Origin Energy on Thursday announced its intention to exit its potential Hunter Valley hydrogen project, the Hunter Valley Hydrogen Hub (HVHH).

In doing so, the ASX-listed company also confirmed its intention to cease work on all hydrogen development opportunities.

Explaining the decision, Origin chief executive Frank Calabarria said that while he believed hydrogen could play a “key role in the future energy mix”, the market was “developing more slowly than expected”.

"Risks and both input costs and technological advances remain to be overcome," Calabria said.

"We have worked hard to assess the investment case for hydrogen and are grateful for the government's strong support."

Origin first announced plans for a potential hydrogen hub on Kooragang Island, in the Hunter region, in early 2022, with plans to gradually displace natural gas as a feedstock in nearby ammonia production, as well as enable mobility and other use cases.

The project – which was undertaken in a joint development agreement with Orica last year – was shortlisted under the Australian Government's Hydrogen Headstart program after previously securing grant funding commitments from the Commonwealth and NSW.

At the time, Origin received $70 million in government funding to support the proposed project.

Calabria has now said the change in tune reflects "the prioritization of capital expenditure towards opportunities closely aligned with Origin's strategy".

"Ultimately, we believe that investments focused on renewables and storage can best support the decarbonisation of energy supplies and support energy security in the short term," he said.

"Origin has closely followed the global development of hydrogen technologies and markets over the past four years and we have evaluated a range of options in several jurisdictions."

However, the CEO acknowledged the "disappointment" that could come with the company's decision.

"[We] are grateful for the opportunity to evaluate the feasibility of this project in conjunction with Orica and with the support of both federal and state governments, local officials and the community,” said Calabria.

The Australian government has described hydrogen as "central" to its policy for an Australian-made future. Namely, its Department of Climate Change, Energy, Environment and Water believes there is an opportunity to develop Australia's hydrogen industry sector.

"This will capture the significant economic, trade, export and investment opportunities that are becoming available," it said.

Earlier this year, PGIM, in its analysis of the energy transition, listed hydrogen as a "speculative" innovation, noting that companies involved in areas such as hydrogen could be characterized as "bold new entrants challenging large energy companies".