Key highlights
- 1The Australia green hydrogen market is expected to reach USD 5.5 billion by 2036, at a CAGR of 22.5% from 2026 to 2036.
- 2Western Australia has the largest project pipeline, followed by Queensland, Tasmania, and Victoria.
- 3The market is at an early stage, and several large projects were cancelled in 2025, resetting expectations.
- 4The Hydrogen Production Tax Incentive provides A$2 per kilogram of renewable hydrogen produced from 2027-28 to 2039-40.
- 5The Hydrogen Headstart program provides production-based revenue support administered by ARENA.
- 6In May 2026, ARENA shortlisted seven projects totalling about 2.18 GW for Hydrogen Headstart Round 2, across four states.
- 7The 2026 Federal Budget halved Round 2 funding to about A$1 billion, reflecting more cautious support.
- 8Shortlisted projects focus on derivatives such as ammonia, methanol, urea, and sustainable aviation fuel, rather than pure hydrogen.
- 9Key companies include Fortescue Ltd, Woodside Energy Group Ltd, Intercontinental Energy, Perdaman Group, and Hysata Pty Ltd.
Report Overview
The Australia green hydrogen market covers hydrogen produced from renewable electricity by electrolysis, together with derivatives such as green ammonia, methanol, and other e-fuels, the electrolysers and technology used to produce it, and its use in export and domestic applications. Australia has some of the world's best renewable energy resources and set out to become a major exporter of green hydrogen, but the market is at an early stage, and in 2025 several large projects were cancelled, including the Central Queensland Hydrogen Project, Fortescue's Gladstone electrolyser, and the Whyalla project, resetting expectations. Government support continues through the Hydrogen Production Tax Incentive and the Hydrogen Headstart program, and projects are increasingly focused on derivatives for domestic use and export. This report examines the market's size, drivers, segmentation, state markets, pricing, competition, recent developments, and outlook, and provides recommendations for participants.
Market dynamics
Drivers
- 01Australia has abundant solar and wind resources which provide the low-cost renewable electricity needed for green hydrogen, and long-standing ambitions to be a hydrogen and green-derivatives exporter to markets such as Japan, South Korea, and Europe.
- 02Government support is significant: the Hydrogen Production Tax Incentive provides A$2 per kilogram of renewable hydrogen from 2027-28, and the Hydrogen Headstart program provides production-based revenue support to bridge the gap between production cost and market price.
- 03Domestic decarbonization including green ammonia, green iron, and fuels, adds demand.
Opportunities
- 01Green derivatives including ammonia, methanol, urea, and sustainable aviation fuel, which are easier to transport and sell than pure hydrogen, are the focus of the shortlisted Hydrogen Headstart projects and offer a clearer route to market.
- 02Domestic green metals including green iron and green ammonia for fertilizer, offer opportunities to use hydrogen within Australia and add value to its resources.
- 03Electrolyser technology including the high-efficiency electrolysers developed by Australian company Hysata, offers an opportunity in technology and manufacturing.
Trends
- 01Following the cancellation of several large projects in 2025 the industry has refocused on fewer, more viable projects, particularly those producing derivatives for identified markets.
- 02The shortlisted Hydrogen Headstart Round 2 projects focus on ammonia methanol, urea, and sustainable aviation fuel rather than pure hydrogen.
- 03Government support continues but has become more cautious with the 2026 Federal Budget halving Round 2 funding.
Report Summary
| Base Year | 2025 |
|---|---|
| Forecast Period | 2026-2036 |
| Market Size (2025) | USD 0.6 billion |
| Market Size (2026) | USD 0.72 billion |
| Market Size (2036) | USD 5.5 billion |
| CAGR (Value) | 22.5% (2026-2036) |
| Segments Covered | By Production Technology (Alkaline, PEM, Other Electrolysis); By Product / Carrier (Green Hydrogen, Green Ammonia, Methanol & Other Derivatives); By End Use (Export, Domestic Industry, Power & Mobility) |
| Regions Covered | Western Australia, Queensland, Tasmania, Victoria, South Australia, New South Wales, and Rest of Australia |
| Key Companies | Fortescue Ltd, Woodside Energy Group Ltd, Intercontinental Energy, CWP Global, Copenhagen Infrastructure Partners, Perdaman Group, HIF Asia Pacific, HAMR Energy, ABEL Energy, Hysata Pty Ltd |
Segmental analysis
By Production Technology
- Alkaline electrolysis a mature and lower-cost technology, accounts for a large share of planned capacity, and Australian company Hysata is developing a high-efficiency alkaline-based electrolyser.
- PEM electrolysis which offers flexibility, is used in some projects.
- Other electrolysis including solid-oxide and next-generation designs, is emerging.
Alkaline and PEM electrolysis account for most planned capacity, while next-generation and high-efficiency designs aim to reduce cost, and the technology mix reflects the priority on lower-cost production for a market where cost is the main barrier.
By Product and Carrier
- Green hydrogen is the base product but because it is difficult and costly to transport, most projects convert it into derivatives.
- Green ammonia used as a fuel, a carrier, and for fertilizer, is a major product, and several projects are focused on it.
- Methanol urea, and sustainable aviation fuel, which are easier to sell and transport, are the focus of the shortlisted Hydrogen Headstart projects.
Derivatives, particularly ammonia and methanol, account for most of the market's route to sale, while pure hydrogen is mainly an intermediate, and the product mix reflects the shift toward marketable derivatives.
By End Use
- Export to markets such as Japan, South Korea, and Europe, was the original focus, though export demand has been slower and less certain than expected.
- Domestic industry including green ammonia for fertilizer, green iron and metals, and fuels, is an increasingly important end use that adds value within Australia.
- Power and mobility are smaller end uses.
Domestic industry and export account for the main end uses, with domestic use growing in importance as export demand proves uncertain, and the end-use mix reflects the reset toward domestic and derivative markets.
Market Dynamics in Australia
- 1
Western Australia
Western Australia has the largest green hydrogen project pipeline. The state has abundant solar and wind resources and large areas of land, and hosts major projects and hubs, including the Murchison Green Hydrogen project and the Perdaman Helios project, both shortlisted for Hydrogen Headstart Round 2, and large proposed hubs such as the Asian Renewable Energy Hub and the Western Green Energy Hub. The state combines resources, land, and existing industry, including ammonia and minerals. Western Australia's resources, land, and large pipeline make it the leading state for green hydrogen, though projects must still reach final investment decisions.
- 2
Queensland
Queensland has significant projects but experienced major cancellations. Queensland, particularly Gladstone, was a focus for green hydrogen and export, but the Central Queensland Hydrogen Project, a 2.88 GW project, was cancelled in 2025 when the lead partner withdrew, citing costs and market viability, and Fortescue abandoned its Gladstone electrolyser. Projects including the Summit Hydro Gladstone project and a European Energy project were shortlisted for Hydrogen Headstart Round 2. Queensland retains significant projects and industry, but its experience reflects the challenges the sector has faced.
- 3
Tasmania and Victoria
Tasmania and Victoria host derivative-focused projects. Tasmania, with renewable hydro and wind resources, hosts the Bell Bay Powerfuels and HIF Tasmania e-fuel projects, both producing methanol and shortlisted for Hydrogen Headstart Round 2, and Victoria hosts the HAMR Energy Portland project, producing methanol and sustainable aviation fuel. These states are focused on derivatives and e-fuels using their renewable resources. Tasmania and Victoria, with their renewable resources and derivative-focused projects, are important states in the reset toward marketable products.
- 4
South Australia and Other States
South Australia and other states have significant resources but have experienced setbacks. South Australia, which had planned a world-first green hydrogen power plant and electrolyser at Whyalla, cancelled the project and disbanded its Office of Hydrogen Power in 2025 following the financial collapse of the Whyalla Steelworks, redirecting priorities. New South Wales, the Northern Territory, and other states have resources and some projects. These states have significant potential but, as in South Australia, have experienced the difficulties that have reset the sector. South Australia and other states retain resources and potential, tempered by recent setbacks.
Pricing Analysis
Green hydrogen prices in Australia are shaped by production cost, government support, and the gap with alternatives. Green hydrogen currently costs more than fossil-based hydrogen and more than buyers in many markets are willing to pay, which is the main barrier and a reason for the 2025 project cancellations. Production cost is driven by renewable electricity cost, electrolyser capital cost, and scale, and Australian technology such as high-efficiency electrolysers aims to reduce it. Government support reduces the effective cost: the Hydrogen Production Tax Incentive provides A$2 per kilogram, and Hydrogen Headstart provides production-based revenue support to bridge the gap between cost and market price. Conversion to derivatives adds cost but makes the product saleable.
Overall, prices reflect a production cost that is currently above what the market will pay, which government support is designed to bridge, and cost reduction is central to the market's viability.
Competitive landscape
The Australia green hydrogen market includes resource and energy companies, specialized project developers, electrolyser and technology companies, and international partners. Competition and the viability of projects centre on access to low-cost renewable energy, offtake and markets, government support, and cost reduction, and the market has been marked by the withdrawal of several large players and projects. Participants compete and cooperate on securing renewable energy, offtake agreements, and government support, and on reducing production cost, and the shortlisted Hydrogen Headstart projects, focused on derivatives, are among the more advanced. As the sector has reset, the viability of projects and access to support have become central.
Companies active in the market include resource and energy companies such as Fortescue Ltd, which is pursuing green hydrogen, ammonia, and green iron, Woodside Energy Group Ltd, and bp Australia, project developers including Intercontinental Energy and CWP Global, which are developing large Western Australian hubs, Copenhagen Infrastructure Partners, which is developing the Murchison project, and Perdaman Group, HIF Asia Pacific, HAMR Energy, ABEL Energy, and European Energy, which have shortlisted derivative projects, and electrolyser company Hysata Pty Ltd. Several other companies, including Stanwell and Origin Energy, have withdrawn from projects. These companies compete and cooperate as the sector focuses on viable projects.
Voice of Customer
Primary interviews conducted for this study noted that cost and demand are the main barriers, that government support is essential, and that derivatives offer a clearer route to market. Three representative perspectives are summarized below.
"The barrier is cost against demand. Green hydrogen costs more than buyers will pay, which is why projects have been cancelled, and government support is essential to bridge that gap." — Executive, energy company
"We have shifted our focus to derivatives such as ammonia and methanol, which are easier to sell and transport than pure hydrogen. That is a clearer route to market." — Manager, project developer
"Cost reduction, including through more efficient electrolysers, is essential. Without it, projects do not reach final investment decisions, whatever the ambition." — Director, hydrogen technology company
Analyst perspective
In our assessment, the Australia green hydrogen market has reset from its earlier ambition to become a major hydrogen exporter to a smaller, more focused set of projects, and its future depends on cost reduction and government support. Australia has world-class renewable resources and set out to be a hydrogen export superpower, but the reality has been difficult: green hydrogen costs more than buyers in many markets will pay, export demand has been slower and less certain than expected, and in 2025 several large projects were cancelled, including the 2.88 GW Central Queensland Hydrogen Project, Fortescue's Gladstone electrolyser, and the Whyalla project, with Origin and others also withdrawing. Government support continues through the A$2 per kilogram Production Tax Incentive and the Hydrogen Headstart program, but the 2026 Federal Budget halved Round 2 funding, reflecting more cautious support. The clearest direction now is toward derivatives, ammonia, methanol, urea, and sustainable aviation fuel, which are easier to sell, and toward domestic use such as green iron, as reflected in the seven projects shortlisted in May 2026. We expect growth from a low base, driven by the projects that reach final investment decisions with government support, but we would emphasise the execution and cost risks, and we see the market as more modest and more focused than the earlier ambitions implied.
Key Strategic Developments
- May 2026 — ARENA shortlists seven projects for Hydrogen Headstart Round 2: ARENA shortlisted seven projects totalling about 2.18 GW of electrolyser capacity across Western Australia, Tasmania, Victoria, and Queensland, focused on derivatives including ammonia, methanol, urea, and sustainable aviation fuel, with full applications due by early September 2026. Impact: focuses government support on a smaller set of derivative-focused projects.
- 2026 — Federal Budget halves Hydrogen Headstart Round 2 funding to about A$1 billion: the 2026 Federal Budget reduced Round 2 funding to about A$1 billion. Impact: signals more cautious government support after the 2025 project cancellations.
- 2026 — Shift to derivatives and e-fuels: the shortlisted projects and the wider industry focused on derivatives such as ammonia, methanol, urea, and sustainable aviation fuel for domestic use and export, rather than pure hydrogen. Impact: refocuses the industry on marketable products with clearer demand.
- 2026 — Hydrogen Production Tax Incentive supports planning toward 2027-28: the A$2 per kilogram Production Tax Incentive, available from 2027-28 to 2039-40, continued to support project planning in 2026. Impact: provides long-term revenue support that helps bridge the cost gap.
- 2026 — Hysata scales high-efficiency electrolyser production: Australian electrolyser company Hysata continued to scale its high-efficiency electrolyser, which it says will reduce the cost of green hydrogen and deliver capital savings for large projects. Impact: supports cost reduction and local manufacturing.
Strategic Recommendations
- Focus on derivatives with identified markets. Prioritize green ammonia, methanol, and other derivatives that are easier to sell and transport than pure hydrogen and have clearer demand, as the shortlisted projects do.
- Use government support to bridge the cost gap. Structure projects around the Production Tax Incentive and Hydrogen Headstart support, which are essential to bridge the gap between production cost and market price, while recognizing that support has become more cautious.
- Prioritize domestic use and green metals. Pursue domestic uses such as green iron and green ammonia for fertilizer, which add value within Australia and reduce reliance on uncertain export demand.
- Reduce production cost. Invest in cost reduction, including high-efficiency electrolysers and low-cost renewable energy, as cost is the main barrier and the determinant of whether projects reach final investment decisions.
- Secure offtake before committing. Secure firm offtake agreements, which have been a weak point, before committing to large projects, to avoid the cost and demand mismatch that led to cancellations.
- Manage execution and cost risk. Plan realistically for cost, demand, and execution risk, phasing projects and avoiding over-scaling, in light of the sector's recent experience.
Sustainability impact
Enabling Decarbonization Where It Is Hard
Green hydrogen and its derivatives can decarbonize sectors that are difficult to electrify, including ammonia and fertilizer, steel and green iron, and fuels, using Australia's renewable resources. By replacing fossil inputs, green hydrogen reduces emissions in these sectors.
By enabling the decarbonization of hard-to-abate industries, green hydrogen and its derivatives support emissions reduction in Australia and, through exports, in other economies, using Australia's renewable energy.
Adding Value to Renewable Resources
Green hydrogen and green metals allow Australia to add value to its renewable resources and minerals by processing them domestically, rather than exporting raw materials. Domestic processing adds economic value.
By adding value to renewable resources and minerals through green hydrogen, ammonia, and iron, the sector can support a more sustainable and higher-value use of Australia's resources.
Managing Cost and Realism
The sector's recent cancellations show the importance of realistic assessment of cost and demand, so that investment supports viable projects and avoids waste. Realistic planning supports sustainable development.
By assessing cost and demand realistically and focusing on viable projects, the sector can develop sustainably and avoid the waste of resources on projects that do not proceed, supporting responsible investment.
Supporting a Just and Regional Transition
Green hydrogen and derivative projects, located in regional areas such as the Pilbara, Gladstone, and Bell Bay, can support regional employment and a just transition. Regional projects support local economies.
By locating in regional areas and supporting employment, green hydrogen projects can contribute to a just and regional transition, an important social dimension, provided the projects are viable.
Table of contents
14 chapters · 115 pages · click to expandFrequently asked questions
The Australia green hydrogen market was valued at USD 0.6 billion in 2025 and is projected to reach USD 5.5 billion by 2036, at a CAGR of 22.5% from 2026 to 2036, from a low base, driven by government support and derivative projects, though subject to cost, demand, and execution risk.