Bell Bay could be the site of a new hydrogen production and export facility after the Commonwealth government increased its investment to $464 million to develop a national network of clean hydrogen hubs.
Prime Minister Scott Morrison said the hubs would create jobs across Australia and drive the country to become a global leader in a new energy economy.
"Our plan to invest and develop low emissions industries will mean more jobs for Australian workers, particularly in our regions," he said.
"We are accelerating the development of our Australian hydrogen industry and it is our ambition to produce the cheapest clean hydrogen in the world."
Tasmanian Energy and Emissions Reduction Minister Guy Barnett said Bell Bay was a strategically important location with the state and federal governments working to leverage the site's existing resources and infrastructure to produce hydrogen.
"We are working with the federal government to maximise the opportunity for Bell Bay to be a national hydrogen hub," he said.
The Clean Hydrogen Industrial Hubs program will include two rounds of funding with grant applications for round one opening on September 28.
The first round of grants will be provided to support the roll-out and establishment of hub projects in regional Australia.
The establishment grants will cover up to 50 per cent of eligible project costs with a minimum grant amount of $30 million and a maximum of $70 million.
Grants will also be available for the development and design phase with a minimum of $500,000 and a maximum of $3 million per applicant and capped at 50 per cent of eligible project costs.
The federal government said the program was expected to drive significant co-investment from the private sector both domestically and internationally.
Federal Energy and Emissions Reduction Minister Angus Taylor said the hubs would help the hydrogen industry create job opportunities in regional Australia with the potential to create 8000 new jobs and over $11 billion a year by 2050.
According to the federal government, the Bell Bay site was nominated following a review of its existing capability including infrastructure and resources.
In addition to Bell Bay, six locations have been identified for possible hubs including Darwin, the Eyre Peninsula in South Australia, Gladstone in Queensland, the Latrobe Valley in Victoria, the Hunter Valley in NSW and the Pilbara in Western Australia.
While the seven locations were considered the most advanced based on existing infrastructure, workforce and resources grant applications for both grant rounds were not restricted, with applicants able to nominate alternative locations in their submission.
According to the Morrison government, all seven proposed sites had received support from their state/territory governments.
Hydrogen production at Bell Bay has been a pet project of the state government since it introduced a Renewable Hydrogen Action Plan in 2019.
Western Australian company Woodside in January was the recipient of a Memorandum of Understanding with the state government to secure part of a $70 million grant from the federal government's Renewable Energy Agency.
A Woodside spokesperson said the company believed Bell Bay remains a promising opportunity for renewable hydrogen production.
The company is also currently undergoing an EPA assessment for a chemical works facility at Bell Bay.
Mr Taylor said developing the hydrogen hubs was part of the national effort to reduce Australia's carbon emissions.
"A thriving hydrogen sector will help Australia to achieve its emission-reduction goals while continuing to grow our economy and support existing industries."
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Mr Morrison said the program took a technology not taxes approach to reducing Australia's carbon emissions.
"This is good for jobs, good for our environment and contributes to our global effort to reduce emissions through technology, not taxes," he said.
The $464 million in grant funding brings the federal government's investment into the hydrogen sector to $1.2 billion.
Applications close November 22, with funding announced in early 2022.
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