Published name
An initial focus on hydrogen production is proposed to facilitate timely establishment of a hydrogen GO scheme. Do you agree with this as a starting point?
A well-to-gate boundary is proposed as the initial boundary across which the emissions are to be calculated for hydrogen GO scheme. Do you agree this is an appropriate and acceptable starting point for the boundary?
Is hydrogen production at a pressure of 3MPa and 99% purity appropriate conditions for measuring the emissions associated with hydrogen?
Is hydrogen production at a pressure of 3MPa and 99% purity appropriate conditions for measuring the emissions associated with hydrogen?
Is hydrogen production at a pressure of 3MPa and 99% purity appropriate conditions for measuring the emissions associated with hydrogen?
A standard conversion procedure for other conditions should be agreed.
The department recognises the need to extend the coverage of the scheme over time to include hydrogen derivatives and downstream products, additional production pathways and additional steps in the value chain. - What additional components should be covered and when? (noting the commitment to include hydrogen energy carriers as an early next step).
We agree with the focus on hydrogen carriers as the next step.
The focus of future expansions should be on green hydrogen, given the significant role that the green hydrogen export industry can play in the future for Australia.
Do you agree that ISO standards and the GHG protocol provide the appropriate basis for the overarching framework for a hydrogen GO scheme?
Should IPCC Guidelines, the NGERS determination and the Climate Active Electricity Accounting rules be leveraged to provide guidance on the detailed emissions calculations?
What is your preferred approach to offset inclusion within a domestic hydrogen GO scheme?
What is your preferred approach to offset inclusion within a domestic hydrogen GO scheme?
Linking emissions reduction across all sectors of the economy is important for delivering least-cost abatement. For example, linking renewable energy LGCs with emission reduction ACCUs (as recommended by the King Review) will facilitate additional abatement from the electricity sector. Allowing offsets to be transferred and exported through hydrogen will help source the most efficient sources of emissions reduction.
However, offsets being used to market green hydrogen can mask the actual emissions, and hinder the uptake of more sustainable solutions. We note related challenges in giving consumers an informed choice through "hydrogen ready" gas turbines that measure hydrogen by volume - such that a turbine running "30% hydrogen" might only be 15% hydrogen by energy (and hence see emissions reduce by, at most, 15%).
We therefore recommend that offsets be allowed, and build a liquid market, but only for a minority of the associated emissions. This should be linked to other emissions avoidance activities: for example, offsets could be used up to the percentage of carbon capture and storage.
For avoidance of doubt, offsets should not, on their own, be able to be used to classify a kilogram of H2 as zero emissions if actual, physical emissions have been produced.
Do you agree that the Australian government should lead the administration of an Australian GO scheme?
Do you agree that the scheme should be administered by the Clean Energy Regulator?
What should be the role of industry in co-designing a government led scheme?
Close consultation with industry will help ensure that the products (including certificate specifications) align with commercial deals being negotiated. Focus on providing market signals that facilitate stimulating commercial investment.
Do you support the creation of Australia’s hydrogen GO scheme as a certificate scheme?
Do you support the creation of Australia’s hydrogen GO scheme as a certificate scheme?
Certificate schemes such as the LRET have been highly effective at delivering and tracking targets, and facilitating short-term long-term commercial deals between buyers and sellers.
Transparency of such registries is critical, both for participants and also analysts considering future investment opportunities.
How frequently do you consider hydrogen GO certificate creation will be required?
We suggest that certificate creation will be required at least quarterly, but ideally would be available continuously (i.e., similar to LGC creation under the LRET) so that trades and exports can be readily tracked.
How frequently should data be reported; Is the proposed 12 month period adequate?
How frequently should data be reported; Is the proposed 12 month period adequate?
12 month report is likely adequate in the long-term, although more regular updates may be helpful in the initial stages of the scheme.
Do you agree with the approach set out for scope 1 emissions?
Do you agree with the approach set out for upstream emissions?
Do you agree with the approach set out for upstream emissions?
Yes. Including upstream emissions associated with extraction, processing and delivery of coal or natural gas feedstocks is critical to establishing a high quality certificate product.
The source of water, including desalination (and associated electricity usage) if applicable, should also be considered.
Do you agree that the calculation of electricity (scope 2) emissions should be based on the market-based method?
Do you agree that the calculation of electricity (scope 2) emissions should be based on the market-based method?
Yes. The proposed framework ensures emissions reduction is not double counted.
Would you suggest any changes to the Climate Active approach (set out in detail in Attachment D) for the purposes of a hydrogen GO scheme?
See Q20 on treatment of below-baseline hydro.
What are your views on using voluntary surrender of LGCs to verify the consumption of renewable electricity under the market based method, compared to the alternative of a location-based method?
Do you agree that a means of identifying consumption of below-LRET-baseline renewable electricity generation would be beneficial for the hydrogen certification scheme?
Do you agree that a means of identifying consumption of below-LRET-baseline renewable electricity generation would be beneficial for the hydrogen certification scheme?
In the long-term, zero emissions energy from existing (below-baseline) hydro facilities should be included as sources of zero emissions hydrogen.
However, there has been national agreement to date that hydro production is not used to count towards zero emissions targets in the electricity sector. That is, the LRET target was set such that the combination of new and existing renewables would deliver 20% of Australia’s projected demand. The emissions reduction from below-baseline hydro is effectively a “national good”. As noted in the discussion paper, zero emission electricity claims must be made through surrendered LGCs.
If the ~15 TWh of existing below baseline generation was suddenly made available to businesses to "offset" genuine emissions, it would reduce incentives for businesses to genuinely reduce emissions, and would be a windfall gain for the incumbents. This would reduce investment in new renewable generation and hence emissions reduction.
It would also risk actually increasing NEM emissions if electricity demand increases without a corresponding emissions obligation (i.e., existing coal would run harder). Exporting “zero emissions” hydrogen backed by such certificates might simply shift emissions from the export market into Australia. Offtakers would not be able to have confidence that "zero emissions" hydrogen was actually reducing global emissions - this would undermine confidence in the proposed scheme.
Even if targeted at hydrogen projects, there is a risk that such certificates would be used to claim zero emissions for other sectors – e.g., electric vehicles. This would undermine critical schemes such as GreenPower and Climate Active.
Iberdrola Australia therefore supports LGCs and ACCUs being the products for tracking and verifying zero emissions claims, and establishing a GO certificate post-LRET. Below-baseline hydro should not be included in any scheme _until_ a post-LRET emissions or renewable target is established covering the electricity sector - therefore ensuring that businesses (or exports) can have confidence they are genuinely reducing emissions when seeking zero-emissions products.
In the near-term, it would be more appropriate to include a pro-rata share of below-baseline renewables for all participants in the “Market Based Approach” to assessing scope 2 emissions (in additional to the LRET RPP).
What are your views on establishing a new renewable guarantee-of-origin certificate for verifying below-baseline and post-2030 renewable electricity?
What are your views on establishing a new renewable guarantee-of-origin certificate for verifying below-baseline and post-2030 renewable electricity?
Establishing a renewable GO, on a similar basis to LGCs, will provide a long-term mechanism for measuring and verifying renewable generation for businesses seeking long-term contracts for 100% renewable energy, or offsetting other emissions through additional renewable generation.
However, see above comments.
What would be the effect of having a general certification scheme for renewable electricity?
See above.
Do you agree that certification should recognise other sources of renewable electricity, including those outlined outlined in Section 3.5.1?
Do you agree that emissions should be attributed to co-products where they are on-sold?
Are the by-products identified for each pathway likely to be co-products (or are they more likely to be waste products?)
Do you think that the allocation methods suggested in each pathway are appropriate and practical?
Do you agree with an approach limiting provisions for CCS and CCUS in an initial Guarantee of Origin scheme to those included under the NGER determination, noting that these will be expanded or adjusted as new CCUS technologies and industrial processes are implemented?
Do you agree with setting a materiality threshold allowing entities to exclude a small amount (e.g. 2.5 to 5%) of total emissions from analysis?
Is a trial phase an appropriate next step for testing and refining the proposed methodologies?
Is the list of attributes and features to be tested correct?
Would you like to be involved in a trial (noting an affirmative response will not guarantee participation)?
Would you like to be involved in a trial (noting an affirmative response will not guarantee participation)?
Iberdrola Australia is part of the Iberdrola group, one of the largest utilities in the world. Iberdrola has strong global capabilities in both renewable generation and producing green hydrogen.
We would be keen to further discuss a potential trial, as well as practical elements of scheme design, LGC transferral, etc.
What reporting frequency should be adopted for trials to deliver learnings and results quickly?
Reporting should be tied to the milestones of the trial. We propose a trial period of 1 year.
Submission - General comment
We would like to thank the Department for preparing a comprehensive discussion paper.
Submission - File for publishing
Submission - File for publishing
