Hydrogen Headstart is one of several federal government policies intended to reduce Australia’s greenhouse gas emissions. The consultation process for Hydrogen Headstart is taking place within the context of a review of the National Hydrogen Strategy
Climateworks welcomes the Hydrogen Headstart program as part of a broader emissions reduction push by government.
A report containing scenario analysis from Climateworks and CSIRO for the Australian Industry Energy Transitions Initiative (Australian Industry ETI) found that hydrogen could be effectively used to reduce emissions in heavy industry (Australian Industry ETI 2023a).
The Australian Industry ETI found that low-cost, renewable hydrogen could play an important role in decarbonising Australia’s “hard to abate” sectors, both as a fuel and chemical feedstock.
Renewable hydrogen will be especially important in instances where electrification is not technically possible or is cost prohibitive.
Currently, most hydrogen in Australia is produced through emissions-intensive fossil fuel-based processes.
To realise the decarbonisation potential of hydrogen, Australia must rapidly scale renewable, zero emissions hydrogen at scale.
The design proposed in the government’s consultation is that two or three renewable hydrogen producers will be granted a ‘production credit’ for every unit of renewable hydrogen they produce, covering the gap between the cost of producing the hydrogen and the amount that customers pay for it.
This is intended to help develop hydrogen markets and capabilities in Australia.Developing Australia’s hydrogen markets and capabilities is a major opportunity to achieve Australia’s domestic emissions reduction targets, as well as contribute to global decarbonisation through renewable hydrogen exports.
During the 10-year period that Hydrogen Headstart funding will be available, renewable hydrogen will be urgently required to decarbonise Australian industry.
Modelling for the Australian Industry ETI finds that in the short-term, hydrogen could be used effectively to decarbonise ammonia production, and potentially also mining haulage and alumina calcination.
Long-term, steelmaking and freight could require significant volumes of hydrogen.
A rapid build-out of renewable energy could enable the creation of new export industries, in which renewable hydrogen plays a key role.
Australia could also derive long-term value from electrolysers as a provider of essential system services.
The Hydrogen Headstart Program also includes a provision of $2 million of funding for First Nations communities to engage with hydrogen project development.
Climateworks welcomes this as a way of setting the stage for success for these projects and prioritising the sharing of benefits with the local community.
Climateworks recommends that:
- Funding through the Hydrogen Headstart Program should be prioritised (or weighted as part of the selection criteria) for high-emitting and high-economic-output industrial regions.
- Production credits should be in addition to other existing or planned support from government programs and agencies, which would enable projects to proceed rapidly if delivery of Hydrogen Headstart production credits does not commence until 2026.
- Hydrogen Headstart’s investment mandate should be designed to drive economy-wide emissions reductions, carefully balanced against reducing the risk faced by individual facilities.
- Hydrogen Headstart funding should be granted with consideration for mandatory reporting provisions recently announced by the International Sustainability Standards Board.