Plans for a $600 million hydrogen plant at Whyalla shelved as government announces steelworks support package
The vacant site in Whyalla earmarked for a hydrogen power plant. (ABC News: Brant Cumming)
In short:
Plans to build a major hydrogen electrolyser and power plant near Whyalla have effectively been scrapped.
Money for that project has now been allocated to saving the Whyalla steelworks, which went into administration on Wednesday.
What's next?
The state's opposition has asked why the state government's Office of Hydrogen Power is continuing.
The South Australian Government's plan to build a major hydrogen electrolyser and power plant near Whyalla has effectively been scrapped, with the Premier Peter Malinauskas blaming the lack of progress on a plan for green steel at the local steelworks for the decision.
The hydrogen plant was one of Labor's major election promises — an almost $600 million project that it said would lead to more jobs, cheaper power and less carbon emissions.
As part of the plan, the state government signed an agreement with steelworks owner GFG Alliance to provide it with hydrogen as it transitioned to green iron and steel.
But that transition had been delayed, and with the company's debts mounting, the state government made the extraordinary move to force the steelworks into administration.
The government hoped the Whyalla steelworks would be a major customer for hydrogen power plant. (ABC News: Brant Cumming)
Mr Malinauskas said that is the reason for the decision to "defer" the hydrogen plan.
"(Steelworks owner Sanjeev Gupta's) vision was to do what's called an electric arc furnace and a direct reduction iron facility to make green steel and then the third thing you need to do that is hydrogen and of course he hasn't delivered on that," he said.
"I'm not going to build a hydrogen plant and have no-one to sell the hydrogen to."
Government was major customer for hydrogen in original plan
In a tour of the Upper Spencer Gulf in February last year promoting the plan, Mr Malinauskas was adamant it would go ahead, with construction scheduled to begin late in 2024.
"It's baked in, it's happening, it's real," he said at the time.
The site earmarked for Whyalla's $600 million hydrogen power plant. (ABC News: Brant Cumming)
He said the community could have confidence in the plan because the hydrogen electrolyser was designed to generate power through adjacent generators.
"We've got our own customer for the hydrogen we produce and that will be the power plant itself," he said.
"But if there is the opportunity to enter into a commercial life-time agreement to realise the green iron and green steel opportunity then we want to grab that too."
The opposition has been pushing for a parliamentary committee to inquire into the government's hydrogen plan, and said the decision to not go ahead was a broken promise.
"They promised that energy prices would come down by eight per cent with this hydrogen power plant," opposition leader Vincent Tarzia said.
"This is basically their only significant energy policy and now it looks like this has been scrapped."
Money now to be spent on support package
The money that had been budgeted for the hydrogen plan will now make up part of the $2.4 billion dollar support package announced by the federal and state governments.
The bulk of the funding will be spent on new infrastructure at the steelworks once a new owner is found.
Mr Malinauskas told FiveAA radio once that happens, he will enter into discussions about how it will be used.
"We want to sit down with the would-be new owner, whoever that might be and say 'look, the state government's got $600 million of capital here, in conjunction with the federal government's investment'," he said.
Premier Peter Malinauskas speaking to workers at the Whyalla steelworks after his government tipped the industrial plant into administration. (ABC News: Che Chorley)
"'Here it is, let's work together about how you allocate those funds to roll out the transformation of the steelworks'."
Mr Malinauskas said that could include using it to build a hydrogen facility, but that would depend on the new owner's priorities.
Office of Hydrogen Power to remain
Despite the news, the state government said its Office of Hydrogen Power will continue operating.
"In order to decarbonise iron and steelmaking you need hydrogen, and there is a future for that," Mr Malinauskas said.
"But the large functions of that office will be curtailed and wound back, now that we defer that plan in order to get the basics right here in terms of the steel mill and the steel plant and the mine."
Mr Tarzia said the head of that office is paid more than half a million dollars a year, and the government needs to explain why.
Liberal Party leader Vincent Tarzia and opposition energy spokesperson Stephen Patterson are pushing for a parliamentary inquiry into hydrogen. (ABC News: Carl Saville)
"I think it's now up to the Premier to justify why this guy deserves a salary north of half a million dollars a year," he said.
"By the end of the four years this guy would have been paid $2 million. I mean that is an obscene amount of money, especially for a project that has now been shelved."