Hydrogen in Australia: Can we expect massive adoption in the next 10 years?

When will we see hydrogen in Australia? Not as a fad, not as an idea, but as a widespread energy source as we are all being told it will be? Earlier this decade, you could be forgiven for thinking the answer was very soon — billions were being pledged, projects were multiplying, and major companies were racing to plant their flags.

Since then, the picture has changed considerably. A string of high-profile cancellations and strategic retreats has forced a sober reckoning, even as the long-term investment case for hydrogen remains intact. We thought we’d look at why hydrogen is still a big deal, where things stand heading into the second half of the 2020s, and how investors can think about gaining exposure.

4 reasons hydrogen is a big deal

We see four reasons, and they haven’t changed. First, to state the blatantly obvious, it is a renewable energy source. When hydrogen is used in fuel cells, it produces water as the only by-product, making it a zero-emission fuel. OK, but there are plenty of other renewable sources like solar and wind. What makes hydrogen better? We’ll deal with those in the remaining three reasons.

The second of our four reasons is hydrogen’s high energy density by weight, which makes it significantly more efficient than other common energy carriers such as batteries. Specifically, hydrogen contains approximately three times the energy per mass of gasoline, meaning it can store more energy for the same amount of weight. This property is particularly advantageous in transportation sectors such as aviation and shipping, where weight is a critical factor — and where battery-electric alternatives remain impractical.

The third is hydrogen’s versatility and flexibility to be used in a variety of applications. It can generate power through fuel cells, be burned to create heat, or be used as a raw material in industrial processes. Furthermore, it can be integrated into existing energy systems — it can store and transport energy generated from other renewable sources, such as wind or solar, thus addressing one of the major challenges of renewable energy: intermittency.

And finally, it can serve not just as an energy source, but as a storage medium, enabling surplus energy from renewable sources to be stored and then used when needed. By converting excess electricity into hydrogen, energy can be stored indefinitely and then converted back to electricity through fuel cells as demand requires. This remains one of the most compelling long-term arguments for the technology — even as its near-term economics have proved more stubborn than anticipated.

So, when will we see hydrogen in Australia?

The honest answer in mid-2026 is: later than many hoped, but earlier than the pessimists now claim. Australia’s National Hydrogen Strategy (first launched in 2019) was comprehensively updated in 2024 and now sets a more measured tone, reflecting hard-learned lessons about the gap between ambition and commercial reality. According to CSIRO’s HyResource tracker, the total number of hydrogen projects in Australia actually fell from 104 in 2023 to 90 in 2024, as expectations around its role in the energy transition matured and a number of unviable proposals were quietly shelved.

That pruning is not necessarily a bad thing. The projects that remain are increasingly credible. As of late 2025, a handful of hydrogen projects with capacities greater than 10 MW are progressing into construction, with production expected to commence across 2025 and 2026. The combined production capacity of operational or under-construction projects is estimated at approximately 11.5 kilotonnes per year — modest by global standards, but a real and growing base.

Government support remains substantial. The Australian Government has committed $17.5bn in hydrogen-specific support and a further $42.8 billion in hydrogen-eligible support across a range of programs. The centrepiece is the $2 billion Hydrogen Headstart initiative, a revenue support program designed to scale up large green hydrogen projects by offering a production credit over a 10-year period from 2026–27. In July 2025, ARENA conditionally awarded $432m under Headstart’s first round to support Orica’s Hunter Valley Hydrogen Hub near Newcastle. This is a 50 MW electrolysis plant expected to produce 12 tonnes of renewable hydrogen per day for use in Orica’s ammonia manufacturing facility.

On the international front, Australia has been active in locking in future demand. In September 2024, Australia and Germany signed a deal to deepen cooperation on green hydrogen supply chains, backed by a €400m H2Global funding window to guarantee European buyers for Australian producers. And in October 2025, a landmark US-Australia Critical Minerals Production Tax Credit Agreement gave Australian hydrogen projects access to incentives available to similar projects in the US, a significant development given the scale of US demand-side support under the Inflation Reduction Act framework.

The re-election of the Albanese Labor Government in May 2025 (with energy and climate policy a central dividing line between major parties) has provided improved investor confidence and policy continuity. Labor’s target of 82% renewable energy in the National Electricity Market by 2030 forms the backbone of the cheap renewable electricity that production ultimately depends on.

The reality check: cancellations and consolidation

It would be remiss not to address the significant setbacks of the past two years. The green hydrogen market has contracted sharply (both in Australia and globally) in response to challenging project economics, stubbornly high production costs, and slower-than-expected demand growth.
The most high-profile casualty has been Fortescue (ASX: FMG). We thought Fortescue Future Industries (FFI) was the standout ASX vehicle for hydrogen exposure, pointing to its electrolyser manufacturing facility in Queensland.

Since then, the story has changed dramatically. Fortescue cancelled its PEM50 green hydrogen project in Gladstone and its 80 MW Arizona Hydrogen hub in the US, taking a US$150m pre-tax write-down. FFI,  once a standalone green-energy entity championed by founder Andrew Forrest, has been largely reabsorbed into the parent company’s corporate structure. Fortescue cited global energy price pressures, infrastructure delays, and a strategic decision to move away from proton exchange membrane (PEM) electrolysis technology. The company says it remains committed to decarbonisation technology in the long term, but the near-term ambitions have been scaled back considerably – there’s no shying away from that fact.

In another significant reversal, the AUD$14bn Central Queensland Hydrogen Project was cancelled in June 2025 after state-owned energy company Stanwell withdrew its support, following the earlier exits of Kansai Electric Power and Iwatani Corporation. And Origin Energy (ASX:ORG), which was building a Hydrogen Hub in the Hunter Valley, exited that project entirely in October 2024, citing continuing uncertainty about the pace of hydrogen market development and the capital-intensive risk profile. The project has since been restructured, with Orica taking the lead and ARENA’s Headstart funding stepping in to fill the gap.

The International Energy Agency, writing in its Energy Technology Perspectives 2026 report, put these setbacks in context: low-emissions hydrogen is seeing a correction that is “typical in emerging sectors”, and deployment could soon approach the “breakneck expansion” seen in solar and offshore wind in their early years. Global investments in low-emissions hydrogen reached $8bn in 2025, up 80% from the prior year. The hydrogen bubble may be weakening, but it is far from bursting.

Can I gain exposure to hydrogen on the ASX?

Yes, if you want exposure to hydrogen in Australia, listed companies remain active in this space — but the landscape looks quite different to 2024. Fortescue (ASX: FMG) still harbours long-term hydrogen and green metals ambitions, but investors should now treat these as a distant secondary story behind its core iron ore business. The near-term hydrogen narrative has been significantly deflated.

On the industrial side, Orica (ASX: ORI) is now the more interesting ASX proxy in the near term, as it takes the lead on the Hunter Valley Hydrogen Hub with ARENA’s $432 million in conditional Headstart funding behind it. This is a genuine industrial decarbonisation play rather than a pure-hydrogen bet, and it has real offtake underpinning it — Orica will consume the hydrogen in its own ammonia manufacturing operations.

Meanwhile, many individual ASX hydrogen stocks at early stages continue to face the same challenges they did two years ago: limited access to low-cost renewable electricity, a lack of established offtake agreements, and the ongoing difficulty of securing financing without a proven revenue stream. Infrastructure has progressed more slowly than anticipated, hampered by a lack of clear regulation around hydrogen storage and transportation. The number of refuelling stations for vehicles and equipment remains limited. These are genuine structural issues, not short-term noise.

Investors need to be realistic

So often on the ASX, investors are lured into investing in microcap companies by the promise that these companies are onto the next big trend and will capitalise. We don’t recommend investors buy into hydrogen small cap stocks right now. In the last two years, the hydrogen sector has been brutal for speculative players, and many early-stage ASX players  have seen their valuations decimated as projects have been cancelled, deferred, or restructured.

At the same time, we wouldn’t advise abandoning the sector entirely. Australia’s structural advantages (having world-class wind and solar resources, established export infrastructure, proximity to Asian industrial demand) have not gone away. The Hydrogen Headstart program and the international offtake agreements being built through H2Global and the US-Australia Critical Minerals deal suggest that the plumbing for a genuine hydrogen export industry is still being laid, even if the timeline has stretched.

Our view remains that hydrogen will have a significant role to play in Australia’s future, particularly in hard-to-electrify sectors like ammonia production, alumina refining, and heavy transport. At the same time, we believe that the timeline to widespread commercial adoption continues to extend. The projects most likely to survive and create value are those with genuine industrial offtake, strong government support, and balance sheets capable of absorbing the long gestation period. Slow and steady will win this race. And those without the capital to stay in it won’t even be there at the finish line.