You can download the full PDF here.
Submission to the Senate Economics Legislation Committee
The Australian Hydrogen Council (AHC) welcomes the opportunity to respond to the Australian Government’s Future Made in Australia Bill 2024 (FMIA Bill). We will not address the Future Made in Australia (Omnibus Amendments No. 1) Bill 2024, which we note is about governance of Export Finance Australia and ARENA.
The AHC is the peak body for the hydrogen industry and our membership includes companies from across the hydrogen value chain. Our members are at the forefront of Australia’s hydrogen industry, developing the technology, skills and partnerships necessary to ensure that hydrogen and its derivatives (such as ammonia and methanol) play a meaningful role in decarbonising Australian industry.
The FMIA Bill represents a vital Australian Government response to changes in global supply chains and energy security, as well as a necessary step to reinvigorate Australian capabilities and grow economic complexity. The energy transition is hugely challenging but it also presents an important opportunity for Australia to develop competitive advantage in renewable energy production, technology and use within the global marketplace, as well as ensuring ongoing prosperity in our region.
We note that there have been several related consultations that we have recently responded to:
- Electricity and Energy Sector Plan (considering the grid capabilities and role of molecules), [1]
- Climate Change Authority issues paper (discussing sequencing, concurrent investments and ambition),[2]
- Sustainable Finance Taxonomy (establishing the framework to support transitionary and green capital),[3]
- Carbon Leakage Review (exploring a carbon border adjustment mechanism that should ideally protect Australian decarbonisation of hydrogen, ammonia and urea),[4]
- Hydrogen Production Tax Incentive (maximising eligibility and access to scale the industry), [5]
- Low Carbon Liquid Fuels (encouraging long term decarbonisation in another FMIA focused demand case),[6] and
- Green Metals (encouraging long term decarbonisation in another FMIA focused demand case).[7]
We have engaged with these important and diverse processes because hydrogen can not only decarbonise the hard to electrify parts of our economy and support the energy needs of our neighbours; it can be used to make iron from our iron ore and alumina from our bauxite. Low carbon liquid fuels, such as sustainable aviation fuel (SAF), need hydrogen as a feedstock to support scale when there is insufficient biological feedstock. There will be other manufacturing opportunities as well, such as components and assembly for electrolysers, which we return to below.
We would be pleased to provide further information on any of these matters as they relate to the FMIA Bill Committee process.
Objectives of the legislation
We support the FMIA Bill and its objectives.
With its Inflation Reduction Act (IRA), the US government started a global race for clean technology investment, and the wins that Australian industry and policymakers may have assumed would come to us naturally became far from assured when we did not respond in kind.
The FMIA policy package puts us back in the race. The AHC believes that governments must be market creators at this stage of the energy transition, to enable the extensive reallocation of private funds alongside significant public expenditure required to support construction and operation of infrastructure in the public interest. The FMIA Bill’s National Interest Framework provides the foundation to meet this need and do so with the right balance of objectives and principles to support investment in the public interest.
The Hydrogen Production Tax Incentive in particular shows the world that Australia is back in the race for hydrogen developments. This initiative is vital if Australia is to meet its emissions objectives, support national and regional energy security and create the required volumes of hydrogen for future uses in strategically important areas.
Providing the vital ‘front door’ for investors
We also note the FMIA Bill seeks to create a front door for investors, to “provide a single point of contact for investors and companies with major, transformational investment proposals, delivering a coordinated approach to investment attraction and facilitation for these projects”.
We welcome this approach and would also welcome further engagement on how it can best be delivered, and by whom. For some time now the AHC has observed that the complexity and uncertainty of the investment environment and the overall ecosystem (multiple states, regulatory differences, permitting within states) is making hydrogen project proponents’ decisions unnecessarily difficult. There is a need for investors and other decision makers to recognise meaningful investments in new infrastructure and technology, and the current environment is not conducive to this. Government thus has a role to direct investors’ attention to the opportunities; to help create value propositions that investors recognise.
Supporting not replacing current agency practices
It is important to note that much of the content of the FMIA Bill will support rather than replace current agency practices.
Australia’s investment attraction agencies – whether at a State or Federal level – have always developed sector strategies to guide investment attraction activity. The FMIA Bill, the National Interest Framework and the sector plans form a suite of policies that formalise this process, as well as extend the focus and remit of the Australian Government’s investment vehicles to provide incentives to domestic investors in the priority sectors.
The sector strategies usually conduct a ‘look back to look forward’ – that is, they assess the existing areas of competitive advantage, significant research activity and potential for scale and develop scenarios for the future growth of these identified sectors. Gap analyses may also be conducted, to identify key investments that would add significant value to the sector ecosystem. The investment attraction agencies provide financial (e.g. non-dilutive grants, or in some instances, equity investments) and non-financial (e.g. planning assistance, guidance on regulations, identification of sites, comparison of wages for staff and personnel and R&D partnerships) support to investors. Usually, the investment attraction agencies are required to demonstrate additionality – that is, how the work of the investment attraction agency increased the likely investment that would have taken place in the absence of any support or contact with the agency.
This example is provided to illustrate that whilst the proposed activity under the FMIA Bill appears to be a radical new step, it is actually an extension, consolidation and rationalisation of existing activity.
Further, and as discussed later in this submission, Australian Industry Participation Plans, Environmental Management Plans, Stakeholder Management Plans, and Cultural Heritage Management Plans already cover important areas of the FMIA Bill and could and should be reviewed and revised rather than replaced or overlaid with a new approach.
Sector assessments
We are pleased that the National Interest Framework is intended to support the Australian Government to make wise public investments that unlock private investment at scale. We support the Australian Government’s vision to see the task as being both to reduce emissions and revitalise Australian innovation and manufacturing in areas that meet the criteria.
The FMIA Bill section 8.1 sets out the following matters to be considered in assessing whether a sector should be identified for priority and targeted investment as set out in the Bill (and in alignment with the National Interest Framework):
(a) whether Australia could be competitive in the sector;
(b) whether the sector could contribute to an orderly path to net zero transformation, including through the use of renewable energy;
(c) whether the sector could build the capabilities of the Australian people and the regions of Australia, and generate employment opportunities;
(d) whether support for the sector could improve Australia’s economic resilience and security;
(e) whether support for the sector could:
(i) recognise the key role of the private sector; and
(ii) deliver genuine value for money.
We support this approach and note that ‘sector’ is intended to be as broad or as narrow as needed.
In the 2024–25 Budget, five industries were announced as aligned with the National Interest Framework:
- Renewable hydrogen
- Critical minerals processing
- Green metals
- Low carbon liquid fuels
- Clean energy manufacturing, including battery and solar panel supply chains.
These industries are clearly vital for Australia’s decarbonisation and sovereign capabilities. As we noted above, hydrogen also plays a role in most of them.
Hydrogen developments are in the national interest
Developing Australia’s hydrogen sector is in the national interest. This has been shown in the efforts to date by the Australian Government to refresh and reinforce the National Hydrogen Strategy, as well as in the formulation of the energy, industry and transport sector plan consultations. Of course, it is most apparent in the announcements to date about Hydrogen Headstart and the Hydrogen Production Tax Incentive.
We note that almost 80 per cent of Australia’s domestic energy consumption in FY2021-2022 was in the form of molecules (such as petrol, diesel and natural gas) rather than electrons.[8] While many applications for molecules will shift to electrons as electrification emerges as the most efficient option to decarbonise operations, there is still a significant portion of industrial activity that will not be covered and so will need molecules. And hydrogen is the key large-scale option to meet this need (noting that we also mean where it is converted to ammonia and methanol).
Further, Australia is a trusted energy partner across Asia and the export of molecules is critical to Australia’s prosperity. It is integral that export of energy vectors remains an option that is actively supported by government policy and incentives. Our trade partners are confronting their own decarbonisation challenges within their national context, and Australia has an important role in remaining a source of clean energy, in whatever form is required.
This is all before we consider the promise for hydrogen to decarbonise industry through its use as a chemical to reduce iron ore to iron. Hydrogen is also the chemical building block for ammonia and methanol. Each of these industries could be grown as Australian export markets, with the potential for new high-value jobs. (It will be necessary to decarbonise these sectors to protect Australia’s exports at the very least given future exports can be expected to face a carbon price at the importing country’s border.)
The growth of Australia’s hydrogen industry therefore not only supports domestic decarbonisation but also provides Australia with an opportunity to add value to existing raw exports and creating new export opportunities. This will improve Australia’s slide down Harvard’s globally recognised Atlas of Economic Complexity, where Australia is at 93rd place (from 60th in 2000) with Uganda, Armenia and Honduras ranked directly ahead of us.
It will also require a level of Australian local industry participation all along the value chain to support the production, storage, movement and use of hydrogen. The ambition of the AHC is to see the Australian industry become a global leader in aspects of the hydrogen supply chain through our universities, start-ups and SMEs developing and commercialising innovative technologies.
Electrolyser technology as a sector for assessment
There may be value in undertaking an assessment of how future manufacturing of hydrogen production equipment might support Australia’s national interests. This sits within the National Interest Framework via the clean energy manufacturing category and does not seem explicitly covered in work to date.
Large scale electrolysis facilities will be required to produce the volumes of hydrogen anticipated by our superpower ambitions, and Figure 1 shows that the electrolyser plant supply chain is complex in its own right. Australian companies can “capitalise on the lengthy lead time for equipment from international suppliers” through building local capacity.[9]
This is particularly appealing given Australia’s reserves of platinum, iridium and nickel, which are required for electrolysers. Fuel cells for mobility and stationary energy are also an opportunity given their similar configuration to electrolysers.
Figure 1: Electrolyser plant components; SOURCE: Arup (2023), page 30.
Australia has experience and capability with advanced manufacturing in supply chains for global primes/OEMs and complex energy projects (e.g., defence, mining and previously automotive) that we can leverage to create and sustain an electrolyser (or electrolyser component) industry. The Australian Government has recognised this opportunity through the development of the National Reconstruction Fund, but that fund will be stretched across the multiple priority sectors and the electrolyser pipeline will need to progress well into 2030 and beyond.
We have previously recommended that the Australian Government (including CSIRO) should develop RD&D priorities (and dedicated funding of these) with a view to make the emerging industry resilient to supply chain issues, including novel and emerging electrolyser and fuel cell technologies, storage and forms of sustainable/clean carbon capture to produce e-fuels.
As a final point, it must be noted that not all RD&D occurs in university labs or in large corporates. Australia can harness industry solutions through our start up community. Over the past decade, this community has been growing its capability from working with mining, renewables, oil and gas, Industry 4.0 and on other climate tech related challenges.
Community benefit principles and Future Made in Australia Plans
The FMIA Bill seeks to hold recipients of significant funding accountable to the community by aligning corporate activity with an expected set of benefits and principles.
The community benefit principles set out in the FMIA Bill are:
(a) that Future Made in Australia support should provide community benefits, in particular by:
(i) promoting safe and secure jobs that are well paid and have good conditions; and
(ii) developing more skilled and inclusive workforces, including by investing in training and skills development and broadening opportunities for workforce participation; and
(iii) engaging collaboratively with and achieving positive outcomes for local communities, such as First Nations communities and communities directly affected by the transition to net zero; and
(iv) strengthening domestic industrial capabilities, including through stronger local supply chains; and
(v) demonstrating transparency and compliance in relation to the management of tax affairs, including benefits received under Future Made in Australia supports; and
(b) any other principles specified in the rules for the purposes of this paragraph.
As we discuss in our recent submission to the Hydrogen Production Tax Incentive, we are supportive of the principles and their role to guide decision makers on how FMIA outcomes would benefit the community.
We note that delivery on the intent is likely to differ across Australia given the diversity of communities that will benefit, differences in opinion about how communities would like to benefit, and the maturity of different sectors covered by the FMIA. There will be a balance required so that processes for demonstrating benefit do not stifle the innovation the funding was intended to support.
Project proponents are often already reporting to government on how they meet objectives outlined in the community benefit principles, and these existing approaches can readily be reviewed and used. We urge an assessment and consolidation of existing obligations to ensure they align with the FMIA, rather than the imposition of a requirement for a new set of plans to be developed which may just add administrative burden without necessarily adding additional benefits.
For example, the Australian Industry Participation (AIP) Plans required when participants receive Australian Government funding,[10] alongside the Environmental Management Plans, the Stakeholder Management Plans and the Cultural Heritage Management Plans, could and should be reviewed in light of the development of the community benefit principles.
[1] AHC (2024) Electricity & Energy Sector Plan – Discussion Paper, 26 April, https://h2council.com.au/wp-content/uploads/2024/04/240426-AHC-submission_Electricity-and-Energy-Sector-Plan.pdf.
[2] AHC (2024) Re: Climate Change Authority 2024 issues paper: targets, pathways and progress, 21 May, https://h2council.com.au/wp-content/uploads/2024/05/240521-AHC-submission-CCA-issues-paper.pdf.
[3] AHC (2024) Australian Sustainable Finance Taxonomy V0.1 consultation, 7 July, https://h2council.com.au/wp-content/uploads/2024/07/240707-AHC-submission-to-ASFI.pdf.
[4] AHC (2023) Re: Public consultation on the proposed approach to assess and address carbon leakage risk, as part of the Carbon Leakage Review, 15 December, https://h2council.com.au/wp-content/uploads/2023/12/231215-Carbon-Leakage-Review-AHC-SUB_for-submission.pdf.
[5] AHC (2024) The Hydrogen Production Tax Incentive, 12 July, https://h2council.com.au/wp-content/uploads/2024/07/240712-AHC-HPTI-submission_final.pdf.
[6] AHC (2024) Submission to the low carbon liquid fuels and transport sector plan, 18 July, https://h2council.com.au/submissions/ahc-submission-to-low-carbon-liquid-fuels-and-transport-sector-plan/.
[7] AHC (2024) Submission to A Future Made in Australia: Unlocking Australia’s Green Iron, Steel, Alumina and Aluminium Opportunity, 22 July, https://h2council.com.au/submissions/ahc-fed-fmia-green-metals-opportunity/.
[8] Calculated based on data found in Table H and Table R of Department of Climate Change, Energy, the Environment and Water (2023) Australian Energy Statistics, Australian Government, September, https://www.energy.gov.au/publications/australian-energy-update-2023.
[9] Arup (2023), Powering Up: Seizing Australia’s Hydrogen Opportunity by 2040, report for NERA, page 13, https://www.nera.org.au/Publications-and-insights/HETS-Study.
[10] See Department of Industry, Science and Resource (n.d.) Australian Government funded projects, Australian Government, https://www.industry.gov.au/major-projects-and-procurement/australian-industry-participation/australian-government-funded-projects.
