Manufacturers are concerned federal and state politicians are too focused on electricity reliability at any cost, putting affordability and emissions at risk.
Australian Industry Group chief executive Innes Willox believes Friday's meeting between federal and state energy and resources minister made only "modest" progress, but welcomed an agreement on a national hydrogen strategy.
He says while more action will be needed in the years ahead to realise the potential of hydrogen, the strategy lays out a range of sensible steps to prepare the ground for what could be Australia's next big resources boom.
But in a statement on Saturday, Mr Willox says that good work sits besides "concerning developments".
"Reliable electricity is a good thing, but it can cost a lot," he said.
"Ministers should be aware that if they wind up signing a blank cheque for reliability, they will condemn Australians to paying through the nose for surplus generators and transmission lines that will sit idle most of the time."
He also questions the timing of another review of the electricity reliability standard over the next four months and during the Christmas period.
Energy ministers agreed to adopt the national hydrogen strategy prepared by chief scientist Alan Finkel, which will see the federal government direct $370 million to a new fund aimed at developing a hydrogen industry.
Federal energy Minister Angus Taylor says the funding will help Australia to realise its potential as a leading hydrogen supplier to key export markets, particularly in Asia.
The money will come from existing allocations to the Clean Energy Finance Corporation and Australian Renewable Energy Agency.
"The national hydrogen strategy maps out the steps we can take to develop a sustainable and commercial hydrogen industry," Mr Taylor said.
""Importantly, hydrogen can play a role in the future energy mix to bring down energy prices, keep the lights on and reduce emissions."
At the meeting in Perth, ACT's energy minister Shane Rattenbury had sought to change the strategy so it only supported clean energy sources.
But federal resources minister Matt Canavan confirmed the strategy would also support production from fossil fuels.
"We have a really challenging task to bring down the costs of supplying hydrogen to the world," Mr Canavan told reporters..
"Getting all of those costs down means trying different things at the moment and it's not the time to foreclose different ways of producing hydrogen which would limit our ability to reduce those costs in the supply chain."
Mr Canavan said there was potential for thousands of new jobs to be created with export markets in Southeast Asia diversifying their energy sources.
A report by the Australia Institute on Friday said the projected demand for hydrogen had been overstated, at times by a factor of 11.
The think tank urged the government not to rush into export opportunities using hydrogen made from fossil fuels, and instead wait until renewable sources were competitive.
Australian Associated Press