidy to illustrate the problem. A $547 million government subsidy is projected to deliver just 4,700 tonnes of green hydrogen per year, covering only 7.5% of Orica’s requirements. This equates to approximately $11 per kilogram in subsidies alone, before accounting for production costs.

The implied carbon abatement cost under the Orica arrangement ranges from $915 to $1,569 per tonne of CO₂. This is up to 44 times higher than current Australian carbon credit prices, making green hydrogen one of the most expensive methods available for reducing emissions.

The report concludes that Australia’s hydrogen strategy amounts to an enormous wager on future technology and dramatic energy cost reductions. Based on current evidence, it warns this is a bet Australia is likely to lose.

Jude Blik was a Senior Policy Analyst, and Aidan Morrison is Director of the Energy Program, at the Centre for Independent Studies