Power Grid

The cost of generating electricity from renewable sources such as solar and wind in South Australia has declined significantly, with current prices under A$30 (US$19.35) per megawatt-hour. In contrast, the cost of hydrogen production remains much higher up to three times more due to inefficiencies and energy losses during electrolysis, storage, and conversion into green hydrogen.

This widening cost gap is seen as a key factor in the recent postponement of a major hydrogen energy project in the state, raising questions about the economic feasibility of such ventures in the short term.

The delayed hydrogen project, valued at A$1.037 billion (US$670.1 million), was originally intended to generate 200 MW of clean energy through electrolysis in the Whyalla region. This project was expected to play a pivotal role in enabling the transition to green steel and contributing to South Australia's goal of achieving full renewable energy reliance by 2027.

However, the state has now redirected A$600 million of its A$2.4 billion budget toward stabilizing operations at the Whyalla steelworks, which the government took control of after appointing an administrator in February 2025 due to the financial instability of its previous owner, GFG Alliance.

State Premier Peter Malinauskas described the hydrogen project as “delayed,” though it was officially withdrawn from the Energy Market Operator’s business plan in April 2025. Four GE Vernova turbines, each with a 50 MW capacity and contracted in late 2024, were also listed for sale, with the government aiming to recover a significant portion of project costs.

As global demand for turbines increases and lead times stretch, the resale market for these units is expected to be strong, offering a partial financial reprieve.

Despite the setback, South Australia remains committed to its hydrogen and clean energy goals. The state has consolidated its hydrogen initiatives under the Department of Energy and Mining, with former hydrogen chief Sam Crafter now leading efforts to decarbonize steel production in Whyalla.

Other hydrogen-related projects, such as the Hydrogen Centre at Port Bonython and Zero Petroleum’s feasibility studies for sustainable aviation fuel, continue to move forward. However, the shelving of the Whyalla hydrogen plant illustrates the political and economic uncertainties that can disrupt hydrogen production strategies across their entire value chain.