Submission

AHC WA Green Hydrogen Target for Electricity Generation

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.

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