The Australian state of Tasmania will begin offering subsidies to green H2 developers in October, using cash from its A$50m ($32m) Renewable Hydrogen Industry Development Fund (RHIDF).

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The funding round will be available for projects that will start operations in 2025, but these will have to be 5-10MW in size, with a focus on supplying local industries.

“The development of a domestic market for the use of locally produced renewable hydrogen will play a critical role in establishing a viable renewable hydrogen industry in Tasmania,” said the state’s minister for energy and renewables Guy Barnett.

“To secure funding, proponents will need to be able to commit to commencing production in 2025, provide evidence of their market for the green hydrogen produced and demonstrate a pathway to commercial sustainability,” he added.

However, the Tasmanian government has not specified which sectors it will prioritise when considering renewable hydrogen offtake — only that it aims for green H2 to be “a significant form of energy used in Tasmania by 2030”, according to Barnett.

While this announcement is a boon for smaller developers such as Countrywide Hydrogen and LINE Hydrogen — both of which are planning Tasmanian projects in the 5-10MW range — this funding round could end up excluding major projects that are already in development over size or planned offtake.

The state had provided A$2.6m in RHIDF grants for feasibility studies for three projects each by developers Origin Energy, ABEL Energy and Grange Resources. But all of these plants would be much larger than 5-10MW in size, with the first two geared towards exports.

Tasmania’s hydroelectric power stations have given it the greenest grid in Australia. But insufficient electricity supply was raised by all three feasibility studies funded by the government.

Origin specifically raised in its study that although first exports are planned for 2027, “the cost of electricity generation, transmission, and firming have the largest material impact on the levelized cost of ammonia, and these are not yet at a level that supports the project progressing”.

Tasmania’s Marinus Link, an interconnection to Victoria long in development, was this month scaled back by the federal government to just one 750MW cable due to start construction in 2025 instead of two due to cost overruns — which could restrict how much electricity is available for large-scale electrolysis.

And a lack of green power may have already scuppered plans for Tasmania to be the site of what was originally set to be Fortescue’s first green hydrogen plant it would build, with final investment decision (FID) originally scheduled for 2021.

However, investment has been delayed since that year owing to a decision by the state-owned electricity generator Hydro Tasmania to only supply a portion of power from existing assets towards the new H2 plant, reasoning that it would only provide backup to intermittent energy from new wind farms which could be built to power the facility’s demand.

Fortescue’s billionaire founder Andrew Forrest had at the time indicated that the restricted hydropower supply would lead to the company seeking other locations for its first hydrogen project.

And CEO of Fortescue’s energy division Mark Hutchinson last Friday confirmed that the company will not build its own upstream renewables for the Tasmanian plant, rather waiting for the power market in the state to develop further before taking any investment decision, reported the Australian Financial Review.

“If we had a good source of power, we would do it, but we don’t, so I can’t do it without power,” he said.

”When we have the power we will do that project – whether it’s domestic or for export, we will see at the time.”

Tasmania’s state government had in June pushed back against accusations that Fortescue had completely cancelled the project and exited the region.

But reports by Australian media from May suggest that the company has bid in South Australia’s A$593m funding competition to build an H2 production and storage complex by 2025, indicating that while its Tasmanian plant may not have been mothballed, it is prioritising investment elsewhere.

Oil and gas giant Woodside had also announced in 2020 that it would build a 300MW green hydrogen and ammonia plant in Tasmania, with FID scheduled for this year.

However, while it applied for an environmental impact assessment in 2022, this is still outstanding, although the project has been listed by Australia’s federal government as one of 19 to take part in design trials for an H2 guarantees of origin scheme.