Federal Labor says it dropped its opposition to the controversial Kurri Kurri gas plant in NSW’s Hunter Valley because of its potential to tap a green hydrogen boom, as the government accuses the opposition of lacking a business plan for the policy switch.

The government committed in May to build a $600 million, 660-megawatt gas plant in the Hunter Valley by 2023, to be run by public utility Snowy Hydro.

Labor leader Anthony Albanese announced on Tuesday his party would back the Kurri Kurri gas project with a demand that the plant run on green hydrogen. Credit: Luis Enrique Ascui.

Kurri Kurri is designed as a gas peaking plant that can fire up quickly to plug gaps in energy supply as the grid relies more heavily on intermittent renewable sources such as wind and solar.

Labor climate change and energy spokesman Chris Bowen in May called Kurri Kurri a “waste of taxpayer money”.

But the party on Tuesday reversed its opposition to the project and pledged an additional $700 million investment in Snowy Hydro to run the plant on green hydrogen, a nascent zero-emission fuel produced with renewable energy. It will require the plant to start with a 30 per cent hydrogen fuel mix with the aim of ramping up to 100 per cent by 2030.

Heading into a likely May federal election, Labor is feeling the pressure of government challenges in the Hunter electorate, as well as neighbouring Shortland and Paterson. The party’s new policy position endorses the construction jobs that would flow from Kurri Kurri while acknowledging the climate advocates on its left flank with the focus on green hydrogen.

Mr Bowen argued on Tuesday that Labor would raise sovereign risk if it cancelled the government’s contract with Snowy Hydro and that Kurri Kurri could be tapped to drive the development of a local hydrogen industry.

“What we’re doing today is ensuring that Kurri Kurri is at the centre of the hydrogen revolution which is about to take place right around the world,” he said.

Energy and Emissions Reduction Minister Angus Taylor said Labor had “spectacularly backflipped” on Kurri Kurri and had failed to produce a business case for green hydrogen.

“What we have seen today is a classic example of Labor making a vacuous announcement without explaining who was going to pay for it,” Mr Taylor said.

The government is investing hundreds of millions of dollars in projects aimed at lowering the cost of hydrogen fuel. Despite objections from green groups and some business leaders, the government has adopted a “technology-agnostic” approach to hydrogen. It has opened research and development funds to both green and “blue” hydrogen, the latter made from natural gas backed with carbon capture and storage (CCS) to trap the emissions.

Mr Taylor argues Kurri Kurri is needed because the energy market will lose 1000 megawatts of dispatchable power when the Liddell coal-fired power station shuts in 2023. He said on Tuesday its construction would generate 600 jobs by the end of 2023 as well as 1200 indirect jobs in areas servicing the building industry.

However, energy industry leaders and market analysts have described Kurri Kurri as an unnecessary and expensive intervention by the government. The energy market operator says some gas power is needed to back up renewables in the near term, but official projections do not show a shortfall that requires a 660-megawatt gas plant. Energy companies have claimed the use of public funds will discourage private investment in new energy generation assets.

Mr Taylor said modelling showed green hydrogen was unlikely to be an economically viable fuel source for energy generation for at least a decade.

Labor leader Anthony Albanese argued Labor’s $700 million investment in Kurri Kurri could help grow the local hydrogen industry into an export earner, as the global economy transitioned to net-zero emissions.

“I see the Hunter as potentially a green hydrogen powerhouse for Australia and the world. Not just producing it here, but exporting it internationally,” Mr Albanese said.

Greens leader Adam Bandt said Labor’s support for Kurri Kurri showed it was “not serious about tackling the climate crisis” and criticised the lack of detail in plans for green hydrogen.

“The Liberals have got to go, but with Labor wanting more coal and gas, the only way to get climate action is to put the Greens in balance of power,” Mr Bandt said. “Non-binding pledges about green hydrogen don’t stop this from being a terrible idea.”

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