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Australia's Hydrogen Tipping Point

The urgent case to support renewable hydrogen production

Australia, like other economies around the world is embarking on the greatest transformation since the industrial revolution – a transition to a net zero future. Our economic future, like others’ will depend on rapid deployment of renewable energy, renewable hydrogen to decarbonise hard-to-abate sectors, and to enable clean manufacturing and supply chains. Put simply, our future prosperity is inextricably linked with development of an Australian energy-industrial complex.

Australia’s natural advantages means we are well-placed to develop a clean energy export market. But we are at risk of being left behind in the race to become a clean energy superpower as economies around the world enter into a bidding war for market share and dominance of clean energy supply chains. New analysis of US Inflation Reduction Act (IRA)’s clean energy incentives unpack implications for Australia’s hydrogen aspirations.

Key insights

  • The transition to net zero is ushering in a new economics of comparative advantage and clean manufacturing. Those who decarbonise their supply chains will rise to the top
  • Hydrogen has the potential to be a tipping point for Australian manufacturing, based on its ability to decarbonise ‘hard-to-abate’ industries
  • The timing for Australia’s action is crucial: we’re at risk of being left behind in the race to become a clean energy superpower as economies around the world, such as the USA, Europe and Gulf nations are moving quickly to gain market dominance; the recent US Inflation Reduction Act features largely on the competitive landscape
  • We estimate that if Australia does not respond to the Inflation Reduction Act, we could export 65% less hydrogen p.a by 2050 than before the IRA’s introduction, with scaled production delayed until after 2030
  • We suggest six design principles to help shape a renewed Australian industrial policy including renewable hydrogen
  • Swift policy action is required – we suggest a ‘goldilocks zone’ for intervention and public investment of $15.5 billion in today’s terms over a decade to be on track and produce almost 16 million tonnes of renewable hydrogen a year by 2050

Head of Deloitte Access Economics, Dr Pradeep Philip, said:

"We have a wealth of comparative advantages in green industries like hydrogen but we’re at risk of falling behind in the race to net zero. Despite Australia’s clean energy ambitions, the reality is our global competitiveness is declining. The US Inflation Reduction Act looks set to cut Australia’s renewable hydrogen lunch. Australia will need to take decisive and swift policy action to secure Australia’s global competitiveness – this means an urgent and significant new energy-industrial policy. These new policy settings should aim to maximise public value by building out place-based industrial ecosystems and offering support across value chains to grow value-added economic activity within Australia. We’re standing at a crossroads and our future prosperity depends on getting the transition right."

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