Newcastle's Orica fertiliser and explosives factory will cut its massive natural gas consumption by seven per cent when Australia's first commercial hydrogen plant opens in 2026.
Climate Change and Energy Minister Chris Bowen formally announced $70 million federal funding for the plant at a media conference with Orica and Origin Energy executives on Thursday.
The two companies are partnering on a 55-megawatt plant which will pipe green hydrogen to the nearby Orica factory, which accounts for 15 per cent of the state's natural gas usage.
Mr Bowen said Newcastle would be among the first cities in the world to produce commercial quantities of green hydrogen.
"Today we're announcing that Newcastle will be the first hydrogen hub in Australia," he said.
"The world is moving to green hydrogen, but it's a race, and Orica and Origin will be among the first companies in the world using green hydrogen."
He said green hydrogen would play an important role in decarbonising the truck and aviation industries.
"So all this is before us. And, if the Hunter is in early, then the world's your oyster."
Mr Bowen said it had been a "big couple of days for the Hunter and a very important couple of days for Australia's industrial and energy future" after he declared the nation's second offshore wind farm zone off the Newcastle coast and Port of Newcastle revealed it had signed memorandums of understanding with a host of major domestic and international players to develop its clean energy precinct on Kooragang Island.
Origin chief executive Frank Calabria said hydrogen would help decarbonise Australia "particularly in the areas of difficult emissions".
A 55MW electrolyser producing 5500 tonnes of hydrogen a year represented a "scale step up" for the industry.
The Orica operations in Newcastle include an ammonia plant, three nitric acid plants and two ammonium nitrate plants.
Origin is also in talks with Central Coast operator Red Bus Services about using some of the hydrogen to power its fleet when production begins in early 2026.
Orica chief executive Sanjeev Gandhi said the company was finalising its feasibility studies for the project and would move to a final investment decision "hopefully very quickly now the minister's given us all the encouragement we need".
The companies plan to increase hydrogen production via a second-phase project which would replace more of Orica's natural gas consumption.
"We've certainly got big ambitions, and what we need to do is to get this industry started. And that's why this is an important step. It's a step up in scale," Mr Calabria said.
Orica also commissioned new abatement technology on Thursday which it said had reduced greenhouse gas emissions at its three Kooragang Island nitric acid plants by at least 98 per cent.
The company said the reduction equated to 48 per cent of the site's total greenhouse gas emissions and 11 per cent of all chemical industry process emissions in Australia.
The technology will help the company meet its obligations under the government's Safeguard Mechanism, which is designed to cut emissions from the nation's leading polluters.
Mr Gandhi said the project would eliminate 567,000 tonnes of carbon dioxide emissions from the site each year.
Orica received $13 million from the state government's Net Zero Industry and Innovation Program and $25 million in finance from the federal government's Clean Energy Finance Corporation.
