Green hydrogen proponents pumped on vote of confidence

Years of hype about green hydrogen could soon pay off for billionaire Andrew Forrest and other proponents of the future industry.

The federal budget tipped a surprise $2 billion into a "hydrogen head start" program to make sure Australia keeps pace with rivals.

"If they hadn't done it, Australia would have precisely zero green hydrogen projects of anything remotely commercial scale in five years' time," independent energy analyst Tim Buckley told AAP.

The cash - to be split between two or three as yet unnamed projects - is expected to make the numbers stack up for Fortescue Future Industries (FFI) in Queensland.

FFI executive Eva Hanly said customers need strong investment signals that this industry will be supported by government.

"This announcement does that," she said.

"They also need certainty this will be a big enough industry they can switch from a fossil fuel product and not have problems later.

"We need to give our manufacturing sector certainty there'll be enough product - that's why this $2 billion is really exciting."

Ms Hanly said the budget announcement was an important first step and the federal government had foreshadowed further announcements.

Part of Dr Forrest's Fortescue Group, FFI's main focus is green hydrogen which it intends to produce using Australian-made electrolysers and renewable energy.

Heavy industry needed to decarbonise but electrification would not be the whole solution, Ms Hanly said, particularly for steelmaking, aluminium, agriculture and mining.

"What we'll see is industries like that, who are wanting to decarbonise, will come up with a project partnered with a producer," she said.

"My understanding is that industry now needs to come to government with proposals."

As well as partnering with the United States Department of Energy, FFI is working with chemicals giant Incitec Pivot at Gibson Island near Brisbane to decarbonise ammonia production.

The first electrolysers made at FFI's Green Energy Manufacturing Centre in Gladstone, Queensland are earmarked for the proposed green hydrogen to ammonia project on the island.

Building new facilities and power are the biggest costs for green hydrogen, and will differ from country to country and even from state to state in Australia with jurisdictions such as Queensland still heavily dependent on coal-fired power.

Hydrogen plants could be connected to the electricity grid or operate as standalone facilities, hooked into their own renewable energy sources.

Ms Hanly said FFI would "absolutely ensure" their product was green hydrogen, not so-called blue and brown hydrogen from gas and coal.

"We will provide green electrons into the green hydrogen facility," she said.

"Whether that's us building them, supporting another generator to develop them on the grid - we will make sure that it's 100 per cent green hydrogen."

As well as greening traditional industries with the new fuel, FFI also expects Australia to become a significant exporter to Asia.

"We really need to get out as first mover before they source it from other jurisdictions," Ms Hanly said.

Treasurer Jim Chalmers said there would be a competitive process to decide which projects get production credits when the scheme is up and running.

"It is about encouraging more hydrogen production," he said.

"This is a big part of our plan to grow the economy - hydrogen will be key to our future."

Woodside Energy is pressing ahead in the US with a hydrogen project underway in Oklahoma. But the company has plans for "H2Perth" - potentially a world-scale hydrogen and ammonia production plant in WA.

H2Perth is one of 19 Australian projects that participated in the design trials for the Guarantee of Origin Scheme for hydrogen that was given the green light in Tuesday's budget.

Meanwhile, South Australian Premier Peter Malinauskas is on a four-day trade tour of Germany and the Netherlands to pitch a project to investors.

He said the Albanese government's decision to invest $2 billion in hydrogen energy underscored the importance of SA's plans for the renewable energy technology.

"It is clear hydrogen is going to be an integral part of the world's future energy needs, and this represents an incredible opportunity for South Australia," Mr Malinauskas said.

Dr Chalmers also highlighted in his budget speech the future production of green steel in Whyalla, using SA-made green hydrogen.

The Australian Hydrogen Council had asked the Commonwealth for a strong signal amid fierce global competition for investment dollars.

Council CEO Fiona Simon welcomed the budget's vote of confidence in renewable hydrogen as part of the energy transition, and as a future export.

But the projects - requiring land, power, water and upgraded ports - will not be possible without the support of local communities.

Some $2 million will support Indigenous communities and businesses to be part of the planning and design.

"It is crucial that hydrogen projects have the support of communities and communities reap the benefits from having projects in their regions," Dr Simon said.

Mr Buckley has no doubt Australia will be a renewable industry superpower, with green hydrogen - not any other variant - playing a role.

"Twiggy Forrest has done a huge sales job on how Australia should be a hydrogen superpower that has been massively over-hyped, but there is real potential there," Mr Buckley said.

But the electrification - using abundant solar, wind and energy storage - will be the bedrock of decarbonising the economy, he said.