Dire warning from Down Under as Ed Miliband places hydrogen on the coronary heart of his inexperienced dream

Ed Miliband has put the ‘low-carbon hydrogen economy’ at the heart of his mission to secure plentiful clean energy in the UK – but events in Australia suggest his dream may in fact be a mirage.

The Energy Secretary is not alone in his enthusiasm – with Prime Minister Keir Starmer and his Australian counterpart Anthony Albanese vowing to work more closely together to harness hydrogen as well as other, more established renewable sources such as offshore wind.

As in Britain, generating ‘green’ hydrogen to make ammonia used in fertiliser, or to replace diesel in trucks, heavy machinery and ships, is central to Australia’s plans to hit net zero carbon emissions by 2050, despite being a largely untried and untested technology. Many countries have been watching Australia closely because of the sheer scale of its hydrogen ambitions.

With its space, sunshine and sea, Australia has the largest pipeline of hydrogen projects in the world, with an estimated value of £110billion.

But enthusiasm among some of the biggest players has been fading fast – another potential blow to Miliband’s vision of the future.

Green hydrogen is made by using electricity to separate water into its component parts of hydrogen and oxygen, using machines called electrolysers powered by renewable sources such as solar panels or wind turbines. 

Blue hydrogen is made from burning gas, while brown and black hydrogen is made from coal. This does not come cheap.

Australian energy giant Origin recently pulled out of building the country’s biggest green hydrogen plant in New South Wales, saying it was too expensive to produce.

Andrew ‘Twiggy’ Forrest, the iron-ore billionaire and arguably the world’s most bombastic green hydrogen advocate, has also drastically scaled back his ambitions by slashing hundreds of workers and postponing the ambitious 15m tonne target he’d set for the end of the decade. The cost, he said, would need to come down significantly to be viable.

The green energy arm of his Fortescue Metals Group had said it was on track to be the biggest supplier of green hydrogen to the UK, after completing a deal in 2021 with Lord Bamford’s digger manufacturer JCB and the hydrogen distribution firm Ryze Power, founded by Bamford’s son Jo. 

But disgruntled shareholders wanted Forrest to focus on digging up iron ore.

BP, which has faced similar pressure from investors led by activist hedge fund Elliott, is in the spotlight over its green ambitions ahead of an update from chief executive Murray Auchincloss next week.

It shelved plans this month for hydrogen and renewable aviation fuel hubs south of Perth in Western Australia. And Queensland’s state government is pulling funding from a £6billion plant and pipeline.

It did not fit with its goal to provide ‘affordable, reliable and sustainable power for Queenslanders’, said treasurer David Janetzki. 

This followed a decision by a key investors, Japan’s Kansai Electric Power Company, to withdraw due to costs.

Tony Wood, an energy expert at independent think tank the Grattan Institute, said: ‘People got carried away with the hype. Then they find out that… it’s a lot harder and more expensive to do than they imagined.’

There has certainly been no shortage of hype. With the world scrambling to cut reliance on fossil fuels, the global market has been forecast to top £1trillion by 2050. Some

projects in Australia are vast. The much-delayed £28billion renewable energy hub in the Pilbara region of north-west Australia, backed by BP, is four times the size of Greater London.

Given BP, in common with other oil majors, has been watering down its green energy commitments (it said in November it was dumping 18 early stage hydrogen schemes), the project’s future is far from certain.

BP is expected to use a major investor presentation on Wednesday to announce plans to jettison renewable projects after a slump in profits from lower oil and gas prices.

Around the world, hydrogen hype is giving way to reality. Nearly a quarter of projects in Europe have been stalled and cancelled, according to a report from consultancy firm Westwood Global Energy.

It gave three reasons: high costs; failure to obtain funding; and lack of demand. 

Meanwhile, the practical limitations of green hydrogen – its low density and high flammability make it difficult to store and transport – are becoming more apparent despite long being cited by critics.

Former prime minister Boris Johnson, who launched the UK’s first hydrogen strategy in 2021, envisaged a future where British households would be able to cook their breakfast with hydrogen gas.

The chances of this are increasingly slim, with households more likely to be relying on electricity.

In May last year, a third pilot project to test hydrogen heating in homes by building a ‘hydrogen town’ was shelved by the Conservative government. The UK had already abandoned plans for two smaller trials in Redcar on Teesside and at a village in Cheshire.

The greatest potential for green hydrogen is widely believed to lie in making ammonia for ferti-liser and explosives, in place of burning methane, which produces carbon dioxide.

Another big opportunity centres around replacing diesel in heavy machinery and ships – where electrification is not practical.

But even the biggest hydrogen advocates acknowledge government incentives are needed to get going, given how expensive it is to make, store and transport.

‘This industry needs to exist in order for Australia to decarbonise. But it cannot exist in the absence of government support,’ said Dr Fiona Simon, chief executive of the Australian Hydrogen Council. This too is looking increasingly precarious.

Around the world there has been a populist push-back – most vividly with the election of Donald Trump in the US – with political leaders vowing to prioritise energy security in the wake of Russia’s invasion of Ukraine to keep bills down.

With an election just months away in Australia, a pro-fossil fuel, pro-nuclear centre-Right coalition is adamant the renewable energy revolution needs to be slowed down and sees no reason why billions of dollars of taxpayers’ money should be ploughed into a green hydrogen industry which may turn out to be little more than hot air.