AHC NSW Renewable Fuel Scheme

The Australian Hydrogen Council (AHC) is the peak body for the hydrogen industry, with over 100
members 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 plays a meaningful role in decarbonising Australian industry.

AHC welcomes engagement by the New South Wales government on the operation on the
Renewable Fuel Scheme. We view the scheme, along with the other elements of the NSW Hydrogen
Strategy as crucial in bringing down the cost of hydrogen production.

The development of a commercially sustainable, clean hydrogen industry in Australia will be aided
by a nationally consistent approach to regulation. As such we support the proposal to align with the
definition of renewable energy contained in the Renewable Energy (Electricity) Act 2000. Similarly,
we support NSW’s commitment to aligning with the national GO Scheme. We note however, recent
milestones in the development of the scheme which provide opportunities for alignment beyond
those outlined in the Discussion paper.

In December 2022, the Department of Climate Change, Energy, the Environment and Water
(DCCEEW) released two policy position papers on the design of the GO Scheme. The first of these
papers relates to the creation and use of Product GO certificates, used to track the emissions
intensity of a commodity, in this instance hydrogen. The paper proposes a provenance model
whereby a GO certificate cannot be traded independently of the hydrogen to which it relates. This
attribute will allow hydrogen to be tracked from its production through to its final use and may
provide a simple means for IPART to verify local use of green hydrogen. We suggest engagement
with DCCEEW as the policy maker and the Clean Energy Regulator as the scheme administrator to
determine the extent to which the GO Scheme can be used to verify the local use of hydrogen.

The second of the papers outlines the development of a new mechanism to certify renewable
energy. An instrument, known as a Renewable Energy Guarantee of Origin certificate (REGO), will be
created to allow certification of a broader range of renewable generation (primarily below the
Renewable Energy Target (RET) baseline). The REGO also anticipates the need for renewable energy
certification once the RET scheme ceases in 2030. AHC recommends that eligible REGOs should also
be an acceptable instrument to demonstrate purchases of renewable energy in addition to the
purchase and surrender of LCGs or Greenpower.

We believe that the GO Scheme developments will simplify scheme administration and compliance
without altering the policy intent or outcomes.

AHC notes that 2.4 of the Discussion paper describes the RFS as a scheme to incentivise green
hydrogen production. While measures to reduce the cost of hydrogen production will be vital to the
development of a green hydrogen industry, it should be noted that for most end uses, hydrogen is
not a drop-in replacement for the incumbent technology. This means that demand for green
hydrogen will not materialise without policy support. Notwithstanding the relatively gradual rampup of targets in the Electricity Supply (General Regulation) 2014 and the fact that the NSW Hydrogen
Strategy also includes demand side activities, we believe that it will be necessary to ensure that
there is sufficient demand for the green hydrogen produced under the scheme.

We recommend that demand for green hydrogen should be monitored to ensure that investment
driven by the scheme is sustainable in the long term. If necessary, intervention to stimulate demand
would be preferable to any downward adjustment of targets, as this is likely to provide greater
certainty to industry. We welcome further discussions with government on policies to drive
hydrogen demand if the scheme output exceeds what is needed in the short term.

AHC supports the introduction of the RFS as part of a suite of policy mechanisms aimed at improving
the commerciality of hydrogen production. We acknowledge the NSW government’s efforts to align
with national policy but suggest that continued engagement with DCCEEW and the Clean Energy
Regulator may be necessary to leverage mechanisms which are currently under development to
ensure that the RFS is user friendly and minimises compliance costs on participants.

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