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‘Concerns’ | Decision on Australia’s controversial coal-to-hydrogen project handed to regional planning minister

Developers warn that $1.16bn H2 export project will not proceed unless it has ‘consistency’ from governments

Daniel Andrews, premier of Victoria.
Daniel Andrews, premier of Victoria.Photo: Darrian Traynor/Getty Images

A decision on whether to give regulatory approval for the construction of a controversial coal-to-hydrogen demonstration project in the state of Victoria, Australia, has been handed to the state’s planning minister — who has recently been accused of derailing a local wind project on environmental grounds.

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The news comes as developers behind the Latrobe Valley coal-to-hydrogen project, alarmed by what they perceive as the federal government’s ambivalence to fossil-based “clean” hydrogen, warn that they need consistency of messaging from politicians in order for the project to proceed.

A consortium of four Japanese companies, J-Power, Sumitomo, Kawasaki and Iwatani, supported with $1.1bn of funding from the Japanese government, want to produce 30,000 tonnes of hydrogen gas from coal mined in Victoria’s Latrobe Valley, before liquefying it for export to Japan and sequestering the carbon emissions under the Bass Strait — all by the end of this decade.
But support for the controversial project among local officials has begun to melt away, just as new planning laws for hydrogen projects, drawn up by the Victoria government, land the final responsibility for granting permitting for the scheme to planning minister Sonya Kilkenny, the Australian Financial Review (AFR) reported.

The AFR indicated that it had detected unease from unnamed “project developers”, concerned that this could mean an additional hurdle for the project — just as Victorian officials start to hedge on the project’s environmental credentials, despite the scheme winning initial support from finance minister Tim Pallas.

Energy minister Lily D’Ambrosio has already refused to endorse it earlier this year, and Victoria’s premier Daniel Andrews has also cast doubt on the efficacy of carbon capture and storage, describing it as “unproven”.

The Victorian government told AFR that the new laws simply introduce streamlined rules for hydrogen projects that previously did not exist, claiming that it would add no new regulatory or planning burden — noting that the old system would have required local councils to take decisions on massive projects.

And the head of the leading partner in the project, Jeremy Stone of J-Power Latrobe Valley, said the new planning laws might actually indicate progress.

But Kilkenny is apparently unafraid to slap additional regulations on projects that could be deemed harmful to the environment.

Earlier this month the minister imposed planning conditions on a 354MW wind farm proposed in the state, in order to protect local bird and bat populations. The “restrictive” conditions were blasted by Australia’s renewables trade body the Clean Energy Council (CEC) as “disastrous” and “not workable” for local wind developments, going on to accuse Kilkenny of using draft or inappropriate guidelines as the basis for her report into the project.

And she also recently moved to ban all development on Victoria’s Bellarine Peninsula, designating it a protected landscape under Victorian law.

The Japanese developers behind the Latrobe Valley project are becoming increasingly concerned that the federal Australian government — run by the same Labor Party running Victoria’s administration — is fundamentally opposed to fossil fuel-based H2 production and carbon capture and storage, both of which it has excluded from its $1.33bn Hydrogen Headstart subsidy programme.

Yuko Fukuma, senior manager of Kawasaki Heavy Industry’s hydrogen unit, said that the developers require “consistency in messaging” from politicians before the project can proceed.

The four-strong group behind the Latrobe project are acting as part of the Hydrogen Energy Supply Chain (HESC), a consortium of around nine different companies, including oil giant Shell and seven Japanese corporations, to drive forward projects that develop a hydrogen supply chain between Australia and Japan.

“The HESC partners really want to see any clear indication of support for HESC from the Commonwealth and Victorian governments,” said Fukuma.

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Published 21 August 2023, 13:16Updated 21 August 2023, 17:09