Australia lags behind in the hydrogen space: shift required from planning to implementation

The latest annual State of Hydrogen report published by the Department of Climate Change, Energy, the Environment and Water in April 2023 is a "call to action" to ensure Australia's early lead in the hydrogen space is not conceded and to progress the investments that have been stuck in the pipeline pending final investment decisions (FIDs).

The report provides that there has been a general increase in hydrogen demand worldwide in 2021 (around 5%), with most of this demand met through unabated fossil fuel-based production.

However, global hydrogen produced using low emissions increased by 20% on the preceding year. Projected global demand for hydrogen and ammonia by 2030 has doubled in the past year, due to geo-strategic developments in Europe leading to increased national renewable hydrogen demand targets.

According to the report, Australia was one of the first countries to publish a hydrogen strategy (being the National Hydrogen Strategy published in 2019). Over a quarter of the known strategies adopted in other jurisdictions are export orientated and at least eight countries could be considered competitors of Australia. Australia has several advantages which many of our trading partners do not share (eg, abundant renewable energy resources and considerable fossil fuel and mineral resources), meaning it is well placed to produce hydrogen and export it at a large scale.

Despite having a national strategy early on and enjoying some first mover advantages, Australia risks falling behind other countries that are implementing market-based policy mechanisms and new economic incentives to propel their hydrogen industries. The report suggests that overall: (i) Australia now tends to be a follower rather than a leader on the global scale with one of the reasons being that Australia has a large pipeline of announced hydrogen projects that are yet to proceed to deployment (ie, FIDs being achieved), trailing many OECD nations; and (ii) private investment in other countries is also ahead of Australia.

Current focus areas in Australia

The Australian governments recognised the need to act on Australia's declining status, and on 24 February 2023, federal and state representatives agreed to review the National Hydrogen Strategy with the goal of positioning Australia as a global hydrogen leader by 2030.

The National Hydrogen Strategy identified the following areas as a priority:

• Providing regulatory certainty for investors and proponents with a focus on providing:
  • national consistency in the regulation of hydrogen production
  • national consistency in hydrogen refuelling station safety
  • national consistency in hydrogen industry appliances
  • prioritised reforms in the transport sector
• Regulation of pipelines infrastructure – In December 2022, a policy paper was released, providing an overview of reforms which would extend the national gas regulatory framework to cover hydrogen, biomethane and other renewable gases.
• Hydrogen Guarantee of Origin – The Australian Government is developing a Guarantee of Origin scheme which consists of a product-based emissions accounting framework and a mechanism for tracking renewable electricity.

The State of Hydrogen provided some additional information on initiatives:

• Supporting hydrogen research and development – Since 2017, the Australian public and private sectors have invested more than $570 million into hydrogen research and development (R&D) and demonstration projects. Over the past year there has been a notable increase in R&D funding from the private sector.
• Gaining community acceptance of hydrogen and informing the market and the community – While public support and awareness of hydrogen is growing, further efforts to increase understanding of hydrogen as an environmentally sustainable energy source is necessary. Information sources such as HyResource and Hydrogen Economic Fairways Tools offer a readily accessible source of collated knowledge on hydrogen projects.

Next steps for Australia

Australia has made a promising start on the above National Hydrogen Strategy pathways. However, continuing and even increasing the pace of development is vital for Australia to regain its place as a world leader in hydrogen. Some focus areas in the State of Hydrogen report highlighted to facilitate Australia's switch from planning to implementation include:

• Implementation of projects supporting scale: Hydrogen hubs are crucial for jumpstarting the industry, providing centres for infrastructure, scaling, innovation, and sector synergies. Such projects offer clarity on associated costs, deployment timelines, and potential constraints.
• Implementation of hydrogen ready regulation – To ensure investor certainty, Australian governments must continuously strive to establish and implement consistent standards, regulations, and certification. Consistency domestically and internationally is vital to prevent unnecessary confusion and perceived risk for investors and project proponents.
• Securing foreign investment: Australia's hydrogen industry relies heavily on foreign direct investment to grow and develop. With the significant increase in renewable energy generation required to achieve renewable electricity targets and support the hydrogen industry, there are attractive opportunities for foreign investment. Appropriate regulations, incentives, and workforce capabilities will facilitate such investment.
• Delivery of electricity generation projects: Hydrogen as an electricity generation alternative to traditional fossil fuels can provide a means of storing excess renewable energy. The proposed South Australian government project in Whyalla, Commonwealth government project in Kurri Kurri, and projects in WA envision hydrogen storage to meet medium to long term demand. These large-scale projects will generate significant hydrogen demand, and it is crucial to provide adequate support for their progress from planning to implementation.
• Engaging the community: As the hydrogen industry advances with the development of new projects and hubs, it is important to acknowledge and address any potential concerns raised by local communities. Engaging in community consultation allows for the expression of concerns and the identification of appropriate measures to alleviate them.