National Hydrogen Strategy Issues Papers

Starting with a 100 MW.

Overall, we applaud the Australian Government’s initiative in this particular consultation process that should be fruitful in the very short term to allow scale-up of the market of renewable hydrogen. The implementation of the Australian Hydrogen Strategy is essential to start as soon as possible the development of the renewable hydrogen economy through the development of its legal and regulatory framework.

See comment in track changes (in the mark-up which has been uploaded) of the potential role for government to “backstop” or “underwrite” the demand in the initial phase where it is still developing.

Renewable/low-carbon hydrogen accreditation/certification schemes need to be established in Australia, and linked to those schemes in export markets (Japan and Korea but potentially also Europe, for example CertifHy).

A specific framework for renewable H2 is essential
- Clear definitions to distinguish between the different categories of hydrogen, such as low-carbon or renewable hydrogen, is fundamental for the creation of the renewable hydrogen commercial and industrial market. The traceability of the different types of hydrogen is linked to this question.
- A thinking process is crucial on specific support schemes with respect to the different types of hydrogen mentioned above. Renewable hydrogen production support scheme should be more favorable (and put in place in priority) than the low-carbon hydrogen production support scheme, with regard to the delta of sustainability criteria.
Non-specific H2 regulatory framework are also impacting the uptake of the untapped renewable and decarbonized H2 potential.
- CO2-based taxation framework
o An adequate CO2 price signal is tremendous economic incentive for hydrogen users to switch to renewable hydrogen, especially in the industrial sector. An ETS system (market-based trading mechanism, like the Australian ERF Safeguard Mechanism) may not be enough to fully benefit from a complemented price floor. Despite the recent reforms of the ERF Safeguard Mechanism, an additional CO2 price floor should be introduced to reinforce the impact of the scheme and reach an adequate carbon price.
o Additional taxation schemes at state level based on CO2 should be fostered while avoiding any double taxation between the federal and state levels. These schemes may aim different market actors or activities.
o Some regulatory measures could have the same impact in terms of CO2 reductions without been a tax per se. For instance, a ban of specific technologies than are known to emit important level of CO2.
- Energy Efficiency support schemes
o Energy Efficiency financial support schemes (market based or not) are also a legal/regulatory dimension to take into account when thinking an overall hydrogen framework. Their adequate designs could be a true enabler for the renewable hydrogen production uptake, allowing asset-based solution offers through additional market revenues (supply side) and incentivizing the switch to renewable hydrogen production (demand side). With respect to the reciprocal perspective, renewable hydrogen is an enabler for energy efficiency.

Although it may be counter-intuitive, we strongly recommend that governments fund a few, single hydrogen projects – of scale – rather then several small projects.
Capital flows to where it is treated well and this means that investors have a reasonable prospect of revenue certainty when adjusted for risk. In the case of hydrogen the level of risk in investing already exceeds existing technologies. For this reason, creating a stable regulatory environment and working to secure public support are two areas where government can play a key role in reducing risks faced by investors.
Setting down an attractive investment environment for the private sector finance
- Development of a public-private scheme where a private investment is (entirely of partly) guaranteed by the federal or state government. Introduction of an incentive for private actors to mobilized their financing capacities when making sure they will be paid by a public and trustworthy body in case of failure.
- Development of national sustainable finance scheme to integrate sustainability considerations into the Australian financial policy framework to deliver sustainable finance growth. Such scheme may include:
o a sustainable activities’ classification system where the production of renewable hydrogen is explicitly recognized as so
o a global approach to sustainable finance and provide the opportunity to discuss ways to channel private capital towards sustainable projects in a coherent manner
o federal/state labels for green financial products
o incorporating climate risks into banks' risk management policies and supporting financial institutions that contribute to fund sustainable projects

Encouraging hydrogen mobility (especially heavy-duty, such as trucks, trains etc) will help activating the market; government could play a role by aggregating the demand of various actors (e.g. buying 100 buses in one go for 10 municipalities will be cheaper – on a per bus basis – then each municipality buying on its own 10 buses). There are also different types of industries that could use hydrogen as a feedstock; not only ammonia, but also steel, hydrogenperoxide etc.
Focus on the financial support mechanism with respect to its design and amount, with a specific consultation of energy suppliers, grid operators and industrials.
- Such remuneration scheme should be implemented temporarily, giving enough time for the LCOH to decrease and for the technology to reach its maturity level.
- Renewable hydrogen production support scheme should be more favorable (and put in place in priority) than the low-carbon hydrogen production support scheme, with regard to the delta of sustainability criteria.
The traceability of the different types of renewable and low-carbon hydrogen should effectively allow by a specific scheme (even between the Australian States), especially in an international context.

The implementation of an effective legal and regulatory framework with clear definitions of the different types of hydrogen is the first and prior step to consider before the specific revenue designs.

We recommend investigating how electrolysers can fully play its role as energy storage means for the electricity grid (including valorizing curtailed power), including creating the necessary revenue streams (similar to FCAS etc).
Electrolysers are beneficial to the overall energy system including in terms of infrastructures and environment. They can contribute solving the issue of the intermittency of renewable energies (renewable hydrogen as a mean for long-term inter-seasonable storage) and favoring security of supply in cases of well-known market and infrastructure signposts. They are key to enable sector coupling potentials, not only in specific momentum but on a continuing basis, and should be remunerated accordingly.

By showing the clear path forward for a hydrogen industry in Australia, as the National Roadmap will help to do, and also by taking concrete actions.

Ensuring that the conditions are met for renewable energy to be available at low cost to feed into the electrolyser to produce cheap hydrogen (e.g. reduce high grid transmission costs).

The facilitation of export agreements with interested nations will support Australia’s hydrogen export market.

The development of a domestic market is not necessarily a pre-cursor to the development of an export market. Rather each presents environmental, fuel diversification, and in time, economic benefits that should be pursued in tandem regardless of whether both or only one market evolves in the medium term. So in sum, both should be equally activated; contrary to natural gas, not clear that there could be a “shortage” of (renewable) hydrogen.

If it is to become a truly global trade, then we could perhaps also consider hydrogen exports to other parts of the world (e.g. Europe)?

The sooner, the better. In order to make viable business cases, project developers need to find offtakers that are willing to pay a premium for a decarbonized product; one of the first questions they will have is - how do we know that it is indeed decarbonized? A guarantee of origin will most likely also be required for any early export project.

[Please see comments inserted in the mark-up that was uploaded as part of our submission.]

[Please see comments inserted in the mark-up that was uploaded as part of our submission.]

[Please see comments inserted in the mark-up that was uploaded as part of our submission.]

[Please see comments inserted in the mark-up that was uploaded as part of our submission.]

With an appropriate certification scheme potential carbon dioxide emissions from the hydrogen sector could be captured with existing frameworks, like the safeguard mechanism and NGERs reporting.
European Return of experience
- The EU-ETS (emission trading scheme) was reviewed in 2018, entering into a new phase that should accelerate the decarbonization mechanism (as a reminder of Issue 1 of the series of public consultation: “Overall advocacy message: The EU-ETS (emission trading scheme) was conceived as the key instrument to reduce CO2 emissions in the power sector, as well as some industrial sectors, relying on a market mechanism. Despite the recent reforms in the right direction, the EU-ETS does not provide a robust CO2 price signal nor long-term visibility in line with decarbonization targets. In order to reinforce its impact, the EU ETS could be complemented by a CO2 price floor.”)
The Industrial Emission Directive is under public consultation. The main comment we have so far with regard to this Directive’s assessment is with respect to the application scope, which should explicitly exclude the production of renewable hydrogen.

There is the fundamental question of who bears the responsibility of storing the carbon dioxide over a long period of time (see page 24 of CSIRO National Hydrogen Roadmap: “Transfer long-term liability to the Government so that upon completion of sequestration, the ownership of the CO2 is adopted by the government”). This could be addressed by ensuring that CCS only remains a transitional technology.

Hydrogen projects should be treated the same as existing, and other newly proposed, industrial facilities that have cause to draw upon water resources.

Streamline of the construction process by avoiding any administration burden and red tape (possible to deal with several issues simultaneously basically leading the schemes approvals, permitting process and land-use): incentive to develop such production project by the reduction of a wide range of points of contacts with specific jurisdiction. One-stop-shop at a determine level (state level, rather than federal or local?) without undermining the existing authorities/jurisdictions of each level of the public authorities Need to tackle this issue as soon as possible in the Hydrogen Strategy, paving the way to concrete legal/regulatory changes in 2020-2021.

There may be value in developing a model safety regime that can be adopted by each jurisdiction given hydrogen is likely to touch upon a range of actors and agencies across all States of Australia.

Implementation of a one-stop-shop governance model
- Representation of the national, federal, and local authorities in the same place without breaking down established jurisdictions and expertise. In legal terms, each layers will keep its established jurisdictions and will apply it in a dedicated inter-institutional centralized platform.
- Common standards and regulatory enablers should be applied while keeping in mind the specificities of each state/region.
European return of experience: States may have already took unilateral initiatives, that should be foster and not breaking down by a particular view on authority/jurisdiction rulings. In Europe, the local authority is often responsible for the permitting process in its lands, when centralized subsidy schemes are usually taking care of at federal and/or at national level.

Springfield City Group and ENGIE’s collaboration in Springfield (Queensland) could be such an opportunity.

The proposed timetable of activities to support hydrogen blending in Australian gas distribution networks should be in line with the following principles:
- The implementation of the provisions/schemes should be done in relation with market players (consultation processes, return of experiences on pilot demonstration projects).
- The implementation should be thought in terms Soft and Hard law. While the first introduces more flexibility and may overcome the length of a legislative process, the latter is suitable for long term ambitions and targets.
- Regular assessments should take place to make sure the supporting measures in place are suitable and for the sector to head toward the overall targets.

Electrolysers are beneficial to the overall energy system including in terms of infrastructures and environment. They can contribute solving the issue of the intermittency of renewable energies (renewable hydrogen as a mean for long-term inter-seasonable storage) and favouring security of supply in cases of well-known market and infrastructure signposts. They are key to enable sector coupling potentials, not only in specific momentum but on a continuing basis, and should be remunerated accordingly.
To the extent possible, integration of hydrogen systems within existing gas and
electricity markets makes sense. To enable this hydrogen facilities need to be
exposed to the same incentives and be able to service customers in these markets.

The current rules do not offer many revenue streams to electrolysers. As stated in this paper, the initiatives or changes required are those that value the long term storage that hydrogen brings to the table.

Sector coupling appears possible; however, hydrogen may ultimately be a more
dynamic fuel resource than gas where the gas markets are characterised by long
term and relatively inflexible agreements for molecules and transport. As
hydrogen production has significant embedded generation prospects this may not always be the case with hydrogen. To the extent hydrogen can be used as a
substitute or competitor for aspects of gas market trading and supply, supported by the market design, this should be considered.

We’re not sure that further pilots are required at this stage, given the various pilots that already exist in Australia and abroad.

It would need to include large-scale hydrogen producers, like ourselves (ENGIE). But there is no limit to the range of companies that could support and service the required infrastructure or coordinate the necessary procurement. The limit will be the initial step to facilitate transfer of larger vehicles to hydrogen fuel, something where government may wish to play a more active role.

This should be coordinated via Hydrogen Mobility Australia (HMA).

To support private investment, other than CO2 reduction targets and standards (for fleet of passenger cars, light commercial vehicles, heavy trucks) and procurement policies, ambitions towards the development of renewable fuels and infrastructures should be outlined.
- With regard to renewable fuels: A specific binding target at federal or state level in the use of RES in the transport sector, with a sub-target dedicated to renewable hydrogen as a RES-fuels
- With regard to infrastructure: Setting down specific obligations of deployment per state and municipalities of H2 refuelling stations. Here, the deployment ambitions can be translated in terms of general targets, but also by specific building code requirements/standards. The federal government may for instance set down standards to install H2 refuelling stations in car parking in or adjacent to new and renovated buildings (both private and public). A target per municipality to build such stations in public areas in terms of station numbers.

Flagship demonstration projects (see hereafter the example of the ENGIE & ENERGY OBSERVER project) to be co-financed by a public authority and an energy firm as ENGIE may play a widespread demonstration role to in Australia and the APAC region. Such demonstration project foster information sharing for consumers with regard to renewable energies but also make aware potential investors specially about the Australian hydrogen economy.
ENGIE and ENERGY OBSERVER are working together on land and water for renewable energy. Renewable hydrogen is at the heart of this round-the-world tour, which has so far led the mission in fourteen countries. A real floating laboratory composed of the most innovative and cleanest technologies, allowing it to combine performance, lightness and efficiency.

Buying buses in bulk for a variety of locations throughout Australia.

Carbon capture and utilization (CCU): technologies using CO2 as a raw material (feedstock) and integrate its carbon content in products for a shorter or longer period, i.e. until the product reaches its end-of-life and the carbon is released to the atmosphere or recaptured.
- The development of a potential national strategy with regard to CCU should focus on a calculation methodology for the climate mitigation potential of CCU schemes, the eligibility criteria for such schemes, the regulatory and investment framework.
- In a sustainable cycle perspective, the by-product should be considered as renewable if the initial production process is renewable (on which is added reused CO2).

Reliability of supply.
Plus, there is a need for a clear political target to green and decarbonize the industry sector by the use of renewable hydrogen as a chemical feedstock and/or as a source of industrial heat.
- Adequate CO2 signals to trigger the switch to decarbonized and renewable hydrogen
- Thinking process over industrial requirements and standards

It may be useful to make the link with those industries using, for example green steel; a building could receive a green certification/label if it uses green steel. This will make the business case for steel suppliers to switch to (more expensive) hydrogen to produce green steel. Also:
• A long-term national target (for instance in terms of renewable gas injected into the gas network with a sub-target for hydrogen) driving investment in renewable hydrogen.
• Need for a detailed roadmap for the integration of renewable gas in the renewable energy markets
• Clear definitions to distinguish between the different categories of hydrogen, such as low-carbon or renewable hydrogen, is fundamental for the creation of the renewable hydrogen commercial and industrial market. This issue not tackled enough in this series of public consultation. The traceability of the different types of hydrogen is obviously linked to this question.
• A thinking process is crucial on specific support schemes with respect to the different types of hydrogen mentioned above. Renewable hydrogen production support scheme should be more favorable (and put in place in priority) than the low-carbon hydrogen production support scheme, with regard to the delta of sustainability criteria.