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The South Australian government has signed an agreement to sell hydrogen to a company that owns the Whyalla steelworks in the state's Upper Spencer Gulf.
The announcement comes as the state government will this year start building a 200 megawatt (MW) hydrogen power plant and storage facility near Whyalla under a $593 million Hydrogen Jobs Plan to bolster the state's electricity supply.
The agreement with GFG Alliance, owned by British billionaire Sanjeev Gupta, will consider to sell some of the hydrogen as the company transitions to green iron and steel.
Premier Peter Malinauskas said the hydrogen facility and the greening of Whyalla steelworks will "lead the world through decarbonisation".
"We got our own customer for the hydrogen that we produce, that would be the power plant itself," Mr Malinauskas said.
"But if there is the opportunity to enter into a commercial offtake agreement, to realise the green iron and green steel opportunity, then we want to grab that too."
But Mr Malinauskas said some details of the plan, including how much taxpayers would get back from the potential sale of hydrogen, were being worked through.
"We've got to weigh up as a government what price are we going to sell the people of South Australia's hydrogen to GFG to warrant that investment from that perspective.
"The economics and the commerciality of the price of the hydrogen, relative to what we need to generate the electricity that we know the state energy market requires, is a delicate balancing act, and that's what will precipitates those commercial negotiations.
"But we have to start somewhere."
Sandip Biswas, CEO of Liberty Primary Steel and Mining, which is part of GFG Alliance, said the offtake would happen.
"There will definitely be an offtake at a price which will be beneficial to both," Mr Biswas said.
"Whyalla will have a future in steelmaking."
Mr Biswas today signed a memorandum of understanding with Santos, which will help supply natural gas to support the steelworks's transition to green iron.
Whyalla's population is set to grow by 1000 workers ahead of the hydrogen power station due to open in 2026.
To accommodate workers, the SA government today announced 32 cabins would be built at the Discovery Parks' Whyalla Foreshore Caravan and Holiday Park and another 50 cabins at a greenfield site near Whyalla Airport with local business Bentley's Cabin Parks.
Mr Malinauskas said the cabins were the "first tranche" of housing needed, with discussions underway with the local council for a location to set up a workers camp.
"The Hydrogen Jobs plan start major construction later this year. At its peak it requires 1000 workers just on its own," he said.
"We do need to increase the housing capacity, the working housing capacity, in the city to be able to get this project built."
The state government also said energy giant General Electric (GE) has been selected as the preferred supplier for hydrogen-run turbines required at the hydrogen plant.