By Elizabeth Thurbon, Alexander M. Hynd, and Hao Tan.

Australia launched its National Hydrogen Strategy back in 2019, as part of a bid to establish the country as a ’renewable energy superpower’. Five years on, Australia still talks big on its green hydrogen future, but our approach is at serious risk of bombing out.

The stakes of the global green hydrogen race couldn’t be higher. By 2050, hydrogen may account for 25% of the world’s primary energy. Much of this demand will centre on green hydrogen: an emissions-free energy source powered by renewables like solar and wind.

Crucially for Australia, our three largest current coal and gas export markets — Japan, South Korea, and China — are now the world’s most vocal and ambitious proponents of the hydrogen shift. Japan and South Korea have both pledged to become ‘hydrogen societies’ by 2050 and are on track to be two of the world’s largest hydrogen consumers, with 100% of their hydrogen consumption being green.

Make no mistake. For Tokyo and Seoul, the shift away from fossil fuels and towards green energy –especially hydrogen — is a matter of national security, both economic and geo-strategic. And the scale of their anticipated demand for hydrogen is almost mind-boggling. According to Korean and Japanese government estimates, by the 2040-50s, their combined hydrogen demand will exceed 25 million tonnes. This equates to around 1,000 gigawatts of new renewable energy — or approximately 12.5% of the world’s entire installed generation capacity as of today, including fossil-fuelled systems.

If Australia can’t meet their markets’ needs, they will look elsewhere — dealing a severe blow to our national prosperity unless we move with speed and purpose to capitalise on our green energy potential.

Australia initially looked well-placed to do just this, emerging as an early frontrunner in this industry of the future. Our government was only the third in the world to release a national hydrogen strategy, hot on the heels of pioneering Japan and Korea. And Australia was quick to build up a massive pipeline of potential domestic and export-oriented hydrogen projects, which currently stands at around $300 billion — the largest in the world.

But today it is striking that almost all these proposed projects have failed to move out of the planning phase to reach a final investment decision. Moreover, few planned projects are of the scale that might signal to East Asia that we are serious about meeting their incredible projected demand. And since 2019, at least 30 other countries, including the US, Germany, and Canada, have announced their own ambitious hydrogen strategies, involving impressive government support that far outstrips our own.

As a result, Australia has now slipped from likely leader to obvious laggard in the green hydrogen race, significantly trailing other OECD countries in terms of the actual implementation of projects. So where have we gone wrong?

We argue that since 2019. The most significant obstacle to Australia’s success has been the prevailing policymaking mindset. In this mindset, the hydrogen shift is viewed principally as an energy and climate policy challenge. However, this approach largely misses the high-stakes geo-economic and geo-strategic challenges inherent in the green energy transition.

This is what distinguishes Australia’s green hydrogen policymaking from the framing adopted by our East Asian neighbours. In Tokyo, Seoul, Beijing (and, increasingly, Washington DC), hydrogen policymaking occupies the realm of a new green energy statecraft.

Green energy statecraft involves bold government initiatives to build, grow and dominate the high-technology markets essential to the green transition, and to fend off or outflank rival powers, be they economic, geo-strategic or both.

Green energy statecraft is different from plain old energy policy, or even ‘industrial policy’ because its focus is squarely on building new industries with the intention of ensuring success in hyper-competitive global markets and, simultaneously, bolstering national security.

Given the national security motivations at play, governments that practice green energy statecraft have no qualms in creating bold visions for new industries (like green hydrogen, green steel, and bioenergy) setting clear production and export targets, and mobilising all available financial incentives and policy instruments to ensure that these targets are met.

In contrast, Australia’s National Hydrogen Strategy — devised and released by the previous Coalition government — is arguably more a reflection of domestic political conflicts than national economic and geostrategic security concerns. This can be seen in its backwards-looking call for ‘clean hydrogen’ — which means a major role for fossil fuel industries in the new hydrogen play. As two of us (Thurbon and Tan, along with Kim and Mathews) argue in our new co-authored book, Northeast Asia’s ambitious green hydrogen targets have as much, if not more to do with energy and economic security concerns than climate change.

At the same time, Australia’s strategy doesn’t include any clear production, demand, or export targets. As the Northeast Asian industrialisation success story demonstrates, these kinds of targets have long formed the basis of effective techno-economic policymaking in East Asia. It’s hard to see how a strategy without targets can give domestic industry anything to aim for or provide benchmarks against which to measure success. A strategy without targets also does nothing to reassure our energy security-conscious foreign buyers that we understand their needs and intend to actually help meet them.

This lack of ambitious target setting is also evident in many of Australia’s state government strategies that followed the 2019 National Strategy. The lack of national coordination between these state strategies has risked overlapping projects, and uncertainty among potential global investors and purchasers over who to consult with.

Moreover, some states with the most natural potential have the least ambitious hydrogen plans, not least New South Wales, which seems largely preoccupied with supporting relatively small, domestically-oriented projects. This approach is hardly likely to inspire confidence from our power-hungry potential buyers, not least Japan and Korea. Given their massive future needs, the key to success for these countries is via large-scale production and the accompanying economies of scale that will ultimately make green hydrogen economically viable.

Yet frustratingly, Australia is currently not providing a plan or at least credible signalling that shows we can deliver these resources at the scale and speed required, particularly regarding investment into transmission and generation beyond our own domestic needs.

To be sure, mega projects require mega funds. But this should not be viewed as a limiting factor. Funding for such projects neither could nor necessarily should fall on the shoulders of Australian governments, federal or state. The reality — which seems to be lost on most Australian policymakers — is that Korean and Japanese governments and companies have been queuing impatiently to invest in the kinds of large-scale energy projects that will deliver their countries’ ongoing economic and geostrategic security.

But, some notable exceptions aside, Australia’s obsession with small-scale projects arguably confuses and confounds Korean and Japanese investors by sending the message that we simply don’t understand what is required. The fact that NSW is currently struggling to meet its own domestic renewable targets is hardly likely to inspire foreign investor confidence in our future as a reliable renewables exporter.

Thanks to these missteps, some of our country’s most thoughtful policy and industry insiders fear that Australia may already have lost any advantage it once held in the green hydrogen export space. Canberra’s recently announced review of the 2019 National Hydrogen Strategy — for which submissions closed last week — will no doubt reveal the extent of our underperformance.

The current review is likely to produce an abundance of policy advice. But what is needed most urgently is a shift in policymaking mindset and a wholesale reframing of the green energy challenge with the embrace of a new green energy statecraft. We hope it’s not too late for hydrogen.

But whatever the outcome, this lesson remains crucially relevant to the other emerging green industries — not least bioenergy — in which Australia still holds massive potential: the clock is ticking.

This article was originally published at the Mandarin on 8 September 2023.