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Part 4

Hy-Achieving – creating a suitable incentive regime

Various government funds and initiatives have been created to incentivise the development of hydrogen projects in Australia. For example, at the national level, there is the Clean Energy Finance Corporation's $300m Advancing Hydrogen Fund and a $70m Renewable Hydrogen Deployment Funding Round from the Australia Renewable Energy Agency. State governments have also committed to supporting the development of the hydrogen industry by way of financial support. While this funding has resulted in the feasibility of a number of research and pilot programmes required for large-scale hydrogen production, it has been suggested that such financial support needs to be extended to encourage technological development and support existing pilot programmes transition to large-scale commercialisation.

The Federal Government has developed, and consulted with industry in respect of, a proposed approach to the development of a 'Guarantee of Origin' scheme for hydrogen. This scheme would implement a standardised process of tracing and certifying where and how hydrogen is made and associated environmental impacts. This aligns with Australia's hydrogen strategy, which provides that "Australia wants to be a leader in developing an international [certification] scheme". On the basis of Australia's comparative advantage in producing renewable energy (due to space and natural resources available), a robust and internationally recognised certification scheme for green hydrogen is expected to be critical for Australia's competitiveness in the export of hydrogen.

Currently, the main method of incentivising the use case is government funded financial support provided directly to project developers, although in April 2021, the Federal Government announced that the 2021-22 budget would include funding to accelerate the development of clean hydrogen hubs in regional Australia. Accordingly, it is the taxpayer who pays for the chosen method of incentivising the use case. Whether this is the incentive model that continues to prevail as hydrogen gains traction and becomes more established in Australia remains to be seen.

 

Part 5

Hy-ly Volatile? making it safe, sustainable and transportable

The current regulatory landscape does not explicitly accommodate the creation of a hydrogen market in Australia. While some existing legislative frameworks are likely to apply to the hydrogen industry, it is probable that further regulatory reform will be required to specifically target the needs of large-scale hydrogen production.

A report commissioned by the Department of Industry, Innovation and Science identified 730 pieces of legislation and regulations, and a further 119 standards, that may be relevant to the development of an Australian hydrogen industry. These pieces of legislation principally relate to aspects addressing the safety, development and upscaling, environmental impacts and infrastructure needs (including transport and pipelines) of the hydrogen industry. A separate review would need to be undertaken to consider whether changes would be required to address hydrogen production, transport to market, use as fuel, use in gas networks, safety, project approvals, environmental protection and economic effects on industry. The Federal Government included $2.4m in the 2021-22 budget to support hydrogen related legal reforms.

A further regulatory challenge facing the hydrogen industry is the inconsistent application of different policies and priorities across the states. In order to achieve relative uniformity among jurisdictions, the various state and territory governments have committed to developing a nationally consistent approach to regulatory models applicable to the hydrogen industry. To this end, the Australian Government will drive the national regulatory reform by applying a "smart, consistent, light-touch" approach. In July 2020, through Standards Australia, the Australian Government adopted eight international standards relating to hydrogen quality, storage, transportation and usage. Several state and territory governments have also established cross-government agency working groups to develop competency in, and awareness of, hydrogen across government, including identifying and addressing regulatory gaps and providing advice on compliance with existing requirements.

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