Australia is falling behind in the global hydrogen market, with a large majority of its low-carbon hydrogen projects still in early development and several key initiatives cancelled, according to a report by consultancy Wood Mackenzie.
Released during the Australia Energy Producers Conference, the report titled “How can Australia compete in the global hydrogen market (before it’s too late)?” notes that while Australia has strong renewable resources and proximity to Asian demand centres, it is struggling to develop a competitive hydrogen industry.
“Australia’s strategic proximity to Asian demand centres is a clear advantage,” said Joshua Ngu, vice chairman for Asia Pacific at Wood Mackenzie. “But this is offset by a significantly higher Levelized Cost of Hydrogen (LCOH), driven by elevated engineering, procurement and construction (EPC) and power costs. This leaves Australia trailing behind global hydrogen front-runners such as Europe and the Middle East.”
The report highlights that less than 5% of the six million tonnes per annum (Mtpa) of global low-carbon hydrogen capacity currently operating or under construction comes from Australia. Most domestic projects, including Fortescue’s PEM50 and the Yuri Green Ammonia project, remain small-scale, each producing under 10,000 tonnes annually.
Multiple planned projects—such as the Grange Resources Renewable Hydrogen Study and Nyrstar Port Pirie—have recently been cancelled. Once viewed as key steps in building Australia’s hydrogen industry, their cancellation has raised concerns about the sector’s direction.
Wood Mackenzie identified limited domestic demand as a major barrier to scaling hydrogen production, especially given the high costs. Hydrogen has the potential to decarbonise sectors such as steelmaking, transport and power generation, but remains commercially unviable in the current market.
“At current costs, hydrogen production in Australia is economically unviable without policy support,” Ngu said. “For instance, the displacement cost for hydrogen in power generation is around US$0.80 to 1.00/kg, while Australia’s LCOH exceeds US$10/kg.”
The report suggests Australia could look to international examples, such as Germany, Japan and South Korea, where mechanisms like Contracts for Difference have been introduced to bridge cost gaps and stimulate local demand.
While Australia retains the natural advantages needed to become a hydrogen exporter, Wood Mackenzie cautions that without stronger policy support and cost reductions, the country risks missing out on the opportunity to be a significant player in the global hydrogen economy.
