Hydrogen energy – how do I get a project approval?

A recent study published by the Australian Renewable Energy Agency estimated Australian hydrogen exports could add $1.7 billion (USD$1.2 billion) per year to the economy by 2030, with China, Singapore, Japan and the Republic of Korea identified as major prospective markets for Australian hydrogen by 2025. Japan especially, is already being regarded as a potential major customer with the country aiming to derive 40% of all its energy from hydrogen by 2050. The hope is that Australia can utilise the existing natural gas infrastructure and conventional transport methods to accelerate the hydrogen export industry. Considering Australia's success at exporting natural gas and its status as a global energy exporter, the country is well-positioned for such a move.

For those who plan to take advantage of that position, it's important to understand how any hydrogen production facility will be subject to various environmental regulations at both a Federal and State level. In this article we review the existing regulatory framework and key considerations for hydrogen energy production projects, and what major projects are currently underway or in the pipeline.

Hydrogen as part of the energy mix

Hydrogen is a carrier of energy; it is not a fuel source in itself. Typically produced through the process of electrolysis where water molecules are split into hydrogen and oxygen, hydrogen can be condensed into a liquid fuel source which can generate conventional electricity or power vehicles in a similar way to diesel. At the point of consumption, the only by-products are water and electricity making it an attractive fuel alternative. "Green" or renewable hydrogen is produced using the same methods but the production process is powered by renewable energy such as solar, wind or biomass. Once produced, hydrogen can be blended into existing gas and power networks or exported much like natural gas. The global market for hydrogen is growing due to the increased demand for efficient, large-scale renewable energy and the market is forecast to become a trillion dollar economy by 2050. A major driver of this market growth is expected to be hydrogen-powered fuel cell electric vehicles in densely populated countries such as Japan, China, the Republic of Korea and areas of Europe. Spurred on by these significant export opportunities and the vast domestic potential, the Australian hydrogen industry continues to gain momentum with numerous companies backed by state and foreign governments developing pilot projects to investigate commercial applications.

In August 2018, the CSIRO released the National Hydrogen Roadmap providing a blueprint for the development of a hydrogen industry in Australia. The report found strategic investments along the value chain from both the private and public sector will help scale Australia's hydrogen industry and recommended utilising Australia's abundant natural resources (specifically solar, wind, fossil fuels and available land) to establish a hydrogen export supply chain. Additionally, Australia's Chief Scientist, Dr Alan Finkel AO, is leading the COAG Energy Council Hydrogen Working Group tasked with developing a National Hydrogen Strategy. In July 2019, the Hydrogen Working Group released nine issues papers that delve into specific topics to help develop the strategy such as producing hydrogen at scale, attracting investment, hydrogen for transport and industrial use and developing an hydrogen export industry.

How does hydrogen trigger regulatory considerations?

Generally, environmental protection legislation will regulate an activity that causes, or is likely to cause, environmental harm. Hydrogen energy can either be generated through thermochemical technologies (including steam methane reforming and coal gasification) or electrochemical technologies (such as polymer electrolyte membrane or alkaline electrolysis). Production of hydrogen energy from these technologies carries numerous possible environmental and safety risks associated with:

• the manner in which fuel sources and materials are used and stored;
• the location and operation of plant and equipment as well as connection and interaction with power sources;
• the waste generated from production activities (eg. carbon dioxide produced as a by-product from thermochemical technologies);
• the storage of hydrogen, either via compression, liquefaction or chemical carriers; and the transport of hydrogen by truck, rail, ship or pipeline.

Due consideration must be given to these risks to ensure environmental and safety hazards are avoided or minimised. For example, some hydrogen production technologies involve chemical reactions occurring in controlled environments at high temperatures and pressures which can increase explosion risk and may lead to major hazard facility classifications. Similarly, the storage of hydrogen in underground salt caverns, line packing in gas pipelines and the use of ammonia also create potentially significant environmental and safety risks that may require regulation.

Current regulatory framework for hydrogen

Currently, no targeted regulation for hydrogen production facilities exists in Australia. There is an existing framework of technical regulations (eg. for transport of gaseous materials) that provide broad coverage regarding the use of hydrogen and related technologies. Any hydrogen production facility will be governed by existing energy, water, gas and environmental regulations. However, given the increasing attention given to hydrogen by political parties and the renewable energy industry, regulatory reform is likely to occur in the near future. Considering this, and depending on the intended end-use application of the hydrogen produced by a facility, it is important to understand the current regulatory frameworks applying to: the export of hydrogen and related substances here in Australia and the destination country; and, participation in the domestic gas market. While they are yet to be any introduced in Australia, hydrogen-specific standards are being developed internationally through organisations such as the International Organisation for Standardisation and the International Electro-technical Commission. These standards remain voluntary unless codified as Australian law. However, it is important to consider these technical standards when developing a hydrogen project as equivalent specifications between Australia and potential export markets can simplify processes and help to reduce costs.

Environmental laws

Early in the development process, proponents should consider: 

• if the facility will engage any activity that may have a "significant impact" on a "matter of environmental significance" and whether the project requires approval under the Environment Protection and Biodiversity Conservation Act 1999 (Cth);
• whether any licences are required under Federal and State legislation, eg. an environment protection licence; and
• if reporting to the National Pollutant Inventory is required and any relevant reporting obligations which may apply.

Storage and transport regulations

On-site storage of hydrogen post-production and subsequent transport off-site is governed by multiple laws, regulations and codes at both the federal and state levels. Substances other than hydrogen may be present during the production process and these may also be subject to such regulatory requirements. Key considerations regarding compliance, licensing and reporting obligations include:

• the presence of any "dangerous goods or substances" at a facility as prescribed under the Australian Dangerous Goods Code;
• which licences are required (if any) to store or transport any relevant dangerous goods or substances; and
• any technical standards which may apply to storage and transportation depending on the type and volume of any dangerous goods or substances, eg. permissible types and specifications for storage conditions or tanks.

Water for hydrogen electrolysis

The production of "green" hydrogen requires water for the electrolysis process. A key challenge of production is sourcing and securing a sufficient volume of quality water. Relevant considerations include:

• any licensing or approval requirements for connecting to the relevant water network in the state or territory where the facility is located; and
• if using seawater, the relevant state licensing requirements regarding the operation of a desalination facility (including limitations on water temperature increases at the point of discharge, and brine management and disposal).

Project approval requirements

As the current hydrogen projects are pilot projects, the approvals requirements have been regulated on a case-by-case basis by the relevant authorities under feasibility study, demonstration or pilot project regimes, enabling smaller-scale proof-of-concept testing without the need for lengthy formal assessment and approval processes. If the technology is proven, it is most likely that regulations will be amended to introduce a new category of energy specific projects and approval guidelines will be developed (as has happened for wind and solar projects).

Regardless of the regulatory approval pathway, given the likely significant environmental and safety risks it is likely that these projects will be subject to comprehensive environmental assessments and public consultation regimes.

Moving forward with your hydrogen project in Australia

Overall, hydrogen energy is a rapidly growing industry which the regulatory environment is pushing to catch up with. Although there are numerous pilot programs operating in Australia there is currently is no regulatory framework or established approval pathway. The proposed Asian Renewable Energy Hub may provide an indication on how regulatory authorities will assess large-scale renewable energy projects in future. However, the intended end-use application of the hydrogen produced will likely have the most impact on potential regulation and approval. Proponents should therefore give due consideration to existing international standards on hydrogen as a guideline to potential Australian regulations and consult with the relevant consent authority (eg. the Department) when drafting a proposal.

Current and proposed major projects for hydrogen production