National Hydrogen Strategy Issues Papers

The research appears to show in UK that for domestic appliances, 20% blending results in managed safety. This has been shown through the safety case approval by the Health and Safety Executive in HyDeploy. In some studies, it has been assumed that the calorific value is consistent across the network however ‘Real-Time networks’ has done work in the area of blend monitoring which could allow a different charging model based on variable calorific values across the networks.

It is likely that our context will be different here in Australia. Construction techniques, housing style, venting arrangements and heating requirements are all different. In addition, there are differing requirements for industrial feedstock and industrial and commercial applications.

Arup is managing the UK Government flagship Hy4Heat programme (https://www.hy4heat.info/) designed to answer hydrogen readiness questions in a UK context, downstream of the consumer’s emergency control valve. Further research around gas behaviour and the potential for leaks is required.

The outcomes from such a country specific program would then inform other generic decisions that may need to be made to mitigate risk in relation to ignition control such as: hydrogen monitoring, odourisation, electrical equipment safety and human behaviour in addition to the appliances themselves. Solutions to these challenges are readily available pending appropriate research and or pilot programmes. For example, computational fluid dynamics (CFD) analysis coupled with gas detection is an area of research which can determine gas behaviour inside buildings.

There is strong evidence that networks that are 100% polyethylene could be deemed H2 ready, pending case by case review by appropriate parties. Standard meters would not be appropriate for 100%H2.

Overall, hydrogen is a required vector for transporting energy. Not all the decarbonisation can be borne by renewable electricity, there is a need for resilience in energy vectors. Domestically sourced hydrogen reduces Australia’s vulnerability to hydrocarbon fuel imports and reduces reliance of carbon intensive forms of energy.

The use of 100% hydrogen for a test project may require a new build network or a suitably selected part of an existing network and would certainly require new downstream equipment and appliances. The regional location would ideally need to have ample water supply, high potential for renewable energy generation, a current reliance on costly ($, GHG, Air quality) energy and willingness to participate. To build public awareness, it should ideally be in an area that is well visited by the public, as well as being accessible to influencers from many different stakeholder groups. Due to the requirement for public acceptance, it would be prudent to invite towns to register interest. By way of example, Arup is conducting a feasibility study for the Scottish Gas Network in the UK for 100% H2 network with 300 homes in the Central Belt of Scotland, where there is high population density and the Scottish Government is proximate.

Within metropolitan areas a small demonstration project in a new subdivision is feasible. An extension to an existing demonstration project in the southern Perth metropolitan corridor, for example, or as currently proposed in the southern suburbs of Adelaide.

Opportunities for lower percentage hydrogen blends are occurring and feasible in many areas around Australia. The local industry development in the Latrobe Valley is using brown coal gasification with carbon capture and sequestration (CCS), to ultimately provide Melbourne with a hydrogen gas supply to replace the reducing natural gas supply from Bass Straight is an opportunity to re-skill a workforce. Similarly, the supply of hydrogen from gasification to Japan for the “Hydrogen Olympics”, and demonstration of CCS is underway by CarbonNet looking at use of an exhausted well in the Gippsland Basin are all examples of how hydrogen can adapt to existing energy networks while minimising new infrastructure. The ability to blend hydrogen into the natural gas network is a way in which demand for hydrogen can be stimulated, thereby encouraging the supply market, while also gradually transitioning decarbonization.

On a broader scale, there has been large scale development of renewable electricity generation projects, in particular through programs sponsored by the Victorian and South Australian Governments, at the edges of electricity grids. Where there is a lack of electrical transmission network structure and suitable water supplies exist, the surplus electricity could be used to generate hydrogen, avoiding or minimising an electrical transmission network upgrade.

As hydrogen becomes normalised in an energy context and the industry grows, there is a high requirement for training from the perspective of installation, as well as servicing and maintenance. There is a risk that more people will be attracted to the industry that have developing knowledge and skills, with the potential for incidents. A recent program that demonstrated this effect is the previous Government insulation installation program which resulted in house fires and fatalities from electrocution. Such outcomes can have significant ramifications that have the potential to harm the hydrogen industry before it has taken off.

The development of new business models and technologies will challenge current policy and regulation. The speed at which markets adopt novel technology can outpace regulation, so adoption and agreement of standards early will minimise risk. The complication of multiple tiers of government can be simplified through a single source of information, such as a government platform where information on approvals, taxes and standards can be obtained will provide clarity to the industry.

Arup is working with IGEM (Institute of Gas Engineering Managers) and British Standards Institute to develop standards downstream from the emergency control valve. We are of the opinion that the safety case is achievable for 100% H2.

Given the multi-jurisdictional nature of the regulatory system in the energy space in Australia, an approach similar to the way pipelines are safely designed and regulated may offer a path forward. An Australian Standard (AS 2885 – in all its parts) provides overall direction with regulations referring to the standard about the conformance requirements. In part this standard would apply to hydrogen pipelines too – so specific requirements for hydrogen can be appended in much the same way as the transmission of CO2 for CCS was applied. Improved regulation around the renewal of safety cases and safety management studies associated with pipelines would enhance the integrity of the overall system.

Licensing of gas fitters and installers of appliances and gas pipework will need to be addressed to ensure adequate installation occurs.

A core government responsibility will be the development of appropriate regulatory frameworks in which a future hydrogen industry would operate. Initially networks are likely to be local and will require sufficient control of natural monopolies. Government has a responsibility for managing the development of the hydrogen industry in respect to safety, refer to Question 3 response for more information.

While government intervention can be cited by industry as meddling, transition to a hydrogen economy should not benefit just big business or only parts of society that can afford it. The socio-economic disparity that has been seen as a result of the rooftop solar industry should be avoided. Providing clarity of how policy and regulation will change will provide confidence to the public, investors and industry. The multiple roadmaps suggested in the issue papers, and currently at state/ federal level, could be condensed into a single schematic as proposed in Arup’s Establishing a Hydrogen Economy framework(https://www.arup.com/-/media/arup/files/publications/h/establishing-a-hydrogen-economyfuture-of-energy-2035.pdf), so it is clear the changes that are enacted, and those which are still under consideration.

There will also be a need for government led support to allow the hydrogen market to build up to scale and for innovation to occur to bring cost efficiencies.

As a general note, there are several projects referenced in the document. Arup would like to clarify our understanding of such projects:
• The Iron Mains replacement Project is the UK programme that has been running for over 20 years to replace cast iron with polyethylene pipes.
• H21 Leeds City Gate looked at 100% conversion, not blending.
• HyDeploy is the UK blending trial based on the Keele University campus estate.
Other reports of note include the Institute of Engineering and Technology “Transitioning to Hydrogen” and the program being conducted by National Grid.
Improvement opportunities for Table 2 actions are:
• Determine a program for appliance transfer to hydrogen use. Potentially a Government subsidy. (2022-30)
• Hydrogen and public and industry expectations during consumption, e.g. odour. (2020-22)
Additional actions that could be considered are:
• Determine the appropriate target markets for change. (2020-22)
• Review of how a mandated/ limiting hydrogen blend would apply and risks and opportunities around safety, certainty of investment, public perception and consumer protection around pricing. (2020-22)
• Roll out strategy from pilots through to grids, e.g., from new suburbs through to older ones in centre of town. (2022-30)
• Review how the existing transmission pipe network might be repurposed. (2022-30)

The consortium would ideally include a mix of the public and private sector:
• Policy makers and regulators – provide certainty in regulation including for vehicles and refuelling infrastructure, a clear strategic direction and road map for phasing the transition.
• Investors – understand the related risks and opportunities, governance for the investment, collaboration, learning and engagement, reporting and the pipeline of public infrastructure.
• The key industry players - develop business proposals to respond to the projected market interest and strategy direction, invest in the industry upskilling and professional training required to implement, resourcing the proposals, appropriate transition e.g. phasing blended hydrogen in with existing gas pipeline infrastructure.
• Vehicle fleet suppliers / operators.
• Universities and research.

In many cases, consortium would be led by key industry players, typically gas or oil corporations, fertiliser manufacturers or other industry players with major stakes in hydrogen or similar industry already.

Refer to other examples of what has been setup internationally e.g. H2Bus consortium in Europe, which includes leading players in the hydrogen fuel cell electric value chain. The members are committed to deploying fuel cell electric buses, along with support infrastructure at commercially competitive rates.

An all-of-government approach, in collaboration with key industry stakeholders, is required to strengthen Australia’s purchasing power for fleet procurement (e.g. car, bus, ferry). This approach would be appropriate for large scale public sector and commercial passenger transport services and vehicle fleets. Large scale procurement would more likely lead to discounts and economies-of-scale opportunities from manufacturers of H2 fleet vehicles.

Initially the economics will favour converting daily ‘return-to-home’ fleets, public transport fleets or heavy-duty industrial precinct applications such as cranes or forklifts that operate in ports.

The government, working with key investment firms and banks, can should establish and standardise the procurement and financing terms for procuring hydrogen vehicles. This would encompass procurement policies and subsidies that would be available for both the private and public sector, applicable interest rates, insurance and risk management.

Manufacturers need to be part of discussion regarding production challenges. Australia and New Zealand governments have similar challenges, so there is potential to work together proactively to avoid conflicts in supply and delivery priority.

The government (federal and state) could develop and confirm the potential stages for hydrogen implementation through a roadmap and implementation plan fit for investment by companies and the public sector, working back for key dates and taking note of low-carbon target milestones. The multiple roadmaps suggested in the issue papers, and currently at State/ federal level, could be condensed into a single schematic as proposed in Arup’s Establishing a Hydrogen Economy framework (https://www.arup.com/-/media/arup/files/publications/h/establishing-a-hydrogen-economyfuture-of-energy-2035.pdf), so it is clear the changes that are enacted, and those which are still under consideration.

The Government would need to take a proactive approach to policy and regulation and encourage hydrogen demonstration projects through active stakeholder and community engagement. Health and safety assessment would be an integral part of all aspects.

Sharing knowledge and harmonising standards will be important, including for equipment, safety and certifying emissions from different sources. Hydrogen’s complex supply chain means that the government will need to lead and undertake frequent engagement with key stakeholders, industry players and the wider community.

Other policies to support procurement and emission limits include fuel economy standards, feebates (which tax the worst performing vehicles), and purchase subsidies or incentives. At the local government level, the purchase of low emission vehicles could be incentivised by lower parking charges, berthing fees, etc. and supported by priority infrastructure or clean air zones, especially for mass transit vehicles.
Green infrastructure bonds or similar are critical to help finance / support private investment in hydrogen vehicles and infrastructure. The lessons learned from the current application of multiple funds (e.g. ARENA, CEFC) in Australia should be used to strengthen or target investment better to promote higher quality investment in the development of hydrogen-based transport and improve investment multipliers.
The mandates and strategic priorities and performance metrics of the government (all levels) and public finance institutions need to be aligned to enable clear market signals and reduce uncertainty for investors in hydrogen technology.

They will require stable policy and institutional arrangements, and development of a transition plan. An integral part of stability will be the long-term carbon price visibility to encourage investment confidence in the adoption of green technology. Agreed long-term climate policy (at federal level amongst the main political parties) will be instrumental to provide confidence to investors, and for building a pipeline of investment proposals.

Worldwide, governments will need to address important questions about how to internalise the broader social costs of carbon use (and investments decisions supporting its continued use) in decision-making, otherwise if will be difficult to achieve a level playing field for the development of hydrogen or other new low emission technologies.

The government and industry need to adopt a ‘systems’ approach to help identify and manage the systematic risks which individual industry sectors, companies or businesses cannot manage around investment in new technology. Refer to Question 3 response for more information.

A collaborative stakeholder response will be needed to manage these risks (led by government with a cross industry sector consortium) focused on critical infrastructure (such as fuel supply and refuelling stations) needed to support the uptake of hydrogen vehicles. This type of infrastructure has the biggest potential to make a difference in the uptake of low emission technology.

The government, together with finance companies and banks, need to consider the possibility for blended financial approaches (e.g. green investment fund, government partnerships, sustainability fund, PPAs, etc.) or other finance vehicles to help develop new technology areas more proactively.

The government, financiers, sector industry also need to examine the commercial viability and attractiveness of hydrogen in more detail to establish the clear enablers for its uptake e.g. support for low-emission innovation, specific interventions to address barriers - policy, regulatory, market, technology, information etc.

The key opportunities for hydrogen need to be identified and established in the Australian context. Some suggestions based on international experience are:
• Build on the global experience, investment, technological development and trials into hydrogen fueled vehicles. This would include maritime operations (freight and passenger operations), long distance road-based freight, buses, coaches and aviation. These have limited low-carbon fuel options available and represent a significant opportunity for hydrogen fuels.
• Ports, warehousing and freight handling operations using forklifts and straddle carriers that run continuously would also benefit greatly demonstration projects. Reduction in emission improves air quality in warehouse environments.
• Sharing hydrogen generation and refuelling points between heavy industries, such as ports and rail. Trains frequent the ports as part of their freight routes and there is opportunity for freight vehicles to be refueled quickly at these locations as goods are unloaded and reloaded.
• Applying the lessons from the local roll-out of EV charging sites on the national highway network and from hydrogen infrastructure built in the US, Japan, South Korea, the UK and Europe to enable Australia to be a fast follower.

There is the need to develop a clear strategic vision and implementation pathway for those sectors where hydrogen vehicles have comparative advantage e.g. heavy transport systems, commercial ports, shipping, freight companies. This would be developed between government and key industry sectors and provide some level of confidence for investment in the transition. It is important to establish a multi-stakeholder approach, modelled on or potentially collaborating with international examples on how similar transitions have been established and progressed.

This will require coordinated and integrated planning between service and fleet development, trials/pilots through investments at ports/bus terminals, etc. and infrastructure investment to support refuelling stations, etc. The pathways should lean heavily on international experience for developing pilots, rolling out infrastructure, scaling-up expertise and level of investment provided.
Industry upskilling will be required to support the transition, including professional training and education programmes to implement the pathway. This will also require specialist expertise as part of recruitment and procurement policies.
Government and stakeholder campaigns to raise awareness, stimulate interest and generate demand around investment in these areas will increase uptake. For example, free trials of H2 vehicles around transport nodes.

Arup have been working with the NZ government on the hydrogen strategy a Vision for Hydrogen in New Zealand, which contains further information on timing of development of technologies.