The Australian Hydrogen Council (AHC) is the peak body for the emerging clean hydrogen industry.
We recognise the role that Western Australia will have in helping the nation to achieve its ambitions
to be a leader in the clean hydrogen economy and the extent to which this will drive Australia
towards its net zero ambitions target. We welcome moves to establish a hydrogen industry in the
state while the production and use of green hydrogen is largely pre-commercial and we appreciate
the opportunity to engage on this matter.
In order to play a role in displacing fossil fuels for energy and carbon emitting feedstocks for
manufacturing, the hydrogen industry will need policy support to achieve the scale needed to reach
cost parity with incumbents. The proposed Renewable Hydrogen Target for electricity generation is
an example of the type of policy which could provide the initial support required to establish the
industry and allow it ultimately reach a self-sustaining scale.
We broadly agree with the objectives outlined in the consultation paper; however, we foresee some
design elements of the proposed scheme which could be altered in order to better meet the
objectives in a way which could ultimately be delivered at a lower cost.
Challenges relating to electricity grid reliability and stability will increase as Australia transitions
towards a decarbonised electricity supply. Hydrogen is certainly likely to play a role in addressing
these challenges; however, AHC considers that this role is likely to relate to firming and grid services
such as demand response (via shedding of electrolyser load) rather than generation. Hydrogen can
also provide long term storage which is particularly relevant in the context of the SWIS where hydro
generation does not exist as a storage option.
These will be increasingly important as the proportion of variable renewable electricity generation in
the grid increases. The consultation paper seems to anticipate that hydrogen will be used as a fuel in
existing dispatchable generation which would obviously lead to a reduction in emissions from this
sector, but may not be the most economical or effective way of using hydrogen to reduce emissions
across the economy.
Green hydrogen is produced by powering electrolysis with renewable electricity. The round trip
efficiency of using hydrogen for gas fired generation is relatively low in comparison to its other
applications. More practical alternatives to meeting electricity demand exist, namely energy
efficiency measures, demand management, direct use of renewables or the use of hydrogen fuel
cells. Green hydrogen is currently of greatest value where such decarbonisation alternatives do not
exist. With this in mind, AHC considers the use-agnostic renewable hydrogen certificate scheme
mentioned in the consultation paper an option worthy of further exploration.
This approach presents a number of benefits over the proposed Renewable Hydrogen Target for
electricity generation.
Allocative efficiency – A use-agnostic scheme would see hydrogen deployed to the most
commercially viable end use, ie where the cost of using hydrogen is closest to the cost of the
incumbent technology. This could include applications such as heavy transport, replacing grey
hydrogen as a feedstock or for high temperature process heating. This approach would not preclude
electricity generation where the economics allow it. Such a scheme could be coupled with additional
incentives for the production of hydrogen for long term energy storage, noting that co-locating
storage with mobility solutions could create synergies through the use of shared infrastructure.
We consider that restricting the scheme to electricity generation would impact the relative
commerciality of hydrogen use cases. This could see some applications which would otherwise be
commercially viable not have access to the required hydrogen as it is not being produced in
sufficient quantities to meet demand. Such an outcome would ultimately impact the long term
development of the industry and hamper the transition to hydrogen. Ensuring that hydrogen is first
available to those projects which are closer to economic feasibility will help the industry grow to
scale in a relatively orderly manner it and ensure that demand and supply grow concurrently.
Potential for harmonisation – AHC note that the NSW Government has legislated a Renewable Fuel
Scheme, which is in effect the use-agnostic scheme described in the consultation paper. AHC
advocates for national consistency in the hydrogen industry and consider that the existence of
multiple, broadly compatible schemes could ultimately lead to a nationally harmonised approach
with the potential for efficiency gains through lower compliance costs and centralised
administration.
Lower cost to consumers – Having the market determine the end use of green hydrogen will result
in lower overall costs. While current levels of inflation are putting pressure on household finances, it
is important that additional costs to support a future industry are minimised even when this industry
will provide consumers with longer term benefits. In addition, removing the direct focus on
electricity generation could enable the Western Australian government to consider broadening the
base of liable entities to parties other than electricity retailers so that the cost to the consumer is
defrayed. This model would also allow the scheme to be applied outside the SWIS as the hydrogen
use would not be confined to the electricity grid and would create the opportunity to decarbonise
remote area power systems via the use of fuel cells.
Conclusion
AHC welcomes the Western Australian Government’s commitment to developing a clean hydrogen
industry. We appreciate that the alternative model outlined in this submission will require further
consideration of matters such as the fact that the target would have to be set as kilograms of
hydrogen production rather as a percentage of electricity consumption. AHC is committed to
engaging productively to assist in the development of a scheme which will further Western
Australia’s hydrogen and decarbonisation goals and do not consider that such matters would unduly
delay the commencement of the scheme.
Click here to download the submission PDF.
