Hydrogen regulation in Australia: the state of play - Renewables

Legislative review and reform is seen as one of the most important steps in developing a hydrogen industry in Australia under the National Hydrogen Strategy and the respective Hydrogen Strategies of each State and Territory in Australia.

Below we examine the current state of play of the regulatory environment for hydrogen, an opportunity that promises to be Australia's greatest contribution to the decarbonisation of the Asia-Pacific region.

The extent of legislative reform

A preliminary review of the laws in Australia's jurisdictions (both at Federal and State and Territory levels) conducted in November 2019 identified approximately 730 pieces of legislation and 119 standards were potentially relevant to the hydrogen industry and supply chain development. Under the National Hydrogen Strategy, the Federal Government aims to work with the legislative bodies of each State and Territory in developing a suite of uniform laws which address all aspects of a hydrogen industry.

In February 2021, National Energy Resources Australia (NERA) announced an investment of $1.85 million for the establishment of 13 regional hydrogen clusters across the country. The clusters are open for anyone to join and are intended to facilitate collaboration between projects and bodies across the industry on issues requiring input between competitors, such as legislative reform. This is a promising development that will likely facilitate uniform legislative reform regarding hydrogen across all Australian jurisdictions. Despite these initiatives, as at the date of publication, no specific laws addressing hydrogen have been tabled or introduced by Federal, State or Territory Governments.

It is notable though that in July 2020 the Federal Government, through Standards Australia's ME-093 Hydrogen Technologies Committee, adopted eight international standards relating to hydrogen that facilitate the safe use, transport and trade of hydrogen. The standards cover the:

safety and performance of hydrogen generators, including systems to produce hydrogen via electrolysis of water;
quality of hydrogen fuel for vehicular and stationary applications;
design and safety features of systems to purify hydrogen to meet quality standards;
design, construction and testing of portable hydrogen containers;
design, manufacture and testing of tanks for hydrogen-powered vehicles;
safety and testing of high pressure valves used in refuelling stations for hydrogen powered vehicles.

Now that these standards have been adopted, the Australian Hydrogen Council is lobbying for regulators to implement them as law as a matter of priority. Despite this not having occurred yet, the standards are certain to serve as an informative benchmark for the development of hydrogen projects and supply chains across Australia.

Considerations for legislative reform

Given the range of existing legislation and technical standards which may apply to the hydrogen industry in Australia, it will be important to consider the following when developing a regulatory framework which specifically addresses hydrogen.

1. Safety

Safety is seen as a paramount concern by many relevant bodies in relation to the regulation of the Australian hydrogen industry. While they do not expressly refer to hydrogen, existing safety standards and regulations are arguably broad enough to capture most aspects of the hydrogen industry. Nevertheless, it would be prudent to adopt standards and regulations specifically dealing with hydrogen to ensure that all aspects of the hydrogen industry are dealt with.

2. Trade

Cooperation regarding the sharing of hydrogen-related studies and technologies and the technical standards associated with hydrogen between nations will help to further Australia's presence in the international hydrogen market. In its National Hydrogen Roadmap, the CSIRO stresses the importance of implementing technical standards which are similar to those applicable in other countries to ensure that import and export costs are not increased as manufacturers make modifications to adhere to differing standards between nations.

The CSIRO also adds that, in terms of the export of hydrogen, trade agreements will need to be negotiated and a regulatory framework for the shipping of hydrogen will need to be implemented.

3. Certification and guarantee of origin scheme

The development of a certification and guarantee of origin scheme regarding hydrogen is a vital step in developing a viable hydrogen industry as it will provide comfort to the purchaser and public at large that the product is what it is and does what it says it does.

As an update to our previous article regarding the development of a hydrogen certification scheme in Australia, the Department of Industry, Science, Energy and Resources (DISER) has announced that it is working on the design of a domestic hydrogen guarantee of origin scheme. It expects to release a discussion paper for comment in the first half of 2021. A key issue is the accounting methodologies that are adopted to track the greenhouse emissions associated with different hydrogen production types.

Separately, and unexpectedly, in December 2020, the Smart Energy Council announced that it was pursuing a green hydrogen certification scheme. This scheme is an alternative to the scheme led by DISER and will be limited to green hydrogen. It is still unclear how this scheme will track hydrogen through the supply chain or the source of renewable electricity used to produce the hydrogen.

4. Natural gas distribution systems

Many of the proposed and active hydrogen projects throughout Australia propose to blend hydrogen into existing gas networks. Specifically, the NSW Government has set a target of 10% hydrogen blending into the gas network by 2030.

It follows that consideration must be given to current legislation and technical standards regarding the transportation, distribution and use of gas, and whether specific changes need to be made in order to accommodate for pure hydrogen and blended hydrogen products. A report commissioned by Energy Networks Australia concluded that while there is work yet to be done in this space, the technical regulatory issues appear to be manageable at this stage. However, in its National Hydrogen Strategy, the CSIRO makes the point that the existing definition of 'natural gas' under the National Gas Law does not appear to address natural gas blended with any quantity of hydrogen. Clarification on this issue will be important for projects seeking to blend hydrogen product with the existing gas networks.

5. Education

Industry, industry bodies and the Government will all need to work together in spreading information and awareness in relation to the benefits, costs and safety standards and regulations associated with hydrogen.

On this front, NERA, the CSIRO, the Australian Hydrogen Council and Future Fuels CRC have worked together to establish HyResource, an online information sharing portal that acts as single source of information on hydrogen organisations, policies and projects in Australia. More work is required on the consumer front if domestic demand is to be created.

Final thoughts

The development of a hydrogen regulatory framework in Australia will be a complex process, involving many different industry stakeholders and international counterparts. It is promising therefore that each of the Federal, State and Territory Governments appear to be collaborating with one another and liaising with a vast range of industry stakeholders to develop uniform laws concerning hydrogen across the country.

This will be an interesting space to watch within the coming years.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.