The green hydrogen revolution wasn’t supposed to go like this. In September, the climate change and energy minister, Chris Bowen, declared Australia “the green hydrogen capital of the world” with “50-plus companies on the ground” and a pipeline of investments worth $200bn.

The nascent industry has been touted as the start of a renewable energy revolution, with more than $8bn in support promised across federal and state governments. But just months on from Bowen’s announcement, several major proposals are either shelved or in serious doubt, prompting the question: is green hydrogen’s race over before it began?

In New South Wales, Origin Energy backed out of plans for a hydrogen hub in the Hunter Valley. In Queensland, the Crisafulli government withdrew $1bn in financial support from the Central Queensland Hydrogen Project, a large-scale hydrogen production, ammonia and export facility near Gladstone. In South Australia, plans for a hydrogen plant at Whyalla were put on ice as the state government reallocated nearly $600m in funding to support the continued operation of the steelworks.

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This has not curbed the Albanese government’s belief in, or support for, green hydrogen development. On Thursday, Bowen announced $814m in support for a major hydrogen and green ammonia export project in midwest Western Australia.

Some have suggested the fuel has been over-hyped and “failed to fire”. But experts say the challenges in getting a new, green industry off the ground are unsurprising – and don’t necessarily mean it has no future.

Climateworks Centre has tracked hydrogen’s role in the race to net zero for more than a decade. The organisation’s Kylie Turner says the shift from high levels of speculation to a focus on practical possibilities should be seen as a sign things are getting serious.

“As you roll out the solution, the barriers become clearer, but also the ways that you might address those barriers also becomes a little bit clearer,” Turner says.

Tennant Reed, the Australian Industry Group’s director of climate change and energy, says lots of emerging technologies follow a “hype cycle” from high levels of excitement to a period of disillusionment, where things turn out to be harder, slower, and less applicable than first thought. Some manage to make the slow climb to commercial success.

Renewable hydrogen is currently in a trough, Reed says, after five years of high expectations where many considered hydrogen as the “Swiss army molecule that could do anything”.

Australia’s first national strategy in 2019 foresaw hydrogen being used in everything from home heating and energy storage to transport and steel making, and underpinning an export industry “shipping sunshine” stored as liquid hydrogen.

“It has become increasingly clear that we’re not going to do all of those things with hydrogen, for the same reason that you don’t use a literal Swiss army knife for all the purposes that it has attachments for,” he says. “It’s not actually the best tool for every job.”

The expense, complexity and slower-than-expected deployment – in Australia as well as globally – has narrowed the list of plausible applications for renewable hydrogen in reaching net zero emissions.

Alison Reeve, Grattan Institute’s deputy program director for energy and climate, says cost remains a key barrier. Producing green hydrogen – by running an electric current through water, which splits it into hydrogen and oxygen – is expensive because it uses a large amount of electricity.

Making hydrogen cheap enough to compete with natural gas and coal, requires “really, really cheap” power, she says.

But then, as wind, solar and battery technology costs fall, it also becomes possible to do more with electricity instead. “So a lot of potential uses of hydrogen have just been falling away because electricity has out-competed them.”

Just as battery electric vehicles have dominated the car market, Reeve anticipates electric technologies could prevail in other areas originally slated as applications for hydrogen, like long-distance trucking.

Using electricity directly has other advantages. “It’s just a lot less complicated,” Reeve says. “The supply chain is already there. The generators are already there. The power lines are already there.”

The thinking on exports has changed too. Back in 2019, people thought liquid hydrogen could be shipped like LNG.

But hydrogen turns out to be “a tricky gas to handle”, she says. “You’re just fighting with the physics of it the whole way.” A better option would be to make and use the hydrogen domestically to produce energy intensive products like steel or ammonia, and then export those.

Despite all of that, many analysts still see renewable hydrogen playing a limited but valuable role in addressing industry emissions, particularly in the production of chemical ammonia and iron and steel.

Amandine Denis-Ryan, Australian chief executive for energy analysis firm the Institute for Energy Economics and Financial Analysis (Ieefa), says ammonia – a chemical used to make fertiliser and explosives – already uses hydrogen as a feedstock and is one industry that will need green hydrogen “for sure”.

Currently that hydrogen comes from methane, or fossil gas, which according to Ieefa accounts for roughly 5% of Australia’s gas demand, releasing about 4m tonnes of carbon dioxide into the atmosphere each year. Replacing fossil gas with renewable hydrogen is the only way to decarbonise, Denis-Ryan says.

There are other reasons to think ammonia might be a first mover, says Denis-Ryan. Existing facilities are located near strong renewable resources, she says, and green hydrogen can progressively replace gas up to about 30% without major upgrades to infrastructure.

Simon Nicholas, Ieefa’s lead analyst for global steel, says together with scaling up recycling, using hydrogen instead of metallurgical coal or gas in iron and steel production is a promising way to limit the sector’s emissions, which some estimate is responsible for 7% to 9% of global totals.

“It’s not a question of if it’s going to happen in the steel sector,” he says. “It is actually happening.”

The first commercial-scale green steel plant using hydrogen is already under construction in Sweden, he says, and is expected to start production in 2026.

It’s a question of timing, Nicholas says, and whether Australia will seize the opportunity.

South Australia remains well-positioned, he says, with access to high grade iron ore, a power grid dominated by renewable energy and a proactive state government.

“The silver lining to the slowdown in global green hydrogen development is that we’re now realising that we need less green hydrogen than was being forecast several years ago. Because there were all sorts of crazy uses being put out there for green hydrogen where there are much better alternatives.”

Fewer use cases means less green hydrogen, he says, meaning less renewable energy will need to be built to produce it.

The Climateworks Centre modelling estimates 16 terawatt hours of additional renewable power – equivalent to 9% of Australia’s national electricity market – would be required to produce enough hydrogen for existing industries like ammonia and alumina production in Gladstone.

There are good reasons to think some applications for renewable hydrogen will be “doable”, Reed says, but it will take a sustained period of policy and financial support, an enormous amount of new electricity infrastructure, and managing expectations.

“The initial projects will be quite expensive, and the only way you get to cheaper hydrogen is by doing expensive hydrogen and learning along the way.”

We’ve done it before, Reeve says. Australia successfully built a renewable energy industry “out of nothing”, through support for both demand and supply. Now the industry is meeting 40% of electricity generation.

“We did it by accident, but we managed to get a lot of things right to build up that industry,” she says. “So we could do it again.”