National Hydrogen Strategy Issues Papers

>>The scale of hydrogen required depends on the application.
– Todays best prices, even at the 100 MW scale, can’t compete with natural gas. At this scale, hydrogen will still be 35 per cent more expensive. Parity can be achieved with a further reduction in renewable energy costs and improvements in electrolysers.
– In some applications (e.g. train lines), the role of hydrogen is already established (e.g. the new proposed hydrogen train routes in Europe instead of electrification).
– In other applications, such as gas in networks, the rate at which the technology is deployed will affect the rate at which costs come down. A faster deployment supported by a target will reduce the cost quicker and achieve those scale efficiencies.
>> Appliance conversion will be a major undertaking. At the moment, there are over 11 million gas appliances in Australia and total gas connections continues to grow. Suitable replacements for these appliances are being developed overseas but converting and/or replacing appliances to run on 100 per cent hydrogen will be a major logistics exercise, spanning many years.
>> In all cases, building the scale of hydrogen will lead to cost reductions, resulting in more applications becoming commercially viable.

>> Using existing infrastructure to build scale will minimise the cost for new investment. A key finding is the 10 per cent kickstart report as part of the National Hydrogen Strategy that indicates there are no significant factors restricting the injection of up to 10 per cent hydrogen in gas networks. Using this infrastructure allows a vast amount of renewable hydrogen production to be built.
>> A range of cross sectoral approaches could be considered.
– For example, an initial focus could be to build scale of clean hydrogen production by blending it in networks to build scale. Once scale is developed, some of this hydrogen could then be diverted to exports or mobility, which would then build more scale resulting in more commercial opportunities for hydrogen being realised.

The existing plumbing and gas fitting workforce is skilled in working with natural gas. While additional training may be required to expand their skillset to include hydrogen, this will not be a major retraining exercise

It should be recognised that there have been significant number of “cowboy” operators misleading customers and installing unsafe/ uncompliant systems for roof top solar and small-mid scale solar. Adequate regulation and standards will be required to avoid incidents and leaving system owners out of pocket from un-checked installers.

>> As with any scale up of industry, this takes time and the Strategy should recognise that scaling up the role of hydrogen will take decades. As an example, Australia’s LNG export industry took many years to develop.

>>The Strategy should not set unrealistic target for 2030.

>>A Renewable Gas Target which encourages development of many aspects of the renewable gas industry, such as production, transportation, storage and exports will accelerate commercialisation and scale within the hydrogen industry.
>> Domestic and export markets are interrelated. The capacity to produce, transport and store hydrogen will deliver benefits to both domestic customers and export markets.

>>Many, if not most, commercial investments to develop and grow the hydrogen market will be long-term in nature.
>> For long-term investments to be made, investors must have confidence that their investments will not be subject to additional undue regulatory or political burden, such as those uncertainties that are concerning Australian domestic.gas producers
>> To foster the required confidence, establishing long- term, legislated policies which support investment in a growing domestic or export hydrogen market is paramount.

>> Domestic skills and capabilities will be developed naturally as the hydrogen industry progresses development and should not be the focus of Government policy.
>> As AGIG describe, domestic market development builds capacity, skills and transportation capability which also benefits export markets. Growing export markets builds demand for production, which assists domestic markets.
>> To be considered as a potential exporter of hydrogen, Australia needs to demonstrate that we can scale up quickly to meet demand at a competitive rate. This means large renewable hydrogen plants 100MW or larger. There are a number of domestic applications that can take this that volume of hydrogen, for example ammonia nitrate production or injection into gas networks for domestic gas use. By supporting one or more such initiative will raise Australia’s profile in this space and enhance the potential for it to be seen as a capable exporter
>> Domestic and export markets will be best assisted by Government assistance to develop more competitive production and transportation capability.

>> Sector coupling already exists in the market as gas plays a key role to support the variable generation from renewable energy. Hydrogen can continue this role and also expand its role as a distributed resource (for hydrogen production) that can be switched on and off to follow demand curves.
» Market signals for sector coupling exist within the NEM already when electricity prices are low due to an abundance of renewable generation. A proper functioning market should send (long-term) price signals that enable investment in storage and ancillary services through which hydrogen can deliver value.
» Commercial opportunities to leverage sector coupling benefits will become more appealing as production and transport productivity is achieved as well as when domestic and export markets are further developed.

» The strategy should quantify what this means in terms of total amount of hydrogen produced. What is the scale of this and how does it compare to the scaling of the LNG export industry? Building up industries to significant scale takes time.
» It may be pertinent to consider if Japan and South Korea will want 50% of their hydrogen coming from a single country by 2030? For energy security reasons they may want greater diversification of supply.
» The Strategy should also be cognisant of other national and or state based targets and how those could affect meeting the fulfilment of an export target. For example, the Interim Emissions Reduction Targets for Victoria (20121 – 2030) considers a renewable energy target of 45 to 60% by 2030. The impact of a State based target of that magnitude should be considered when export targets (also based on renewable energy) are added.
» As mentioned above, a target of 10 per cent (by volume) of residential gas in Australia would represent around 5 PJ of energy and require close to 1,000 MW of electrolyser capacity?

» Internationally – when Australia export hydrogen as a clean fuel and the export partners use this hydrogen to reduce their domestic greenhouse gas emissions.
» Domestically – to allow Australia to use hydrogen as a clean fuel to meet our international greenhouse gas emissions obligations.
– This will be required by mid to late 2020s, when gas distribution networks are scheduled to inject renewable hydrogen into their networks.

» The scope of the scheme should initially be:
– restricted to gas networks as mass balance and metering is currently built in, it can be expanded to other methods at a later stage.
– The domestic scheme should be the initial priority as if it is built in compliance with an international standard such as BS EN 16325 (as per Green Gas UK) it can be interfaced with export markets at a later stage.
– It should be flexible such that it can be adapted to different sources and changing requirements, such as interfacing with export markets.

» Yes, but there has to be a compromise between creating a high compliance cost and ensuring credibility. Therefore, we would propose that a maximum level of gCO2 per GJ (or MWh) is required to ensure that the source is eligible. Then producers can receive a GOO for injecting gas from that source if they meet source rules, without each having to undergo full carbon assessments.

» The scheme should be managed by an independent body, potentially the Clean Energy Regulator. This is to ensure adaptability, independence, innovation and reduce compliance costs
» The Clean Energy Regulator already administers the Renewable Energy Target, the Emissions Reduction Fund, the Safeguards Mechanisms and the National Greenhouse and Energy Reporting. The certification and guarantee of origin is similar to the schemes administered by the CER so it may be best placed to also administer a certificate scheme for hydrogen – at different emission levels. However, the compliance requirements of meeting the current programs is high and a new scheme for hydrogen should not duplicate that level of complexity, unless necessary.
» For exports, an agency would need to align the certificates and guarantees of origin with other international schemes, especially those of our trading partners.

» A recent report by Jacobs “Hydrogen economy” concluded that using recycled water is a more sustainable way to produce hydrogen. They also noted that the volume of fresh water needed to support a hydrogen economy (both for exports and domestic markets) would only require a trivial amount of water compared to the 11 trillion litres of water used by Australia’s agricultural industry.
» Integrating a hydrogen production facility with a wastewater facility also creates opportunities for utilising waste heat and potentially producing renewable methane.

» Selecting locations for hydrogen production facilities will require the balancing of the different resources required. This will require an understanding of the demand for hydrogen, how that hydrogen is going to be transported from its source of production to its market (e.g. pipeline, trucking or injecting directly into distribution networks), and the input for producing that hydrogen (e.g. electricity, water, natural gas), and possible also the infrastructure required if CCS is involved in the hydrogen production process.

» Approval processes for major projects are already well developed although may differ by jurisdiction.
» An additional measure for hydrogen projects would be their role in reducing greenhouse gas emissions and the export opportunities these projects can create leading to increased jobs.

» Many of the existing standards and regulations are applicable to hydrogen. These are being reviewed to identify any gaps in knowledge.
» Standards Australia has established a local committee to mirror the work at the International Standards Organization on hydrogen standards.
– Some gaps in current standards have been identified and these are being worked through by the ME93 working group to address these and how best to update existing standards as well as adopt/mirror international standards.

>>Gas distribution networks are actively engaging communities.
» Network businesses are currently developing a range of pilot projects that will inject hydrogen into the gas network. Engaging with the local communities is a major component of these projects to ensure community acceptance.
» Infrastructure businesses have a good track record of engaging with regional and remote communities, for example Jemena and its Northern gas Pipeline.
» The energy industry has adopted The Energy Charter. This is focused on embedding customer-centric culture and conduct in energy businesses to create real improvements in price and service delivery, through commitment to the Five Principles:
– We will put the customer at the centre of our business and the energy system.
– We will improve energy affordability for customers.
– We will provide energy, safety, sustainability and reliability.
– We will improve the customer experience.
– We will support customers facing vulnerable circumstances

» There are many things to be learnt from the upstream industry’s development of the coal seam gas industry. These lessons should be included in an industry code of conduct.
» The Energy Charter is supported by many energy businesses involved in the hydrogen value chain.

» Australia’s gas distribution networks are mostly constructed of plastic materials that are compatible with hydrogen. Earlier towns gas networks were constructed using cast iron and these have been replaced over the time to improve operational performance and enhance safety. It is expected that the full conversion to plastic networks will be completed by the mid 2020’s.
– Networks are effectively ready and individual network operators would be best placed to provide detailed information about the extent of the conversion process for their network.
» Gas fitting behind the meter in homes is covered by AS/NZS5601.1:2013 Gas Installations. Given the low pressure environment, it is expected that home gas installations will operate safely with hydrogen blends.
» It is expected that existing gas appliances can continue to be operated safely and efficiently when blending up to 10 per cent hydrogen into the network. Beyond this, some appliance modifications may be required to ensure they continue to operate safely and efficiently.
– Work is currently underway by Future Fuels CRC to test appliances up to 10 per cent hydrogen.
– Appliance development work is being carried out in Australia and overseas to ensure appliances can operate with high levels of hydrogen.

» Establishing new 100 per cent hydrogen developments and transferring parts of existing networks to 100 per cent hydrogen are logical steps towards full hydrogen adoption.
» Gas network businesses are able to provide details regarding sections of their network, or regional networks, that are fully compliant with converting to 100 per cent hydrogen.
» To demonstrate a conversion of a regional town to 100 per cent hydrogen will require suitable appliances to be available and the safety regulator to be engaged to approve such a project.
» To facilitate approvals from the regulator, network businesses could adopt industry best practices from overseas activity and adopt those standards if approved by regulators.
» Hydrogen based micro grids could likely become commercially viable by 2030, a number of trials under different conditions should be supported to assist in identifying and resolving key issues preventing wider adoption. A recent example is an announcement by a housing developer in Aberdeen, Scotland to include 30 hydrogen fuel cell homes in its latest development. (https://www.h2-view.com/story/first-for-scotland-plans-submitted-for-hydrogen-powered-homes/)

» Australian Standards (AS4645 – Gas Distribution Networks) are already in place. These standards provide best guidance to construct, operate and manage gas distribution networks covering all materials in those networks.
» This standard was last reviewed and updated in 2018.
» The standard is the best vehicle to make amendments to networks protocols when changing the gas blend from natural gas, to a hydrogen blend and then to 100 per cent hydrogen.
» Similarly, standards for behind the meter and appliances are already in place and will need to be modified for changing network fuel compositions.

» Network businesses are effectively engaging with the community through current pilot projects. This engagement will potentially identify community concerns.
» In particular, the Strategy should be informed by the work of the Future Fuels CRC – a joint initiative by government and industry. The FFCRC has a research program focussed on addressing consumer concerns and building social acceptance. The research program has a number of active projects to better understand the community’s reaction to changing infrastructure requirements and to better understand the community’s perceptions on converting to renewable gas.

» Many of these activities listed in Table 2 in the report are already underway through industry-led pilot projects and industry-led R&D via Future Fuels CRC.
» Some specific notes:
– Hydrogen blending will need to be allowed by the mid 2020s to enable current pilot projects to be able to inject into networks, therefore, this should be brought forward to the 2020-2022 timeframe.
– Appliance readiness should be conducted in collaboration with manufacturers. The priority should be to establish the achievable hydrogen concentration with existing appliances, then establish requirements for higher percentages. It is important for social license that changes to appliances are sufficient to support renewable gas used in networks, which may not necessarily be 100 per cent hydrogen.
– The potential path to 100 per cent hydrogen should be better understood through both trials and demonstrations. The focus of the actions should be on understanding the costs and benefits of transition to a low carbon gas network rather than greenfield 100 per cent hydrogen projects.
» Industry is leading a number of pilot projects that will provide relevant information to the activities in Table 2. Individual network businesses will be able to provide additional information.
» ARUP has recently produced a report for a timetable for conversion in the UK. The UK is generally understood to be around 5 years ahead of the rest of the world in terms of decarbonising their gas networks. Their roadmap is a good reference source for the Strategy.
» https://www.arup.com/perspectives/publications/research/section/establishing-a-hydrogen-economy-the-future-of-energy-2035

» The strategy should highlight the potential opportunities for the hydrogen and electricity systems to connect. In particular, it could promote the integration of electrolysers into electricity networks with high penetration of renewables as load balancing systems.
» The Integrated System Plan (ISP) is the integrated plan for strategic transmission infrastructure across the National Electricity Market (NEM). Emissions policies and renewable energy subsidies, renewable energy hubs and demand centres play an important role and have a critical impact on modelling and the results of a co-optimised plan. All state and federal government policies that impact the NEM such as various trajectories of renewables should be documented by COAG and formally provided to AEMO for use in the ISP assumptions and modelling.
» The Strategy should be cognisant of the national planning approach for electricity transmission, and the implications this can have for integrating large scale hydrogen production facilities into the energy system.

» The production of hydrogen via an electrolyser represents a significant load. Electricity Networks would want such a process to be defined as “load”. In Europe there is a push for hydrogen production via an electrolyser to be exempt from import charges (as part of lobbying on storage).
» In the UK OFGEM have just released guidance on the regulatory treatment of storage that would exclude hydrogen production from the exemptions on import charges that would apply to electricity storage. The OFGEM work includes a definition for electricity storage. Where electrolysed hydrogen was stored and then subsequently converted back to electricity (at the same location) this could be classed an “electricity storage facility” under the UK regulations (electricity in-storage-electricity out).
» Hydrogen production via electrolysers represents an important “footroom” service. This is where electricity demand is increased to better match (excess) generation. Footroom is an established demand response service in the UK and helps resolve the minimum demand problem (belly of the so-called duck curve). Demand response services are poorly utilised in Australia. There is a lack of experience of using demand response to manage the Australian electricity system (at all scales, Distribution and Transmission), while in the UK and USA demand side response provides critical system balancing services. The proposed rule changes for demand response in the Wholesale market may help, but the lack of support (e.g. proposed ENA rule change for TNSP DMIS/DMIA scheme) for innovation funding for networks to develop the contractual, technical and market arrangements for large-scale demand response is preventing the deployment of non-network options (NNO) – and the production of H2 from electrolysers is a NNO

» See above on demand side response and footroom.

» https://www.aemc.gov.au/news-centre/media-releases/wholesale-demand-response-mechanism-extended-more-consultation
» AEMO ISP may not incorporate hydrogen opportunities. As mentioned under Q2, hydrogen presents many opportunities that could be either considered as competing with hydrogen, or supporting it.
» Electric vehicles are yet to be deployed at scale in Australia.

» Australia already has a number of pilot projects underway (see response to section 6).
» The next phase should be on scaling up the production of hydrogen to reduce its cost. Government could support through appropriate incentives, for example a renewable gas injection target providing an incentive for energy of renewable gas injected into the gas network. Additional support in the form of competitive grants would reduce the entry cost and share the risk to capital intensive projects between industry and government.
» This is similar to the Renewable Energy Target and then the focussed support by ARENA on large scale solar PV projects.

» Networks should be involved in these consortia as in the longer term, these networks may be able to provide hydrogen fuel to the refuelling infrastructure compared to the current role of providing fuel via refuelling trucks.

» Large fleet users could support the role of hydrogen through selective procurement of hydrogen for fleet vehicles. For example, governments could select hydrogen buses at the next tender stage and as such support the development of hydrogen production and refuelling infrastructure. Large fleet users that return to base, e.g. couriers or taxis, could also lead to increased hydrogen scale.
» The National Hydrogen Roadmap indicates that the cost of hydrogen for these applications is commercially competitive.

» Toyota has demonstrated its fuel-cell vehicle technology through a round of lending a series of its vehicles to local council and businesses in Victoria. This results in increased exposure of the technology.
» Globally, a wide range of mobility is being demonstrated including buses, trains, trucks, and shipping. These back to fleet vehicles demonstrate how these vehicles can be used while at the same time increasing the supply for hydrogen, and subsequently reducing its production cost, which results in other applications becoming commercially viable.

» Many of these vehicles are commercially available on the international markets. Gaining Australian certification may be a limiting factor. Certification of refuelling infrastructure will also be required.
» Buses, ferries, freight and shipping all benefit from returning to depots where refuelling stations could be placed. Similarly, forklifts and other on site vehicles are location specific so a local refuelling station could be used to provide hydrogen for those vehicles.
» Mining vehicles provide another opportunity to demonstrate the role of hydrogen.
» Light vehicles are more challenging as their movements are less restricted so that they are not suitable to be refuelled at depots compared to return-to-base fleets.
» It appears that hydrogen vehicles are available commercially in other countries but that Australia does not have any hydrogen vehicles available for purchase. This is likely a reflection of the lack of infrastructure (which in its own way is a reflection of no demand since no vehicles are available).

» Some businesses are keen to buy green gas but there is no market mechanism in place to do so.
» A renewable gas target would allow businesses to purchase green gas injected into the network. This would be an incentive for renewable hydrogen production.