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Department of Climate Change, Energy,
the Environment and Water
GPO Box 3090
Canberra ACT 2601
9 February 2023
By email: GuaranteeofOrigin@industry.gov.au
To whom it may concern
Policy position paper: Australia’s Guarantee of Origin Certification Scheme for Hydrogen
Low Emission Technology Australia (LETA) is a $550 million fund established in 2006 by Australia’s black coal industry to invest in technologies that significantly reduce emissions and support the transition to a low emission, global economy in line with the Paris Agreement. LETA partners with government, research institutions, universities and industry locally and internationally to develop projects that reduce and remove carbon emissions from large-scale industrial processes, such as power generation, steel and cement manufacturing, mining, and future energy sources, including hydrogen and ammonia.
LETA has been involved in the stakeholder forums and other consultations on Australia’s Guarantee of Origin scheme since their commencement in late 2020 and provided a submission to the earlier round of consultations in 2021.
LETA is generally supportive of the approach adopted in the Department’s Policy Position Paper, including alignment with the National Greenhouse and Energy Reporting System to reduce compliance costs. LETA recommends some modifications to the policy position proposals which are set out at the end of this submission.
The role of Government
Governments should ensure all the various clean hydrogen production routes are available on their merits so they can be deployed in Australia for both domestic use and export as part of Australia’s contribution to achieving the Paris Agreement objectives both here and in the countries that import our low emission fuels. Governments should be equally supportive and not seek to choose which industries and technologies to promote, subsidise and develop unless there is a clearly established market failure involved. The goal should be to allow the market to respond by removing barriers to development of a hydrogen industry.
LETA is therefore pleased that the Clean Energy Regulator (CER) has included examples of the three main routes of hydrogen production in its hydrogen guarantee of origin trials (i.e. electrolysis, gas reforming and coal gasification). This is because the certification scheme should be adaptable to all commercially saleable low emission hydrogen production technologies (see Figures 1 and 2 in the attachment) and capable of expansion over time.
Such a technology neutral approach has been supported during meetings with officials however, this is not currently included in the principles used in the scheme as set out in section 1.3 of the Policy
Position Paper. LETA recommends neutrality be added to the set of design principles.
Scheme development
The approach is to develop an initial domestic scheme aligned with methodologies adopted by the
International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE). The scheme will then transition to an international one. LETA does not support such an approach. Instead we recommend that the proposed scheme should be developed in close collaboration with Australia’s international energy partners as well as Australian stakeholders to ensure it meets their needs as importers of
Australia’s low emission energy fuels.
This will ensure trade will benefit from common international standards for the safe transport and storage of large volumes of hydrogen, and from tracing the environmental impacts of different hydrogen supplies.
In developing the scheme Australia should be mindful of the International Energy agency’s efforts to harmonise the terminology used to define low-emission hydrogen and hydrogen carriers (e.g.
ammonia (NH3) and methanol (CH3OH)) across the energy system. For example, in its publication
Global Hydrogen Review 2022, the agency requests the international community to define low- emission hydrogen as ‘hydrogen produced via electrolysis where the electricity is generated from a low-emission source (renewables or nuclear), biomass or fossil fuels with carbon capture, use and storage (CCUS).’
In addition, Australia should follow the IEA and International Organization for Standardization approaches of not using colour coding to refer to the various hydrogen production routes. While this appears to be the general approach adopted, the policy should not allow future colour categorisations on the grounds that these are marketing measures and do not fit into industry standards used as the basis of sales contracts.
Recommendations
To improve the policy approach, LETA recommends:
1. The design principles be expanded to include technology neutrality, consistent with
successive federal government support for all low emission approaches being considered on
their merits.
2. All hydrogen and other fuel pathways that meet the agreed standard for emissions should be
considered ‘clean’ or, using the IEA’s now preferred terminology, “low-emission”.
3. The domestic scheme should be developed in consultation with Japan as a leading
Australian trading partner as well as other IPHE members. The advantages of this approach
include:
• It will enable road-testing the system with a potential international customer at each step.
• It will assist in defining key terms such as ‘hydrogen’ noting it is possible to have different
grades of hydrogen gas.
• It will assist in addressing the increased complexity associated with broadening the
framework from ‘cradle-to-gate’ to ‘cradle-to-user’. For example, energy export cargoes
on the high seas can be redirected to a new buyer and pass through entrepot or
transhipment ports with no transparent final buyer. Cargoes can also be sold on an FOB
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basis in which case the customer determines the transportation method and route not the
seller. Collaborative engagement with a trading partner will help establish boundaries.
• There needs to be an international standard and this requires international consensus.
Developing the guarantee of origin standard in consultation with Japan will offer an
improved opportunity to engage with Japanese as well as Australian standards bodies
and thence the ISO, which applies a consensus approach in developing standards.
• The process would involve credible test cases – such as export to Japan of hydrogen
produced by the Hydrogen Energy Supply Chain Pilot Project in Victoria (coal
gasification), produced by natural gas reforming (using the expertise of the Future Energy
Exports Cooperative Research Centre) and by electrolysis.
o Using such test cases will assist in distinguishing all the parameters and
contingencies. It has the benefit of engaging with Japanese importers of hydrogen
as customers and Australian companies as potential producers.
o It also recognises that hydrogen produced with different technologies can coexist in
Western and Eastern Australia taking advantage of Australia’s comparative
advantages in competitive and accessible coal and natural gas resources, in
geological storage sites and in renewable energy capacity.
4. CER/Departmental consultation should involve more face-to-face discussion on specific
issues rather than virtual meetings involving presentations followed by short Q&A sessions
5. The scheme should be covered under new legislation with ongoing policy responsibility held
by the department responsible for climate change and administered by the CER (a
modification of the position in proposal 1).
6. The scheme should be reviewed as proposed in policy proposal 5 to ensure it is fit for
purpose and able to support domestic and international trade rather than ‘the industry.’
7. The ‘well-to-user’ approach should be renamed ‘cradle-to-user’ (policy proposal 2) as ‘well’
implies only one production route.
Please do not hesitate to contact me on 02 6233 0600 if you have any questions regarding this submission.
Yours sincerely
Mark McCallum
Chief Executive Officer
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ATTACHMENT
FIGURE 1: SOURCES OF HYDROGEN PRODUCTION, 2021
Electolysis
By product 0.04%
18%
Oil 0.7% Natural gas
without CCUS
Coal without CCUS 62%
19%
Low-emission
hydrogen from fossil
fuels 0.7%
Source: International Energy Agency, Global Hydrogen Review 2022, p 71.
Figure 2: MAIN PRODUCTION ROUTES FOR HYDROGEN BY TECHNOLOGY READINESS
Source Natural gas Coal Power + water Biomass
Hydrogen
Reforming Gasification Electrolysis Gasification or biogas reforming
production route
Decarbonisation None = neutral
CCUS CCUS Low-carbon electricity
measure
CCUS = negative emissions
Commercial Scale: Reforming is well Commercial Scale: Gasification is well Commercial; not yet deployed at Mature technologies but not yet
understood and operates at industrial understood and operates at industrial scale: Several mature deployed at scale:
scale around the world. CCUS has been scale around the world. CCUS has technologies exist. Largest PEM
applied successfully for over 50 years. been applied successfully for over 50 electrolyser is 20 MWe with rapid a) Gasification plants are being built
years. Hydrogen from coal gasification expansion planned (200MWe and and can provide best practices and
Autothermal methane reforming (ATR) is with CCUS can have a low life-cycle above). Alkaline electrolysis was lessons learned.
a less commercially advanced carbon footprint that is comparable to previously deployed in the 1970s
Technology technology to Steam Methane Reforming that of hydrogen produced by with production capacity of up to b) Liquids derived from biomass can
readiness (SMR) for producing hydrogen from electrolysis where the electricity is 165 MWe but SMR proved more be reformed to produce hydrogen in
natural gas. Studies have shown that generated from a low-emission source competitive. Solid oxide a process similar to but more difficult
ATR with CO2 capture rates >90% are (renewables or nuclear) provided the electrolysis cell (SOEC) and Anion than natural gas reforming.
lower than for a comparable SMR best available technologies and exchange membrane (AEM)
system. operational practices are used electrolysis are emerging
together with the highest CO2 capture technologies but require further
rates (98%). development.
Sources: US Department of Energy, Hydrogen and Fuel Cell Technologies Office; and Greg Kelsall, Hydrogen production from coal, International Centre for Sustainable Carbon, 2021.
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