The legislation offers a hydrogen production credit of AUD $2/kg ($1.30/kg) for green hydrogen produced between 2027/28 and 2039/40 for up to ten years per project, as well as a critical mineral incentive worth 10% of processing and refining costs.
Minister for Climate Change and Energy, Chris Bowen, said FMIA would allow the nation to grab the “vast economic and industrial opportunities” from the Net Zero transition.
“Renewable hydrogen and critical minerals are both essential to the world’s path to decarbonisation,” he stressed. “The government sees them playing a central role in Australia’s Net Zero future and these tax incentives make that clear.”
Announced in May, the AUD $13.7bn ($8.9bn) hydrogen incentive was met with praise from key players across the industry.
Bowen has now said that incentives will only be provided to producers once projects are operating. However, like the US’ Inflation Reduction Act, recipients will also need to deliver community benefits set out under FMIA, due to be specified by Treasury.
“The government recognises the best opportunities for Australia and its people lie at the intersection of industry, energy, resources skills and our ability to attract and deploy investment,” the energy minister added.
In recent years Australia has been driving forward to boost its domestic hydrogen industry, with a view to playing a key exporting role to Asian nations.
However, with a federal election tabled for 2025, various high-level backtracks and project cancellations have fanned the flames of political opposition and brought hydrogen’s role into question.
In July, the ever-vocal iron ore major Fortescue revealed it had pushed back its 15 million tonne green hydrogen production target past its original 2030 deadline, blaming high power prices for slowing progress.
By October, Origin Energy announced it had backed out of a 55MW hydrogen project in New South Wales, and halted all hydrogen opportunities citing market uncertainty.
The developments have added fuel to the rhetoric of the current Labour Government’s opposition. When FMIA was unveiled, the Liberal Party came out in criticism. Describing the hydrogen tax credits as a “handout to billionaires,” it said it could not support the budget.
“The fact that major players like Origin and Fortescue are stepping away from green hydrogen only confirms what we’ve been saying all along: Labour is picking losers and it’s Australian taxpayers who are left to pick up the tab,” said the Liberal Shadow Minister for Climate Change and Energy, Ted O’Brien.
While there will be more to sway voters than just hydrogen, if the Liberals take power in one way or another, it appears certain that hydrogen could be in the firing line.
