| August 7, 2023

Hydrogen Headstart Public Consultation: Zero Carbon Hydrogen Australia & Smart Energy Council

Zero Carbon Hydrogen Australia, together with the Smart Energy Council welcomes the opportunity to provide a response to the Australian Government Department of Climate Change, Energy, the Environment and Water on the Hydrogen Headstart Program Consultation.

Zero Carbon Hydrogen Australia is a division of the Smart Energy Council. The Smart Energy Council is the peak independent body for Australia’s smart energy industry, representing around 1,000 residential, commercial, and large-scale renewable generation and storage companies, smart transport firms, as well as the renewable hydrogen and ammonia industry.

Zero Carbon Hydrogen Australia is Australia’s peak industry body for Renewable Hydrogen, providing an intersection between government and industry to drive the adaptation of zero-carbon hydrogen in Australia, and for Australian business globally. Zero Carbon Hydrogen Australia advocates for zero-carbon hydrogen projects and products, including green ammonia and green steel, and provides industry leadership by being a respected and trusted voice for the zero-carbon hydrogen industry here in Australia and overseas.

 

Summary of response

Zero Carbon Hydrogen Australia (ZCHA), in collaboration with the Smart Energy Council (SEC), acknowledges the Department of Climate Change, Energy, the Environment, and Water’s (DCCEEW) valuable action in conducting the initial consultation with industry on the Hydrogen Headstart Program Consultation.

ZCHA and SEC actively support the Australian Government’s ambition to become a renewable energy superpower and recognise that the ambition is achievable through valuable programs such as Hydrogen Headstart. ZCHA and SEC, in collaboration with our Hydrogen Industry Members, finance and investment specialists, and subject matter experts, have conducted extensive consultations to formulate the response to the Hydrogen Headstart. We eagerly anticipate continuing to offer valuable input into the DCCEEW Hydrogen Headstart as we contribute to the program’s development.

 

Key messages and recommendations:

ZHCA and the SEC strongly support the $2 billion Hydrogen Headstart program, both as a means to building Australia’s renewable hydrogen industry and as an initial response to international competition generated by the US Inflation Reduction Act and other nations’ smart energy industry development measures.

The Australian Government needs to ensure Hydrogen Headstart helps, not hinders, Australia’s hydrogen industry. It needs to ensure it doesn’t crowd out other investments and support for renewable hydrogen projects, including smaller projects, and eligibility for funding must be sufficiently flexible that it doesn’t advantage just one or two companies.

Projects below 50 megawatts must be eligible for Hydrogen Headstart funding and only renewable hydrogen should be funded, with those projects appropriately certified. 

ZCHA strongly supports limiting eligibility to renewable hydrogen only. The science dictates that a rapid acceleration in the production and utilisation of renewable hydrogen is necessary to achieve energy and industrial sector emissions trajectories in line with the Paris Agreement and Australia’s legislated Net Zero by 2050.

ZCHA applaud the Australian Government for its commitment to transitioning away from fossil fuel-based hydrogen and actively supporting the adoption of Guarantee of Origin (GO) certificates. We firmly believe that this represents a significant step in the right direction, propelling us towards a cleaner and more sustainable future.

As we move forward, we must ensure that we authenticate our projects, demonstrating that the hydrogen produced is genuinely renewable, sourced exclusively from 100% renewable electricity, and proudly boasts near-zero carbon emissions. 

The SEC’s Zero Carbon Certification Scheme, administered by ZCHA, has emerged as a crucial initiative in promoting and recognising sustainable practices within the renewable energy sector. This scheme aims to foster the growth of environmentally friendly technologies and encourage companies to meet stringent proof of sustainability criteria. By obtaining Zero Carbon Certification, companies and governments can showcase their commitment to carbon neutrality, bolstering their reputation and contributing to a cleaner, greener future.

The Swiss non-profit foundation, The Green Hydrogen Organisation (GH2), has established a global benchmark for defining renewable hydrogen. This benchmark dictates that renewable hydrogen is produced through water electrolysis, utilizing 100% or near 100% renewable energy, and resulting in close to zero greenhouse gas emissions (<=1 kg CO2e per kg H2 taken as an average over a 12-month period).

Recommendation: The Hydrogen Headstart mandates that projects require independent certification for renewable hydrogen as key criteria of the scheme. This ensures that the Hydrogen industry in Australia is built on the foundations of credibility, trust and transparency.

Recommendation: The Hydrogen Headstart criteria state that renewable hydrogen must be certified to meet the GH2 standard threshold of producing less than 1 kg CO2e per kg H2.

We acknowledge that the GO scheme is still in its developmental phase, and there are aspects that require careful consideration. In line with the SEC Submission on the GO we make the following recommendations.

Recommendation: Minister for Climate Change and Energy commission a brief review of the GO scheme to:

a. assess its role in the delivery of the Climate Change Act 2022, the 82% renewables by 2030 target and other Australian Government climate change and energy policies, and to;
b. investigate the merits of a new Guarantee of Origin scheme against the merits of extending the existing Renewable Energy Target to 2040.

Recommendation: Fossil fuel-derived hydrogen, ammonia and metals be removed from any GO scheme.

ZCHA firmly support fostering knowledge sharing and collaboration. However, history has shown a lack of emphasis on this objective during the tender process has resulted in knowledge sharing becoming a mere ‘tick-box’ exercise rather than a core merit criterion to determine tender outcomes.

As a nation with aspirations to lead the charge in the global emergence of the renewable hydrogen industry, we must recognise the critical importance of securing social license for renewable hydrogen and its derivatives. Social licence is critical if Australia is to rise as a renewable energy superpower by 2030, both in terms of exporting hydrogen and decarbonising our domestic industries. It is essential that social licence plays a significant role in the criteria used to determine eligibility under the Hydrogen Headstart. Achieving social licence for large-scale hydrogen projects is critical as these projects hold the key to proving the commercial viability of a renewable hydrogen sector that has the potential to meet around one-fifth of the world’s energy demand by 2050.

Recommendation: Include the identification of sustainable water sources, other environmental aspects and community engagement, including but not limited to First Nations people as key component of the Hydrogen Headstart eligibility and merit criteria. 

Government renewable hydrogen projects with export capability will not only bolster support from the importing countries but also trigger access to concessional finance and international equity participation, including from significant off-takers. This level of support will solidify Australia’s position as a trusted and reliable partner in the global renewable hydrogen market.

By backing these ambitious projects, we demonstrate our commitment to a sustainable and prosperous future, not just for Australia but for the entire world. The time to act is now, and together, we can pave the way for a cleaner and more sustainable energy landscape, creating lasting benefits for our nation and fostering strong partnerships on the international stage. Let us seize this opportunity to lead, innovate, and shape the future of the renewable hydrogen industry.

Recommendation: The Hydrogen Headstart eligibility and merit criteria includes both export and domestic use of hydrogen as eligible.

Recommendation: The Hydrogen Headstart eligibility and merit criteria, should heavily emphasise projects that bring multiple and stackable economic benefits to Australia, while also supporting other key government policy priorities.

Whilst the Hydrogen Headstart program has been strongly welcomed by industry, noting the concerns below, it has not yet had sufficient impact on activating supply chains. More work is needed in this area. Ongoing challenges with supply chains have led to a lack of competition between suppliers thus creating the absence of competitively priced equipment and technology.

The Hydrogen Headstart should actively foster the growth of supply chains, considering the manufacturing of electrolysers, compressors, solar and wind power, and battery components.

Recommendation: The Hydrogen Headstart should make growing and diversifying the renewable hydrogen and derivatives sector, including manufacturing supply chains in Australia, a key merit criterion.

Recommendation: The Hydrogen Headstart should not be limited to projects of 50 megawatts and above. By unlocking subsidies and incentives for smaller and mid-range hydrogen projects, the hydrogen industry will experience acceleration and stimulation, leading to significant job creation and a meaningful impact on the supply chains.

The Hydrogen Headstart, despite being a positive action by the Australian Government, has affected commercial outcomes for the Hydrogen industry. Several of our members have informed ZCHA that offtake discussions and negotiations have been significantly hindered and slowed down as companies and investors are holding off on commitments until they understand the subsidy opportunities determined under the Hydrogen Headstart program.

The Hydrogen Headstart program must help, not hinder, Australia’s hydrogen industry. This is a threshold issue for ZCHA. Hydrogen Headstart funding may go to projects over 50 megawatts, but funding eligibility must not be limited to such projects.

Recommendation: The Australia Government acts with purpose and timeliness in establishing the components of the Hydrogen Headstart, including acknowledging further investment is needed into the Hydrogen Industry.

Recommendation: The Australian Government National Hydrogen Strategy must establish a framework for success and continue to set the strategic direction for renewable hydrogen adaptation in Australia, and for Australian business internationally.

 

Download our Hydrogen Headstart Consultation submission.

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