Australia’s Guarantee of Origin Scheme: consultation papers

3 February 2023 Level 20,
140 St Georges Terrace,
Perth, WA, 6000
PO Box 7846, Cloisters
Department of Climate Change,
Square PO, WA, 6850
Energy, the Environment and Water
frontierhe.com
Via email: GuaranteeofOrigin@industry.gov.au

Re: Australia’s Guarantee of Origin scheme

Frontier Energy Limited (“Frontier”) appreciates this valuable opportunity to make a submission to Australia’s
Guarantee of Origin scheme - Policy position paper. As an organisation that aims to participate in the GO scheme, we appreciate the opportunity to ensure the framework is fit for purpose.
This submission will be divided into three sections:
1. Overview of Frontier Energy
2. Frontier’s responses to relevant Policy Positions, and
3. Concluding statement

Frontier Energy
Frontier is an Australian Stock Exchange (FHE.ASX) listed Company and developing the. Bristol Springs Solar
Hydrogen Project (“BSSH Project”) located 120km south of Perth in Western Australia. The Project is well advanced, with all key permits and approvals in place, and is on track to become one of the first commercial green hydrogen projects in Australia. Stage One of the Project is designed to produce 114 MWdc of renewable electricity connected to the South West Interconnected System (“SWIS”), The 114 Megawatts (“MW”) solar plant, will generate 243,000
Megawatt Hours (“MWh”) of clean energy, enough to power a minimum (stage 1) sized electrolyser of 36.6MW producing 4,400 tonnes of green hydrogen per year.
We are not proposing a pilot or trial plant and we believe our Company can be the first commercial producer of green hydrogen in Western Australia. Key to this is the Project’s close proximity to WA’s electricity grid, gas pipeline, scheme water, transport networks, major industries and a highly skilled workforce. Due to its strategic location, the
Project has significant scalability. Please see the map in Attachment A.
Our aim is to make a positive final investment decision in the second half of 2023. This would allow us to commence construction in 2024 with first renewable energy generation in 1H 2025 and hydrogen in 2H 2025.
To achieve this next step, it is crucial that we can secure a commercially viable offtake. From extensive discussions with potential offtake partners, it is apparent that an internationally recognised Guarantee of Origin scheme is vital to successful offtake arrangements.

Policy Positions
Policy Position Proposal 1: The scheme will be covered under new legislation administered by the CER.
The Government should ensure legislative guidance on calculating emissions intensity aligns with the
processes developed by the Smart Energy Council’s Zero Carbon Certification Scheme. As an existing
industry-led mechanism that provides Guarantee of Origin style certification, Frontier is currently working
with the Council to achieve pre-certification. Government should seek to replicate and, where required,
enhance the Council’s approach.
Policy Position Proposal 2: The Product GOs will cover the well-to-user system boundary.
The Government should ensure there is clarity on the input materials to be captured by the emissions
accounting process. While we welcome the inclusion of input materials such as water and electricity, it may
be challenging to account for emissions associated with the production of equipment such as the raw metals
used in the process, as one example.

Policy Position Proposal 4: The GO scheme will be cost recovered in line with Australian Government policy.
We note the commitment to wait until the industry is mature and competitive with existing energy sources
before introducing a cost recovery mechanism. We would suggest that a sliding scale cost recovery scheme
may be more appropriate to accommodate early mover projects in consideration of the level of industry
maturity. Cost recovery must be allocated to each Product i.e. Product GO and REGO's.

Policy Position Proposal 5: The scheme will be reviewed in 2025 and every five years thereafter to ensure it is fit for purpose and able to support the industry.
Agree. However, early indication of the Government’s commitment to the scheme will be required in 2023
to allow projects to proceed to a Financial Investment Decision in 2023.

Policy Position Proposal 6: Product GOs and REGOs will be housed on a publicly visible register with general information and the ability to share specific information with other scheme participants.
We note that certificates will be issued for each Product GO and REGO and housed on the register. We
would ask that the Government ensures that there is no cancellation of one type of certificate over the other.

Policy Position Proposal 7: Product GOs will use a provenance approach, while REGOs are able to be traded independently of the electricity they were created alongside.
Many businesses will rely on the tradability of the certificates particularly where they cannot physically
consume the hydrogen. A provenance approach in the short-term makes sense however a broader scheme
in the future will be required.

Policy Position Proposal 8: An upfront data reporting model will be implemented to provide a practical reporting process.
We note the Government’s commitment to a practical reporting process. As the cost of reporting will likely
be reflected in the Cost Recovery Mechanism, we would request that the process is as efficient as possible.

Policy Position Proposal 12: REGOs are proposed to be available to be traded or surrendered after being validly created.
We note the Government’s approach to REGO and GO production and would request that for facilities that
house both Renewable Electricity Generating assets and Hydrogen production assets, it will be possible to
produce and trade both REGOs and GO certificates.

Policy Position Proposal 20: ACCUs issued from within the system boundary will need to be surrendered for the emissions reductions to be recognised under the GO scheme. ACCUs or other carbon offsets cannot be used to reduce the emissions intensity of products listed on GO certificates.
ACCU's should not be surrenderable for generating systems that are collocated i.e. have a direct wire
between the Renewable Energy asset and the Hydrogen production facility. Surrendering ACCU's for
hydrogen produced within systems which included a direct cable from the Renewable Energy generating
asset and the Hydrogen Production Plant could be a disincentive. ACCU's should only be retired when the
energy is traded/consumed via the grid, where the energy cannot be physically traced to its source. By
design, the emissions accounting should handle this scenario.

Policy Position Proposal 21: LGCs and REGOs will be used to demonstrate renewable electricity use. Behind the meter or directly supplied renewable electricity will not require certificate surrender if none were created.
Agreed. It is very important that behind-the-meter supplied electricity will not require certificate surrender
however the Renewable Asset should still create tradeable REGOs.
Conclusion
Frontier strongly supports the Commonwealth Government’s objectives to create a mechanism to track and verify emissions associated with hydrogen produced in Australia. As the likely first commercial producer of renewable hydrogen in Western Australia, having a reliable and tradeable certificate is a key prerequisite for many of our potential offtake partners. If designed and implemented successfully, the scheme will create market confidence in carbon emissions claims and boost domestic and export markets.
We also welcome and commend the Government’s international engagements to ensure the scheme is established in a way that should enable the certificate to be applicable in other jurisdictions.
We note the Government’s intention to legislate the scheme by the beginning of 2024 and we regard meeting this timeline as hugely important to progressing early mover projects.
In conclusion, Frontier’s key request of the Government is that it considers how a facility that includes both renewable energy and hydrogen production assets can best be supported by a GO scheme. Frontier’s position is that the value of the physical electron and the certificate is different and should be separately recognised. So, in essence, the electron has a value and a price and separately, the carbon credit has a value and a price. If a system uses the electron to create hydrogen, and thus a molecule and a new carbon credit is created from the electron, then the LGC credit should not cancel out the creation/value of the hydrogen credit.
As always, Frontier appreciate all your efforts to support the Hydrogen Industry development in Australia. Should you wish to discuss any aspect of my letter, please do not hesitate to contact me directly.
Frontier would once again like to thank the Department of Climate Change, Energy, the Environment and Water for the opportunity to make this submission and looks forward to reviewing the final report when it is published.

Yours sincerely

Sam Lee Mohan
Managing Director and CEO

M: 0451828646
E: Sam.leemohan@frontierhe.com
Appendix A: Frontier Energy Location
The BSSH Project benefits from its unique location surrounded by major infrastructure. This reduces operating and capital costs compared to more remote hydrogen projects, while also being surrounded by likely early adopters into the hydrogen industry in the transition from fossil fuels.