Key considerations across the legal landscape
11 min read
Following the release of the National Hydrogen Strategy in 2019, Australia is seeing exciting developments in government funding, new project announcements and private sector interest in a hydrogen industry. Federal and state governments are partnering with the private sector to support hydrogen technologies, in the race to become a premier exporter of clean hydrogen to the decarbonised global economy.
This Insight explores the opportunities for Australia to establish a leading hydrogen industry, including recent policy developments, the latest funding announcements and key legal issues to be aware of.
- There has been an increasingly strong commitment from federal and state governments to fund hydrogen projects around Australia. The private sector is enthusiastically taking up these opportunities.
- The policy landscape for hydrogen production and export in Australia is still in development. Commentators recognise the need for regulatory reform to kickstart a commercial hydrogen industry on a national scale.
- If you are interested in developing or investing in a hydrogen opportunity, now is the time to be aware of the policy, regulatory and practical issues for hydrogen projects. These span development, production, transport, storage and use issues, and will continue to change as regulations and policy evolve.
Hydrogen – what is all the fuss about?
Policy developments and what they mean for the industry
Hydrogen policy objectives
State and federal governments have a clearly defined and researched hydrogen policy. The COAG Energy Council released the National Hydrogen Strategy in 2019, which identifies key hurdles and growth areas for the development of a hydrogen industry in Australia. Since then, there has been increasing funding for hydrogen related projects and a crystallisation of the policy priorities for Australia at both federal and state levels. These include:
- Export: Australia aims to establish itself as a leading exporter of high quality clean hydrogen by 2030.1 Australia has already developed ties with export partners in Asia (see our Insight article on Australia’s collaboration with Japan) and Europe,2 and aims to use its existing gas export infrastructure to export hydrogen and its derivatives, such as ammonia, to a number of international export partners. Each State and Territory has also committed to supporting the renewable hydrogen industry and prioritising its development.3
- H2 under 2: the Federal Government has set an economic goal to produce hydrogen at or under $2 per kilogram.4 That is understood to be the point where hydrogen becomes competitive with alternative energy sources in large-scale deployment across our energy system. To achieve this, funding has focussed on projects seeking to decrease the cost of electrolysers and scoping locations for the most efficient hydrogen production facilities.5
- Clean hydrogen: both government and industry groups have recognised that Australia must focus on the development of green and blue hydrogen. Global emissions targets and the move towards decarbonisation, mean that the demand for zero or low-emission hydrogen will grow significantly over the coming decades.
- Gas blending: hydrogen can be blended into existing gas networks. Preliminary studies have found that hydrogen can be safely added to gas supplies at up to 10% by volume without having to modify pipelines or appliances.6 The NSW Government aims to achieve 10% renewable hydrogen in the gas network by 2030.7 The National Hydrogen Strategy also aims to have the gas network eventually functioning on 100% hydrogen.
Recent developments in hydrogen project funding
Federal and state governments have recently announced a series of funding commitments to new hydrogen projects around Australia. In April 2021, the Federal Government announced that the 2021-22 budget would include $275.5 million to accelerate the development of four additional clean hydrogen hubs in regional Australia.
See our Hydrogen Technologies timeline for more information on hydrogen in the Federal Budget, and the evolution of federal level funding for hydrogen projects.
An overview on funding:
Key considerations across the legal landscape
There is no existing legal framework in Australia targeted specifically at hydrogen production projects. Dr Alan Finkel has called for a nationally coordinated regulatory scheme to encourage the growth of hydrogen industries in Australia.11
Stakeholders interested in investing in hydrogen should be aware of the existing regulatory landscape. Each stage of a hydrogen project will be subject to various regulatory requirements including for construction, production, transportation, storage and use. In some areas, existing legal regimes are well-adapted to the hydrogen economy. Others, will require reform to facilitate the development and use of hydrogen technology.
A 2019 review for the Department of Industry, Innovation and Science identified 730 pieces of legislation and 119 standards that may be relevant to a hydrogen industry.12 The 2021-22 budget includes $2.4 million to support hydrogen related legal reforms.
Key regimes relevant to the hydrogen industry:
Once hydrogen plants are built, operators will be subject to various regulatory regimes, including for workplace health and safety, environmental impacts and energy supply. Operators will also need to ensure they can secure the necessary volumes of water to support production.
Transport and storage
Once produced, hydrogen will need to be transported from the production facility to storage locations and to ports for export. This could be achieved by utilising existing gas pipeline infrastructure and via road, rail and shipping.
Use, export and generating demand
Hydrogen has varied potential uses including as industrial feedstock, an export commodity, fuel cells for vehicles and electricity generation. Each of these uses will be subject to regulatory requirements and standards. Some existing regulatory regimes in Australia are not adequately adapted to address the use of hydrogen and will require amendment, while new regulatory regimes may be developed to support hydrogen. Additionally, the Federal Government has recognised the need for a ‘Guarantee of Origin’ scheme to support the export of Australian-produced hydrogen.
Actions you can take now
- Those interested in developing or investing in a hydrogen project should ensure they are up to date with government announcements about funding opportunities, policy development and legislative reforms.
- Project developers should ensure they consider the detailed suite of regulatory requirements and potential uncertainties applicable to new hydrogen projects, and factor this in to project timelines.
- Understand the ‘Guarantee of Origin’ regime and the potential impacts. Know what the changes mean for you going forward and what other countries are doing in regards to this regime.