Policy and Regulation

The hydrogen industry has enormous potential to benefit Australia, through new export markets, decarbonising the economy, and supporting energy security.

However, the industry is still developing. The need for policy and funding support remains high if we are to get the industry to scale and deliver benefit to Australian consumers.

Government can support the hydrogen market (which comprises several, interconnected markets) in two primary ways:

• Direct funding of production via projects (such as via ARENA): The industry still requires significant investment to become commercial – potentially tens of billions of dollars. Governments can help fill the gap, with every dollar from governments drawing through $3-$4 from the private sector.

• Policy to activate markets: There are many potential mechanisms to activate the various markets for hydrogen. These support either the supply side (to reduce the cost of production and delivery) or the demand side (to reduce the cost of purchase). The mechanisms tend to fall into four main categories:
  • tax credits/incentives;
  • new market mechanisms that value low-emissions fuels, such as tradeable certificates;
  • direct funding; and
  • new compliance requirements that stimulate demand.

Like any new large-scale industry, the emerging hydrogen industry requires a trusted and positive relationship with consumers and with communities living near infrastructure. For the industry this is a matter of obtaining and maintaining a social licence, and of working with policymakers to ensure policy and regulatory regimes are properly targeted to avoid harm.

While hydrogen has been produced and transported in large quantities as a chemical and industrial gas in Australia for many decades, public understanding of, and exposure to, hydrogen is still relatively low. The large-scale development of hydrogen through newer production pathways such as electrolysis also brings a new requirement to engage communities about any concerns regarding land, water and safety.

Regulation is an important foundation for the industry to support social and economic licence. It codifies expectations of minimum standards to:

• Allow for a baseline for community and stakeholder trust in operations.
• Help create a stable investment environment.

Regulation is complex in the case of the emerging hydrogen industry. This is because we have (or might have) relevant regulatory regimes across different:

• sectors (such as electricity, gas and water);
• jurisdictions (national, states, territories and international);
• issues (such as safety, environmental protection and training); and
• parts of the various value chains (such as producing and transporting for different uses).

Regulation also takes time to develop, particularly in complex systems. While it may appear that we have that time in some cases, investment decisions about long-lived assets are being made now. This is also an innovative space – technologies are still developing.