Origin decided to scrap one of the country’s most advanced hydrogen projects on Thursday and cited the “risks associated with developing capital-intensive projects of this nature”.

The decision has put an exclamation point on growing concerns about the viability of hydrogen as a key component in Australia’s transition to net zero.

Even after the government announced a $2 hydrogen production tax incentive per kilogram of renewable hydrogen in September, the Hunter Valley Hydrogen Hub was still too costly to pursue.

Origin’s chief executive, Frank Calabria, said he was grateful for the “strong government support” but expressed the “risks” and “input costs” were insurmountable. 

“We have worked hard to evaluate the investment case for hydrogen and are grateful for the strong government support,” Mr Calabria said on Thursday.

“However, it has become clear that the hydrogen market is developing more slowly than anticipated and there remain risks and both input cost and technology advancements to overcome.”

The Hunter Valley project was earmarked for funding under the Federal Government’s $2 billion Hydrogen Headstart scheme and received approval for $70 million to advance its development.

“We acknowledge there will be some disappointment at this decision,” Mr Calabria said.

The country's second-largest power producer said while it planned to cease work on all hydrogen opportunities, it remained open to other commercial options for HVHH.

Origin had originally envisioned a facility with a 55-megawatt electrolyser capable of producing up to 5,500 tonnes of green hydrogen annually.

The energy production was primarily intended for the transport sector and as a replacement for natural gas in nearby ammonia manufacturing.

Origin’s decision to abandon hydrogen has come just a few months after mining billionaire Andrew Forrest’s Fortescue scaled back its own green hydrogen ambitions.

The Albanese government has heavily invested in hydrogen production, hoping to position Australia as a global leader in the market.

However, Origin’s decision further complicates the Labor Party's narrative that renewables can solely drive the nation’s energy transition.

Opposition Leader Peter Dutton has repeatedly criticised the government’s “dangerous” approach to 100 per cent renewables.

“The Albanese government has us on a path towards the hollowing-out of industry and business in our country,” Mr Dutton said last week.

The Opposition has proposed a mixed energy strategy including nuclear power, gas and renewables.

“Nuclear power is the only form of baseload power that meets all three of our national energy goals” – affordability, reliability, and sustainability – according to Mr Dutton.