Australia’s Hydrogen Production Tax Incentive: driving investment in renewable hydrogen
The Government recently introduced the Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024. This Bill is anticipated to establish the Hydrogen Production Tax Incentive (HPTI), with the aim to incentivise and support the production of renewable hydrogen.
The HPTI is a core component of the Government’s $22.7 billion Future Made in Australia plan, which supports Australia’s 2024 National Hydrogen Strategy.
The HPTI is intended to:
promote project development
make renewable hydrogen available sooner
build scale to reduce production costs over time.
The HPTI is expected to be delivered through Australia’s tax system as a refundable tax offset. It would provide a $2 incentive per kilogram of renewable hydrogen to eligible producers for up to 10 years, between 1 July 2027 and 30 June 2040.
The goal of the initiative is to reduce production costs, attract private sector investment, and position Australia as a leader in the global hydrogen market. It aligns with Australia's broader goals to achieve net-zero emissions, diversify our economy, and make hydrogen more affordable for domestic use and exports.
What does the HPTI mean for businesses and how is it helpful?
The HPTI provides significant business advantages by reducing the financial barriers to entering the renewable hydrogen market. The tax credit directly lowers costs, enhancing the viability of hydrogen projects.
Businesses can benefit from a more predictable policy framework and achieve confidence in long-term investments. Additionally, the 10-year eligibility project period enables better financial planning and operational stability.
For businesses aligned with Australia’s net-zero goals, the incentive also creates opportunities to tap into growing domestic and export markets for clean energy solutions, bolstering innovation and competitiveness.
Eligibility: How to align your hydrogen project with HPTI standards
To access the HPTI, once legislated, businesses must meet specific eligibility criteria set by the Australian government. Key requirements include:
Operational readiness – hydrogen production projects must be operational or reach final investment decision by 2030 to qualify.
Renewable sourcing and production – projects must align with the government's renewable energy goals, ensuring hydrogen is produced from renewable sources. Hydrogen must be produced with an emissions intensity of less than, or equal to 0.6 kg of CO2 throughout the lifecycle. Prospective recipients of the HPTI should familiarise themselves with requirements of the Guarantee of Origin Certification scheme (“GO”)*.
Facility and capacity – facilities (either new or existing) must be located in Australia, on a single site, registered with the Clean Energy Regulator, using a GO production profile. It must include a minimum capacity equivalent to a 10 megawatt (MW) electrolyser.
Alignment with Community Benefit Principles – HPTI recipients must align hydrogen production with investment in local communities, domestic industry and supply chains, as well as diverse workforces, secure jobs, and tax transparency.
*What is the Guarantee of Origin Certification (GO) scheme?
This Guarantee of Origin Certification (GO) scheme is an internationally aligned assurance scheme designed to track and verify emissions associated with hydrogen and renewable electricity made in Australia. It demonstrates where a product has come from, how it was made, and emissions throughout its lifecycle.
Be sure to consider the capital structure of your projects in alignment with the HPTI, and potential impacts on project costs and investment returns. You may also like to consider exploring complementary government initiatives, such as the Hydrogen Headstart program.
What is the Hydrogen Headstart program?
The Hydrogen Headstart program will provide revenue support for large-scale renewable hydrogen projects through competitive hydrogen production contracts.
Renewable hydrogen projects may be eligible for both the HPTI and Headstart. But note: payments under this program will proportionally reduce if a project receives the HPTI.
Final thoughts
As Australia’s renewable hydrogen industry grows, businesses have a unique opportunity to capitalise on the government’s proposed HPTI incentive. To benefit, carefully review and satisfy eligibility criteria. Consider maximising your advantage by partnering with a hydrogen technology provider, such as Endua. Technology partnerships are a valuable way to reduce complexity, ensure compliance, and gain support in achieving long-term sustainability goals.
For more information about the HPTI, see the statement from the Minister for Climate Change and Energy and the Treasury’s Hydrogen Production Tax Incentive Consultation paper.
Take the first step towards unlocking the potential of hydrogen for your industry – start a conversation with the Endua team.